10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
__________________________

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            For the fiscal year ended December 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            For the transition period from __________________ to __________________

COMMISSION FILE NUMBER 000-27905

MutualFirst Financial, Inc. (Exact Name of Registrant as Specified in its Charter)

Maryland (State or other jurisdiction of incorporation or organization)	35-2085640 (I.R.S. Employer Identification No.)
110 E. Charles Street, Muncie, Indiana (Address of principal executive offices)	47305-2419 (Zip Code)

Registrant's telephone number, including area code: (765) 747-2800

Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

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

             The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the last sale price of such stock on the Nasdaq National Market on March 1, 2001, was approximately $113.3 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

            As of March 1, 2001, there were issued and outstanding 8,376,623 shares of the registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE
PART II of Form 10-K--Portions of registrant's Annual Report to Stockholders for the fiscal year ended December 31, 2000.
PART III of Form 10-K--Portions of registrant's Proxy Statement for its 2001 Annual Meeting of Stockholders.


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Item 1. Business

General

            MutualFirst Financial, Inc., a Maryland corporation, is a savings and loan holding company which has as its wholly-owned subsidiary Mutual Federal Savings Bank. MFS Financial was formed in September 1999 to become the holding company of Mutual Federal in connection with Mutual Federal's conversion from the mutual to stock form of organization on December 29, 1999. In April 2000, MFS Financial formally changed its corporate name to MutualFirst Financial, Inc. ("MutualFirst"). The words "we," "our" and "us" refer to MutualFirst and Mutual Federal on a consolidated basis, except that references to us prior to December 29, 1999 refer only to Mutual Federal.

            At December 31, 2000, we had total assets of $770 million, deposits of $515 million and stockholders' equity of $130 million. Our executive offices are located at 110 E. Charles Street, Muncie, Indiana 47305-2400.

            Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences and a variety of consumer loans. We also originate loans secured by commercial and multi-family real estate, commercial business loans and construction loans secured primarily by residential real estate.

            Our revenues are derived principally from interest on loans and interest on investments and mortgage-backed securities.

            We offer deposit accounts having a wide range of interest rates and terms, which generally include passbook and statement savings accounts, money market deposit accounts, NOW and non-interest bearing checking accounts and certificates of deposit with terms ranging from seven days to 71 months. We solicit deposits in our market areas and we have not accepted brokered deposits.

            On December 8, 2000, MutualFirst Financial, Inc. completed a strategic alliance with Marion Capital Holdings, Inc. ("Marion Capital") in Marion, Indiana. Marion Capital had assets totaling $198.3 million and equity of $30.3 million held primarily through its wholly owned subsidiary, First Federal Saving Bank of Marion. MutualFirst issued approximately 2.5 million MutualFirst shares to Marion Capital shareholders in exchange for their Marion Capital shares. The combination was accounted for using the purchase accounting method and created no goodwill.

Forward-Looking Statements

            This Form 10-K contains various forward-looking statements which are based on assumptions and describe our future plans and strategies and our expectations. These forward-looking statements are generally identified by words such as "believe," "expect," "intend," "anticipate," "estimate," "project," or similar words. Our ability to predict results or the actual


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effect of future plans or strategies is uncertain. Factors which could cause actual results to differ materially from those estimated include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of our loan and investment portfolios, demand for our loan products, deposit flows, our operating expenses, competition, demand for financial services in our market areas and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely too much on these statements.

Market Areas

            We are a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. We are headquartered in Muncie, Indiana and with our recent merger with Marion Capitol Holdings, Inc., we offer our financial services through 17 retail offices primarily serving Delaware, Randolph, Kosciusko and Grant counties in Indiana. We also originate mortgage loans in contiguous counties and we originate indirect consumer loans throughout Indiana and western Ohio. See "Lending Activities -- Consumer and Other Lending."

Lending Activities

            General. Our mortgage loans carry either a fixed or an adjustable rate of interest. Mortgage loans are generally long-term and amortize on a monthly basis with principal and interest due each month. At December 31, 2000, our net loan portfolio totaled $643 million, which constituted 83.5% of our total assets.

            Loans up to $550,000 may be approved by individual loan officers. Loans in excess of $550,000, but not in excess of $1.0 million, require the signatures of the recommending officer and any two signatures from the Executive Loan Committee. Loans in amounts greater than $1.0 million, but not to exceed $1.5 million, require the signatures of the recommending officer and any three Executive Loan Committee members. All loans in excess of $1.5 million and loans of any amount to a borrower whose aggregate debt will exceed $3.0 million must be approved by the Board of Directors.

            At December 31, 2000, the maximum amount which we could lend to any one borrower and the borrower's related entities was approximately $15.6 million. At December 31, 2000, our largest lending relationship to a single borrower or a group of related borrowers consisted of ten loans to a local developer/entrepreneur and related entities totaling $3.6 million. Although the relationship dates back to 1980, 88.2% of the outstanding debt has been originated since June 30, 1998, and consists of refinancing existing debt. The loans are diverse and are secured by apartment complexes, medical facilities and a bank branch, each with independent income streams to support debt service requirements. Each of the loans to this group of borrowers was current and performing in accordance with its terms at December 31, 2000.


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            The following table presents information concerning the composition of our loan portfolio in dollar amounts and in percentages as of the dates indicated.

	December 31,
	2000		1999		1998		1997		1996
	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
	(Dollars in Thousands)
Real Estate Loans:
One- to four-family(1)	$392,832	60.19%	$286,578	63.70%	$264,461	65.42%	$266,971	65.77%	$244,518	63.17%
Multi-family	9,787	1.50	5,544	1.23	6,282	1.56	7,694	1.90	9,598	2.48
Commercial	53,197	8.15	14,559	3.24	10,293	2.54	8,131	2.00	7,878	2.03
Construction and development	13,591	2.08	12,470	2.77	11,805	2.92	10,385	2.56	22,040	5.69
Total real estate loans	469,407	71.92	319,151	70.94	292,841	72.44	293,181	72.23	284,034	73.37
Other Loans:
Consumer Loans:
Automobile	28,909	4.43	19,887	4.42	17,820	4.41	19,977	4.92	20,164	5.21
Home equity	17,428	2.67	10,585	2.36	10,253	2.54	11,366	2.80	10,885	2.81
Home improvement	23,304	3.57	14,588	3.24	12,108	2.99	14,485	3.57	12,066	3.12
Manufactured housing	9,865	1.51	12,305	2.74	15,466	3.83	20,017	4.93	24,933	6.44
R.V.	34,744	5.32	25,629	5.70	19,100	4.72	14,564	3.59	11,503	2.97
Boat	35,180	5.39	32,374	7.20	23,608	5.84	21,553	5.31	17,244	4.45
Other	7,508	1.15	4,554	1.01	5,753	1.42	5,585	1.38	5,676	1.47
Total consumer loans	156,938	24.04	119,922	26.67	104,108	25.75	107,547	26.50	102,471	26.47
Commercial business loans	26,375	4.04	10,764	2.39	7,285	1.81	5,211	1.27	596	0.16
Total other loans	183,313	28.08	130,686	29.06	111,393	27.56	112,758	27.77	103,067	26.63
Total loans receivable, gross(1)	652,720	100.00%	449,837	100.00%	404,234	100.00%	405,939	100.00%	387,101	100.00%
Less:
Undisbursed portion of loans	5,247		4,844		3,353		3,998		6,073
Deferred loan fees and costs	(2,274)		(1,446)		(689)		(440)		(252)
Allowance for losses	6,472		3,652		3,424		3,091		2,990
Total loans receivable, net	$643,275		$442,787		$398,146		$399,290		$378,290

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(1) Includes loans held for sale.





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            The following table shows the composition of our loan portfolio by fixed- and adjustable-rate at the dates indicated.

	December 31,
	2000		1999		1998		1997		1996
	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
	(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
One- to four-family(1)	$179,656	27.52%	$178,033	39.58%	$163,262	40.39%	$141,024	34.74%	$132,095	34.12%
Multi-family	3,248	0.50	2,270	.50	2,656	0.66	2,485	0.61	3,161	0.82
Commercial	10,197	1.56	6,220	1.38	2,398	0.59	1,447	0.36	1,280	0.33
Construction and development	6,713	1.03	5,043	1.12	8,076	2.00	4,108	1.01	11,271	2.91
Total real estate loans	199,814	30.61	191,566	42.58	176,392	43.64	149,064	36.72	147,807	38.18
Consumer	137,003	20.99	106,563	23.69	93,855	23.22	96,181	23.70	91,586	23.66
Commercial business	11,607	1.78	3,320	.74	1,972	0.49	4,454	1.09	596	0.16
Total fixed-rate loans	348,424	53.38	301,449	67.01	272,219	67.35	249,699	61.51	239,989	62.00
Adjustable-Rate Loans:
Real estate:
One- to four-family	213,176	32.66	108,545	24.13	101,199	25.03	125,947	31.03	112,423	29.05
Multi-family	6,539	1.00	3,274	.73	3,626	0.90	5,209	1.29	6,437	1.66
Commercial	43,000	6.59	8,339	1.85	7,895	1.95	6,684	1.64	6,598	1.70
Construction and development	6,878	1.05	7,427	1.65	3,729	0.92	6,277	1.55	10,769	2.78
Total real estate loans	269,593	41.30	127,585	28.36	116,449	28.80	144,117	35.51	136,227	35.19
Consumer	19,935	3.06	13,359	2.97	10,253	2.53	11,366	2.80	10,885	2.81
Commercial business	14,768	2.26	7,444	1.66	5,313	1.32	757	0.18	---	---
Total adjustable-rate loans	304,296	46.62	148,388	32.99	132,015	32.65	156,240	38.49	147,112	38.00
Total loans(1)	652,720	100.00%	449,837	100.00%	404,234	100.00%	405,939	100.00%	387,101	100.00%
Less:
Undisbursed portion of loans	5,247		4,844		3,353		3,998		6,073
Deferred loan fees and costs	(2,274)		(1,446)		(689)		(440)		(252)
Allowance for loan losses	6,472		3,652		3,424		3,091		2,990
Total loans receivable, net	$643,275		$442,787		$398,146		$399,290		$378,290

________________
(1) Includes loans held for sale.



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            The following schedule illustrates the contractual maturity of our loan portfolio at December 31, 2000. Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

	Real Estate
	One- to Four-Family(3)		Multi-family and Commercial		Construction and Development(1)		Consumer		Commercial Business		Total
	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate
	(Dollars in Thousands)
Due During Years Ending December 31,
2001(2)	$ 851	8.011%	$ 659	10.121%	$ 792	9.024%	$ 7,271	10.219%	$ 9,441	9.961%	$ 19,014	9.939%
2002	600	8.609	276	8.479	129	10.081	5,205	9.386	2,078	9.655	8,288	9.378
2003	2,400	7.669	1,655	8.778	---	---	8,895	9.135	1,403	9.965	14,353	8.930
2004 and 2005	5,325	8.532	5,330	8.933	748	9.707	30,634	9.081	6,715	9.538	48,752	9.076
2006 to 2007	10,514	8.057	4,950	8.556	353	9.095	14,592	9.426	2,520	9.628	32,929	8.870
2008 to 2022	182,330	7.733	49,487	8.842	4,466	8.646	90,085	9.413	4,218	7.697	330,586	8.369
2023 and following	186,899	7.514	627	9.290	7,103	8.252	256	11.191	---	0.000	194,885	7.551
Total	$388,919		$62,984		$13,591		$156,938		$26,375		$648,807

_______________
⁽¹⁾ Once the construction phase has been completed, these loans will automatically convert to permanent financing.
⁽²⁾ Includes demand loans, loans having no stated maturity and overdraft loans.
⁽³⁾ Does not include mortgage loans held for sale.


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            The total amount of loans due after December 31, 2001 which have predetermined interest rates is $336 million, while the total amount of loans due after such date which have floating or adjustable interest rates is $294 million.

            One- to Four-Family Residential Real Estate Lending. We focus our lending efforts primarily on the origination of loans secured by first mortgages on owner-occupied, one- to four-family residences in our market areas. At December 31, 2000, one- to four-family residential mortgage loans totaled $392.8 million, or 60.2% of our gross loan portfolio.

            We generally underwrite our one- to four-family loans based on the applicant's employment and credit history and the appraised value of the subject property. Presently, we lend up to 100% of the lesser of the appraised value or purchase price for one- to four-family residential loans. For loans with a loan-to-value ratio in excess of 80%, we generally require private mortgage insurance in order to reduce our exposure to below 80%. Properties securing our one- to four-family loans are appraised by independent state licensed fee appraisers approved by Mutual Federal's board of directors. We require borrowers to obtain title and hazard insurance, and flood insurance, if necessary, in an amount not less than the value of the property improvements.

            We originate one- to four-family mortgage loans on either a fixed- or adjustable-rate basis, as consumer demand dictates. Our pricing strategy for mortgage loans includes setting interest rates that are competitive with Freddie Mac and other local financial institutions, and consistent with our internal needs. Adjustable-rate mortgage, or ARM, loans are offered with a six-month, one-year, three-year, five-year or seven-year term to the initial repricing date. After the initial period, the interest rate for each ARM loan adjusts consistently with the initial term for the six-month, one-year and three-year terms, respectively, and annually for the five-year and seven-year terms, for the remainder of the term of the loan. We use the weekly average of the appropriate term Treasury Bill Constant Maturity Index to reprice our ARM loans. During fiscal 2000, we originated $18.6 million of one- to four-family ARM loans and $32.7 million of one- to four-family fixed rate mortgage loans. By way of comparison, during fiscal 1999, we originated $23.0 million of one- to four-family ARM loans, and $48.3 million of one- to four-family fixed-rate mortgage loans.

            Fixed-rate loans secured by one- to four-family residences have contractual maturities of up to 30 years, and are generally fully amortizing, with payments due monthly. These loans normally remain outstanding, however, for a substantially shorter period of time because of refinancing and other prepayments. A significant change in interest rates could alter considerably the average life of a residential loan in our portfolio. Our one- to four-family loans are generally not assumable, do not contain prepayment penalties and do not permit negative amortization of principal. Most are written using underwriting guidelines which make them saleable in the secondary market. Our real estate loans generally contain a "due on sale" clause allowing us to declare the unpaid principal balance due and payable upon the sale of the security property.

            Our one- to four-family residential ARM loans are fully amortizing loans with contractual maturities of up to 30 years, with payments due monthly. Our ARM loans generally provide for specified minimum and maximum interest rates, with a lifetime cap and floor, and a periodic


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adjustment on the interest rate over the rate in effect on the date of origination. As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as is our cost of funds. We offer a one-year ARM loan that is convertible into a fixed-rate loan. When these loans convert, they are usually sold in the secondary market.

            In order to remain competitive in our market areas, we originate ARM loans at initial rates below the fully indexed rate. ARM loans generally pose different credit risks than fixed-rate loans, primarily because as interest rates rise, the borrower's payment rises, increasing the potential for default. We have not experienced difficulty with the payment history for these loans. See "Asset Quality -- Non-performing Assets" and "-- Classified Assets." At December 31, 2000, our one- to four-family ARM loan portfolio totaled $213.2 million, or 32.7% of our gross loan portfolio. At that date, the fixed-rate one- to four-family mortgage loan portfolio totaled $179.7 million, or 27.5% of our gross loan portfolio.

            Multi-family and Commercial Real Estate Lending. We offer a variety of multi-family and commercial real estate loans for acquisition, renovation or construction. These loans are secured by the real estate and improvements financed. The collateral securing these loans ranges from industrial commercial buildings, churches, office buildings and multi-family housing complexes. At December 31, 2000, multi-family and commercial real estate loans totaled $63 million, or 9.7% of our gross loan portfolio.

            Our loans secured by multi-family and commercial real estate are originated with either a fixed or adjustable interest rate. The interest rate on adjustable-rate loans is based on a variety of indices, generally determined through negotiation with the borrower. Loan-to-value ratios on our multi-family and commercial real estate loans typically do not exceed 80% of the appraised value of the property securing the loan. These loans typically require monthly payments, may not be fully amortizing and have maximum maturities of 20 years.

            Loans secured by multi-family and commercial real estate are underwritten based on the income producing potential of the property and the financial strength of the borrower. The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt. We generally require personal guarantees of the borrowers in addition to the security property as collateral for such loans. We also generally require an assignment of rents or leases in order to be assured that the cash flow from the project will be used to repay the debt. Appraisals on properties securing multi-family and commercial real estate loans are performed by independent state licensed fee appraisers approved by Mutual Federal's board of directors. See "Loan Originations, Purchases, Sales and Repayments."

            We generally do not maintain a tax or insurance escrow account for loans secured by multi-family and commercial real estate. In order to monitor the adequacy of cash flows on income-producing properties, the borrower is requested or required to provide periodic financial information.

            Loans secured by multi-family and commercial real estate are generally larger and involve a greater degree of credit risk than one- to four-family residential mortgage loans. Multi-family


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and commercial real estate loans typically involve large balances to single borrowers or groups of related borrowers. Because payments on loans secured by multi-family and commercial real estate are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower's ability to repay the loan may be impaired. See "Asset Quality -- Non-performing Assets."

            Construction and Development Lending. We originate construction loans primarily secured by existing residential building lots. We make construction loans to builders and to individuals for the construction of their residences. Substantially all of these loans are secured by properties located within our market areas. At December 31, 2000, we had $13.6 million in construction and development loans outstanding, representing 2.1% of our gross loan portfolio.

            Construction and development loans are obtained through continued business with builders who have previously borrowed from us, from walk-in customers and through referrals from realtors and architects. The application process includes submission of accurate plans, specifications and costs of the project to be constructed. These items are used to determine the appraised value of the subject property. Loans are based on the lesser of the current appraised value and/or the cost of construction, including the land and the building. We generally conduct regular inspections of the construction project being financed.

            Construction loans for one- to four-family homes are generally granted with a construction period of up to one year. During the construction phase, the borrower generally pays interest only on a monthly basis. Loans to individuals for the construction of their residences may be either short term construction financing or a construction/permanent loan which automatically converts to a long term mortgage consistent with our one- to four-family residential loan products. Loan-to-value ratios on our construction and development loans typically do not exceed 80% of the appraised value of the project on an as completed basis. Single family construction loans with loan-to-value ratios over 80% require private mortgage insurance.

            Because of the uncertainties inherent in estimating construction and development costs and the market for the project upon completion, it is difficult to evaluate accurately the total loan funds required to complete a project, the related loan-to-value ratios and the likelihood of ultimate success of the project. These loans also involve many of the same risks discussed above regarding multi-family and commercial real estate loans and tend to be more sensitive to general economic conditions than many other types of loans. In addition, payment of interest from loan proceeds can make it difficult to monitor the progress of a project.

            Consumer and Other Lending. Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates, and carry higher rates of interest than one- to four-family residential mortgage loans. In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our customer base by increasing the number of customer relationships and providing cross-marketing opportunities. At December 31, 2000, our consumer loan portfolio totaled $156.9 million, or


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24% of our gross loan portfolio. We offer a variety of secured consumer loans, including home equity and lines of credit, home improvement, auto, boat and recreational vehicle, manufactured housing and loans secured by savings deposits. We also offer a limited amount of unsecured loans. We originate our consumer loans both in our market areas and throughout Indiana and western Ohio.

            At December 31, 2000, our home equity loans, including lines of credit, and home improvement loans totaled $40.7 million, or 6.2% of our gross loan portfolio. These loans may be originated in amounts, together with the amount of the existing first mortgage, of up to 100% of the value of the property securing the loan. The term to maturity on our home equity and home improvement loans may be up to 15 years. Home equity lines of credit have a maximum term to maturity of 20 years and require a minimum monthly payment based on the outstanding loan balance per month, which amount may be reborrowed at any time. Other consumer loan terms vary according to the type of collateral, length of contract and creditworthiness of the borrower.

            We directly and indirectly originate auto loans, boat and recreational vehicle loans and manufactured housing loans. We generally buy indirect auto loans on a rate basis, paying the dealer a cash payment for loans with an interest rate in excess of the rate we require. This premium is amortized over the remaining life of the loan. Any prepayments or delinquencies are charged to future amounts owed to that dealer, with no dealer reserve or other guarantee of payment if the dealer stops doing business with us.

            We underwrite indirect auto loans using the Fair-Isaacs credit scoring system. We also directly originate auto loans through bank personnel. These loans are underwritten more traditionally, with a review of the borrower's employment and credit history and an assessment of the borrower's ability to repay the loan.

            At December 31, 2000, auto loans totaled $28.9 million, or 4.4% of our gross loan portfolio. Auto loans may be written for up to six years and usually have fixed rates of interest. Loan to value ratios are up to 100% of the sale price for new autos and 110% of value on used cars, based on valuation from official used car guides.

            Our boat and recreational vehicle loans are generally originated on an indirect basis. We utilize an independent company to market our loan products and help service and collect our boat and RV loans, keeping down our marketing, collection and related personnel costs. We pay a fee based on a percentage of the loan amounts originated through this company as well as monthly service fees, for these services. We pay dealers a premium for each loan based on the interest rate charged on each loan. We amortize this premium, which is usually significantly smaller than the premium we pay dealers for our indirect auto loans, over the estimated life of each loan.

            For a few of our largest boat and RV dealers, we also offer a program where we pay for each loan on a rate basis, just as with our indirect auto loans. Under this program, however, we pay only a portion of the cash payment due, holding back a reserve in a Mutual Federal savings account. This dealer holdback is released to the dealer pro-rata over the life of the loan.



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            We underwrite indirect boat and RV loans using the Fair-Isaacs credit scoring system and, as with our indirect auto loans, tend to accept only the more qualified buyers based on our scoring.

            Loans for boats and recreational vehicles totaled $69.9 million at December 31, 2000, or 10.7% of our gross loan portfolio. This has been the fastest growing portion of our consumer loan portfolio over the past five years. We will finance up to 100% of the purchase price for a new recreational vehicle and 95% for a new boat. The maximum loan to value ratio is 100% for used recreational vehicles and 95% for boats. Values are based on the applicable official used vehicle guides. The term to maturity for these types of loans is up to 10 years for used boats and recreational vehicles and up to 15 years for new boats and recreational vehicles. These loans are generally written with fixed rates of interest.

            At December 31, 2000, manufactured housing loans totaled $9.9 million, or 1.5% of our gross loan portfolio. This amount has decreased significantly over the last five years, due to increased competition. Manufactured housing loans are offered at fixed or adjustable rates of interest for terms up to 25 years, and at a maximum loan to value ratio of 95%.

            Consumer loans may entail greater risk than one- to four-family residential mortgage loans, especially consumer loans secured by rapidly depreciable assets, such as automobiles, boats and recreational vehicles. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan collections are dependent on the borrower's continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

            Commercial Business Lending. At December 31, 2000, commercial business loans totaled $26.4 million, or 4% of our gross loan portfolio. Most of our commercial business loans have been extended to finance local businesses and include short term loans to finance machinery and equipment purchases, inventory and accounts receivable. Commercial business loans also involve the extension of revolving credit for a combination of equipment acquisitions and working capital needs and agricultural purposes such as seed, farm equipment and livestock.

            The terms of loans extended on the security of machinery and equipment are based on the projected useful life of the machinery and equipment, generally not to exceed seven years. Lines of credit generally are available to borrowers for up to 13 months, and may be renewed by us.

            We issue a few financial-based standby letters of credit which are offered at competitive rates and terms and are generally on a secured basis. We are attempting to expand our volume of commercial business loans.

            Our commercial business lending policy includes credit file documentation and analysis of the borrower's background, capacity to repay the loan, the adequacy of the borrower's capital and collateral as well as an evaluation of other conditions affecting the borrower. Analysis of the borrower's past, present and future cash flows also is an important aspect of our credit analysis. We generally obtain personal guarantees on our commercial business loans. Nonetheless, these loans are believed to carry higher credit risk than traditional single family loans.


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            Unlike residential mortgage loans, commercial business loans are typically made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. As a result, the availability of funds for the repayment of commercial business loans may substantially depend on the success of the business itself (which, in turn, often depends in part upon general economic conditions). Our commercial business loans are usually secured by business assets. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

Loan Originations, Purchases, Sales and Repayments

            We originate loans through referrals from real estate brokers and builders, our marketing efforts, and our existing and walk-in customers. We also originate many of our consumer loans through relationships with dealerships. While we originate both adjustable-rate and fixed-rate loans, our ability to originate loans depends upon customer demand for loans in our market areas. Demand is affected by local competition and the interest rate environment. During the last several years, due to low market interest rates, our dollar volume of fixed-rate, one- to four-family loans has exceeded the dollar volume of the same type of adjustable-rate loans. From time to time, we sell fixed rate, one- to four-family residential loans. We have also, on a very limited basis, purchased one- to four-family residential and commercial real estate loans. Furthermore, during the past few years, we, like many other financial institutions, have experienced significant prepayments on loans due to the low interest rate environment prevailing in the United States.

            In periods of economic uncertainty, the ability of financial institutions, including us, to originate or purchase large dollar volumes of real estate loans may be substantially reduced or restricted, with a resultant decrease in interest income.


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            The following table shows our loan origination, purchase, sale and repayment activities for the years indicated.

	Year Ended December 31,
	2000	1999	1998
	(In Thousands)
Originations by type:
Adjustable rate:
Real estate - one- to four-family	$18,565	$23,002	$ 19,835
- multi-family	1,356	37	1,051
- commercial	8,626	3,008	2,701
- construction or development	8,285	8,710	4,160
Non-real estate - consumer	---	---	---
- commercial business	5,417	611	3,003
Total adjustable-rate	42,249	35,368	30,750
Fixed rate:
Real estate - one- to four-family	32,716	48,307	96,672
- multi-family	---	---	514
- commercial	709	4,032	1,240
- construction or development	6,141	8,486	7,297
Non-real estate - consumer	53,130	47,925	32,492
- - commercial business	4,969	491	810
Total fixed-rate	97,665	109,241	139,025
Total loans originated	139,914	144,609	169,775
Purchases(1):
Real estate - one- to four-family	113,064	3,324	---
- multi-family	49,035	---	---
- commercial	2,036	---	325
- construction or development	2,229	---	---
Non-real estate - consumer	4,168	---	---
- commercial business	9,819	---	---
Total loans purchased	180,351	3,324	325
Sales and Repayments:
Sales:
Real estate - one- to four-family	7,866	---	35,123
- multi-family	---	---	---
- commercial	---	---	---
- construction or development	---	---	---
Non-real estate - consumer	---	---	---
- - commercial business	---	---	---
Total loans sold	7,866	---	35,123
Principal repayments	112,549	100,480	135,909
Total reductions	120,415	100,480	171,032
Increase (decrease) in other items, net	3,033	(1,850)	(773)
Net increase (decrease)	$202,883	$ 45,603	$ (1,705)

_____________
⁽¹⁾ Includes loans acquired in the merger with Marion Capital Holdings, Inc.


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Asset Quality

            When a borrower fails to make a payment on a mortgage loan on or before the default date, a late charge notice is mailed 16 days after the due date. When the loan is 31 days past due (16 days for an ARM), we mail a delinquency notice to the borrower. All delinquent accounts are reviewed by a collector, who attempts to cure the delinquency by contacting the borrower once the loan is 30 days past due. If the loan becomes 60 days delinquent, the collector will generally contact the borrower by phone or send a letter to the borrower in order to identify the reason for the delinquency. Once the loan becomes 90 days delinquent, the borrower is asked to pay the delinquent amount in full, or establish an acceptable repayment plan to bring the loan current. Between 100 and 120 days delinquent a drive-by inspection is made. If the account becomes 120 days delinquent, and an acceptable repayment plan has not been agreed upon, a collection officer will generally refer the account to legal counsel, with instructions to prepare a notice of intent to foreclose. The notice of intent to foreclose allows the borrower up to 30 days to bring the account current. During this 30 day period, the collector may accept a written repayment plan from the borrower which would bring the account current within the next 90 days. If the loan becomes 150 days delinquent and an acceptable repayment plan has not been agreed upon, the collection officer will turn over the account to our legal counsel with instructions to initiate foreclosure.

            For consumer loans, a similar process is followed, with the initial written contact being made once the loan is 30 days past due.

            Delinquent Loans. The following table sets forth, as of December 31, 2000, our loans delinquent 60 - 89 days by type, number, amount and percentage of type.

	Loans Delinquent For:
	60-89 Days
	Number	Amount	Percent of Loan Category
	(Dollars in Thousands)
Real Estate:
One- to four-family	45	$1,827	.465%
Multi-family	0	0	0
Commercial	0	0	0
Construction and        development	0	0	0
Consumer	111	1,017	.648
Commercial business	0	0	0
Total	156	$2,844	.436%

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            Non-performing Assets. The table below sets forth the amounts and categories of non-performing assets in our loan portfolio at the dates indicated. Loans are placed on non-accrual status when the loan becomes more than 90 days delinquent. At all dates presented, we had no troubled debt restructurings which involve forgiving a portion of interest or principal on any loans or making loans at a rate materially less than that of market rates. Foreclosed assets owned include assets acquired in settlement of loans.

	December 31,
	2000	1999	1998	1997	1996
	(Dollars in Thousands)
Non-accruing loans:
One- to four-family	$ 710	$ 385	$ 500	$ 243	$ 558
Multi-family	---	---	---	---	---
Commercial real estate	1,548	---	31	108	471
Construction and development	---	---	---	---	---
Consumer	761	368	485	331	---
Commercial business	---	---	---	---	---
Total	3,022	753	1,016	682	1,029
Accruing loans delinquent 90 days or more:
One- to four-family	232	16	88	27	8
Multi-family	---	---	---	---	---
Commercial real estate	137	12	---	---	---
Construction and development	---	---	---	---	---
Consumer	31	---	10	51	507
Commercial business	---	---	---	---	---
Total	400	28	98	78	515
Total nonperfoming loans	3,422	781	1,114	760	1,544
Foreclosed assets:
One- to four-family	80	304	46	83	20
Multi-family	---	---	---	---	---
Commercial real estate	764	425	---	1,498	---
Construction and development	---	---	---	---	---
Consumer	90	122	223	486	561
Commercial business	---	---	---	---	---
Total	934	851	269	2,067	581
Total non-performing assets	$4,356	$1,632	$1,383	$2,827	$2,125
Total as a percentage of total assets	0.56%	0.30%	0.29%	0.62%	0.49%

            For the year ended December 31, 2000, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $126,900. The amount included in interest income on these loans for the year ended December 31, 2000 was $81,300.
            At December 31, 1997, foreclosed commercial real estate consisted of two properties acquired during 1997 from a troubled debtor. The properties, comprised of a 50 unit apartment building and a food pantry, were sold in 1998.


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            At December 31, 2000, foreclosed commercial real estate consisted of an office building in Muncie, which is currently being offered for sale and the remaining condominium units in a project acquired from a troubled debtor. Based on the sales of other units in this project, the condominiums are expected to generate sufficient funds to result in 100% recovery of the outstanding principal. In addition, one residential property was acquired in 2000 with a book value of $62,000. This property is also being offered for sale.

            Other Loans of Concern. In addition to the non-performing assets set forth in the table above, as of December 31, 2000, there was an aggregate of $3.4 million in loans with respect to which known information about the possible credit problems of the borrowers have caused management to have doubts as to the abilities of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such items in the non-performing asset categories. These loans have been considered in management's determination of the adequacy of our allowance for loan losses.

            Included in the $3.4 million above are one multi-family loan totaling $419,000, two commercial business loans totaling $96,000 and four nursing home loans totaling $2.9 million. All of these loans, according to financial statements submitted by the borrowers, indicate insufficient cash flow to meet all expenses. All of the above loans were current as of December 31, 2000.

            Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the Office of Thrift Supervision to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses inherent in those classified "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

            When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management and approved by the board of directors. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as "loss," it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount. An institution's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the Office of Thrift Supervision and the FDIC, which may order the establishment of additional general or specific loss allowances.



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            In connection with the filing of Mutual Federal's periodic reports with the Office of Thrift Supervision and in accordance with our classification of assets policy, we regularly review the problem assets in our portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of management's review, at December 31, 2000, we had classified $4.1 million of Mutual Federal's assets as substandard and $883,000 as loss. We did not classify any assets as doubtful. The total amount classified represented 4.8% of our stockholders' equity and 0.65% of our assets at December 31, 2000.

            Provision for Loan Losses. We recorded a provision for loan losses during the year ended December 31, 2000 of $685,000, compared to $760,000 million for the year ended December 31, 1999 and $1.3 million for the year ended December 31, 1998. The provision for loan losses is charged to income to bring our allowance for loan losses to a level deemed appropriate by management based on the factors discussed below under "-- Allowance for Loan Losses." The provision for loan losses during the year ended December 31, 2000 was based on management's review of such factors which indicated that the allowance for loan losses was adequate to cover losses inherent in the loan portfolio as of December 31, 2000.

            Allowance for Loan Losses. We maintain an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the estimated losses inherent in the loan portfolio. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance, specific allowances for identified problem loans and portfolio segments and the unallocated allowance. In addition, the allowance incorporates the results of measuring impaired loans as provided in SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans.

            The formula allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of such loans or pools of loans. Changes in risk evaluations of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based on our historical loss experience as well as on significant factors that, in management's judgment, affect the collectibility of the portfolio as of the evaluation date.

            The appropriateness of the allowance is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan. Senior management reviews these conditions quarterly in discussions with our senior credit officers. To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management's estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the



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evaluation date, management's evaluation of the loss related to this condition is reflected in the unallocated allowance. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments.

            The allowance for loan losses is based on estimates of losses inherent in the loan portfolio. Actual losses can vary significantly from the estimated amounts. Our methodology as described permits adjustments to any loss factor used in the computation of the formula allowance in the event that, in management's judgment, significant factors which affect the collectibility of the portfolio as of the evaluation date are not reflected in the loss factors. By assessing the estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available. Due to the loss of numerous manufacturing jobs in the local community during recent years and the increase in higher risk loans, like consumer and commercial loans, as a percentage of total loans, management has concluded that our allowance for loan losses should be greater than historical loss experience would otherwise indicate.

            At December 31, 2000, our allowance for loan losses was $6.5 million, or 1.01% of the total loan portfolio, and approximately 189% of total non-performing loans. Assessing the adequacy of the allowance for loan losses is inherently subjective as it requires making material estimates, including the amount and timing of future cash flows expected to be received on impaired loans, that are susceptible to significant change. In the opinion of management, the allowance, when taken as a whole, is adequate to absorb reasonable estimated loan losses inherent in our loan portfolio.






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            The following table sets forth an analysis of our allowance for loan losses.

	Year Ended December 31,
	2000	1999	1998	1997	1996
	(Dollars in Thousands)
Balance at beginning of period	$3,652	$3,424	$3,091	$2,990	$2,754
Charge-offs:
One- to four-family	504	63	446	3	30
Multi-family	75	---	38	---	---
Commercial real estate	50	167	43	237	---
Construction and development	---	---	---	---	---
Consumer	453	421	511	450	353
Commercial business	12	---	---	---	---
	1,094	651	1,038	690	383
Recoveries:
One- to four-family	23	81	40	47	6
Multi-family	---	---	---	---	---
Commercial real estate	---	7	---	---	---
Construction and development	---	---	---	---	---
Consumer	34	31	66	44	43
Commercial business	---	---	---	---	---
	57	119	106	91	49
Net charge-offs	1,037	532	932	599	334
Amount acquired with Marion purchase	3,172	---	---	---	---
Provisions charged to operations	685	760	1,265	700	570
Balance at end of period	$6,472	$3,652	$3,424	$3,091	$2,990
Ratio of net charge-offs during the period    to average loans outstanding during the    period	0.22%	0.13%	0.23%	0.15%	0.09%
Allowance as a percentage of     non-performing loans	189.13%	467.61%	307.36%	406.71%	193.65%
Allowance as a percentage of total loans    (end of period)	1.01%	0.82%	0.85%	0.77%	0.78%

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            The distribution of our allowance for loan losses at the dates indicated is summarized as follows:

	December 31,
	2000			1999			1998			1997			1996
	Amount of Loan Loss Allowance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allowance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allowance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allowance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allowance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
One- to four-family	$1,106	$392,832	60.19%	$1,038	$286,578	63.70%	$1,181	$264,461	65.42%	$ 583	$266,971	65.77%	$ 683	$244,518	63.17%
Multi-family	610	9,787	1.50	55	5,544	1.23	57	6,282	1.56	275	7,694	1.90	363	9,598	2.48
Commercial real estate	1,550	53,197	8.15	300	14,559	3.24	174	10,293	2.54	234	8,131	2.00	282	7,878	2.03
Construction or    development	68	13,591	2.08	62	12,470	2.77	59	11,805	2.92	52	10,385	2.56	110	22,040	5.69
Consumer	2,505	156,938	24.04	1,647	119,922	26.67	1,535	104,108	25.75	1,480	107,547	26.50	1,367	102,471	26.47
Commercial business	455	26,375	4.04	215	10,764	2.39	146	7,285	1.81	104	5,211	1.27	12	596	0.16
Unallocated	178	---	---	335	---	---	272	---	---	363	---	---	173	---	---
Total	$6,472	$652,720	100.00%	$3,652	$449,837	100.00%	$3,424	$404,234	100.00%	$3,091	$405,939	100.00%	$2,990	$387,101	100.00%

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Investment Activities

            Federally chartered savings institutions may invest in various types of liquid assets, including United States Treasury obligations, securities of various federal agencies, including callable agency securities, certain certificates of deposit of insured banks and savings institutions, certain bankers' acceptances, repurchase agreements and federal funds. Subject to various restrictions, federally chartered savings institutions also may invest in investment grade commercial paper and corporate debt securities and mutual funds the assets of which conform to the investments that a federally chartered savings institution is otherwise authorized to make directly. See "How We Are Regulated - Mutual Federal" and "- Qualified Thrift Lender Test" for a discussion of additional restrictions on our investment activities.

            The Chief Financial Officer has the basic responsibility for the management of our investment portfolio, subject to the direction and guidance of the asset and liability management committee. The Chief Financial Officer considers various factors when making decisions, including the marketability, maturity and tax consequences of the proposed investment. The maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

            The general objectives of our investment portfolio are to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low and to maximize earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset and Liability Management and Market Risk" contained in our Annual Report to Stockholders, filed as Exhibit 13 to this Form 10-K.

            Our investment securities currently consist of U.S. Agency securities, mortgage-backed securities, marketable equity securities (which consist of shares in mutual funds that invest in government obligations, corporate obligations and mortgage-backed securities) and corporate obligations. See Note 5 of the Notes to Consolidated Financial Statements contained in our Annual Report to Stockholders, filed as Exhibit 13 to this Form 10-K. Our mortgage-backed securities portfolio currently consists of securities issued under government-sponsored agency programs.

            While mortgage-backed securities carry a reduced credit risk as compared to whole loans, these securities remain subject to the risk that a fluctuating interest rate environment, along with other factors like the geographic distribution of the underlying mortgage loans, may alter the prepayment rate of the mortgage loans and affect both the prepayment speed and value of the securities.

            At times over the past several years, we also have maintained a trading portfolio of U.S. Government securities. At December 31, 2000, we did not maintain a trading portfolio. However, we are permitted by the board of directors to have a portfolio of up to $5.0 million, and to trade up to $2.0 million in these securities at any one time. See Note 5 of the Notes to



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Consolidated Financial Statements contained in our Annual Report to Stockholders, filed as Exhibit 13 to this Form 10-K.

            Mutual Federal has investments in six separate Indiana limited partnerships that were organized to construct, own and operate four multi-unit apartment complexes in the Indianapolis area, one in Findley, Ohio and one in Niles, Michigan (the Pedcor Projects). The general partner in each of these Pedcor Projects is Pedcor Investments. We have no financial or other relationships with Pedcor Investments. The four Indianapolis area Pedcor Projects and the Pedcor project located in Niles, Michigan, are operated as multi-family, low and moderate-income housing projects, and have been performing as planned for several years. The Findley, Ohio Pedcor Project, which also is operated as a multi-family, low and moderate-income housing project, was completed in 2000. At the inception of the Findley, Ohio Pedcor Project in February 1998, we invested $2.1 million and committed to invest an additional $1.9 million. As of December 31, 2000, $1.7 million of this commitment remained payable over the next nine years. At the inception of the Niles, Michigan Project in August 1997, we committed to invest $3.6 million over ten years. As of December 31, 2000, $2.4 million remained payable over the next seven years.

            A low and moderate-income housing project qualifies for certain federal income tax credits if (1) it is a residential rental property, (2) the units are used on a non-transient basis, and (3) at least 20% of the units in the project are occupied by tenants whose incomes are 50% or less of the area median gross income, adjusted for family size, or alternatively, at least 40% of the units in the project are occupied by tenants whose incomes are 60% or less of the area median gross income. Qualified low-income housing projects generally must comply with these and other rules for 15 years, beginning with the first year the project qualified for the tax credit, or some or all of the tax credit together with interest may be recaptured. The tax credit is subject to the limitation as the use of general business credit, but no basis reduction is required for any portion of the tax credit claimed. As of December 31, 2000, at least 90% of the units in the Indianapolis area Pedcor Projects were occupied, and all of the tenants met the income test required for the tax credits.

            We received tax credits of $158,000 for the year ended December 31, 2000, and $262,000 for each of the years ended December 31, 1999 and 1998 from the Indianapolis Pedcor Projects. We also received a tax credit of $151,000 from the Findley, Ohio project , and $30,000 from the Niles, Michigan project. Additionally, the Pedcor Projects have incurred operating losses in the early years of their operations primarily due to accelerated depreciation of assets. We have accounted for our investment in five of the six Pedcor Projects on the equity method. Accordingly, we have recorded our share of these losses as reductions to Mutual Federal's investment in the Pedcor Projects. Mutual Federal has less than a 20% ownership interest in the remaining Pedcor Project, and we have recorded its investment in this project at amortized cost.



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            The following summarizes Mutual Federal's equity in the Pedcor Projects' losses and tax credits recognized in our consolidated financial statements.

	For the Year Ended December 31,
	2000	1999	1998
	(In Thousands)
Investments in Pedcor low     income housing projects	$6,437	$5,275	$5,266
Equity in losses, net of income    tax effect	$ (127)	$    (7)	$    (9)
Tax credit	339	262	262
Increase in after tax income    from Pedcor Investments	$ 212	$ 255	$ 253

            See Note 8 of the Notes to Consolidated Financial Statements contained in our Annual Report to Stockholders filed as Exhibit 13 to this Form 10-K for additional information regarding our limited partnership investments.









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            The following table sets forth the composition of our investment and mortgage-related securities portfolio and other investments at the dates indicated. As of December 31, 2000, our investment securities portfolio did not contain securities of any issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States Government or its agencies.

	December 31,
	2000		1999		1998
	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value
	(In Thousands)
Investment securities held-to-maturity:
Federal agency obligations	$ 9,400	$ 9,274	$10,200	$ 9,787	$ 6,220	$ 6,220
Corporate obligations	989	989	2,099	2,079	4,634	4,651
Municipal obligations	150	150	150	150	150	150
Total investment securities held to maturity	10,539	10,413	12,449	12,016	11,004	11,021
Investment securities available-for-sale:
Mutual funds	7,925	7,754	5,781	5,587	7,761	7,625
Federal agency obligations	4,364	4,420	2,416	2,382	1,244	1,286
Mortgage-backed securities	7,934	7,979	9,517	9,387	5,129	5,297
Collateralized mortgage obligations	4,529	4,584	4,584	4,536	---	---
Corporate obligations	10,300	10,405	7,781	7,707	---	---
Total investment securities held for sale	35,052	35,142	30,079	29,599	14,134	14,208
Trading account securities:
U.S. Treasury obligations	---	---	1,447	1,235	---	---
Total trading account securities	---	---	1,447	1,235	---	---
Total investment securities	45,591	45,555	43,975	42,850	25,138	25,229
Investment in limited partnerships	6,437	N/A	5,275	N/A	5,266	N/A
Investment in insurance company	590	N/A	590	N/A	590	N/A
Federal Home Loan Bank stock	6,993	N/A	5,339	N/A	3,612	N/A
Total investments	$ 59,611		$55,179		$34,606

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            The following table indicates, as of December 31, 2000, the composition and maturities of our investment securities and mortgage-backed securities portfolio, excluding Federal Home Loan Bank stock and our trading securities.

	Due in
	Less Than 1 Year	1 to 5 Years	5 to 10 Years	Over 10 Years	Total Investment Securities
	Amortized Cost	Amortized Cost	Amortized Cost	Amortized Cost	Amortized Cost	Fair Value
	(Dollars in Thousands)
Corporate obligations	$ 1,497	$ 9,319	$ 473	$   ---	$ 11,289	$ 11,394
Federal agency obligations	1,500	8,888	1,988	1,388	13,764	13,694
Municipal obligations	---	---	---	150	150	150
Mutual funds	7,925	---	---	---	7,925	7,754
Mortgage-backed securities:
Freddie Mac	---	345	---	1,291	1,636	1,646
Fannie Mae	---	583	485	4,889	5,957	5,992
Ginnie Mae	---	---	---	1,221	1,221	1,232
Other	---	---	---	3,649	3,649	3,693
	$10,922	$ 19,135	$2,946	$12,588	$45,591	$45,555
Weighted average yield	6.28%	6.35%	6.70%	6.94%	6.52%

Sources of Funds

            General. Our sources of funds are deposits, borrowings, payment of principal and interest on loans, interest earned on or maturation of other investment securities and funds provided from operations.

            Deposits. We offer deposit accounts to consumers and businesses having a wide range of interest rates and terms. Our deposits consist of passbook accounts, money market deposit accounts, NOW and demand accounts and certificates of deposit. We solicit deposits in our market areas and have not accepted brokered deposits. We primarily rely on competitive pricing policies, marketing and customer service to attract and retain these deposits.

            The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates, and competition. The variety of our deposit accounts has allowed us to be competitive in obtaining funds and to respond to changes in consumer demand. We have become more susceptible to short-term fluctuations in deposit flows, as customers have become more interest rate conscious. We try to manage the pricing of our deposits in keeping with our asset/liability management, liquidity and profitability objectives, subject to competitive factors. Based on our experience, we believe that our deposits are relatively stable sources of funds. Our ability to attract and maintain these deposits, however, and the rates paid on them, has been and will continue to be affected significantly by market conditions.



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            The following table sets forth the dollar amount of savings deposits in the various types of deposit programs we offered at the dates indicated.

	December 31,
	2000		1999		1998
	Amount	Percent of Total	Amount	Percent of Total	Amount	Percent of Total
	(Dollars in Thousands)
Transactions and Savings Deposits:
Passbook accounts	$ 48,189	9.36%	$ 39,792	10.91%	$ 42,242	11.54%
NOW and demand accounts	76,982	14.96	52,560	14.42	57,239	15.64
Money market accounts	43,898	8.53	42,091	11.54	33,686	9.20
Total non-certificates	169,069	32.85	134,443	36.87	133,167	36.38
Certificates:
0.00 - 1.99%	---	---	---	---	---	---
2.00 - 3.99%	35	.01	5,494	1.51	8,691	2.38
4.00 - 5.99%	134,795	26.19	185,993	51.01	171,455	46.85
6.00 - 7.99%	209,151	40.63	36,957	10.14	50,928	13.91
8.00 - 9.99%	1,660	.32	1,717	.47	1,758	0.48
10.00% and over	---	----	---	---	---	---
Total certificates	345,641	67.15	230,161	63.13	232,832	63.62
Total deposits	$514,710	100.00%	$364,604	100.00%	$365,999	100.00%

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            The following table shows rate and maturity information for our certificates of deposit as of December 31, 2000.

	2.00- 3.99%	4.00- 5.99%	6.00- 7.99%	8.00- 9.99%	Total	Percent of Total
	(Dollars in Thousands)
Certificate accounts maturing in quarter ending:
March 31, 2001	$ 29	$50,295	$ 22,104	$ ---	$ 72,428	20.95%
June 30, 2001	---	32,788	39,185	---	71,973	20.82
September 30, 2001	---	11,407	34,812	---	46,219	13.37
December 31, 2001	---	8,301	19,110	---	27,411	7.93
March 31, 2002	---	3,852	10,472	---	14,324	4.14
June 30, 2002	6	2,912	20,042	40	23,000	6.65
September 30, 2002	---	4,274	11,891	651	16,816	4.87
December 31, 2002	---	2,769	3,036	459	6,264	1.81
March 31, 2003	---	2,011	1,314	279	3,604	1.04
June 30, 2003	---	1,895	707	139	2,741	0.79
September 30, 2003	---	1,934	388	89	2,411	0.70
December 31, 2003	---	1,052	246	3	1,301	0.38
Thereafter	---	11,305	45,844	---	57,149	16.55
Total	$ 35	$134,795	$209,151	$ 1,660	$ 345,641	100.00%
Percent of total	0.01%	39.00%	60.51%	.48%	100.00%

            The following table indicates, as of December 31, 2000, the amount of our certificates of deposit and other deposits by time remaining until maturity.

	Maturity
	3 Months or Less	Over 3 to 6 Months	Over 6 to 12 Months	Over 12 months	Total
	(In Thousands)
Certificates of deposit less than $100,000	$49,039	$59,196	$61,758	$100,332	$270,325
Certificates of deposit of $100,000 or more	7,639	11,002	11,872	27,278	57,791
Public funds (1)	15,750	1,775	---	---	17,525
Total certificates of deposit	$72,428	$71,973	$73,630	$127,610	$345,641

_______________

⁽¹⁾ Deposits from governmental and other public entities.

            Borrowings. Although deposits are our primary source of funds, we may utilize borrowings when they are a less costly source of funds and can be invested at a positive interest rate spread, when we desire additional capacity to fund loan demand or when they meet our asset/liability management goals. Our borrowings historically have consisted of advances from



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the Federal Home Loan Bank of Indianapolis and securities sold under agreement to repurchase. See Notes 10 and 11 of the Notes to Consolidated Financial Statements contained in our Annual Report to Stockholders, filed as Exhibit 13 to this Form 10-K.

            We may obtain advances from the Federal Home Loan Bank of Indianapolis upon the security of certain of our mortgage loans and mortgage-backed securities. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. At December 31, 2000, we had $112.5 million in Federal Home Loan Bank advances outstanding.

            The following table sets forth, for the years indicated, the maximum month-end balance and average balance of Federal Home Loan Bank advances, securities sold under agreement to repurchase and other borrowings.

	Year Ended December 31,
	2000	1999	1998
	(In Thousands)
Maximum Balance:
FHLB advances	$112,807	$99,039	$63,754
Securities sold under agreements to repurchase	830	895	---
Other borrowings	3,640	1,799	1,830
Average Balance:
FHLB advances	$65,600	$60,220	$55,232
Securities sold under agreements to repurchase	128	400	---
Other borrowings	1,889	1,784	1,685

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            The following table sets forth certain information as to our borrowings at the dates indicated.

	December 31,
	2000	1999	1998
	(Dollars in Thousands)
FHLB advances	$112,542	$72,289	$50,632
Securities sold under agreements to repurchase	---	840	---
Other borrowings	3,640	1,768	1,830
Total borrowings	$116,182	$74,897	$52,462
Weighted average interest rate of FHLB    advances	6.16%	5.69%	5.50%
Weighted average interest rate of securities    sold under agreements to repurchase	---%	5.50%	---%
Weighted average interest rate of other    borrowings	---%	---%	---%

Subsidiary and Other Activities

            As a federally chartered savings bank, Mutual Federal is permitted by Office of Thrift Supervision regulations to invest up to 2% of its assets, or $15.3 million at December 31, 2000, in the stock of, or unsecured loans to, service corporation subsidiaries. Mutual Federal may invest an additional 1% of its assets in service corporations where such additional funds are used for inner-city or community development purposes.

            At December 31, 2000, Mutual Federal had three active subsidiaries, First M.F.S.B. Corporation, Third M.F.S.B. Corporation and First Marion Service Corporation. First M.F.S.B. owns stock in Family Financial Life Insurance Company, a life and accident and health insurance company chartered in Indiana. Family Financial Life primarily sells mortgage and credit life insurance, as well as accident and disability insurance. It also issues and services annuity contracts. As of December 31, 2000, Mutual Federal's total investment in this subsidiary was $780,000. For the year ended December 31, 2000, First M.F.S.B. reported net income of $61,800, which consisted of dividends from Family Financial Life.

            Third M.F.S.B., which does business as Mutual Financial Services, offers tax-deferred annuities, long-term health and life insurance products. All securities related products and services made available through Mutual Financial Services are offered by a third party independent broker-dealer. As of December 31, 2000, Mutual Federal's total investment in this subsidiary was $76,200. For the year ended December 31, 2000, Third M.F.S.B. reported net income of $157,500, which consisted of commissions less expenses.

            First Marion Service Corporation ("First Marion") is engaged in the sale of tax deferred annuities and mutual funds pursuant to an arrangement with several independent brokers. In



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addition, First Marion provides 100% financing to borrowers of the Bank by providing 20% second mortgages behind the Bank's 80% mortgage. Such loans amounted to $2.6 million at December 31, 2000. This service corporation will be dissolved in the first quarter of 2001 and the assets and liabilities will be merged into the Bank.

Competition

            We face strong competition in originating real estate and other loans and in attracting deposits. Competition in originating real estate loans comes primarily from other savings institutions, commercial banks, credit unions and mortgage bankers. Other savings institutions, commercial banks, credit unions and finance companies provide vigorous competition in consumer lending.

            We attract our deposits through our branch office system. Competition for deposits comes principally from other savings institutions, commercial banks and credit unions located in the same community, as well as mutual funds and other alternative investments. We compete for deposits by offering superior service and a variety of account types at competitive rates.

Employees

            At December 31, 2000, we had a total of 188 full-time and 61 part-time employees. Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

HOW WE ARE REGULATED

            Set forth below is a brief description of certain laws and regulations which apply to us. This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and regulations.

            Legislation is introduced from time to time in the United States Congress that may affect our operations. In addition, the regulations by which we are governed may be amended from time to time. Any such legislation or regulatory changes could adversely affect us. We cannot assure you as to whether or in what form any such changes will occur.

General

            Mutual Federal, as a federally chartered savings institution, is subject to federal regulation and oversight by the Office of Thrift Supervision extending to all aspects of Mutual Federal's operations. Mutual Federal also is subject to regulation and examination by the FDIC, which insures the deposits of Mutual Federal to the maximum extent permitted by law, and to requirements of the Federal Reserve Board. Federally chartered savings institutions are required to file periodic reports with the Office of Thrift Supervision and are subject to periodic examinations by the Office of Thrift Supervision and the FDIC. The investment and lending authority of savings institutions are prescribed by federal laws and regulations, and savings



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institutions are prohibited from engaging in any activities not permitted by such laws and regulations. This regulation and supervision primarily is intended for the protection of depositors and not for the purpose of protecting stockholders.

            The Office of Thrift Supervision regularly examines Mutual Federal and prepares reports for the consideration of Mutual Federal's board of directors on any deficiencies that it may find in Mutual Federal's operations. The FDIC also has the authority to examine Mutual Federal in its role as the administrator of the Savings Association Insurance Fund. Mutual Federal's relationship with its depositors and borrowers also is regulated to a great extent by both Federal and state laws, especially in such matters as the ownership of savings accounts and the form and content of Mutual Federal's mortgage requirements. Any change in these laws and regulations, whether by the FDIC, the Office of Thrift Supervision or Congress, could have a material adverse impact on our operations.

MutualFirst Financial, Inc.

            Pursuant to regulations of the Office of Thrift Supervision and the terms of MutualFirst's Maryland articles of incorporation, the purpose and powers of MutualFirst are to pursue any or all of the lawful objectives of a thrift holding company and to exercise any of the powers accorded to a thrift holding company.

            If Mutual Federal fails the qualified thrift lender test, MutualFirst must obtain the approval of the Office of Thrift Supervision prior to continuing, directly or through other subsidiaries, any business activity other than those approved for multiple thrift companies or their subsidiaries. In addition, within one year of such failure MutualFirst must register as, and will become subject to, the restrictions applicable to bank holding companies. The activities authorized for a bank holding company are more limited than the activities authorized for a unitary or multiple thrift holding company. See "- Qualified Thrift Lender Test."

Mutual Federal

            The Office of Thrift Supervision has extensive authority over the operations of savings institutions. Mutual Federal is required to file periodic reports with the Office of Thrift Supervision and is subject to periodic examinations by the Office of Thrift Supervision and the FDIC. The last regular Office of Thrift Supervision examination of Mutual Federal was as of September 30, 2000. When these examinations are conducted by the Office of Thrift Supervision and the FDIC, the examiners may require Mutual Federal to provide for higher general or specific loan loss reserves. All savings institutions are subject to a semi-annual assessment, based upon the savings institution's total assets, to fund the operations of the Office of Thrift Supervision. Mutual Federal's Office of Thrift Supervision assessment for the year ended December 31, 2000 was $105,159.

            The Office of Thrift Supervision also has extensive enforcement authority over all savings institutions and their holding companies, including Mutual Federal and MutualFirst. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In


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general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the Office of Thrift Supervision. Except under certain circumstances, final enforcement actions by the Office of Thrift Supervision must be publicly disclosed.

            In addition, the investment, lending and branching authority of Mutual Federal is prescribed by federal laws and it is prohibited from engaging in any activities not permitted by such laws. For instance, no savings institution may invest in non-investment grade corporate debt securities. In addition, the permissible level of investment by federal institutions in loans secured by non-residential real property may not exceed 400% of total capital, except with approval of the Office of Thrift Supervision. Federal savings institutions are also generally authorized to branch nationwide. Mutual Federal is in compliance with the noted restrictions.

            Mutual Federal's general permissible lending limit for loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). At December 31, 2000, Mutual Federal's lending limit under this restriction was $15.6 million. Mutual Federal is in compliance with the loans-to-one-borrower limitation.

            The Office of Thrift Supervision, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits. Any institution which fails to comply with these standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

            Mutual Federal is a member of the Savings Association Insurance Fund, which is administered by the FDIC. Deposits are insured up to the applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the Savings Association Insurance Fund or the Bank Insurance Fund. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the Office of Thrift Supervision an opportunity to take such action, and may terminate an institution's deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

            The FDIC's deposit insurance premiums are assessed through a risk-based system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their level of capital and supervisory evaluation. Under the system, institutions classified as well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1 or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at least 6% and a


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risk-based capital ratio of at least 10%) and considered healthy pay the lowest premium while institutions that are less than adequately capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a risk-based capital ratio of less than 8%) and considered of substantial supervisory concern pay the highest premium. Risk classification of all insured institutions is made by the FDIC for each semi-annual assessment period.

            The FDIC is authorized to increase assessment rates, on a semi-annual basis, if it determines that the reserve ratio of the Savings Association Insurance Fund will be less than the designated reserve ratio of 1.25% of Savings Association Insurance Fund insured deposits. In setting these increased assessments, the FDIC must seek to restore the reserve ratio to that designated reserve level, or such higher reserve ratio as established by the FDIC. The FDIC also may impose special assessments on Savings Association Insurance Fund members to repay amounts borrowed from the United States Treasury or for any other reason deemed necessary by the FDIC.

            Since January 1, 1997, the premium schedule for Bank Insurance Fund and Savings Association Insurance Fund insured institutions has ranged from 0 to 27 basis points. However, insured institutions are required to pay a Financing Corporation assessment, in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. For both Savings Association Insurance Fund insured institutions, and Bank Insurance Fund insured institutions this assessment is 2.02 basis points for each $100 in domestic deposits. The assessment, which may be revised further based upon the level of Bank Insurance Fund and Savings Association Insurance Fund deposits, will continue until the bonds mature in the year 2017.

Regulatory Capital Requirements

            Federally insured savings institutions, such as Mutual Federal, are required to maintain a minimum level of regulatory capital. The Office of Thrift Supervision has established capital standards, including a tangible capital requirement, a leverage ratio or core capital requirement and a risk-based capital requirement applicable to such savings institutions. These capital requirements must be generally as stringent as the comparable capital requirements for national banks. The Office of Thrift Supervision also may impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.

            The capital regulations require tangible capital of at least 1.5% of adjusted total assets, as defined by regulation. Tangible capital generally includes common stockholders' equity and retained income, and certain noncumulative perpetual preferred stock and related income. In addition, all intangible assets, other than a limited amount of purchased mortgage servicing rights, must be deducted from tangible capital for calculating compliance with the requirement. At December 31, 2000, Mutual Federal had $1.3 million of intangible assets.

            At December 31, 2000, Mutual Federal had tangible capital of $103.9 million, or 13.6% of adjusted total assets, which is approximately $92.4 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date.


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            The capital standards also require core capital equal to at least 3.0% of adjusted total assets. Core capital generally consists of tangible capital plus certain intangible assets, including a limited amount of purchased credit card relationships. As a result of the prompt corrective action provisions discussed below, however, a savings institution must maintain a core capital ratio of at least 4.0% to be considered adequately capitalized unless its supervisory condition is such to allow it to maintain a 3.0% ratio. At December 31, 2000, Mutual Federal had $1.3 million of intangible assets which were subject to these tests.

            At December 31, 2000, Mutual Federal had core capital equal to $103.9 million, or 13.6% of adjusted total assets, which is $81 million above the minimum requirement of 3.0% in effect on that date.

            The Office of Thrift Supervision also requires savings institutions to have total capital of at least 8.0% of risk-weighted assets. Total capital consists of core capital, as defined above, and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital. The Office of Thrift Supervision is also authorized to require a savings institution to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non-traditional activities. At December 31, 2000, Mutual Federal had $ 5.7 million of general loan loss reserves, which was less than 1.25% of risk-weighted assets.

            In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset. For example, the Office of Thrift Supervision has assigned a risk weight of 50% for prudently underwritten permanent one- to four-family first lien mortgage loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at origination unless insured to such ratio by an insurer approved by Fannie Mae or Freddie Mac.

            As of December 31, 2000, Mutual Federal had total risk-based capital of $109.6 million and risk-weighted assets of $528.5 million; or total capital of 20.7% of risk-weighted assets. This amount was $67.3 million above the 8.0% requirement in effect on that date.

            The Office of Thrift Supervision and the FDIC are authorized and, under certain circumstances, required to take actions against savings institutions that fail to meet their capital requirements. The Office of Thrift Supervision is generally required to restrict the activities of an "undercapitalized institution," which is an institution with less than either a 4% core capital ratio, a 4% Tier 1 risked-based capital ratio or an 8.0% risk-based capital ratio. Any such institution must submit a capital restoration plan and, until such plan is approved by the Office of Thrift Supervision, may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The Office of Thrift Supervision is authorized to impose the additional restrictions that are applicable to significantly undercapitalized institutions.


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            As a condition to the approval of the capital restoration plan, any company controlling an undercapitalized institution must agree that it will enter into a limited capital maintenance guarantee with respect to the institution's achievement of its capital requirements.

            Any savings institution that fails to comply with its capital plan or has Tier 1 risk-based or core capital ratio of less than 3.0% or a risk-based capital ratio of less than 6.0% and is considered "significantly undercapitalized" must be made subject to one or more additional specified actions and operating restrictions which may cover all aspects of its operations and may include a forced merger or acquisition of the institution. An institution that becomes "critically undercapitalized" because it has a tangible capital ratio of 2.0% or less is subject to further restrictions on its activities in addition to those applicable to significantly undercapitalized institutions. In addition, the Office of Thrift Supervision must appoint a receiver, or conservator with the concurrence of the FDIC, for a savings institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized institution is also subject to the general enforcement authority of the Office of Thrift Supervision and the FDIC, including the appointment of a conservator or a receiver.

            The Office of Thrift Supervision is also generally authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

            The imposition by the Office of Thrift Supervision or the FDIC of any of these measures on Mutual Federal may have a substantial adverse effect on our operations and profitability.

Limitations on Dividends and Other Capital Distributions

            Office of Thrift Supervision regulations impose various restrictions on distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

            Generally, savings institutions, such as Mutual Federal, that before and after the proposed distribution remain well-capitalized, may make capital distributions during any calendar year equal to the greater of 100% of net income for the year-to-date plus retained net income for the two preceding years. However, an institution deemed to be in need of more than normal supervision by the Office of Thrift Supervision may have its dividend authority restricted by the Office of Thrift Supervision. Mutual Federal may pay dividends in accordance with this general authority.

            Savings institutions proposing to make any capital distribution need not submit written notice to the Office of Thrift Supervision prior to such distribution unless they are a subsidiary of a holding company or would not remain well-capitalized following the distribution. Savings institutions that do not, or would not meet their current minimum capital requirements following a proposed capital distribution or propose to exceed these net income limitations must obtain Office of Thrift Supervision approval prior to making such distribution. The Office of Thrift Supervision may object to the distribution during that 30-day period based on safety and soundness concerns. See "- Regulatory Capital Requirements."


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Qualified Thrift Lender Test

            All savings institutions, including Mutual Federal, are required to meet a qualified thrift lender test to avoid certain restrictions on their operations. This test requires a savings institution to have at least 65% of its portfolio assets, as defined by regulation, in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, the savings institution may maintain 60% of its assets in the assets specified in Section 7701(a)(19) of the Internal Revenue Code. Under either test, such assets primarily consist of residential housing related loans and investments. At December 31, 2000, Mutual Federal met the test and has always met the test since its effectiveness.

            Any savings institution that fails to meet the qualified thrift lender test must convert to a national bank charter, unless it requalifies as a qualified thrift lender and thereafter remains a qualified thrift lender. If an institution does not requalify and converts to a national bank charter, it must remain Savings Association Insurance Fund-insured until the FDIC permits it to transfer to the Bank Insurance Fund. If such an institution has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings institution and a national bank, and it is limited to national bank branching rights in its home state. In addition, the institution is immediately ineligible to receive any new Federal Home Loan Bank borrowings and is subject to national bank limits for payment of dividends. If such an institution has not requalified or converted to a national bank within three years after the failure, it must divest of all investments and cease all activities not permissible for a national bank. In addition, it must repay promptly any outstanding Federal Home Loan Bank borrowings, which may result in prepayment penalties. If any institution that fails the qualified thrift lender test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies.

Community Reinvestment Act

            Under the Community Reinvestment Act, every FDIC-insured institution is obligated, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community Reinvestment Act. The Community Reinvestment Act requires the Office of Thrift Supervision, in connection with the examination of Mutual Federal, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch. An unsatisfactory rating may be used as the basis for the denial of an application. Due to the heightened attention being given to the Community Reinvestment Act in the past few years, Mutual Federal may be required to devote additional funds for investment and lending in its local community. Mutual Federal was examined for Community Reinvestment Act compliance in January 2000, and received a rating of satisfactory.


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Transactions with Affiliates

            Generally, transactions between a savings institution or its subsidiaries and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates. In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the institution's capital. Affiliates of Mutual Federal include MutualFirst and any company which is under common control with Mutual Federal. In addition, a savings institution may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates. The Office of Thrift Supervision has the discretion to treat subsidiaries of savings institutions as affiliates on a case by case basis.

            Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the Office of Thrift Supervision. These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests. Among other things, such loans must generally be made on terms substantially the same as loans to unaffiliated individuals.

Federal Securities Law

            The common stock of MutualFirst is registered with the SEC under the Securities Exchange Act of 1934. MutualFirst is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Securities Exchange Act of 1934.

            MutualFirst stock held by persons who are affiliates of MutualFirst may not be resold without registration under the Securities Act of 1933 unless sold in accordance with certain resale restrictions. Affiliates are generally considered to be officers, directors and principal stockholders. If MutualFirst meets specified current public information requirements, each affiliate of MFS Financial is permitted to sell in the public market, without registration, a limited number of shares in any three-month period.

Federal Reserve System

            The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts, primarily checking, NOW and Super NOW checking accounts. At December 31, 2000, Mutual Federal was in compliance with these reserve requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be imposed by the Office of Thrift Supervision.

            Savings institutions are authorized to borrow from the Federal Reserve Bank "discount window," but Federal Reserve Board regulations require institutions to exhaust other reasonable alternative sources of funds, including Federal Home Loan Bank borrowings, before borrowing from the Federal Reserve Bank.


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Federal Home Loan Bank System

            Mutual Federal is a member of the Federal Home Loan Bank of Indianapolis, which is one of 12 regional Federal Home Loan Banks that administers the home financing credit function of savings institutions. Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes loans or advances to members in accordance with policies and procedures established by the board of directors of the Federal Home Loan Bank, which are subject to the oversight of the Federal Housing Finance Board. All advances from the Federal Home Loan Bank are required to be fully secured by collateral deemed sufficient by the Federal Home Loan Bank. In addition, all long-term advances must be used for residential home financing.

            As a member, Mutual Federal is required to purchase and hold stock in the Federal Home Loan Bank of Indianapolis. At December 31, 2000, Mutual Federal had $7.0 million in Federal Home Loan Bank stock, which was in compliance with this requirement. In past years, Mutual Federal has received substantial dividends on its Federal Home Loan Bank stock. Over the past five fiscal years, these dividends have averaged 8.09% and were 8.25% for 2000.

            Under federal law, the Federal Home Loan Banks must provide funds for the resolution of troubled savings institutions and contribute to low- and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have affected adversely the level of Federal Home Loan Bank dividends paid and could continue to do so in the future. These contributions also could affect adversely the future value of Federal Home Loan Bank stock. A reduction in value of Mutual Federal's Federal Home Loan Bank stock may result in a corresponding reduction in Mutual Federal's capital.

            For the year ended December 31, 2000, dividends paid to Mutual Federal by the Federal Home Loan Bank of Indianapolis totaled $457,000, as compared to $318,000 for the year ended December 31, 1999.

Federal Taxation

             General. We are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to us. Mutual Federal's federal income tax returns have been closed without audit by the IRS through its year ended December 31, 1995. MutualFirst and Mutual Federal will file a consolidated federal income tax return for fiscal year 2000, the first taxable year after completion of the conversion.

            Bad Debt Reserves. Prior to the Small Business Job Protection Act, Mutual Federal was permitted to establish a reserve for bad debts under the percentage of taxable income method and to make annual additions to the reserve utilizing that method. These additions could, within specified formula limits, be deducted in arriving at taxable income. As a result of the Small


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Business Job Protection Act, savings associations of Mutual Federal's size may now use the experience method in computing bad debt deductions beginning with their 1996 federal tax return. In addition, federal legislation requires Mutual Federal to recapture, over a six year period, the excess of tax bad debt reserves at December 31, 1997 over those established as of the base year reserve balance as of December 31, 1987. As of December 31, 2000 the amount of Mutual Federal's reserves subject to recapture were approximately $269,000.

             Taxable Distributions and Recapture. Prior to the Small Business Job Protection Act, bad debt reserves created prior to the year ended December 31, 1997 were subject to recapture into taxable income if Mutual Federal failed to meet certain thrift asset and definitional tests. Recent federal legislation eliminated these thrift related recapture rules. However, under current law, pre-1988 reserves remain subject to recapture should Mutual Federal make certain non-dividend distributions or cease to maintain a thrift/bank charter.

            Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, called alternative minimum taxable income. The alternative minimum tax is payable to the extent such alternative minimum taxable income is in excess of an exemption amount. Net operating losses can offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Mutual Federal has not been subject to the alternative minimum tax, and does not have any such amounts available as credits for carryover.

             Net Operating Loss Carryovers. A financial institution may carryback net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. This provision applies to losses incurred in taxable years beginning after August 6, 1997. For losses incurred in the taxable years prior to August 6, 1997, the carryback period was three years and the carryforward period was 15 years. At December 31, 2000, we had no net operating loss carryforwards for federal income tax purposes.

            Corporate Dividends-Received Deduction. MutualFirst may eliminate from its income dividends received from Mutual Federal as a wholly owned subsidiary of MFS Financial if it elects to file a consolidated return with Mutual Federal. The corporate dividends-received deduction is 100% or 80%, in the case of dividends received from corporations with which a corporate recipient does not file a consolidated tax return, depending on the level of stock ownership of the payor of the dividend. Corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct 70% of dividends received or accrued on their behalf.

State Taxation

            Mutual Federal is subject to Indiana's financial institutions tax, which is imposed at a flat rate of 8.5% on "adjusted gross income." "Adjusted gross income," for purposes of the financial institutions tax, begins with taxable income as defined by Section 63 of the Internal Revenue Code and incorporates federal tax law to the extent that it affects the computation of taxable income. Federal taxable income is then adjusted by several Indiana modifications.


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            Other applicable state taxes include generally applicable sales and use taxes plus real and personal property taxes.

Executive Officers Who Are Not Directors

            The business experience for at least the past five years for each of our executive officers who do not serve as directors is set forth below.

            Steven R. Campbell. Age 57 years. Mr. Campbell is Senior Vice President of Mutual Federal's Retail Banking Division, a position he has held since 1991. He has been employed by Mutual Federal since 1984.

            David W. Heeter. Age 39 years. Mr. Heeter is Mutual Federal's Vice President of Human Resources, Marketing and Administration. He has served in these positions since 1993, and started with Mutual Federal in 1986.

            Timothy J. McArdle. Age 50 years. Mr. McArdle, a certified public accountant, has served as Senior Vice President of Mutual Federal since 1995, and Treasurer and Controller of Mutual Federal since 1986. He also serves as Senior Vice President, Treasurer and Controller of MutualFirst Financial. He has been employed by Mutual Federal since 1981.

            Stephen C. Selby. Age 55 years. Since 1995, Mr. Selby has served as Senior Vice President of the Operations Division at Mutual Federal. Prior to 1995, he served as Vice President of the Operations Division for nine years. Mr. Selby has served in various other capacities at Mutual Federal since 1964.

Item 2. Description of Property

            At December 31, 2000, we had 17 full service offices. We own the office building in which our home office and executive offices are located. At December 31, 2000, we owned all but two of our other branch offices. The net book value of our investment in premises, equipment and leaseholds, excluding computer equipment, was approximately $7.7 million at December 31, 2000.

            We believe that our current facilities are adequate to meet our present and immediately foreseeable needs.

            We utilize a third party service provider to maintain our database of depositor and borrower customer information. At December 31, 2000, the net book value of the data processing and computer equipment utilized by us was $1.3 million.

Item 3. Legal Proceedings

            From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. We do not anticipate incurring any material liability as a result of such litigation.


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Item 4. Submission of Matters to a Vote of Security Holders

            A special meeting of stockholders of MutualFirst was held on December 1, 2000 at our corporate offices. At the meeting stockholders voted upon three proposals: (1) The approval of an Agreement and Plan of Merger dated June 7, 2000 by and between MutualFirst Financial, Inc. and Marion Capital Holdings, Inc., and the approval of the issuance of shares of MutualFirst common stock in the merger; (2) the ratification of the adoption of the 2000 Stock Option and Incentive Plan; (3) the ratification of the adoption of the 2000 Recognition and Retention Plan. The voting on such matters was as follows:

	Votes For	Votes Against	Abstentions	Broker Non-Votes
Proposal 1	4,051,825	402,493	9,677	0
Proposal 2	3,863,868	542,251	57,876	0
Proposal 3	3,524,136	877,059	62,800	0

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

            The information under the caption "Shareholder Information" in the Company's Annual Report to Stockholders for the year ended December 31, 2000, portions of which are included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.

Item 6. Selected Financial Data

            The information under the heading "Selected Financial and Other Data" in the Company's Annual Report to Stockholders for the year ended December 31, 2000, portions of which are included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation

The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report to Stockholders for the year ended December 31, 2000, portions of which are included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

            The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset and Liability Management and Market Risk" in the Company's Annual Report to Stockholders for the year ended December 31, 2000, portions of which are included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.


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Item 8. Financial Statements and Supplementary Data

            The consolidated financial statements and notes thereto and supplementary data (selected quarterly financial information) contained in the Company's Annual Report to Stockholders for the year ended December 31, 2000, portions of which are included as Exhibit 13 to this Form 10-K, are incorporated herein by reference.


Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

            No disclosure under this item is required.


PART III

Item 10. Directors and Executive Officers of the Registrant

Directors

            Information concerning the Company's directors is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in April 2001, except for information contained under the headings "Compensation Committee Report on Executive Compensation", "Shareholder Return Performance Presentation"and "Report of the Audit Committee", a copy of which will be filed not later than 120 days after the close of the fiscal year.

Executive Officers

Information concerning the executive officers of the Company who are not directors is incorporated herein by reference from Part I of this Form 10-K under the caption "Executive Officers of the Registrant Who Are Not Directors."

Section 16(a) Beneficial Ownership Reporting Compliance

No Disclosure under this item is required.

Item 11. Executive Compensation

            Information concerning executive compensation is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in April 2001, except for information contained under the headings "Compensation Committee Report on Executive Compensation", "Shareholder Return Performance Presentation" and "Report of the Audit Committee", a copy of which will be filed not later than 120 days after the close of the fiscal year.


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Item 12. Security Ownership of Certain Beneficial Owners and Management

            Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held April 2001, except for information contained under the headings "Compensation Committee Report on Executive Compensation", "Shareholder Return Performance Presentation" and "Report of the Audit Committee", a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 13. Certain Relationships and Related Transactions

            Information concerning certain relationships and related transactions is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in April 2001, except for information contained under the headings "Compensation Committee Report on Executive Compensation", "Shareholder Return Performance Presentation" and "Report of the Audit Committee", a copy of which will be filed not later than 120 days after the close of the fiscal year.

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

            (a)(1) Financial Statements

            The following are contained in the portions of the Company's Annual Report to Stockholders filed as Exhibit 13 to this Form 10-K and are incorporated by reference into Item 8 of this Form 10-K:

Annual Report Section	Page in Annual Report
Independent Auditor's Report	17
Consolidated Balance Sheet at December 31, 2000 and 1999	18
Consolidated Statement of Income for the Years Ended December 31, 2000, 1999 and 1998	19
Consolidated Statement of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998	20
Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998	21
Notes to Consolidated Financial Statements	23-46

            (a)(2) Financial Statement Schedules:
            All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.



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            (a)(3) Exhibits:

Regulation S-K Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Hereto
2	Plan of acquisition, reorganization, arrangement, liquidation or succession	None
3(i)	Articles of Incorporation	*
3(ii)	Amended Bylaws	3(ii)
4	Instruments defining the rights of security holders, including indentures:
	Form of MutualFirst Financial, Inc. Common Stock Certificate	*
9	Voting Trust Agreement	None
10	Material contracts: Employment Agreement with R. Donn Roberts Employment Agreement with Timothy J. McArdle Employment Agreement with Steven L. Banks	** ** 10.1
	Form of Supplemental Retirement Plan Income Agreements for R. Donn Roberts, Steven Campbell, David W. Heeter, Timothy J. McArdle and Stephen C. Selby	**
	Form of Director Shareholder Benefit Program, as amended, for Steven L. Banks Form of Executive Shareholder Benefit Program Agreement, as amended, for Steven L. Banks Form of Director Shareholder Benefit Program Agreement, as amended, for Jerry D. McVicker	10.2 10.3 10.4
	Form of Agreements for Executive Deferred Compensation Plan for R. Donn Roberts, Steven Campbell, David W. Heeter, Timothy J. McArdle and Stephen C. Selby	**
	Registrant's 2000 Stock Option and Incentive Plan	***
	Registrant's 2000 Recognition and Retention Plan	***
11	Statement re computation of per share earnings	None
12	Statements re computation of ratios	None
13	Annual Report to Security Holders	13
16	Letter re change in certifying accountant	None
18	Letter re change in accounting principles	None
21	Subsidiaries of the registrant	21
22	Published report regarding matters submitted to vote of security holders	None
23	Consents of Experts and Counsel	23
24	Power of Attorney	None
99	Additional Exhibits	None

____________
* Filed as an exhibit to the Company's Form S-1 registration statement filed on September 16, 1999 (File No. 333-87239) pursuant to Section 5 of the Securities Act of 1933. Such previously filed document is incorporated herein by reference in accordance with Item 601 of Regulation S-K.

** Filed as an exhibit to the Company's Annual Report on Form 10-K filed on March 30, 2000 (File No. 000-27905). Such previously filed document is incorporated herein by reference in accordance with Item 601 of Regulation S-K.

*** Filed as an Appendix to the Company's Form S-4/A Registration Statement filed on October 19, 2000 (File No. 333-46510). Such previously filed document is incorporated herein by reference in accordance with Item 601 of Regulation S-K.


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            (b) Reports on Form 8-K

            On December 20, 2000, MutualFirst filed a Current Report on Form 8-K disclosing a press release issued on December 8, 2000 announcing the consummation of the merger with Marion Capital Holdings and the appointment of Steven L. Banks, John M. Dalton, Jon R. Marler and Jerry D. McVicker to MutualFirst's Board of Directors.















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SIGNATURES

             Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MutualFirst Financial, Inc.
By:	/s/ R. DONN ROBERTS
	R. Donn Roberts, President, Chief Executive Officer and Director (Duly Authorized Representative)

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

/s/ R. DONN ROBERTS R. Donn Roberts, President, Chief Executive Officer and Director (Principal Executive Officer)	/s/ WILBUR R. DAVIS Wilbur R. Davis, Chairman of the Board
Date: April 2, 2001	Date: April 2, 2001
/s/ LINN A. CRULL Linn A. Crull, Director	/s/ EDWARD J. DOBROW Edward J. Dobrow, Director
Date: April 2, 2001	Date: April 2, 2001
/s/ WILLIAM V. HUGHES William V. Hughes, Director	/s/ JAMES D. ROSEMA James D. Rosema, Director
Date: April 2, 2001	Date: April 2, 2001
/s/ JULIE A. SKINNER Julie A. Skinner, Director	/s/ JERRY D. MCVICKER Jerry D. McVicker
Date: April 2, 2001	Date: April 2, 2001
/s/ STEVEN L. BANKS Steven L. Banks, Director	/s/ JOHN M. DALTON John M. Dalton, Director
Date: April 2, 2001	Date: April 2, 2001
/s/ JON R. MARLER Jon R. Marler, Director	/s/ TIMOTHY J. MCARDLE Timothy J. McArdle, Senior Vice President, Treasurer and Controller (Principal Financial and Accounting Officer)
Date: April 2, 2001	Date: April 2, 2001

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INDEX TO EXHIBITS

Number	Description
3(ii)	Amended Bylaws
10.1	Employment Agreement with Steven L. Banks
10.2	Form of Director Shareholder Benefit Program, as amended, for Steven L. Banks
10.3	Form of Executive Shareholder Benefit Program, as amended, for Steven L. Banks
10.4	Form of Director Shareholder Benefit Program, as amended, for Jerry D. McVicker
13	Portions of Annual Report to Security Holders
21	Subsidiaries of the Registrant
23	Consent of Accountants

End.

EX-3.2

EXHIBIT 3(ii)

MUTUALFIRST FINANCIAL, INC.
AMENDED BYLAWS

ARTICLE I
STOCKHOLDERS

            Section 1.01. Annual Meeting. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix.

            Section 1.02. Special Meetings. Subject to the rights of the holders of any class or series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called by the President or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies on the Board of Directors (hereinafter the "Whole Board"). Special meetings of the stockholders shall be called by the Secretary at the request of stockholders only on the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting. Such written request will state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting, and shall be delivered at the home office of the Corporation addressed to the President or the Secretary. The Secretary shall inform the stockholders who make the request of the reasonable estimated cost of preparing and mailing a notice of the meeting and, upon payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting.

            Section 1.03. Notice of Meetings. Not less than ten nor more than 90 days before each stockholders' meeting, the Secretary shall give written notice of the meeting to each stockholder entitled to vote at the meeting and to each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to the stockholder, left at the stockholder's usual place of business, or mailed to the stockholder at his or her address as it appears on the records of the Corporation. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if such person, before or after the meeting, signs a waiver of the notice which is filed with the records of the stockholders' meeting, or is present at the meeting in person or by proxy.

            Section 1.04. Adjournment. A meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.







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            Section 1.05. Quorum; Voting. At any meeting of the stockholders, the presence in person or by proxy of stockholders entitled to cast at least one-third of all the votes entitled to be cast at the meeting constitutes a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. A majority of all votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting.

            If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date or time.

            Section 1.06. General Right to Vote; Proxies. Unless the Articles of Incorporation provides for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. In all elections for directors, directors shall be determined by a plurality of the votes cast, and except as otherwise required by law or as provided in the Articles of Incorporation, all other matters shall be determined by a majority of the votes cast at the meeting.

            A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholder's authorized agent signing the writing or causing the stockholder's signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of a telegram, cablegram, datagram, or other means of electronic transmission to the person authorized to act as proxy or to a proxy solicitation firm, proxy support service organization, or other person authorized by the person who will act as proxy to receive the transmission. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for so long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its asset or liabilities.

            Section 1.07. Conduct of Business.

            (a) The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order.

            (b) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving







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notice provided for in Section 1.09, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 1.09. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at a special meeting of stockholders only pursuant to the Corporation's notice of meeting. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in Section 1.09 and, if any proposed nomination or business is not in compliance with Section 1.09, to declare that such defective nomination or proposal be disregarded.

            Section 1.08. Conduct of Voting. The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, to act at the meeting or any adjournment thereof and make a written report thereof, in accordance with applicable law. At all meetings of stockholders the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies, the acceptance or rejection of votes not otherwise specified by these Bylaws, the Articles of Incorporation or law, shall be decided or determined by the inspector of elections. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefore by a stockholder entitled to vote or his or her proxy, a stock vote shall be taken. Every stock vote shall be taken by ballot, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballot shall be counted by an inspector or inspectors appointed by the chairman of the meeting. No candidate for election as a director at a meeting shall serve as an inspector at such meeting.

            Section 1.09. Stockholder Proposals. For any stockholder proposal to be presented in connection with an annual meeting of stockholders of the Corporation (including proposals made under rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including any nomination or proposal relating to the nomination of a director to be elected to the Board of Directors of the Corporation, the stockholders must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days or more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or the tenth day following the day on which notice of the date of annual meeting was mailed or public announcement of the date of such meeting is first made. No adjournment or postponement of an annual meeting shall commence a new period for the giving of notice of a stockholder proposal hereunder. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of







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the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of stock of the Corporation which are owned beneficially and of record by such stockholders and such beneficial owner.

            Section 1.10. Informal Action by Stockholders. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if there is filed with the records of the stockholders' meetings a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at the meeting.

            Section 1.11. List of Stockholders. At each meeting of stockholders, a full, true and complete list of all stockholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the Secretary, shall be furnished by the Secretary.


ARTICLE II

BOARD OF DIRECTORS

            Section 2.01. Function of Directors, Number and Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors shall be as provided for in the Articles of Incorporation. The Board of Directors shall annually elect a Chairman of the Board and a President from among its members and shall designate, when present, either the Chairman of the Board or the President to preside at its meetings.

            The directors, other than those who may be elected by the holders of any class or series of preferred stock, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the conclusion of the first annual meeting of stockholders, the term of office of the second class to expire at the conclusion of the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the conclusion of the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified.

            Section 2.02. Vacancies and Newly Created Directorships. A vacancy on the board of Directors may be filled only in accordance with the provisions of the Articles of Incorporation. Subject to the rights of the holders of any class of stock separately entitled to elect one or more directors, a majority of the remaining directors, whether or nor sufficient to constitute a quorum, may







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fill a vacancy on the Board of Directors which results from any cause. A director so chosen by the remaining directors shall hold office until the next succeeding annual meeting of stockholders, at which time the stockholders shall elect a director to hold office for the balance of the term then remaining.

            Any director or the entire Board of Directors may be removed only in accordance with the provisions of the Articles of Incorporation.

            Section 2.03. Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required.

            Section 2.04. Special Meetings. Special meetings of the Board of Directors may be called by one-third (1/3) of the directors then in office (rounded up to the nearest whole number) or by the President and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director by whom it is not waived by mailing written notice not less than five days before the meeting or by telegraphing or telexing or by facsimile or electronic transmission of the same not less than 24 hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. No notice of any meeting of the Board of Directors need be given to any director who attends except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened, or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any special meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.

            Section 2.05. Quorum. At any meeting of the Board of Directors, a majority of the authorized number of directors then constituting the Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

            Section 2.06. Participation in Meetings By Conference Telephone. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and such participation shall constitute presence in person at such meeting.

            Section 2.07. Conduct of Business. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.








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            Section 2.08. Powers. The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:

                        (i) To declare dividends from time to time in accordance with law;

                        (ii) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

                        (iii) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;

                        (iv) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;

                        (v) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;

            (vi) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;

                        (vii) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and

                        (viii) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporation's business and affairs.

            Section 2.09. Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees (and expenses, if any) and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.

            Section 2.10. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by certified mail, return receipt requested, to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who votes in favor of such action.







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            Section 2.11. Qualifications.

            (a) In order to qualify to stand for election or to continue to serve as a director, a person must have his or her principal residence in any county in which the Corporation or any of its subsidiaries has an office.

            (b) No person shall be eligible for election or appointment to the Board of Directors if such person (i) has, within the previous 10 years, been the subject of supervisory action by a financial regulatory agency that resulted in a cease and desist order or an agreement or other written statement subject to public disclosure under 12 U.S.C. 1818 (u), or any successor provision, (ii) has been convicted of a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under state or federal law, or (iii) is currently charged in any information, indictment, or other complaint with the commission of or participation in such a crime. No person shall be eligible for election to the Board of Directors if such person is the nominee or representative of a person or group that includes a person who is ineligible for election to the Board of Directors under this Section 2.11(b). The Board of Directors shall have the power to construe and apply the provisions of this Section 2.11(b) and to make all determinations necessary or desirable to implement such provisions, including but not limited to determinations as to whether a person is a nominee or representative of a person or a group and whether a person is included in a group.


ARTICLE III

COMMITTEES

            Section 3.01. Committees of the Board of Directors. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of one or more directors and delegate to these committees any of the powers of the Board of Directors, except the power to authorize dividends on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend these Bylaws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board of Directors, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Any committee so designated may exercise the power and authority of the Board of Directors if the resolution which designated the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.







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            Section 3.02. Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings, one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee.

            Section 3.03. Nominating Committee. The Board of Directors may appoint a Nominating Committee of the Board, consisting of not less than three members, one of which shall be the President if, and only so long as, the President remains in office as a member of the Board of Directors. The Nominating Committee shall have authority (i) to review any nominations for election to the Board of Directors made by a stockholder of the Corporation pursuant to Section 1.07 of these Bylaws in order to determine compliance with such Bylaw and (ii) to recommend to the Board of Directors nominees for election to the Board of Directors to replace those directors whose terms expire at the annual meeting of stockholders next ensuing.


ARTICLE IV

OFFICERS

            Section 4.01. Generally.

            (a) The Board of Directors as soon as may be practicable after the annual meeting of stockholders shall choose a President, a Secretary and a Treasurer and from time to time may choose such other officers as it may deem proper. The President shall be chosen from among the directors. Any number of offices may be held by the same person, except no person may serve concurrently as both President and Vice President of the Corporation.

            (b) The term of office of all officers shall be until the next annual election of officers and until their respective successors are chosen, but any officer may be removed from office at any time by the affirmative vote of a majority of the authorized number of directors then constituting the Board of Directors.

            (c) All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this ARTICLE IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

            Section 4.02. President. The President shall be the chief executive officer and, subject to the control of the Board of Directors, shall have general power over the management and oversight of the administration and operation of the Corporation's business and general supervisory power and authority over its policies and affairs. The President shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.







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            Each meeting of the stockholders and of the Board of Directors shall be presided over by such officer as has been designated by the Board of Directors or, in his or her absence, by such officer or other person as is chosen at the meeting. The Secretary or, in his or her absence, the General Counsel of the Corporation or such officer as has been designated by the Board of Directors or, in his or her absence, such officer or other person as is chosen by the person presiding, shall act as secretary of each such meeting.

            Section 4.03. Vice President. The Vice President or Vice Presidents, if any, shall perform the duties of the President in the President's absence or during his or her disability to act. In addition, the Vice Presidents shall perform the duties and exercise the powers usually incident to their respective offices and/or such other duties and powers as may be properly assigned to them from time to time by the Board of Directors, the Chairman of the Board or the President.

            Section 4.04. Secretary. The Secretary or an Assistant Secretary shall issue notices of meetings, shall keep their minutes, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such offices and/or such other duties and powers as are properly assigned thereto by the Board of Directors, the Chairman of the Board or the President.

            Section 4.05. Treasurer. The Treasurer shall have charge of all monies and securities of the Corporation, other than monies and securities of any division of the Corporation which has a treasurer or financial officer appointed by the Board of Directors, and shall keep regular books of account. The funds of the Corporation shall be deposited in the name of the Corporation by the Treasurer with such banks or trust companies or other entities as the Board of Directors from time to time shall designate. The Treasurer shall sign or countersign such instruments as require his or her signature, shall perform all such duties and have all such powers as are usually incident to such office and/or such other duties and powers as are properly assigned to him or her by the Board of Directors, the Chairman of the Board or the President, and may be required to give bond, payable by the Corporation, for the faithful performance of his duties in such sum and with such surety as may be required by the Board of Directors.

            Section 4.06. Assistant Secretaries and Other officers. The Board of Directors may appoint one or more assistant secretaries and one or more assistants to the Treasurer, or one appointee to both such positions, which officers shall have such powers and shall perform such duties as are provided in these Bylaws or as may be assigned to them by the Board of Directors, the Chairman of the Board or the President.

            Section 4.07. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President, or any officer of the Corporation authorized by the President, shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other Corporation.







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ARTICLE V

STOCK
            Section 5.01. Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.

            Section 5.02. Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.06, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefore.

            Section 5.03. Record Dates or Closing of Transfer Books. The Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may not be prior to the close of business on the day the record date is fixed nor, subject to Section 1.04, more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting.

            Section 5.04. Stock Ledger. The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock or, if none, at the principal executive offices of the Corporation.

            Section 5.05. Certification of Beneficial Owners. The Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board of Directors in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.







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            Section 5.06. Lost Stock Certificates. The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation. In their discretion, the Board of Directors or such officer or officers may require the owner of the certificate to give a bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate save upon the order of some court having jurisdiction in the premises.

            Section 5.07. Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.


ARTICLE VI

FINANCE

            Section 6.01. Checks, Drafts, Etc. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall, unless otherwise provided by resolution of the Board of Directors, be signed by the Chairman of the Board, the President, a Vice-President, an Assistant Vice-President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.

            Section 6.02. Annual Statement of Affairs. The President or chief accounting officer shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the stockholders and, within 20 days after the meeting, placed on file at the Corporation's principal office.

            Section 6.03. Fiscal Year. The fiscal year of the Corporation shall be the 12 calendar months ending on December 31 in each year.

            Section 6.04. Dividends. If declared by the Board of Directors at any meeting thereof, the Corporation may pay dividends on its shares in cash, property, or in shares of the capital stock of the Corporation, unless such dividend is contrary to law or to a restriction contained in the Articles of Incorporation.

            Section 6.05. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.

            Section 6.06. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in any of its duly authorized depositories as the Board of Directors may select.







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ARTICLE VII

MISCELLANEOUS

            Section 7.01. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

            Section 7.02. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

            Section 7.03. Reliance upon Books, Reports and Records. Each director, each member of any committee designated by the Board of Directors, and each officer and agent of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any advisor, accountant, appraiser or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such expert or consultant may also be a director.

            Section 7.04. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mail, postage paid, by sending such notice by prepaid telegram or mailgram or by sending such notice by facsimile machine or other electronic transmission. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered or dispatched, if delivered through the mail, by telegram or mailgram or by facsimile machine or other electronic transmission, shall be the time of the giving of the notice.

            Section 7.05. Waivers. A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver.

            Section 7.06. Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included.







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ARTICLE VIII

AMENDMENTS

            The Bylaws of the Corporation may be adopted, amended or repealed as provided in ARTICLE 9 of the Articles of Incorporation.






































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EX-13

2000 ANNUAL REPORT

MutualFirst Financial, Inc.
Muncie, Indiana

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Mutual Federal Savings Bank Serving North and East Central Indiana

Delaware County
Muncie:
  110 East Charles Street
  2918 West Jackson Street
  4710 East Jackson Street
  Oakwood & McGallard
  2000 South Madison Street
  3613 North Broadway Avenue
  3701 West Bethel Avenue

Yorktown:
  2101 South Tiger Drive

Albany:
  401 West State Street Randolph County
Winchester:
  110 West Pearl Street
  Marsh Supermarket -
    SR 32 East

Kosclusko County
Warsaw:
  219 West Market Street
  2034 East Center Street

North Webster:
  Crystal Flash Road &
    SR 13 North Grant County
Marion:
  100 West 3^rd Street
  Wal-Mart -
    3240 B. Western Ave.

Gas City:
  1010 East Main Street

MutualFirst
Financial Inc.
www.mfsbank.com


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MUTUAL FEDERAL SAVINGS BANK

MISSION STATEMENT

       "The mission of the Bank will continue to be a growing community bank, building relationships with individuals, families and businesses by offering a broad range of innovative consumer and commercial products and services. The Bank will depend upon high quality service to set the Bank apart from all competitors. These goals are accomplished by continually focusing on employees to ensure proper training, technological competence, teamwork, motivation and rewards are provided. Shareholder value, measured by total return will be key in the decision process. The Bank is committed to the effective utilization of technology to meet customer needs. Directors, officers and staff fill roles of influence and responsibility in the communities served. The Bank will continue to build on the tradition of strength, security, stability, longevity, consistency and superior quality service."

TABLE OF CONTENTS

	Page No.
President's Message	1
Selected Consolidated Financial Information	2
Management's Discussion and Analysis of Financial   Condition and Results of Operations	4
Independent Auditor's Report	17
Consolidated Financial Statements	18
Notes to Consolidated Financial Statements	23
Shareholder Information	47
Corporate Information	48

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President's Letter
Annual Report

       MutualFirst Financial, Inc. completed its first full year as a public company in year 2000. I am pleased to bring you the Report of this first full year and I think you will be pleased with the results.

       As most of you know, we started 2000 under the name of MFS Financial, Inc. Early in 2000, we decided that a name change would be appropriate given our position in the market. MutualFirst Financial, Inc. was chosen to signify the commitment we have made to capitalize on the heritage of our business.

       At the corporate level, MutualFirst Financial, Inc. had an outstanding year. Late in 2000, MutualFirst completed a strategic alliance with Marion Capital Holdings, Inc. in Marion, Indiana. This alliance provides a winning combination for MutualFirst Financial shareholders. First, it expands the MutualFirst and Mutual Federal Savings Bank franchise. This is critical to bridging the gap between our Kosciusko County market and our Delaware County market. Marion Capital Holdings, through its subsidiary First Federal Savings Bank of Marion, enjoys the number one deposit market-share in Grant County, Indiana. First Federal of Marion also had a history of being a strong lender and was a very profitable bank. This strategic alliance is accretive to MutualFirst Financial's earnings and we look forward to enhanced performance through this alliance.

Our Grant County region is headed by Steven L. Banks, Senior Vice President and Chief Operating Officer, the former President and Chief Executive Officer of Marion Capital Holdings. Steve's leadership will ensure the successful integration of Marion Capital into our Company.

The operational conversion of Marion Capital into MutualFirst took countless hours by the officers and staff of both companies. I am pleased with the results of that transition and I am proud to say excellent customer service continued throughout this process. A successful transition like this is only possible with quality people working towards a common goal. I salute those staff members who made this happen. At Mutual Federal Savings Bank, operations produced an outstanding year in consumer lending. The general economy, as well as a commitment from our staff, created the opportunity for this substantial growth. In addition, Mutual Financial Services, a subsidiary corporation providing non-traditional investment products, had another outstanding year providing an option to bank products for customers in our markets. We also opened a new Delaware County office at 4710 E. Jackson Street in Muncie, Indiana.

Throughout 2000, we continued to make significant progress towards achieving our strategic goals. Our strategic plan has guided the activities that are described in this Report. I am proud of the accomplishments Mutual Federal Savings Bank has made in achieving its strategic objectives, and of the effort put forth by our staff in this year of change. As we look to 2001, we look to continue to make progress in our strategic objectives. Growing Mutual Federal Savings Bank continues to be a top priority. The evolving structure of MutualFirst Financial will provide us the best opportunity to continue to enhance our franchise and enhance shareholder value. I would like to thank you for your confidence in not only MutualFirst, but also Mutual Federal Savings Bank and we look forward to continuing our tradition of providing quality customer service in all our market areas.

R. Donn Roberts
President and Chief Executive Officer

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following information is only a summary and you should read it in conjunction with our financial statements and notes contained in this Annual Report.

	At or For the Year Ended December 31,
	2000	1999	1998	1997	1996
	(In Thousands)
Selected Financial Condition Data
Total assets	$770,370	$544,523	$469,515	$458,695	$434,389
Cash and cash equivalents	21,046	19,983	12,938	10,349	12,541
Loans receivable, net	639,362	442,787	398,146	399,290	378,290
Investment securities:
Available-for -sale, at market value	35,142	29,599	14,208	12,370	11,765
Held-to-maturity	10,539	12,449	11,004	10,167	8,997
Total deposits	514,710	364,604	365,999	344,860	330,235
Total borrowings	116,182	74,898	52,462	66,255	61,109
Total stockholders' equity	129,941	96,712	43,846	39,660	35,479
Selected Operations Data
Total interest income	$41,180	$34,811	$34,474	$34,085	$32,427
Total interest expense	21,645	19,242	19,690	19,082	17,851
Net interest income	19,535	15,569	14,784	15,003	14,576
Provision for loan losses	685	760	1,265	700	570
Net interest income after provision for loan losses	18,850	14,809	13,519	14,303	14,006
Service fee income	2,070	1,728	1,544	1,316	1,132
Gain on sale of loans and investment securities	144	32	807	188	12
Other non-interest income	1,402	1,091	1,077	579	763
Total non-interest income	3,616	2,851	3,428	2,083	1,907
Salaries and employee benefits	7,496	7,236	6,115	5,548	5,258
Charitable contributions	4	4,570	97	69	63
Other expenses	5,625	4,870	4,547	4,474	6,626
Total non-interest expense	13,125	16,676	10,759	10,091	11,947
Income before taxes	9,341	984	6,188	6,295	3,966
Income tax expense	3,106	138	2,049	2,160	1,266
Net income	$ 6,235	$ 846	$ 4,139	$ 4,135	$ 2,700

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	At or For the Year Ended December 31,
	2000	1999	1998	1997	1996
Ratios and Other Financial Data
Performance Ratios:
Return on average assets (ratio of net     income to average total assets)	1.09%	0.17%	0.89%	0.93%	0.64%
Return on average equity (ratio of net     income to average equity)	6.15	1.83	9.83	11.36	7.79
Interest rate spread information:
Average during the period	3.09	3.24	3.21	3.34	3.42
Net interest margin(1)	3.71	3.41	3.42	3.58	3.66
Ratio of operating expense to average     total assets	2.30	3.35	2.31	2.28	2.84
Ratio of average interest-earning assets     to average interest-bearing liabilities	115.17	104.05	104.56	405.18	105.45
Efficiency ratio(2)	56.69	90.53	59.08	59.06	72.48
Asset Quality Ratios:
Non-performing assets to total assets     at end of period	0.56	0.30	0.29	0.62	0.49
Non-performing loans to total loans	0.53	0.17	0.28	0.19	0.40
Allowance for loan losses to non-     performing loans	189.13	467.61	307.36	406.71	193.65
Allowance for loan losses to loans     receivable, net	1.01	0.82	0.85	0.77	0.78
Capital Ratios:
Equity to total assets at end of period	16.87	17.76	9.34	8.65	8.16
Average equity to average assets	17.81	9.29	9.06	8.22	8.24
Average common shares outstanding	5,558,337
Per share:
Earnings	$1.12
Dividends	0.28
Dividend payout ratio(3)	25.00%
Other Data:
Number of full-service offices	17	13	12	12	11

(1)   Net interest income divided by average interest-earning assets.
(2)   Total non-interest expense divided by net interest income plus total non-interest income.
(3)   Dividends per share divided by earnings per share.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

       MutualFirst Financial, Inc., a Maryland corporation, is a savings and loan holding company which has as its wholly-owned subsidiary Mutual Federal Savings Bank. MFS Financial, Inc. was formed in September 1999 to become the holding company of Mutual Federal in connection with Mutual Federal's conversion from mutual to stock form of organization on December 29, 1999. In April 2000, MFS Financial, Inc. formally changed its corporate name to MutualFirst Financial, Inc. ("MutualFirst") The words "we," "our" and "us" refer to MutualFirst and Mutual Federal on a consolidated basis, except that references to us prior to December 29, 1999 refer only to Mutual Federal.

       Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one-to-four family residences and in a variety of consumer loans. We also originate loans secured by commercial and multi-family real estate, commercial business loans and construction loans secured primarily by residential real estate. We are headquartered in Muncie, Indiana with 17 retail offices primarily serving Delaware, Randolph, Kosciusko, and Grant counties in Indiana. We also originate mortgage loans in contiguous counties and we originate indirect consumer loans throughout Indiana and western Ohio.

       The following discussion is intended to assist your understanding of our financial condition and results of operations. The information contained in this section should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements.

       Our results of operations depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, which principally consist of loans and mortgage-backed and investment securities, and interest expense on interest-bearing liabilities, which principally consist of deposits and borrowings. Our results of operations also are affected by the level of our noninterest income and expenses and income tax expense.

Forward-Looking Statements

       This discussion contains various forward-looking statements which are based on assumptions and describe our future plans and strategies and our expectations. These forward-looking statements are generally identified by words such as "believe," "expect," "intend," "anticipate," "estimate," "project," or similar words. Our ability to predict results or the actual effect of future plans or strategies is uncertain. Factors which could cause actual results to differ materially from those estimated include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of our loan and investment portfolios, demand for our loan products, deposit flows, our operating expenses,

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competition, demand for financial services in our market areas and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely too much on these statements. We do not undertake, and specifically disclaim any obligation, to publicly revise any forward looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Management Strategy

       Our strategy is to operate as an independent, retail oriented financial institution dedicated to serving customers in our market areas. Our commitment is to provide a broad range of products and services to meet the needs of our customers. As part of this commitment, we are looking to increase our emphasis on commercial business products and services. We have also created a fully interactive transactional website. In addition, we are continually looking at cost-effective ways to expand our market area.

       Financial highlights of our strategy include:

• Continuing as a Diversified Lender. We have been successful in diversifying our loan portfolio to reduce our reliance on any one type of loan. From 1995 through 1999 approximately 32% of our loan portfolio has consisted of loans other than one- to four family real estate loans. At the end of 2000 that percentage had increased to 39.8%.
• Continuing as a Leading One-to Four-Family Lender. We are one of the largest originators of one-to four-family residential loans in our four county market area. During 2000, we originated $52.1 million of one- to four-family residential loans.
• Continuing Our Strong Asset Quality. Since 1994, our ratio of non-performing assets to total assets has not exceeded .62% and at December 31, 2000 this ratio was .56%.
• Continuing Our Strong Capital Position. As a result of our conservative risk management and consistent profitability, we have historically maintained a strong capital position. At December 31, 2000, our ratio of stockholders' equity to total assets was 16.9%.

Asset and Liability Management and Market Risk

       Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

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       How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

       In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on our results of operations, we adopted asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Mutual Federal's board of directors sets and recommends asset and liability policies which are implemented by the asset and liability management committee. The asset and liability management committee is chaired by the chief financial officer and is comprised of members of our senior management. The purpose of the asset and liability management committee is to communicate, coordinate and control asset/liability management consistent with our business plan and board approved policies. This committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources consistent with liquidity, capital adequacy, growth, risk and profitability goals. The asset and liability management committee generally meets monthly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to net present value of portfolio equity analysis and income simulations. At each meeting, the asset and liability management committee recommends appropriate strategy changes based on this review. The chief financial officer or his designee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the board of directors, at least quarterly.

       In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we have sought to:

• originate and purchase adjustable rate mortgage loans and commercial business loans,
• originate shorter-term consumer loans,
• manage our deposits to establish stable deposit relationships,
• acquire longer-term borrowings at fixed rates, when appropriate, to offset the negative impact of longer-term fixed rate loans in our loan portfolio, and
• limit the percentage of fixed-rate loans in our portfolio.

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       Depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the asset and liability management committee may increase our interest rate risk position somewhat in order to maintain our net interest margin. We intend to increase our emphasis on the origination of relatively short-term and/or adjustable rate loans. In addition, in an effort to maintain our limit on the percentage of fixed-rate loans, in 2000, we sold $7.9 million of fixed rate, one- to four-family mortgage loans in the secondary market.

       The asset and liability management committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by our board of directors.

       The Office of Thrift Supervision provides Mutual Federal with the information presented in the following tables. The tables present the change in our net portfolio value at December 31, 2000 and 1999 that would occur upon an immediate and sustained change in market interest rates of 100 to 300 basis points as required by the Office of Thrift Supervision, and do not give any effect to any steps that management might take to counteract that change.

December 31, 2000
Net Portfolio Value

Changes In Rates	$ Amount	$ Change	% Change	NPV as % of PV of Assets
				NPV Ratio	Change
+300 bp	75,363	-29,160	-28%	10.47%	-323 bp
+200 bp	85,950	-18,753	-18%	11.69%	-201 bp
+100 bp	95,979	-8,764	-8%	12.79%	-91 bp
0 bp	104,743			13.70%
-100 bp	110,794	6,051	6%	14.28%	58 bp
-200 bp	115,006	10,263	10%	14.63%	93 bp
-300 bp	121,141	16,398	16%	15.18%	148 bp

December 31, 1999
Net Portfolio Value

Changes In Rates	$ Amount	$ Change	% Change	NPV as % of PV of Assets
				NPV Ratio	Change
+300 bp	41,797	-29,979	-42%	8.40%	-498 bp
+200 bp	52,208	-19,568	-27%	10.23%	-316 bp
+100 bp	62,435	-9,341	-13%	11.92%	-147 bp
0 bp	71,776			13.39%
-100 bp	79,142	7,366	10%	14.48%	+109 bp
-200 bp	84,484	12,709	18%	15.21%	+182 bp
-300 bp	88,638	16,862	23%	15.74%	+236 bp

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       The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market value of certain assets under differing interest rate scenarios, among others.

       As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the tables.

Financial Condition at December 31, 2000 Compared to December 31, 1999

       General. Our total assets increased by $225.9 million, or 41.5%, to $770.4 million at December 31, 2000 from $544.5 million at December 31, 1999. The increase was mainly due to an increase in net loans of $196.6 million, or 44.4% and an increase in cash surrender value of life insurance of $12.2 million or 113.3%. These increases were funded primarily by an increase of $150.1 million in total deposits and $41.3 million in borrowed funds. Most of these increases resulted from the merger with Marion Capital Holdings, Inc., which was approved by our shareholders on December 8, 2000.

       Loans. Our net loan portfolio increased from $442.8 million at December 31, 1999 to $639.4 million at December 31, 2000. The increase in the loan portfolio over this time period was due primarily to the merger with Marion Capital which had a $163.7 million loan portfolio. The loan portfolio increased most in the one-to-four family category, from $286.6 million at December 31, 1999 to $388.9 million at December 31, 2000. All other loan categories increased from $163.2 million at December 31, 1999 to $259.9 million at December 31, 2000.

       Allowance for Loan Losses. The allowance for loan losses increased to $6.5 million at December 31, 2000 from $3.7 million at December 31, 1999 an increase of $2.8 million or 75.7%. Net charge-offs were $1.0 million during the year ended 2000 as compared to net charge-offs of $532,000 for 1999. An additional $3.2 million allowance was acquired as a result of the merger with Marion Capital. This, along with a $685,000 loan loss provision during 2000, resulted in the allowance for loan losses as a percentage of total loans increasing to 1.01% at December 31, 2000 compared to .82% at December 31, 1999. The allowance for loan losses as a percentage of non-performing loans was 189.1% and 467.6% at December 31, 2000 and December 31, 1999, respectively. Non-performing loans were $3.4 million or .53% of total loans at December 31, 2000 compared to $781,000 or .17% at December 31, 1999.

       Securities. Investment securities amounted to $42.0 million at December 31, 1999 and $45.7 million at December 31, 2000 or an 8.8% increase.

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       Liabilities. Our total liabilities increased $196.6 million, or 43.0%, to $640.4 million at December 31, 2000 from $447.8 million at December 31, 1999. This increase was due primarily to an increase in deposits of $150.1 million and an increase in borrowed funds of $41.3 million. Deposits from Marion Capital at the merger date were $134.0 million and borrowed funds were $30.0 million.

       Stockholders' Equity. Stockholders' equity increased $33.2 million from $96.7 million at December 31, 1999 to $129.9 million at December 31, 2000. The increase was primarily due to stock issued in the Marion Capital acquisition net of costs of $27.6 million and net income for 2000 of $6.2 million. These increases were partially offset by dividend payments of $1.5 million.

Financial Condition at December 31, 1999 Compared to December 31, 1998

       General. Our total assets increased by $75 million, or 16%, to $544.5 million at December 31, 1999 from $469.5 million at December 31, 1998. The increase was mainly due to an increase in net loans of $44.6 million, or 11.2%, an increase in investment securities of $16.8 million, or 66.8%, and an increase in cash for Y2K preparation of $7.8 million, or 69%. These increases were funded primarily by an increase of $22.4 million in borrowed funds and the net proceeds of $49.9 million from our stock offering as part of the Bank's mutual-to-stock conversion.

       Loans. Our net loan portfolio increased from $398.1 million at December 31,1998 to $442.8 million at December 31, 1999. The increase in the loan portfolio over this time period was due to continued strong loan demand caused by a combination of a strong economy and low interest rates. The loan portfolio increased most in the one- to four-family category, from $264.5 million at December 31, 1998 to $286.6 million at December 31, 1999 and in the RV/Boat loan category from $42.7 million at December 31, 1998 to $58.0 million at December 31, 1999.

       Securities. Investment securities amounted to $25.2 million at December 31, 1998 and $42.0 million at December 31, 1999. The increase of $16.8 million, or 66.7%, was primarily due to the investment of a portion of the conversion proceeds.

       Liabilities. Our total liabilities increased $22.1 million, or 5.2% to $447.8 million at December 31, 1999 from $425.7 million at December 31, 1998. This increase was due primarily to an increase in borrowed funds of $22.4 million.

       Stockholders' Equity. Stockholders' equity increased $52.9 million from $43.8 million at December 31, 1998 to $96.7 million at December 31, 1999. The increase was primarily due to net proceeds from our stock offering of $49.9 million, stock contributed to the charitable foundation of $2.2 million and net income for 1999 of $846,000. These increases were partially offset by a decrease in the unrealized gains on securities available for sale of $328,000.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

       The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are daily average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

	Year ended December 31,
	2000			1999			1998
	Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate
Interest-Earning Assets:
Interest-bearing deposits	$ 1,003	$ 56	5.58%	$3,664	$161	4.39%	$7,330	$358	4.88%
Trading account securities	186	9	4.84	1,134	67	5.91	337	20	5.93
Mortgage-backed securities:
Available-for-sale(1)	13,637	931	6.83	5,006	323	6.45	4,575	329	7.19
Investment securities:
Available-for-sale(1)	18,530	1,243	6.71	8,294	470	5.67	7,001	416	5.94
Held-to-maturity	11,423	673	5.89	12,365	733	5.93	9,642	584	6.06
Loans receivable(2)	475,912	37,811	7.94	422,611	32,739	7.75	399,982	32,488	8.12
Stock in FHLB of Indianapolis	5,464	457	8.36	3,926	318	8.10	3,612	279	7.72
Total interest-earning assets	526,155	41,180	7.83	457,000	34,811	7.62	432,479	34,474	7.97
Non-interest earning assets,       net of allowance for loan       losses and unrealized       gain/loss	43,583			40,162			32,362
Total assets	$569,738			$497,162			$464,841
Interest-Bearing Liabilities:
Demand and NOW accounts	$ 56,288	516	0.92	$ 54,122	553	1.02	$ 49,646	745	1.50
Savings deposits	39,842	845	2.12	42,709	853	2.00	41,332	1,038	2.51
Money market accounts	33,310	1,369	4.11	29,299	1,056	3.60	16,442	560	3.41
Certificate accounts	261,693	14,813	5.66	252,452	13,392	5.30	250,953	14,100	5.62
Total deposits	391,133	17,543	4.49	378,582	15,854	4.19	358,373	16,443	4.59
Borrowings	65,728	4,101	6.24	60,620	3,388	5.59	55,234	3,247	5.88
Total interest-bearing accounts	456,861	21,644	4.74	439,202	19,242	4.38	413,607	19,690	4.76
Other liabilities	11,419			11,767			9,115
Total liabilities	468,280			450,969			422,722
Stockholders' equity	101,458			46,193			42,119
Total liabilities and       stockholders' equity	$569,738			$497,162			$464,841
Net earning assets	$69,294			$17,798			$18,872
Net interest income		$19,536			$15,569			$14,784
Net interest rate spread			3.09%			3.24%			3.21%
Net yield on average interest-     earning assets			3.71%			3.41%			3.42%
Average interest-earning assets     to average interest-bearing     liabilities	115.17%			104.05%			104.56%

(1) Average balances were calculated using amortized cost, which excludes FASB 115 valuation allowances.
(2) Calculated net of deferred loan fees, loan discounts and loans in process.

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Rate/Volume Analysis

       The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the old rate, and (2) changes in rate, which are changes in rate multiplied by the old volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	Year Ended December 31,
	2000 vs. 1999			1999 vs. 1998
	Increase (decrease) Due to		Total Increase (decrease)	Increase (decrease) Due to		Total Increase (decrease)
	Volume	Rate		Volume	Rate
Interest-earning assets:
Interest-bearing deposits	$( 140)	$35	$( 105)	$( 164)	$( 33)	$( 197)
Trading account securities	(48)	(10)	(58)	47	---	47
Mortgage-backed securities	588	20	608	29	(35)	(6)
Investment securities:
Available-for-sale	673	100	773	74	(20)	54
Held-to-maturity	(56)	(4)	(60)	162	(13)	149
Loans receivable	4,217	855	5,072	1,791	(1,540)	251
Stock in FHLB of Indianapolis	128	11	139	25	15	40
Total interest-earning assets	$5,362	$1,007	6,369	$1,964	($1,626)	338
Interest-bearing liabilities:
Savings deposits	$( 59)	$51	( 8)	$36	$( 309)	(273)
Money market accounts	155	158	313	462	34	496
Demand and NOW accounts	21	(58)	(37)	62	(254)	(192)
Certificate accounts	502	919	1,421	83	(703)	(620)
Borrowings	299	414	713	306	(165)	141
Total interest-bearing liabilities	$ 918	$1,484	2,402	$ 949	($1,397)	(448)
Change in net interest income			$3,967			$ 786

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Comparison of Results of Operations for the Years Ended December 31, 2000 and 1999

       General. Net income for the year ended December 31, 2000 increased $5.4 million to $6.2 million compared to $846,000 for the year ended December 31, 1999. The increase in net income was primarily due to the lack of nonrecurring charges in 2000 compared to a one-time nonrecurring $4.5 million contribution in 1999 to the Mutual Federal Savings Bank Charitable Foundation, Inc. made in connection with the stock conversion.

       Net Interest Income. Net interest income increased $3.9 million, or 25%, to $19.5 million for 2000 from $15.6 million for 1999 reflecting a $6.4 million or 18.3% increase in interest income and a $2.4 million or 12.5% increase in interest expense. Our interest rate spread decreased to 3.09% for 2000 from 3.24% for 1999, primarily due to rising market interest rates. Offsetting the decrease in spread, the ratio of average interest earning assets to average interest bearing liabilities increased to 115.17% for 2000 from 104.05% for 1999.

       Interest Income. The increase in interest income during the year ended December 31, 2000 was due to an increase in the average balance of interest earning assets (primarily from December, 1999 stock conversion proceeds) and a higher yield. The average balance of the loan portfolio increased $53.3 million or 12.6% to $476 million for 2000 from $422.6 million for 1999 primarily due to increases in the consumer and commercial loan products due to strong demand. The average yield on our loan portfolio increased from 7.75% in 1999 to 7.94% in 2000 primarily due to higher market rates of interest in non-mortgage related products.

       Interest Expense. The increase in interest expense during the year ended December 31, 2000 was primarily due to an increase in the average rate paid on deposits and borrowed funds from 4.38% in 1999 to 4.74% in 2000. Also, average balances of borrowings and deposits increased from $439.2 million in 1999 to $456.9 million in 2000.

       Provision for Loan Losses. For the year ended December 31, 2000, the provision for loan losses amounted to $685,000 compared to a provision for loan losses in 1999 of $760,000. The 2000 provision and the allowance for loan losses were considered adequate based on size, condition and components of the loan portfolio, past history of loan losses and peer comparisons.

       Other Income. Other income amounted to $3.6 million and $2.9 million for the years ended December 31, 2000 and 1999, respectively. For the year 2000, service fee income was $2.1 million compared to $1.7 million for 1999 representing an increase of $342,000 or 19.8%. This increase was primarily due to higher fees collected as a result of increased volumes in checking account activity. Net gains on loan sales in 2000 were $144,000; there were no sales in 1999.

       Other Expenses. Total operating expenses increased to $13.1 million for 2000 compared to $12.1 million, exclusive of the $4.5 million contribution to the foundation, for the year 1999 representing an increase of $948,000 or 7.8%. This increase was primarily attributed to a $763,000 or 22.5% increase in data processing fees, advertising and promotion, ATM expenses and other expenses. These increases were due to normal growth and increased activity relating to delivery channels, such as more ATM's and an on-line transactional Internet web site.

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       Income Tax Expense. Income tax expense increased $3.0 million from 1999 to 2000. This variation in income tax expense is directly related to taxable income and the low income housing income tax credits earned during those years. The effective tax rate was 33.2% and 14.1% for 2000 and 1999, respectively. The effective rate increased in 2000 as compared to 1999 because the low-income housing income tax credits remained relatively constant while the level of income increased.

Comparison of Results of Operations for the Years Ended December 31, 1999 and 1998

       General. Net income for year ended December 31, 1999 decreased $3.3 million to $846,000 compared to $4.1 million for the year ended December 31, 1998. The decline in net income was primarily due to a one-time nonrecurring $4.5 million contribution to the Mutual Federal Savings Bank Charitable Foundation, Inc. made in connection with the stock conversion.

       Net Interest Income. Net interest income increased $786,000, or 5.3%, to $15.6 million for 1999 from $14.8 million for 1998 reflecting a $448,000 or 2.3% decrease in interest expense and a $338,000 or 1% increase in interest income. Our interest rate spread increased to 3.24% for 1999 from 3.21% for 1998. In addition, the ratio of average interest earning assets to average interest bearing liabilities decreased to 104.05% for 1999 from 104.56% for 1998.

       Interest Income. The increase in interest income during the year ended December 31, 1999 was due to an increase in the average balance of interest earning assets partially offset by a lower yield. The average balance of the loan portfolio increased $22.6 million or 5.7% to $422.6 million for 1999 from $400 million for 1998 due to continued strong loan demand. The average yield on our loan portfolio decreased from 8.12% in 1998 to 7.75% in 1999 primarily due to continued refinancing activity resulting from lower market rates of interest.

       Interest Expense. The decrease in interest expense during the year ended December 31, 1999 was primarily due to a reduction in the average rate paid on deposits and borrowed funds from 4.76% in 1998 to 4.38% in 1999. This was partially offset by an increase in the average balances of borrowings and deposits from $413.6 million in 1998 to $439.2 million in 1999.

       Provision for Loan Losses. For the year ended December 31, 1999, the provision for loan losses amounted to $760,000 compared to a provision for loan losses in 1998 of $1.3 million. The decrease was primarily due to a $500,000 provision for loans in litigation in 1998 with no corresponding provision in 1999.

       Other Income. Other income amounted to $2.9 million and $3.4 million for the years ended December 31, 1999 and 1998, respectively. For the year 1999, service charges and fee income was $1.7 million compared to $1.5 million for 1998 representing an increase of $200,000 or 13.3%. This increase was primarily due to higher fees collected as a result of increased volumes in checking account activity. Net gains on loan sales in 1998 were $806,000; there were no loan sales in 1999.

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       Other Expenses. Exclusive of the $4.5 million contribution to the foundation, total operating expenses increased to $12.2 million for 1999 compared to $10.8 million for year 1998 representing an increase of $1.4 million or 13%. This increase was primarily attributed to a $1.1 million increase in salaries and employee benefits due to a full year of expense for the employee stock ownership plan in the fourth quarter, an increased bank-wide incentive bonus, increased retirement benefit cost and staff expansion in branches and business banking activity. Additionally, equipment expenses increased to $829,000 for 1999 from $613,000 for 1998 primarily due to a change in the estimated useful life of certain data processing equipment.

       Income Tax Expense. Income tax expense decreased $1.9 million, or 93.3%, from 1998 to 1999. This variation in income tax expense is directly related to taxable income and the low income housing income tax credits earned during those years. The effective tax rate was 14% and 33.1% for 1999 and 1998, respectively. The effective rate declined in 1999 as compared to 1998 because the low-income housing income tax credits remained relatively constant while the level of income declined. The effective tax rate is expected to increase in future periods.

Liquidity and Commitments

       Mutual Federal is required to maintain minimum levels of investments that qualify as liquid assets under Office of Thrift Supervision regulations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets at levels above the minimum requirements imposed by Office of Thrift Supervision regulations and above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained. At December 31, 2000, our regulatory liquidity ratio, which is our liquid assets as a percentage of net withdrawable savings deposits with a maturity of one year or less and current borrowings, was 10.46%, which exceeded OTS requirements.

       Our liquidity, represented by cash and cash equivalents, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. We also generate cash through borrowings. We utilize Federal Home Loan Bank advances to leverage our capital base and provide funds for our lending and investment activities, and to enhance our interest rate risk management.

       Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits or U.S. Agency securities. We use our sources of funds primarily to meet our ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed securities and investment securities. At December 31, 2000, the total approved loan origination commitments outstanding amounted to $9.0 million. At the same date, the unadvanced portion of construction loans was $5.1 million. At December 31, 2000, unused lines of credit totaled $43.5 million and outstanding letters of credit totaled $3.5 million. As of December 31, 2000, certificates of deposit scheduled to mature in one year or less totaled $218.0 million, and investment and mortgage-backed securities scheduled to mature in one year or less totaled $3.0 million. Based on historical experience, management believes that a significant portion of maturing deposits will remain with us. We anticipate that we will continue to have sufficient funds, through deposits and borrowings, to meet our current commitments.

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Capital

       Consistent with our goals to operate a sound and profitable financial organization, Mutual Federal actively to remain a "well capitalized" institution in accordance with regulatory standards. Total stockholders' equity of MutualFirst Financial, Inc. was $129.9 million at December 31, 2000, or 16.87% of total assets on that date. As of December 31, 2000, Mutual Federal exceeded all capital requirements of the Office of Thrift Supervision, with regulatory capital ratios as follows: core capital 13.6%; Tier I risk-based capital, 19.7%; and total risk-based capital, 20.7%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0% and 10.0%, respectively.

Impact of Accounting Pronouncements

       In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and hedging activities. The Statement requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Statement is effective for our financial statements for all fiscal quarters for the fiscal year ending December 31, 2001. Management believes that the adoption of this Statement is not expected to have a material impact on our consolidated financial statements.

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Impact of Inflation

       Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

       Our primary assets and liabilities are monetary in nature. As a result, interest rates affect our performance more than general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturity structure of our assets and liabilities are critical to the maintenance of acceptance performance levels.

       The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of noninterest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment cost may increase because of inflation. Inflation also may increase the dollar value of the collateral securing loans that we have made. We are unable to determine the extent to which properties securing our loans have appreciated in dollar value due to inflation.

Selected Quarterly Financial Information

       The following table sets forth certain quarterly results for the years ended December 31, 2000 and 1999. Earnings per share information for the periods before Mutual Federal's conversion to stock savings bank on December 29, 1999 is not meaningful and is therefore not provided in the table below.

Quarter Ended	Interest Income	Interest Expense	Net Interest Income	Provision For Loan Losses	Net Income	Basic Earnings per Common Share	Diluted Earnings per Common Share
2000
March	$ 9,538	$ 4,738	$ 4,800	$172	$1,507	$0.28	$0.28
June	9,883	4,984	4,899	171	1,569	0.29	0.29
September	10,270	5,586	4,684	171	1,462	0.27	0.27
December	11,489	6,337	5,152	171	1,697	0.28	0.28
Total	$41,180	$21,645	$19,535	$685	$6,235	1.12	1.12
1999
March	$ 8,247	$ 4,604	$ 3,643	$190	$967
June	8,499	4,647	3,852	190	956
September	8,570	4,837	3,733	190	951
December	9,495	5,154	4,341	190	(2,028)
Total	$34,811	$19,242	$15,569	$760	$846

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Independent Auditor's Report

Board of Directors
MutualFirst Financial, Inc. and Subsidiary
Muncie, Indiana

We have audited the accompanying consolidated balance sheet of MutualFirst Financial, Inc. and subsidiary (formerly MFS Financial, Inc.) as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements described above present fairly, in all material respects, the consolidated financial position of MutualFirst Financial, Inc. and subsidiary as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with generally accepted accounting principles.

Olive LLP

Indianapolis, Indiana
February 8, 2001

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MutualFirst Financial, Inc. and Subsidiary
Consolidated Balance Sheet

December 31	2000	1999
Assets
Cash and due from banks	$ 19,913,870	$ 19,217,186
Interest-bearing demand deposits	1,132,187	765,945
Cash and cash equivalents	21,046,057	19,983,131
Trading assets, at fair value		1,234,884
Investment securities
Available for sale	35,141,744	29,598,800
Held to maturity (fair value of $10,413,000 and $12,016,000)	10,539,129	12,449,013
Total investment securities	45,680,873	42,047,813
Loans held for sale	3,913,328
Loans, net of allowance for loan losses of $6,472,430 and $3,652,073	639,362,186	442,786,919
Premises and equipment	9,042,462	7,800,460
Federal Home Loan Bank stock	6,993,400	5,338,500
Investment in limited partnerships	6,437,467	5,274,840
Cash surrender value of life insurance	23,055,091	10,806,957
Foreclosed assets	844,438	728,737
Interest receivable	4,313,175	2,652,959
Core deposit intangibles and goodwill	1,249,874	1,466,928
Deferred income tax benefit	5,407,532	2,670,886
Other assets	3,023,719	1,730,426
Total assets	$770,369,602	$544,523,440
Liabilities
Deposits
Noninterest-bearing	$ 24,485,387	$ 14,360,929
Interest-bearing	490,224,150	350,243,469
Total deposits	514,709,537	364,604,398
Securities sold under repurchase agreements		840,000
Federal Home Loan Bank advances	112,542,194	72,289,384
Notes payable	3,639,751	1,768,354
Advances by borrowers for taxes and insurance	1,452,149	1,289,179
Interest payable	1,372,452	2,153,475
Other liabilities	6,712,127	4,866,330
Total liabilities	640,428,210	447,811,120
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par value
Authorized and unissued--5,000,000 shares
Common stock, $.01 par value
Authorized--20,000,000 shares
Issued and outstanding--8,379,447 and 5,819,611 shares	83,794	58,196
Additional paid-in capital	84,553,285	56,740,190
Retained earnings	49,380,571	44,647,767
Accumulated other comprehensive income (loss)	55,528	(284,047)
Unearned employee stock ownership plan (ESOP) shares	(4,131,786)	(4,449,786)
Total stockholders' equity	129,941,392	96,712,320
Total liabilities and stockholders' equity	$770,369,602	$544,523,440

See notes to consolidated financial statements.

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MutualFirst Financial, Inc. and Subsidiary
Consolidated Statement of Income

Year Ended December 31	2000	1999	1998
Interest and Dividend Income
Loans receivable	$37,810,620	$32,739,166	$32,488,310
Trading account securities	8,192	66,535	19,983
Investment securities
Mortgage-backed securities	931,267	323,266	329,093
Federal Home Loan Bank stock	457,271	317,938	277,765
Other investment securities	1,916,417	1,203,727	999,945
Deposits with financial institutions	56,116	160,812	358,346
Total interest and dividend income	41,179,883	34,811,444	34,473,442
Interest Expense
Deposits	17,543,506	15,854,093	16,442,842
Federal Home Loan Bank advances	4,095,843	3,350,567	3,223,168
Other interest expense	5,497	37,598	23,685
Total interest expense	21,644,846	19,242,258	19,689,695
Net Interest Income	19,535,037	15,569,186	14,783,747
Provision for loan losses	685,000	760,000	1,265,000
Net Interest Income After Provision for Loan Losses	18,850,037	14,809,186	13,518,747
Other Income
Service fee income	2,070,326	1,728,487	1,544,398
Net realized gains on sales of available-for-sale securities		32,326	1,000
Net trading assets profit (loss)	25,116	(189,741)	24,922
Equity in losses of limited partnerships	(209,948)	(11,702)	(14,435)
Commissions	560,831	486,706	420,414
Net gains on loan sales	143,791		805,676
Increase in cash surrender value of life insurance	589,389	490,957	383,856
Other income	436,146	314,817	262,302
Total other income	3,615,651	2,851,850	3,428,133
Other Expenses
Salaries and employee benefits	7,496,211	7,235,933	6,115,471
Net occupancy expenses	692,132	655,494	636,396
Equipment expenses	782,116	829,058	613,329
Data processing fees	559,631	472,621	479,001
Advertising and promotion	462,230	412,604	462,632
Automated teller machine expense	457,356	228,162	133,837
Charitable contributions	3,800	4,569,937	97,116
Other expenses	2,671,140	2,272,841	2,220,878
Total other expenses	13,124,616	16,676,650	10,758,660
Income Before Income Tax	9,341,072	984,386	6,188,220
Income tax expense	3,105,850	138,004	2,049,000
Net Income	$ 6,235,222	$ 846,382	$ 4,139,220
Earnings per Share
Basic	$1.12
Diluted	$1.12

See notes to consolidated financial statements. 19NEXT PAGE





MutualFirst Financial, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity

	Common Stock		Additional Paid-in Capital	Compre- hensive Income	Retained Earnings	Accumu- lated Other Compre- hensive Income (Loss)	Unearned ESOP Shares	Total
	Shares Outstanding	Amount
Balances, January 1, 1998					$39,662,165	$ (2,505)		$39,659,660
Comprehensive income
Net income				$4,139,220	4,139,220			4,139,220
Other comprehensive income,       net of tax
Unrealized gains on         securities, net of         reclassification adjustment				46,916		46,916		46,916
Comprehensive income				$4,186,136
Balances, December 31, 1998					43,801,385	44,411		43,845,796
Comprehensive income
Net income				$846,382	846,382			846,382
Other comprehensive loss,       net of tax
Unrealized losses on       securities, net of       reclassification       adjustment				(328,458)		(328,458)		(328,458)
Comprehensive income				$517,924
Stock issued in conversion,     net of costs	5,595,780	$55,958	$54,510,552					54,566,510
Stock contributed to charitable     foundation	223,831	2,238	2,236,072					2,238,310
Contribution of unearned    ESOP shares							$(4,655,680)	(4,655,680)
ESOP shares earned			(6,434)				205,894	199,460
Balances, December 31, 1999	5,819,611	58,196	56,740,190		44,647,767	(284,047)	(4,449,786)	96,712,320
Comprehensive income
Net income				$6,235,222	6,235,222			6,235,222
Other comprehensive income,       net of tax
Unrealized gains on       securities				339,575		339,575		339,575
Comprehensive income				$6,574,797
Cash dividends ($.28 per share)					(1,502,418)			(1,502,418)
Exercise of stock options	18,774	188	203,886					204,074
Stock issued in acquisition,     net of costs	2,541,062	25,410	27,567,304					27,592,714
ESOP shares earned			41,905				318,000	359,905
Balances, December 31, 2000	8,379,447	$83,794	$84,553,285		$49,380,571	$55,528	$(4,131,786)	$129,941,392

See notes to consolidated financial statements.

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MutualFirst Financial, Inc. and Subsidiary
Consolidated Statement of Cash Flows

Year Ended December 31	2000	1999	1998
Operating Activities
Net income	$ 6,235,222	$ 846,382	$ 4,139,220
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	685,000	760,000	1,265,000
Common stock contributed to charitable foundation		2,238,310
Securities gains		(32,326)	(1,000)
Net loss on disposal of premise and equipment			19,301
Net loss on sale of real estate owned		58,676	137,112
Securities amortization, net	(28,121)	(15,813)	(26,390)
ESOP shares earned	359,905	199,460
Equity in losses of limited partnerships	209,948	11,702	14,435
Amortization of net loan origination costs	1,600,778	1,371,722	842,251
Amortization of core deposit intangibles and goodwill	217,054	235,537	246,194
Depreciation and amortization	815,394	802,486	570,184
Deferred income tax	1,324,430	(1,418,864)	282,942
Loans originated for sale	(11,779,434)		(16,295,533)
Proceeds from sales on loans held for sale	8,009,898		35,447,044
Gains on sales of loans held for sale	(65,130)		(548,491)
Change in
Trading account securities	1,234,884	(1,234,884)
Interest receivable	(916,078)	(466,407)	192,210
Other assets	(119,882)	573,417	(847,971)
Interest payable	(896,500)	(174,491)	(141,538)
Other liabilities	(1,510,608)	1,246,392	(542,445)
Increase in cash surrender value of life insurance	(589,389)	(490,957)	(383,856)
Other adjustments			6,646
Net cash provided by operating activities	4,787,371	4,510,342	24,375,315
Investing Activities
Purchases of securities available for sale	(3,489,519)	(25,866,267)	(7,016,986)
Proceeds from maturities and paydowns of securities available for sale	2,186,922	1,711,883	2,150,076
Proceeds from sales of securities available for sale		8,252,785	4,115,510
Purchases of securities held to maturity		(8,463,897)	(11,793,604)
Proceeds from maturities and paydowns of securities held to maturity	1,893,239	7,021,088	10,973,718
Net change in loans	(36,317,394)	(47,744,581)	(20,685,925)
Purchases of premises and equipment	(1,442,449)	(874,377)	(1,461,965)
Proceeds from real estate owned sales	1,822,824	266,798	1,565,489
Purchase of FHLB of Indianapolis stock		(1,726,100)
Purchase of interest in limited partnership			(2,085,000)
Distribution from (to) limited partnership	42,027	(20,746)	55,074
Purchases of insurance contracts		(966,000)	(3,000,000)
Cash received in acquisition, net	6,362,718		309,413
Other investing activities	(800,967)	(36,319)	(22,778)
Net cash used by investing activities	(29,742,599)	(68,445,733)	(26,896,978)
Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits	(4,841,526)	1,275,554	23,571,794
Certificates of deposits	20,938,838	(2,670,565)	(2,784,446)
Securities sold under repurchase agreements	(840,000)	840,000
Repayment of note payable	(61,358)	(61,357)	(25,566)
Proceeds from FHLB advances	282,000,000	157,000,000	53,700,000
Repayment of FHLB advances	(269,855,188)	(135,342,923)	(69,322,214)
Net change in advances by borrowers for taxes and insurance	(24,268)	28,881	(28,351)
Proceeds from sale of common stock, net of costs		49,910,830
Proceeds from stock options exercised	204,074
Cash dividends	(1,502,418)
Net cash provided by financing activities	26,018,154	70,980,420	5,111,217

See notes to consolidated financial statements.

(Continued)

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MutualFirst Financial, Inc. and Subsidiary
Consolidated Statement of Cash Flows

Year Ended December 31	2000	1999	1998
Net Change in Cash and Cash Equivalents	1,062,926	7,045,029	2,589,554
Cash and Cash Equivalents, Beginning of Year	19,983,131	12,938,102	10,348,548
Cash and Cash Equivalents, End of Year	$21,046,057	$19,983,131	$12,938,102
Additional Cash Flows Information
Interest paid	$22,425,869	$19,416,749	$19,831,233
Income tax paid	2,042,000	1,716,402	2,524,700
Transfers from loans to foreclosed real estate	1,307,005	971,983	128,288
Note payable issued for investment in limited partnership			1,855,277
Loans transferred to loans held for sale	7,866,107		18,603,020
Mortgage servicing rights capitalized	78,661		257,185
Common stock issued to ESOP leveraged with an employee loan		4,655,680
Fair value of net assets in acquisition	28,013,809

See notes to consolidated financial statements.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of MutualFirst Financial, Inc. (Company) (formerly MFS Financial, Inc.) and its wholly-owned subsidiary, Mutual Federal Savings Bank (Bank) and the Bank's wholly owned subsidiaries, First MFSB Corporation, Third MFSB Corporation and First Marion Service Corporation conform to generally accepted accounting principles and reporting practices followed by the thrift industry. The more significant of the policies are described below.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company is a thrift holding company whose principal activity is the ownership of the Bank. The Bank operates under a federal thrift charter and provides full banking services. As a federally chartered thrift, the Bank is subject to regulation by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.

The Bank generates mortgage, consumer and commercial loans and receives deposits from customers located primarily in central Indiana. The Bank's loans are generally secured by specific items of collateral including real property, consumer assets and business assets. First MFSB sells various insurance products. Third MFSB offers tax-deferred annuities and long-term health care and life insurance products. First Marion Service Corporation sells tax-deferred annuities and mutual funds and makes second mortgage loans.

Consolidation--The consolidated financial statements include the accounts of the Company and the Bank after elimination of all material intercompany transactions.

Investment Securities--Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities held to maturity are carried at amortized cost. Debt securities not classified as held to maturity, or included in the trading account and marketable equity securities not classified as trading, are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses reported separately in accumulated other comprehensive income, net of tax. Trading account securities are held for resale in anticipation of short-term market movements and are valued at fair value. Gains and losses, both realized and unrealized, are included in other income.

Amortization of premiums and accretion of discounts are recorded using the interest method as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Loans held for sale are carried at the lower of aggregate cost or market. Market is determined using the aggregate method. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income based on the difference between estimated sales proceeds and aggregate cost.

Loans are carried at the principal amount outstanding. A loan is impaired when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially delinquent loans may be considered to be impaired. The Company considers its investment in one-to-four family residential loans and consumer loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. Interest income is accrued on the principal balances of loans. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed when considered uncollectible. Interest income is subsequently recognized only to the extent cash payments are received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans over the contractual maturity of the loans.

Allowance for loan losses is maintained to absorb loan losses based on management's continuing review and evaluation of the loan portfolio and its judgment as to the impact of economic conditions on the portfolio. The evaluation by management includes consideration of past loss experience, changes in the composition of the portfolio, the current condition and amount of loans outstanding, and the probability of collecting all amounts due. Impaired loans are measured by the present value of expected future cash flows, or the fair value of the collateral of the loan, if collateral dependent.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Management believes that as of December 31, 2000, the allowance for loan losses is adequate based on information currently available. A worsening or protracted economic decline in the areas within which the Bank operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves.

Premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based principally on the estimated useful lives of the assets which range from 3 to 50 years. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Investment in limited partnerships is recorded using the equity method of accounting. Losses due to impairment are recorded when it is determined that the investment no longer has the ability to recover its carrying amount. The benefits of low income housing tax credits associated with the investment are accrued when earned.

Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. When foreclosed assets are acquired, any required adjustment is charged to the allowance for loan losses. All subsequent activity is included in current operations.

Intangible assets are being amortized primarily on a straight-line and accelerated basis over a period of 15 years. Such assets are periodically evaluated as to the recoverability of their carrying value.

Mortgage servicing rights on originated loans are capitalized by allocating the total cost of the mortgage loans between the mortgage servicing rights and the loans based on their relative fair values. Capitalized servicing rights are amortized in proportion to and over the period of estimated servicing revenues.

Income tax in the consolidated statement of income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes. The Company files consolidated income tax returns with its subsidiary.

Earnings per share is computed based upon the weighted-average common and potential common shares outstanding during the periods subsequent to the Bank's conversion to a stock savings bank on December 29, 1999. Net income per share for the periods prior to the conversion is not meaningful. Unearned ESOP shares have been excluded from the weighted-average shares outstanding calculation.

Reclassifications of certain amounts in the 1999 and 1998 consolidated financial statements have been made to conform to the 2000 presentation.

Note 2 - Conversion

On December 29, 1999, the Bank completed the conversion from a federally chartered mutual institution to a federally chartered stock savings bank and the formation of the Company as the holding company of the Bank. As part of the conversion, the Company issued 5,595,780 shares of common stock at $10 per share. Net proceeds of the Company's stock issuance, after costs of $1,391,000 and excluding the shares issued for the ESOP, were $49,911,000, of which $27,284,000 was used to acquire 100% of the stock and ownership of the Bank. The transaction was accounted for at historical cost in a manner similar to that utilized in a pooling of interests. In connection with the Conversion, the Company contributed 223,831 shares of common stock and cash of $2,238,000

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

to Mutual Federal Savings Bank Charitable Foundation, Inc. (Foundation), a charitable foundation dedicated to community development activities in the Company's market areas. This resulted in the recognition of an additional $4,477,000 charitable contribution expense for the year ended December 31, 1999.

Note 3 - Acquisition

On December 8, 2000, the Company acquired Marion Capital Holdings, Inc. (Marion), the holding company of First Federal Savings Bank of Marion (First Federal), a federally chartered savings bank. Marion was merged into the Company and First Federal was merged into the Bank. First Marion Service Corporation, a wholly-owned subsidiary of Marion, became a subsidiary of the Bank.

Shareholders of Marion received 1.862 shares of the Company's common stock for each share of Marion common stock. The Company issued 2,541,062 shares of its common stock at a cost of $27,593,000, net of registration costs of $211,000.

The combination was accounted for under the purchase method of accounting, and accordingly, the net assets were recorded at their estimated fair values at date of acquisition. Fair value adjustments on the assets and liabilities purchased are being amortized over the estimated lives of the related assets and liabilities. The excess of the estimated fair value of the underlying net assets over the purchase price was allocated as a reduction in the carrying value of premises and equipment and investments in limited partnerships acquired as part of the acquisition. Marion's results of operations and financial position were included in the Company's consolidated financial statements beginning December 9, 2000.

The following pro forma information discloses the results of operations as though the merger had taken place at the beginning of the year.

Year Ended December 31	2000	1999
Net Interest Income	$22,338	$22,634
Net Income	$ 7,408	$ 3,577
Net Income per Share-Combined
Basic	$.89	N/A
Diluted	$.89	N/A

Note 4 - Restriction on Cash

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2000, was $5,435,000.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 5 - Investment Securities

	2000
December 31	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
Mortgage-backed securities	$ 7,934	$ 70	$ (25)	$ 7,979
Collateralized mortgage obligations	4,529	55		4,584
Federal agencies	4,364	56		4,420
Corporate obligations	10,300	105		10,405
Marketable equity securities	7,925		(171)	7,754
Total available for sale	35,052	286	(196)	35,142
Held to maturity
Federal agencies	9,400	4	(130)	9,274
Corporate obligations	989			989
Municipal obligation	150			150
Total held to maturity	10,539	4	(130)	10,413
Total investment securities	$45,591	$290	$(326)	$45,555

	1999
December 31	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
Mortgage-backed securities	$ 9,517	$25	$(155)	$ 9,387
Collateralized mortgage obligations	4,584		(48)	4,536
Federal agencies	2,416		(34)	2,382
Corporate obligations	7,781		(74)	7,707
Marketable equity securities	5,781		(194)	5,587
Total available for sale	30,079	25	(505)	29,599
Held to maturity
Federal agencies	10,200		(413)	9,787
Corporate obligations	2,099		(20)	2,079
Municipal obligation	150			150
Total held to maturity	12,449		(433)	12,016
Total investment securities	$42,528	$25	$(938)	$41,615

Marketable equity securities consist of shares in mutual funds which invest in government obligations and mortgage-backed securities.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

The amortized cost and fair value of securities available for sale and held to maturity at December 31, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	2000
	Available for Sale		Held to Maturity
December 31	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Within one year	$ 1,997	$ 2,002	$ 1,000	$ 999
One to five years	10,806	10,923	6,901	6,836
Five to ten years	973	994	1,488	1,475
After ten years	501	506	1,150	1,103
	14,277	14,425	10,539	10,413
Mortgage-backed securities	7,934	7,979
Collateralized mortgage obligations	4,529	4,584
Small Business Administration	387	400
Marketable equity securities	7,925	7,754
Totals	$35,052	$35,142	$10,539	$10,413

Securities with a carrying value of $29,974,000 and $30,159,000 were pledged at December 31, 2000 and 1999 to secure FHLB advances.

Proceeds from sales of securities available for sale during the years ended December 31, 1999 and 1998 were $8,253,000 and $4,116,000. Gross gains of $79,000 and $1,000 were realized on those sales in 1999 and 1998. Gross losses of $47,000 were recognized on those sales in 1999.

Trading account securities at December 31, 1999 consisted of U. S. Government bonds with a fair value of $1,235,000. Unrealized holding losses of $212,000 were included in earnings for the year ended December 31, 1999 and there were no unrealized holding gains or losses on trading securities included in earnings in 2000 and 1998. Trading account securities with a carrying value of $823,000 were pledged at December 31, 1999 to secure repurchase agreements.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 6 - Loans and Allowance

December 31	2000	1999
Loans
Real estate loans
One-to-four family	$388,919	$286,578
Multi family	9,787	5,544
Commercial	53,197	14,559
Construction and development	13,591	12,470
	465,494	319,151
Consumer loans
Auto	28,909	19,887
Home equity	17,428	10,585
Home improvement	23,304	14,588
Mobile home	9,865	12,305
Recreational vehicles	34,744	25,629
Boats	35,180	32,374
Credit cards	2,192	2,180
Other	5,316	2,374
	156,938	119,922
Commercial business loans	26,375	10,764
	648,807	449,837
Undisbursed loans in process	(5,247)	(4,844)
Unamortized deferred loan fees and costs, net	2,274	1,446
Allowance for loan losses	(6,472)	(3,652)
Total loans	$639,362	$442,787

Year Ended December 31	2000	1999	1998
Allowance for loan losses
Balances, January 1	$3,652	$3,424	$3,091
Allowance acquired in acquisition	3,172
Provision for losses	685	760	1,265
Recoveries on loans	57	119	106
Loans charged off	(1,094)	(651)	(1,038)
Balances, December 31	$6,472	$3,652	$3,424

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Information on impaired loans is summarized below.

December 31	2000
Impaired loans with an allowance	$1,839
Allowance for impaired loans included in the Company's   allowance for loan losses	$ 990

Year Ended December 31	2000	1999	1998
Average balance of impaired loans	$141	$429	$517
Interest income recognized on impaired loans		9	56
Cash-basis interest included above		9	56

There were no impaired loans at December 31, 2000 and 1999.

Note 7 - Premises and Equipment

December 31	2000	1999
Cost
Land	$ 2,486	$ 1,691
Buildings and land improvements	8,741	8,269
Equipment	5,995	5,236
Total cost	17,222	15,196
Accumulated depreciation and amortization	(8,180)	(7,396)
Net	$ 9,042	$ 7,800

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 8 - Investment In Limited Partnerships

December 31	2000	1999
Pedcor Investments 1987-II (99.00 percent ownership, equity method of accounting)	$ 268
Pedcor Investments 1988-V (98.97 percent ownership, equity method of accounting)	511	$ 522
Pedcor Investments 1990-XIII (99.00 percent ownership, equity method of accounting)	708	683
Pedcor Investments 1990-XI (19.79 percent ownership, at amortized cost)	84	96
Pedcor Investments 1997-XXVIII (99.00 percent ownership, equity method of accounting)	3,707	3,974
Pedcor Investments 1997-XXIX (99.00 percent ownership, equity method of accounting)	1,159
	$6,437	$5,275

The limited partnerships build, own and operate apartment complexes. The Company records its equity in the net income or loss of the Pedcor Investments 1987-II, 1988-V, 1990-XIII, 1997-XXVIII and 1997-XXIX based on the Company's interest in the partnerships. The Company has recorded its investment in Pedcor Investments 1990-XI, which represents less than a 20 percent ownership, at amortized cost and records income when distributions are received. In addition, the Company has recorded the benefit of low income housing credits of $339,000 for 2000 and $262,000 for 1999 and 1998. Combined financial statements for Pedcor Investments recorded under the equity method of accounting are as follows:

December 31	2000	1999
Combined statement of financial condition
Assets
Cash	$ 256	$ 313
Land and property	31,042	22,401
Other assets	1,136	1,694
Total assets	$32,434	$24,408
Liabilities
Notes payable	$30,061	$22,656
Other liabilities	884	820
Total liabilities	30,945	23,476
Partners' equity (deficit)
General partners	(3,076)	(2,423)
Limited partners	4,565	3,355
Total partners' equity	1,489	932
Total liabilities and partners' equity	$32,434	$24,408

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Year Ended December 31	2000	1999	1998
Combined condensed statement of operations
Total revenue	$3,743	$2,497	$2,389
Total expenses	4,353	2,499	2,377
Net income	$ (610)	$ (2)	$ 12

Note 9 - Deposits

December 31	2000	1999
Noninterest-bearing demand	$ 24,485	$ 14,361
Interest-bearing demand	52,497	38,199
Regular passbook	46,504	37,601
90-day passbook	1,685	2,191
Money market savings	43,898	42,091
Certificates and other time deposits of $100,000 or more	66,916	44,804
Other certificates	278,725	185,357
Total deposits	$514,710	$364,604

Certificates including other time deposits of $100,000 or more maturing in years ending December 31:

2001	$218,030
2002	60,406
2003	10,057
2004	11,534
2005	44,917
Thereafter	697
	$345,641

Note 10 - Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements consist of obligations of the Company to other parties. The obligations are secured by U. S. Treasury bonds and such collateral is held in trust at a financial services company.

There was one outstanding agreement of $840,000 at December 31, 1999 and none at the end of 2000. The maximum amount of outstanding agreements at any month-end during 2000 and 1999 totaled $830,000 and $895,000. The average of such agreements totaled $128,000, $400,000 and $2,000 for the years ended December 31, 2000, 1999 and 1998.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 11 - Federal Home Loan Bank Advances

Maturities Year Ending December 31	Weighted- Average Rate	Amount
2001	6.4%	$ 74,091
2002	6.4	2,990
2003	5.8	5,954
2005	5.6	2,000
Thereafter	5.7	27,507
	6.2%	$112,542

The terms of a security agreement with the FHLB require the Bank to pledge as collateral for advances and outstanding letters of credit both qualifying first mortgage loans and investment securities in an amount equal to at least 170 percent of these advances and letters of credit. Advances are subject to restrictions or penalties in the event of prepayment.

Note 12 - Notes Payable

The Bank has a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXVIII, L.P. of $1,707,000 at December 31, 2000 and $1,768,000 at December 31, 1999 payable in semiannual installments through January 1, 2010. At December 31, 2000 and 1999, the Bank was obligated under an irrevocable direct pay letter of credit for the benefit of a third party in the amount of $1,254,000 relating to this note and the financing for an apartment project by Pedcor Investments 1997-XXVIII L.P. (see Note 8).

In the acquisition of Marion, the Bank assumed a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXIX, LP. The note, which is payable in annual installments through August 15, 2008, had a balance of $1,933,000 at December 31, 2000.

Maturities Year Ending December 31	Notes Payable Pedcor
2001	$ 364
2002	359
2003	358
2004	351
2005	349
Thereafter	1,859
	$3,640

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 13 - Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheet. The unpaid principal balances of these loans consist of the following:

December 31	2000	1999	1998
Mortgage loan portfolio serviced for
Freddie Mac	$40,585	$22,128	$26,906
Fannie Mae	8,467	9,977	14,520
Other investors	17,559	311	882
	$66,611	$32,416	$42,308

The aggregate fair value of capitalized mortgage servicing rights at December 31, 2000, 1999 and 1998 is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type, investor type, and interest rates.

No valuation allowance was necessary at December 31, 2000, 1999 and 1998.

Year Ended December 31	2000	1999	1998
Mortgage Servicing Rights
Balances, January 1	$279	$340	$128
Servicing rights acquired	133
Servicing rights capitalized	79		257
Amortization of servicing rights	(63)	(61)	(45)
Balances, December 31	$428	$279	$340

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 14 - Income Tax

Year Ended December 31	2000	1999	1998
Income tax expense
Currently payable
Federal	$1,669	$1,088	$1,308
State	113	469	458
Deferred
Federal	864	(1,408)	216
State	460	(11)	67
Total income tax expense	$3,106	$ 138	$2,049
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34%	$3,176	$335	$2,104
Effect of state income taxes	378	302	347
Low income housing credits	(339)	(262)	(262)
Tax-exempt income	(217)	(167)	(131)
Other	108	(70)	(9)
Actual tax expense	$3,106	$ 138	$2,049
Effective tax rate	33.3%	14.0%	33.1%

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

The components of the deferred asset are as follows:

December 31	2000	1999
Assets
Allowance for loan losses	$2,319	$1,393
Deferred compensation	1,830	1,205
Charitable contribution carryover	1,141	1,390
Depreciation and amortization	261
Business tax and AMT credit carryovers	832
Investments in limited partnerships	811
Unrealized loss on securities available for sale		198
Other	335	193
Total assets	7,529	4,379
Liabilities
FHLB stock	(210)	(165)
Depreciation and amortization		(116)
State income tax	(241)	(92)
Loan fees	(1,462)	(1,125)
Unrealized gain on securities available for sale	(29)
Mortgage servicing rights	(179)	(119)
Investments in limited partnerships		(91)
Total liabilities	(2,121)	(1,708)
	$5,408	$2,671

The Company has a charitable contribution carryover of $3,355,000 that expires in the year ending December 31, 2005 and unused business income tax credits of $267,000, $153,000 and $339,000 expiring in years ending December 31, 2018, 2019 and 2020, respectively. In addition, the Company has an AMT credit carryover of $73,000 with an unlimited carryover period.

Income tax expense attributable to securities gains was $12,800 and $400 for the years ended December 1999 and 1998.

Retained earnings include approximately $14,743,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amounts was approximately $5,013,000.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 15 - Other Comprehensive Income

	2000
Year Ended December 31	Before- Tax Amount	Tax (Expense) Benefit	Net-of- Tax Amount
Net unrealized gains on securities	$563	$(223)	$340

	1999
Year Ended December 31	Before- Tax Amount	Tax (Expense) Benefit	Net-of- Tax Amount
Unrealized losses on securities
Unrealized holding losses arising during the year	$(515)	$206	$(309)
Less: reclassification adjustment for gains realized in net income	32	(13)	19
Net unrealized losses	$(547)	$219	$(328)

	1998
Year Ended December 31	Before- Tax Amount	Tax (Expense) Benefit	Net-of- Tax Amount
Unrealized gains on securities
Unrealized holding gains arising during the year	$79	$(31)	$48
Less: reclassification adjustment for gains realized in net income	1		1
Net unrealized gains	$78	$(31)	$47

Note 16 - Commitments and Contingent Liabilities

In the normal course of business there are outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated statement of financial condition.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Financial instruments whose contract amount represents credit risk as of December 31 were as follows:

December 31	2000	1999
Loan commitments	$57,600	$41,700
Loans sold with recourse		93
Standby letters of credit	3,548	3,617

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation. Collateral held varies, but may include residential real estate, income-producing commercial properties, or other assets of the borrower.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.

The Company and subsidiary are also subject to claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

Note 17 - Dividend and Capital Restrictions

The Company is not subject to any regulatory restrictions on the payment of dividends to its stockholders.

Without prior approval, current regulations allow the Bank to pay dividends to the Company not exceeding retained net income for the current calendar year plus those for the previous two calendar years. The Bank normally restricts dividends to a lesser amount because of the need to maintain an adequate capital structure.

At the time of conversion, a liquidation account was established in an amount equal to the Banks' net worth as reflected in the latest statement of condition used in its final conversion offering circular. The liquidation account is maintained for the benefit of eligible deposit account holders who maintain their deposit account in the Bank after conversion. In the event of a complete liquidation, and only in such event, each eligible deposit account holder will be entitled to receive

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

a liquidation distribution from the liquidation account in the amount of the then current adjusted subaccount balance for deposit accounts then held, before any liquidation distribution may be made to stockholders. Except for the repurchase of stock and payment of dividends, the existence of the liquidation account will not restrict the use or application of net worth. The initial balance of the liquidation account was $45,619,000.

At December 31, 2000, the stockholder's equity of the Bank was $105,176,000, of which approximately $9,494,000 was available for the payment of dividends to the Company.

Note 18 - Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies and is assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations: total risk adjusted capital, Tier 1 risk-based capital, and core leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios.

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. At December 31, 2000 and 1999, the Bank is categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2000 that management believes have changed the Bank's classification.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

The Bank's actual and required capital amounts and ratios are as follows:

	Actual		Required for Adequate Capital1		To Be Well Capitalized1
	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of December 31, 2000
Total risk-based capital 1 (to risk-weighted   assets)	$109,552	20.7%	$42,276	8.0%	$52,846	10.00%
Tier 1 risk-based capital 1 (to risk-weighted   assets)	103,882	19.7%	21,138	4.0%	31,707	6.00%
Core capital 1 (to adjusted total assets)	103,882	13.6%	22,869	3.0%	38,115	5.00%
Core capital 1 (to adjusted tangible assets)	103,882	13.6%	15,246	2.0%	NA	NA
Tangible capital 1 (to adjusted total assets)	103,882	13.6%	11,435	1.5%	NA	NA
As of December 31, 1999
Total risk-based capital 1 (to risk-weighted   assets)	$76,994	21.7%	$28,357	8.0%	$35,446	10.00%
Tier 1 risk-based capital 1 (to risk-weighted   assets)	73,445	20.7%	14,179	4.0%	21,268	6.00%
Core capital 1 (to adjusted total assets)	73,445	13.6%	16,252	3.0%	27,086	5.00%
Core capital 1 (to adjusted tangible assets)	73,445	13.6%	10,835	2.0%	NA	NA
Tangible capital 1 (to adjusted total assets)	73,445	13.6%	8,126	1.5%	NA	NA

¹ As defined by regulatory agencies

Note 19 - Employee Benefits

The Company has a retirement savings 401(k) plan in which substantially all employees may participate. The contributions are discretionary and determined annually. For the years ended December 31, 2000, 1999 and 1998, the Company matched employees' contributions at the rate of 50% for the first $600 participant contributions to the 401(k) and made a contribution to the profit-sharing plan of 7% of qualified compensation. The Company's expense for the plan was $216,000, $286,000 and $284,000 for the years ended December 31, 2000, 1999 and 1998.

The Company has a supplemental retirement plan and deferred compensation arrangements for the benefit of certain officers. These arrangements are funded by life insurance contracts which have been purchased by the Company. The Company's expense for the plan was $262,000, $214,000 and $188,000 for the years ended December 31, 2000, 1999 and 1998.

The Company has deferred compensation arrangements with certain directors whereby, in lieu of currently receiving fees, the directors or their beneficiaries will be paid benefits for an established period following the director's retirement or death. These arrangements are funded by life insurance contracts which have been purchased by the Company. The Company's expense for the plan was $154,000, $106,000 and $117,000 for the years ended December 31, 2000, 1999 and 1998.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

As part of the conversion in 1999, the Company established an ESOP covering substantially all its employees. The ESOP acquired 465,568 shares of the Company common stock at $10 per share in the conversion with funds provided by a loan from the Company. Accordingly, the $4,655,680 of common stock acquired by the ESOP is shown as a reduction of stockholders' equity. At December 31, 2000 and 1999, the Company had 413,179 and 444,979 unearned ESOP shares with a fair value of $6,094,000 and $4,339,000. Shares are released to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares, which may be distributed to participants, or used to repay the loan are treated as compensation expense. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company and Bank, are made to the ESOP. Expense under the ESOP for the years ended December 31, 2000 and 1999 was $360,000 and $199,000. At December 31, 2000, the ESOP had 20,589 allocated shares, 413,179 suspense shares and 31,800 committed-to-be released shares. At December 31, 1999, the ESOP had no allocated shares, 444,979 suspense shares and 20,589 committed-to-be released shares.

On December 1, 2000, shareholders approved a Recognition and Award Plan (RAP). Restricted stock awards covering up to 232,784 shares of the common stock of the Company may be awarded to directors and executive officers under the RAP. At December 31, 2000, no grants had been made under the RAP.

Note 20 - Stock Option Plan

Under the Company's stock option plan approved by shareholders on December 1, 2000, which is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations, the Company grants selected executives and other key employees and directors incentive and non-qualified stock option awards which vest and become fully exercisable at the discretion of the stock option committee as the options are granted. The Company is authorized to grant options for up to 581,961 shares of the Company's common stock. Under certain provisions of the plan, the number of shares available for grant may be increased without shareholder approval by the amount of shares surrendered as payment of the exercise price of the stock option and by the number of shares of common stock of the Company that could be repurchased by the Company using proceeds from the exercise of stock options. The exercise price of each option, which has a 10 or 15 year life may not be less than the market price of the Company's stock on the date of grant; therefore, no compensation expense will be recognized when the options are granted. Except for 58,295 options issued as part of the acquisition of Marion, no options were granted under the plan during 2000. Of the 58,295 options granted, 18,774 options were exercised during 2000 at an exercise price of $10.87 and 39,521 are exercisable at December 31, 2000 at a weighted-average exercise price of $10.97.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

As of December 31, 2000, options outstanding totaling 3,834 have an exercise price of $5.37 and a weighted-average remaining contractual life of 2.25 years, options outstanding totaling 18,774 have an exercise price of $10.87 and a weighted-average remaining contractual life of 5.67 years and options outstanding totaling 16,913 have an exercise price of $12.35 and a weighted-average remaining contractual life of 6.58 years.

Note 21 - Earnings Per Share

Earnings per share were computed as follows:

	Year Ended December 31, 2000
	Income	Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common shareholders	$6,235,222	5,557,775	$1.12
Effect of Dilutive Securities
Stock options		602
Diluted Earnings Per Share
Income available to common stockholders and assumed   conversions	$6,235,222	5,558,377	$1.12

Note 22 - Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents--The fair value of cash and cash equivalents approximates carrying value.

Trading Account, Investment and Mortgage-Backed Securities--Fair values are based on quoted market prices.

Loans Held For Sale--Fair values are based on quoted market prices.

Loans--The fair value for loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

FHLB Stock--Fair value of FHLB stock is based on the price at which it may be resold to the FHLB.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Cash Surrender Value of Life Insurance--The fair value of life insurance values approximate carrying value.

Interest Receivable/Payable--The fair values of interest receivable/payable approximate carrying values.

Deposits--The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits.

Securities Sold Under Repurchase Agreements--Securities sold under repurchase agreements are short-term borrowing arrangements. The rates at December 31, 1999, approximate market rates, thus the fair value approximates carrying value.

Federal Home Loan Bank Advances--The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt for periods comparable to the remaining terms to maturity of these advances.

Note Payable to Pedcor--The fair value of this note is estimated using a discount calculation based on current rates.

Advances by Borrowers for Taxes and Insurance--The fair value approximates carrying value.

Off-Balance Sheet Commitments--Commitments include commitments to purchase and originate mortgage loans, commitments to sell mortgage loans, and standby letters of credit and are generally of a short-term nature. The fair values of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The carrying amount of these investments are reasonable estimates of the fair value of these financial statements.

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

The estimated fair values of the Company's financial instruments are as follows:

	2000		1999
December 31	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets
Cash and cash equivalents	$21,046	$21,046	$19,983	$19,983
Trading account securities			1,235	1,235
Securities available for sale	35,142	35,142	29,599	29,599
Securities held to maturity	10,539	10,413	12,449	12,016
Loans held for sale	3,913	3,983
Loans	639,362	644,143	442,787	433,630
Stock in FHLB	6,993	6,993	5,339	5,339
Cash surrender value of life insurance	23,055	23,055	10,807	10,807
Interest receivable	4,313	4,313	2,653	2,653
Liabilities
Deposits	514,710	518,293	364,604	365,566
Securities sold under repurchase agreements			840	840
FHLB Advances	112,542	112,788	72,289	72,304
Notes payable--Pedcor	3,640	2,698	1,768	986
Interest payable	1,372	1,372	2,153	2,153
Advances by borrowers for taxes and insurance	1,452	1,452	1,289	1,289

Note 23 - Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheet

December 31	2000	1999
Assets
Cash on deposit with subsidiary	$ 17,973	$20,470
Cash on deposit with others	17
Total cash and cash equivalents	17,990	20,470
Investment securities available for sale	2,516
Loans receivable	2,889
Investment in common stock of subsidiary	105,176	74,628
Deferred income tax	1,140	1,393
Other assets	359	343
Total assets	$130,070	$96,834
Liabilities--other	$ 129	$ 122
Stockholders' Equity	129,941	96,712
Total liabilities and stockholders' equity	$130,070	$96,834

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands) Condensed Statement of Income

Year Ended December 31	2000	1999	1998
Income
Interest income from subsidiary	$ 904
Interest income from investments	158
Total income	1,062
Expenses
Interest expense		$ 40
Charitable contribution		4,477
Other	120
Total expenses	120	4,517
Income (loss) before income tax expense (benefit) and equity in   undistributed income of subsidiary	942	(4,517)
Income tax expense (benefit)	374	(1,536)
Income (loss) before equity in undistributed income of   subsidiary	568	(2,981)
Equity in undistributed income of subsidiary	5,667	3,827	$4,139
Net Income	$6,235	$ 846	$4,139

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MutualFirst Financial, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands) Condensed Statement of Cash Flows

Year Ended December 31	2000	1999	1998
Operating Activities
Net income	$ 6,235	$ 846	$4,139
Adjustments to reconcile net income to net cash     provided (used) by operating activities
Earned ESOP shares	360	199
Charitable contribution of Company's common stock		2,238
Deferred income tax benefit	246	(1,393)
Undistributed income of subsidiary	(5,667)	(3,827)	(4,139)
Other	(488)	(221)
Net cash provided (used) by operating activities	686	(2,158)
Investing Activities
Capital contribution to subsidiary		(27,283)
Cash received in acquisition, net	630
Purchase of securities available for sale	(2,498)
Net cash used by investing activities	(1,868)	(27,283)
Financing Activities
Proceeds from sale of common stock, net of costs		49,911
Cash dividends	(1,502)
Proceeds from stock options exercised	204
Net cash provided (used) by financing activities	(1,298)	49,911
Net Change in Cash and Cash Equivalents	(2,480)	20,470
Cash and Cash Equivalents, Beginning of Year	20,470
Cash and Cash Equivalents, End of Year	$17,990	$20,470	$ 0
Additional Cash Flow and Supplementary Information
Common stock issued to ESOP leveraged with an   employee loan		$4,656
Fair value of stock issued in acquisition of Marion	$27,804
Fair value of net assets, excluding cash, in acquisition	2,411

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Shareholder Information Annual Meeting:       The annual meeting of shareholders will be held at 3:00 p.m. local time, on April 25, 2001, at the Company's main office, located at 110 E. Charles Street, Muncie, Indiana.

Transfer Agent:
Continental Stock Transfer & Trust Company       2 Broadway / 19th Floor       New York, NY 10004       (212) 509-4000
General Counsel:	Special Counsel:
Beasley Gilkison, LLP       110 E. Charles Street       Muncie, IN 47305	Silver, Freedman & Taff, L.L.P.       1100 New York Avenue, N.W.       Seventh Floor, East Tower       Washington, DC 20005
Independent Auditor:
Olive, LLP       201 N. Illinois, Suite 700       Indianapolis, IN 46204
Shareholder and General Inquiries:
R. Donn Roberts       President & Chief Executive Officer       MutualFirst Financial, Inc.       110 E. Charles Street       Muncie, IN 47305	Timothy J. McArdle       Senior Vice President, Treasurer and Controller

ANNUAL AND OTHER REPORTS

Copies of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, are available without cost, by writing: MutualFirst Financial, Inc. Investor Relations, Attn: R. Donn Roberts, President and Chief Executive Officer, 110 E. Charles Street, Muncie, Indiana 47305.

The common stock for MutualFirst Financial, Inc. is traded under the symbol "MFSF" on the Nasdaq National Market. The table below shows the high and low closing prices for our common stock for the periods indicated. This information was provided by the Nasdaq. At March 1, 2001, there were 8,376,623 shares of common stock issued and outstanding and approximately 1,531 shareholders of record.

	Stock Price
Quarter Ending:	High	Low	Dividends per Share
03 / 31 / 00	$  9.625	$  8.750	$0.07
06 / 30 / 00	$12.000	$  8.938	$0.07
09 / 30 / 00	$13.750	$11.250	$0.07
12 / 31 / 00	$14.750	$12.750	$0.07

Our cash dividend payout policy is continually reviewed by management and the Board of Directors. The Company intends to continue its policy of paying quarterly dividends; however, the payment will depend upon a number of factors, including capital requirements, regulatory limitations, the Company's financial condition, results of operations and the Bank's ability to pay dividends to the Company. The Company relies significantly upon such dividends originating form the Bank to accumulate earnings for payment of cash dividends to the shareholders.


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Officers & Directors
MutualFirst Financial, Inc. Directors Wilbur R. Davis, Chairman of the Board Julie A. Skinner, Vice Chairman R. Donn Roberts, Director Edward J. Dobrow, Director Linn A. Crull, Director James D. Rosema, Director William V. Hughes, Director Steven L. Banks, Director John M. Dalton, Director Jon R. Marler, Director Jerry D. McVicker, Director	MutualFirst Financial, Inc. Officers R. Donn Roberts, President Tim McArdle, Senior Vice President,   Treasurer and Controller Rosalie Petro, Secretary
Mutual Federal Savings Bank Board of Directors: Wilbur R. Davis, Chairman of the Board Julie A. Skinner, Vice Chairman R. Donn Roberts, Director Edward J. Dobrow, Director Linn Crull, Director James D. Rosema, Director William V. Hughes, Director Steven L. Banks, Director John M. Dalton, Director Jon R. Marler, Director Jerry D. McVicker, Director Senior Directors Charles R. McCormick, Senior Director Gene B. Kern, Senior Director Jack E. Buckles, Senior Director G. Richard Benson, Senior Director	Winchester Advisory Board Kenneth W. Girton, Advisory Director Robert Morris, Advisory Director Clark G. Loney, Advisory Director Gene Gulley, Senior Advisory Director Warsaw Advisory Board J. Kevin Zachary, Advisory Director Candace Wolkins, Advisory Director John Sadler, Advisory Director David Carey, Advisory Director Stephen Harris, Advisory Director Phillip J. Harris, Senior Advisory Director
Mutual Federal Savings Bank   Corporate Officers R. Donn Roberts, President Steve Campbell, Senior Vice President Steve Selby, Senior Vice President Tim McArdle, Senior Vice President,   Treasurer and Controller Steven L. Banks, Senior Vice President Max Courtney, Vice President Dave Heeter, Vice Presdient Marvin Vincent, Vice President Pat Botts, Vice President Michael Barber, Vice President Larry Phillips, Vice President Cynthia M. Fortney, Vice President Michael G. Fisher, Vice President James Tinkey, Vice President Norb Adrian, Assistant Vice President Lori Ritchey, Assistant Vice President Lynda Stoner, Assistant Vice President Ralph Spencer, Assistant Vice President Cornnie Bower, Assistant Vice President Crystal L. Bradford, Assistant Vice President Lila Piper, Assistant Vice President Brenda West, Assistant Vice President Rosalie Petro, Corporate Secretary	Mutual Federal Savings Bank   Administrative Officers Glenda Thomas, Branch Manager, Warsaw East Center Norma Lozier, Branch Manager, North Webster Jean DeHart, Branch Manager, Northwest Carla Gendron, Manager, Deposit Products Tammy Hefflin, Assistant Controller & Manager, Accounting Jan Heminger, Branch Manager, West Bethel Bill Curl, Branch Manager, Warsaw Market Street Kim Evans, Branch Manager, South Madison Patti Decker, Branch Manager, Yorktown Denise Abrams, Branch Manager, Broadway Vicki Reade, Branch Manager, Albany Kristen Welch, Manager, Marketing Sharon Ferguson, Branch Manager, West Jackson Brad Zimmerman, Manager, Information Systems Christie Ankney, Branch Manager, East Jackson Cathy Coolman, Branch Manager, Gas City Barbara Wright, Manager, Loan Operations Dorothy Douglas, Manager, Human Resources Beth Winters, Branch Manager, Wal-Mart, Marion

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MutualFirst
Financial Inc.
110 E. Charles Street
Muncie, IN 47305

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Parent	Subsidiary	Percentage of Ownership	State of Incorporation or Organization
MutualFirst Financial, Inc.	Mutual Federal Savings Bank	100%	United States
Mutual Federal Savings Bank	First M.F.S.B. Corporation	100%	Indiana
Mutual Federal Savings Bank	Third M.F.S.B. Corporation	100%	Indiana
Mutual Federal Savings Bank	First Marion Services Corporation	100%	Indiana

EX-23

EXHIBIT 23

CONSENT OF ACCOUNTANTS





            We consent to the incorporation by reference in the Registration Statement (File No. 333-53600) of MutualFirst Financial, Inc's 2000 Recognition and Retention Plan and 2000 Stock Option and Incentive Plan on Form S-8 of our report, dated February 8, 2001, on the consolidated financial statements incorporated by reference in MutualFirst's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.







                                                                                                  /s/ Olive LLP




Indianapolis, Indiana
March 27, 2001

EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT WITH STEVEN L. BANKS
EMPLOYMENT AGREEMENT

       THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this ___ day of ___________, 200_, by and between Mutual Federal Savings Bank (the "Bank"), Mutual First Financial, Inc. (the "Company") and Steven L. Banks (the "Employee").

       WHEREAS, the Employee has served as President and Chief Executive Officer of First Federal Savings Bank of Marion ("Marion"); and

       WHEREAS, Marion has merged into the Bank effective the date first written above (the "Effective Date"); and

       WHEREAS, the Employee has agreed to be employed by the Bank on the terms set forth herein; and

       WHEREAS, the Board of Directors of the Bank believes it is in the best interests of the Bank to enter into this Agreement with the Employee in order to assure continuity of management of the Bank and to reinforce and encourage the continued attention and dedication of the Employee; and

       WHEREAS, the Board of Directors of the Company has approved and authorized the execution of this Agreement for the purpose of the Company making the guarantee set forth in Section 18; and

       WHEREAS, the Board of Directors of the Bank has approved and authorized the execution of this Agreement with the Employee to take effect as stated in Section 2 hereof;

       NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein, it is AGREED as follows:

       1. Definitions.

       (a) The term "Change in Control" means (1) an event of a nature that (i) results in a change in control of the Bank or the Company within the meaning of the Home Owners' Loan Act of 1933 and 12 C.F.R. Part 574 as in effect on the date hereof; or (ii) would be required to be reported in response to Item 1 of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); (2) any person (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Bank or the Company representing 20% or more of the Bank's or the Company's outstanding securities; (3) individuals who are members of the board of directors of the Bank or the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; or (4) a reorganization, merger, consolidation, sale of all or substantially all of the assets of the Bank or the Company or a similar transaction in which the Bank or the Company is not



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the resulting entity. The term "Change in Control" shall not include an acquisition of securities by an employee benefit plan of the Bank or the Company. In the application of 12 C.F.R. Part 574 to a determination of a Change in Control, determinations to be made by the OTS or its Director under such regulations shall be made by the Board of Directors of the Bank.

       (b) The term "Commencement Date" means the Effective Date.

       (c) The term "Date of Termination" means the date upon which the Employee ceases to serve as an employee of the Bank.

       (d) The term "Involuntarily Termination" means termination of the employment of Employee without the Employee's express written consent, and shall include a material diminution of or interference with the Employee's duties, responsibilities and benefits as Senior Vice President and Chief Operating Officer - Marion Region, including (without limitation) any of the following actions unless consented to in writing by the Employee: (1) a change in the principal workplace of the Employee to a location outside of a 30 mile radius from the former Marion headquarters office; (2) a material demotion of the Employee; (3) a material reduction in the number or seniority of other Bank personnel reporting to the Employee or a material reduction in the frequency with which, or in the nature of the matters with respect to which, such personnel are to report to the Employee, other than as part of a Marion Region-, Bank- or Company-wide reduction in staff; (4) a material adverse change in the Employee's salary, perquisites, benefits, contingent benefits or vacation, other than as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank or the Company; and (5) a material permanent increase in the required hours of work or the workload of the Employee. The term "Involuntary Termination" does not include Termination for Cause or termination of employment due to retirement, death, disability or suspension or temporary or permanent prohibition from participation in the conduct of the Bank's affairs under Section 8 of the Federal Deposit Insurance Act ("FDIA").

       (e)  The terms "Termination for Cause" and "Terminated For Cause" mean termination of the employment of the Employee because of the Employee's personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement. The Employee shall not be deemed to have been Terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors of the Bank at a meeting of the Board called and held for such purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with the Employee's counsel, to be heard before the Board), stating that in the good faith opinion of the Board the Employee has engaged in conduct described in the preceding sentence and specifying the particulars thereof in detail.

       2. Term. The term of this Agreement shall be a period of three years beginning on the Commencement Date, subject to earlier termination as provided herein. Beginning on the first anniversary of the Commencement Date, and on each anniversary thereafter, the term of this Agreement shall be extended for a period of one year in addition to the then-remaining term,



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provided that (1) the Bank has not given notice to the Employee in writing at least 90 days prior to such anniversary that the term of this Agreement shall not be extended further; and (2) prior to such anniversary, the Board of Directors of the Bank explicitly reviews and approves the extension. Reference herein to the term of this Agreement shall refer to both such initial term and such extended terms.

       3. Employment. The Employee is employed as Senior Vice President and Chief Operating Officer - Marion Region of the Bank as of the Commencement Date. As such, the Employee shall render such administrative and management services and shall have such other powers and duties of an officer of the Bank as the Board of Directors of the Bank may prescribe from time to time.

       4. Compensation.

       (a) Salary. The Bank agrees to pay the Employee during the term of this Agreement, not less frequently than monthly, the salary established by the Board of Directors of the Bank, which shall be at least $218,200 annually. The amount of the Employee's salary shall be reviewed by the Board of Directors of the Bank, beginning not later than the first anniversary of the Commencement Date. Adjustments in salary or other compensation shall not limit or reduce any other obligation of the Bank under this Agreement. The Employee's salary in effect from time to time during the term of this Agreement shall not thereafter be reduced.

       (b) Discretionary Bonuses. The Employee shall be entitled to participate in an equitable manner with all other executive officers of the Bank in discretionary bonuses as authorized and declared by the Board of Directors of the Bank to its executive employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such bonuses when and as declared by the Board of Directors of the Bank.

       (c) Expenses. The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in performing services under this Agreement in accordance with the policies and procedures applicable to the executive officers of the Bank, provided that the Employee accounts for such expenses as required under such policies and procedures.

       5. Benefits.

       (a) Participation in Retirement and Employee Benefit Plans. The Employee shall be entitled to participate in all plans relating to pension, thrift, profit-sharing, group life and disability insurance, medical and dental coverage, education, cash bonuses, and other retirement or employee benefits or combinations thereof in which the Bank's executive officers participate.

       (b) Fringe Benefits. The Employee shall be eligible to participate in, and receive benefits under, any fringe benefit plans which are or may become applicable to the Bank's executive officers, including, without limitation, the Company's Stock Option Plan and Management Recognition Plan.



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       6. Vacations; Leave. The Employee shall be entitled to annual paid vacation in accordance with the policies established by the Board of Directors of the Bank for executive employees and to voluntary leave of absence, with or without pay, from time to time at such times and upon such conditions as the Board of Directors of the Bank may determine in its discretion.
      
       7. Termination of Employment.

       (a) Involuntary Termination. The Board of Directors of the Bank may terminate the Employee's employment at any time, but, except in the case of Termination for Cause, termination of employment shall not prejudice the Employee's right to compensation or other benefits under this Agreement. In the event of Involuntary Termination other than in connection with or within twelve (12) months after a Change in Control, (1) the Bank shall pay to the Employee during the remaining term of this Agreement, the Employee's salary at the rate in effect immediately prior to the Date of Termination, payable in such manner and at such times as such salary would have been payable to the Employee under Section 4 if the Employee had continued to be employed by the Bank, and (2) the Bank shall provide to the Employee during the remaining term of this Agreement substantially the same benefits as the Bank maintained for its executive officers immediately prior to the Date of Termination, including Bank-paid dependent medical and dental coverage.

       (b) Termination for Cause. In the event of Termination for Cause, the Bank shall pay the Employee the Employee's salary and benefits through the Date of Termination, and the Bank shall have no further obligation to the Employee under this Agreement.

       (c) Voluntary Termination. The Employee's employment may be voluntarily terminated by the Employee at any time upon 90 days written notice to the Bank or upon such shorter period as may be agreed upon between the Employee and the Board of Directors of the Bank. In the event of such voluntary termination, the Bank shall be obligated to continue to pay to the Employee the Employee's salary and benefits only through the Date of Termination, at the time such payments are due, and the Bank shall have no further obligation to the Employee under this Agreement.

       (d) Change in Control. In the event of Involuntary Termination in connection with or within 12 months after a Change in Control which occurs at any time while the Employee is employed under this Agreement, the Bank shall, subject to Section 8 of this Agreement, (1) pay to the Employee in a lump sum in cash within 25 business days after the Date of Termination an amount equal to 299% of the Employee's "base amount" as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"); and (2) provide to the Employee during the remaining term of this Agreement substantially the same health benefits as the Bank maintained for its executive officers immediately prior to the Change in Control.

       (e) Death; Disability. In the event of the death of the Employee while employed under this Agreement and prior to any termination of employment, the Employee's estate, or such person as the Employee may have previously designated in writing, shall be entitled to receive from the Bank the salary and benefits of the Employee through the last day of the calendar month in which the Employee died. If the Employee becomes disabled as defined in the Bank's then current


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disability plan, if any, or if the Employee is otherwise unable to serve in his current capacity, this Agreement shall continue in full force and effect, except that the salary paid to the Employee shall be reduced by any disability insurance payments made to Employee on policies of insurance, if any, maintained by the Bank at its expense.

       (f) Temporary Suspension or Prohibition. If the Employee is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. § 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its obligations under this Agreement were suspended and (ii) reinstate in whole or in part any of its obligations which were suspended.

       (g) Permanent Suspension or Prohibition. If the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. § 1818(e)(4) and (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

       (h) Default of the Bank. If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the contracting parties.

       (i) Termination by Regulators. All obligations of the Bank under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank: (1) by the Director of the Office of Thrift Supervision (the "Director") or his or her designee, at the time the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the FDIA; or (2) by the Director or his or her designee, at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by any such action.

       8. Certain Reduction of Payments by the Bank.

       (a) Notwithstanding any other provision of this Agreement, if payments under this Agreement, together with any other payments received or to be received by the Employee in connection with a Change in Control would cause any amount to be nondeductible for federal income tax purposes pursuant to Section 280G of the Code, then benefits under this Agreement shall be reduced (not less than zero) to the extent necessary so as to maximize payments to the Employee without causing any amount to become nondeductible. The Employee shall determine the allocation of such reduction among payments to the Employee.


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       (b)  Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. § 1828(k) and any regulations promulgated thereunder.

       9. No Mitigation. The Employee shall not be required to mitigate the amount of any salary or other payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by the Employee as the result of employment by another employer, by retirement benefits after the Date of Termination or otherwise.

       10. Attorneys Fees. In the event the Bank exercises its right of Termination for Cause, but it is determined by a court of competent jurisdiction or by an arbitrator pursuant to Section 17 that cause did not exist for such termination, or if in any event it is determined by any such court or arbitrator that the Bank has failed to make timely payment of any amounts owed to the Employee under this Agreement, the Employee shall be entitled to reimbursement for all reasonable costs, including attorneys' fees, incurred in challenging such termination or collecting such amounts. Such reimbursement shall be in addition to all rights to which the Employee is otherwise entitled under this Agreement.

       11. No Assignments.

       (a)  This Agreement is personal to each of the parties hereto, and no party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party; provided that the Bank shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession or assignment had taken place. Failure of the Bank to obtain such an assumption agreement prior to the effectiveness of any such succession or assignment shall be a breach of this Agreement and shall entitle the Employee to compensation from the Bank in the same amount and on the same terms as the compensation pursuant to Section 7(d) hereof. For purposes of implementing the provisions of this Section 11(a), the date on which any such succession becomes effective shall be deemed the Date of Termination.

       (b)  This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to the Employee hereunder if the Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee or other designee or if there is no such designee, to the Employee's estate.

       12. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when


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personally delivered or sent by certified mail, return receipt requested, postage prepaid, to the Bank at its home office, to the attention of the Board of Directors of the Bank with a copy to the Secretary, or, if to the Employee, to such home or other address as the Employee has most recently provided in writing to the Bank.

       13. Amendments. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.

       14. Headings. The headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

       15. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

       16. Governing Law. This Agreement shall be governed by the laws of the United States to the extent applicable and otherwise by the laws of the State of Indiana.

       17. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction.

       18. Company Guarantee. The Company hereby guarantees the obligations of the Bank to the Employee under the Employment Agreement. This guarantee shall be subject to the provisions of 12 U.S.C. Section 1828(k) and regulations thereunder.
      







[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]









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       IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

       THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

Attest:	MUTUAL FEDERAL SAVINGS BANK
_______________________________ Secretary	____________________________________ By: R. Donn Roberts Its: President and Chief Executive Officer
Attest:	MUTUAL FIRST FINANCIAL, INC.
_______________________________ Secretary	____________________________________ By: R. Donn Roberts Its: President and Chief Executive Officer
	EMPLOYEE
	_____________________________________ Steven L. Banks

8 End.

EX-10.2

 

EXHIBIT 10.2

FORM OF DIRECTOR SHAREHOLDER BENEFIT PROGRAM, AS AMENDED,
FOR STEVEN L. BANKS


FIRST AMENDMENT TO THE AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS

       WHEREAS, First Federal Savings Bank of Marion, in Marion, Indiana, now Mutual Federal Savings Bank (the "Bank") has adopted an Amended Director Shareholder Benefit Plan for Steven Banks (the "Plan"), effective September 1, 2000, this First Amendment to the Plan is for the purpose of amending the Plan as follows:

       The Plan is hereby amended such that the following paragraph shall be added to the Preamble as follows:

       WHEREAS, the Director shall be deemed, for purposes of this Plan only, to receive directors' fees in the same manner and in the same amount as though he were an outside director.

       The Plan is hereby amended such that Paragraph 2 of Exhibit A is modified as follows:

       2. Survivor's Benefit means a monthly amount equal to Five Thousand and Thirteen Dollars ($5,013).

       The definition of Survivor's Benefit has been incorporated into the Agreement for the sole purpose of actuarially establishing the maximum amount of annual Contributions to the Retirement Income Trust Fund and is intended to be an amount equal to the highest annual board fees received by the Director during the twelve (12) month period prior to the Director's Benefit Eligibility Date. For purposes of this agreement, the Director is deemed to receive directors' fees in the same manner and in the same amount as though he were an outside director. The amount of any Survivor's Benefit payable pursuant to the Agreement will be a function of (i) the amount and time of Contributions to the Retirement Income Trust Fund and (ii) the actual investment experience of such Contributions.


       The Plan is hereby amended such that Appendix I is modified as follows:

       Life Insurance Company: Southland Life Insurance Company
       Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
       Assumed Purchase Date: February 7, 2000


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       Assumed End Date: August 31, 2000
       Life Insurance Company: Lincoln Benefit Life
       Single Premium: Four Million Two Hundred Thousand Dollars ($4,200,000)
       Assumed Purchase Date: February 7, 2000
       Assumed End Date: August 31, 2000

       Life Insurance Company: Life Investors Insurance Company of America
       Single Premium: Five Million Five Hundred Thousand Dollars ($5,500,000)
       Assumed Purchase Date: September 1, 2000

       All other provisions of the Plan, which are not specifically modified by this First Amendment, are hereby incorporated and shall remain in full force and effect.








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       IN WITNESS WHEREOF, the Bank has caused this First Amendment to the Amended Director Shareholder Benefit Program for Steven Banks to be executed on this __________ day of _____________, 2001.

WITNESS:	STEVEN BANKS
_________________________	_________________________
WITNESS:	MUTUAL FEDERAL SAVINGS BANK
_________________________	_________________________

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AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS

FIRST FEDERAL SAVINGS BANK
September 1, 2000

















Financial Institution Consulting Corporation 700 Colonial Road, Suite 260 Memphis, Tennessee 38117 WATS: 1-800-873-0089 FAX: (901) 684-7414 (901) 684-7400


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AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS


       This Amended Director Shareholder Benefit Program Agreement (the "Agreement"), effective as of the 1st day of September, 2000, formalizes the understanding by and between FIRST FEDERAL SAVINGS BANK OF MARION (the "Bank"), a federally chartered stock savings bank having its principal place of business in Indiana, and STEVEN L. BANKS (hereinafter referred to as "Director"). Any reference herein to the "Holding Company" shall mean Marion Capital Holdings, Inc.

      W I T N E S S E T H :

       WHEREAS, the Director serves the Bank; and

       WHEREAS, the Bank recognizes the valuable services heretofore performed by the Director and wishes to encourage his continued employment; and

       WHEREAS, the Director wishes to be assured that he will be entitled to a certain amount of additional compensation for some definite period of time from and after retirement from active service with the Bank or other termination of employment and wishes to provide his beneficiary with benefits from and after death; and

       WHEREAS, the Bank and the Director wish to provide the terms and conditions upon which the Bank shall pay such additional compensation to the Director after retirement or other termination of employment and/or death benefits to his beneficiary after death; and

       WHEREAS, the Bank has adopted this Amended Director Shareholder Benefit Program Agreement which controls all issues relating to benefits as described herein;

       NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Bank and the Director agree as follows:



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      SECTION I
      DEFINITIONS

       When used herein, the following words and phrases shall have the meanings below unless the context clearly indicates otherwise:

      1.1 "Act" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

      1.2 "Administrator" means the Bank.

      1.3 "Bank" means FIRST FEDERAL SAVINGS BANK OF MARION and any successor thereto.

      1.4 "Beneficiary" means the person or persons (and their heirs) designated as Beneficiary in Exhibit B of this Agreement to whom the deceased Director's benefits are payable. If no Beneficiary is so designated, then the Director's Spouse, if living, will be deemed the Beneficiary. If the Director's Spouse is not living, then the Children of the Director will be deemed the Beneficiaries and will take on a per stirpes basis. If there are no Children, then the Estate of the Director will be deemed the Beneficiary.

      1.5 "Benefit Age" means the Director's seventieth (70th) birthday or, with proper notice, the actual date the Director's full-time service with the Bank terminates.

      1.6 "Benefit Eligibility Date" means the date on which the Director is entitled to receive any benefit(s) pursuant to Section(s) III or V of this Agreement. It shall be the first day of the month following the month in which the Director attains his Benefit Age.

      1.7 "Board of Directors" means the board of directors of the Bank.


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      1.8 "Cause" means personal dishonesty, willful misconduct, willful malfeasance, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease-and-desist order, material breach of any provision of this Agreement, or gross negligence in matters of material importance to the Bank.

      1.9 "Change in Control" shall mean and include the following with respect to the Bank or the Holding Company:

(1) a Change in Control of a nature that would be required to be reported in response to Item I (a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or

(2) a change in control of the Bank within the meaning of 12 C.F.R. 574.4; or

(3) a Change in Control at such time as

(i) any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank representing Twenty Five Percent (25.0%) or more of the combined voting power of the Bank's outstanding securities ordinarily having the right to vote at the election of directors, except for any stock purchased by the Bank's Employee Stock Ownership Plan and/or trust; or

(ii) individuals who constitute the board of directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Bank's stockholders was approved by the Bank's nominating committee which is comprised of members of the Incumbent Board, shall be, for purposes of this clause (ii), considered as though he were a member of the Incumbent Board; or

(iii) merger, consolidation, or sale of all or substantially all of the assets of the Bank occurs; or

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(iv) a proxy statement is issued soliciting proxies from the stockholders of the Bank by someone other than the current management of the Bank, seeking stockholder approval of a plan of reorganization, merger, or consolidation of the Bank with one or more corporations as a result of which the outstanding shares of the class of the Bank's securities are exchanged for or converted into cash or property or securities not issued by the Bank.

       The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities. The term "acquire" means obtaining ownership, control, power to vote or sole power of disposition of stock, directly or indirectly or through one or more transactions or subsidiaries, through purchase, assignment, transfer, exchange, succession or other means, including (1) an increase in percentage ownership resulting from a redemption, repurchase, reverse stock split or a similar transaction involving other securities of the same class; and (2) the acquisition of stock by a group of persons and/or companies acting in concert which shall be deemed to occur upon the formation of such group, provided that an investment advisor shall not be deemed to acquire the voting stock of its advisee if the advisor (a) votes the stock only upon instruction from the beneficial owner and (b) does not provide the beneficial owner with advice concerning the voting of such stock. The term "security" includes nontransferable subscription rights issued pursuant to a plan of conversion, as well as a "security," as defined in 15 U.S.C. § 78c(2)(1); and the term "acting in concert" means (1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. Further, acting in concert with any person or company shall also be deemed to be acting in

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concert with any person or company that is acting in concert with such other person or company.

       Notwithstanding the above definitions, the Board, in its absolute discretion, may make a finding that a Change in Control of the Bank has taken place without the occurrence of any or all of the events enumerated above.

      1.10 "Children" means all natural or adopted children of the Director, and issue of any predeceased child or children.

      1.11 "Code" means the Internal Revenue Code of 1986, as amended from time to time.
      1.12 "Contribution(s)" means those annual contributions which the Bank is required to make to the Retirement Income Trust Fund on behalf of the Director in accordance with Subsection 2.1(a) and this Subsection 1.12 of the Agreement. The following methodology for determining such contributions shall be: 14.10% of the difference, adjusted to take into account the Bank's tax rate, between the Bank's aggregate after-tax income derived from annual increases in the cash surrender value of the hypothetical pool of no-load, no-surrender charge life insurance policies described in Appendix I and the after-tax Cost of Funds Expense for the Plan Year for which the annual contribution is to be made; provided, however, that in no event shall such yearly Contribution exceed that accrual necessary under the benefit/years of service method for the Bank to pay, beginning at the Benefit Eligibility Date, the Survivor's Benefit payable over the Payout Period.

If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive a annual policy illustrations that assume the above-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contribution to the Retirement Income Trust Fund.


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       In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Director and his beneficiar(ies) shall have no ownership interest in such policy and shall always have no greater interest in the benefits under this Agreement than that of an unsecured creditor of the Bank.

      1.13 "Cost of Funds Expense" means, an interest rate as hereinafter defined to be applied and compounded annually with respect to the after-tax cash flow related to the Agreement, including benefit payments and an initial premium sum of Five Million Five Hundred Thousand Dollars ($5,500,000). The interest rate shall be equal to 80% of the last available one (1) year advance rate from the Federal Home Loan Bank in Indianapolis as determined on January 1 of each Plan Year, or such other rate as is mutually agreed by the Bank and the Director; provided, however, that it shall be 80% of 6.60% for the first Plan Year.

      1.14 "Director" means a person serving as a Director, Advisory Director, or Director Emeritus of the Bank.

      1.15 "Disability Benefit" means the benefit payable to the Director following a determination, in accordance with Subsection 6.1(a), that he is no longer able, properly and satisfactorily, to perform his duties at the Bank.

      1.16 "Effective Date" of this Agreement shall be September 1, 2000.

      1.17 "Estate" means the estate of the Director.

      1.18 "Interest Factor" means monthly compounding, discounting or annuitizing, as applicable, at a rate of Seven Percent (7%) per annum.

      1.19 "Payout Period" means the time frame during which certain benefits payable hereunder shall be distributed. Payments shall be made in monthly installments commencing on the


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first day of the month following the occurrence of the event which triggers distribution and continuing for one hundred eighty (180) months. Should the Director make a Timely Election to receive a lump sum benefit payment, the Director's Payout Period shall be deemed to be one (1) month.

      1.20 "Plan Year" shall mean the calendar year; provided however, that the first Plan Year shall be February 1, 2000 through December 31, 2000.

      1.21 "Retirement Age" means the Director's seventieth (70th) birthday provided, however, that the Director's actual retirement from full-time service may occur on or after the Director attains age seventy (70) and, in such case, the Director's age at actual retirement shall be deemed the Retirement Age.

      1.22 "Retirement Income Trust Fund" means the trust fund account established by the Bank and the Director and into which annual Contributions will be made by the Bank on behalf of the Director pursuant to Subsection 2.1. The contractual rights of the Bank and the Director with respect to the Retirement Income Trust Fund shall be outlined in a separate writing to be known as the Steven Banks Grantor Trust agreement.

      1.23 "Spouse" means the individual to whom the Director is legally married at the time of the Director's death, provided, however, that the term "Spouse" shall not refer to an individual to whom the Director is legally married at the time of death if the Director and such individual have entered into a formal separation agreement or initiated divorce proceedings.

      1.24 "Suicide" means the act of intentionally killing oneself.

      1.25 "Supplemental Retirement Income Benefit" means an annual amount (before taking into account federal and state income taxes), payable in monthly installments throughout the Payout Period equal to the annuitized value, using the Interest Factor, of the Retirement Income Trust Fund.


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      1.26 "Survivor's Benefit" means the benefit provided to Director's Beneficiary payable over the Payout Period as set forth in Exhibit A.

      1.27 "Timely Election" means the Director has made an election to change the form of his benefit payment(s) by filing with the Administrator a Notice of Election to Change Form of Payment (Exhibit C of this Agreement).

      SECTION II
      BENEFITS - GENERALLY

      2.1 (a) Retirement Income Trust Fund. The Director shall establish the Steven Banks Grantor Trust into which the Bank shall be required to make annual Contributions on the Director's behalf, pursuant to this Section II of the Agreement. A trustee shall be selected by the Director. The trustee shall maintain an account, separate and distinct from the Director's personal contributions, which account shall constitute the Retirement Income Trust Fund. The trustee shall be charged with the responsibility of investing all contributed funds. Distributions from the Retirement Income Trust Fund of the Steven Banks Grantor Trust may be made by the trustee to the Director, for purposes of payment of any income or employment taxes due and owing on Contributions by the Bank to the Retirement Income Trust Fund, if any, and on any taxable earnings associated with such Contributions which the Director shall be required to pay from year to year, under applicable law, prior to actual receipt of any benefit payments from the Retirement Income Trust Fund. To the extent this Agreement is inconsistent with the Steven Banks Grantor Trust agreement, the Steven Banks Grantor Trust Agreement shall supersede this Agreement.

       The annual Contributions required to be made by the Bank to the Retirement Income Trust Fund will be determined in accordance with Subsection 1.12. Contributions shall be made by the Bank to the Retirement Income Trust Fund (i) within seventy-five (75) days of establishment of such trust, and (ii) within the first thirty (30) days of the



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beginning of each subsequent Plan Year, unless this Section expressly provides otherwise.

       (b)(1) Contributions Made Annually
       The annual Contributions to the Retirement Income Trust Fund shall continue each year, unless this Subsection 2.1(b) specifically states otherwise, until the Plan Year of the Director's termination of service as a Director.

       (2) Termination Following a Change in Control
       If a Change in Control occurs at the Bank, followed by the Director's involuntary termination of service as a Director of the Bank or by the Bank's failure to renominate and cause to be elected or failure to reappoint the Director as a Director of the Bank , including for reasons of disability, the Contribution set forth below shall be required of the Bank. The Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit at age 70 and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

       (3) Termination For Cause
       If the Director is terminated for Cause pursuant to Subsection 5.2, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination for Cause occurs.

       (4) Involuntary Termination of Service.
       If the Director's service for the Bank is involuntarily terminated for any reason, excluding termination for Cause, or death, or termination following a Change in Control, no further contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if


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not yet made, no contribution shall be required for the Plan Year in which such termination occurs.

       (5) Death During Employment.
       If the Director dies while employed by the Bank, the Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund including (i) the full Contribution required for the Plan Year in which such termination occurs, if not yet made, plus (ii) the current present value (using the Interest Factor) of the right to receive the Survivor's Benefit immediately and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

       (6) Voluntary Termination
       If the Director voluntarily terminates service or does not seek reappointment to the Board, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination occurs.

       (7) Disability Prior to Change in Control
       If the Director becomes entitled to disability benefits under Section VI prior to a Change in Control, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination occurs.

      SECTION III
      RETIREMENT BENEFIT

      3.1 (a) Normal form of payment.
       If (i) the Director is employed with the Bank until reaching his Retirement Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 3.1(a) shall be controlling with respect to retirement benefits.



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       The Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefit payments shall commence on the Director's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a continuation of such monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be payable within thirty (30) days of such notice.



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       (b) Alternative payout option.
       If (i) the Director is employed with the Bank until reaching his Retirement Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 3.1(b) shall be controlling with respect to retirement benefits.

       The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 3.1(b) within thirty (30) days of the date the Administrator receives notice of the Director's death.

      SECTION IV
      PRE-RETIREMENT DEATH BENEFIT

      4.1 (a) Normal form of payment.
       If (i) the Director dies while employed by the Bank, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 4.1(a) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Director's Retirement Income Trust Fund, measured as of the later of (i) the Director's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefits shall commence within thirty (30) days of the date the Administrator receives notice of the Director's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return,



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following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

       (b) Alternative payout option.
       If (i) the Director dies while employed by the Bank, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 4.1(b) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Director's Retirement Income Trust Fund, measured as of the later of (i) the Director's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be paid to the Director's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.

SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF SERVICE PRIOR TO RETIREMENT AGE

      5.1 Involuntary Termination of Service Other Than for Cause.
       In the event the Director's service with the Bank is involuntarily terminated prior to Retirement Age, for any reason including a Change in Control, but excluding (i) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection 6.1, (ii) the Director's pre-retirement death, which shall be covered in Section IV, or (iii) termination for Cause, which shall be



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covered in Subsection 5.2, the Director (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.1. Payments of benefits pursuant to this Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or 5.1(b) below, as applicable.

       (a) Normal form of payment.
       (1) Director Lives Until Benefit Age
       If (i) after such termination, the Director lives until attaining his Benefit Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(1) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence on the Director's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a



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continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.
       (2) Director Dies Prior to Benefit Age
       If (i) after such termination, the Director dies prior to attaining his Benefit Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(2) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the date of the Director's death, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the date the Administrator receives notice of the Director's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in the form of a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the



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Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

       (b) Alternative Payout Option.
       (1) Director Lives Until Benefit Age
       If (i) after such termination, the Director lives until attaining his Benefit Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(1) shall be controlling with respect to retirement benefits.

       The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 5.1(b)(1) within thirty (30) days of the date the Administrator receives notice of the Director's death.

       (2) Director Dies Prior to Benefit Age
       If (i) after such termination, the Director dies prior to attaining his Benefit Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(2) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Retirement Income Trust Fund, measured as of the date of the Director's death, shall be paid to the Director's Beneficiary within thirty (30) days of the date the Administrator receives notice of the Director's death.

      5.2 Termination For Cause.
       If the Director is terminated for Cause, all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. Furthermore, no further Contributions shall be required of the Bank for the year in which such termination for Cause occurs (if



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not yet made). The Director shall be entitled to receive a benefit in accordance with this Subsection 5.2.

       The balance of the Director's Retirement Income Trust Fund shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies prior to his Benefit Eligibility Date, his Beneficiary shall be entitled to receive the balance of the Director's Retirement Income Trust Fund in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.

      5.3 Voluntary Termination of Service.
       In the event the Director's service with the Bank is voluntarily terminated prior to Retirement Age, for any reason including the Director's failure to seek reappointment to the Board but excluding (i) a Change in Control, or (ii) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection 6.1, the Director (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.3. Payments of benefits pursuant to this Subsection 5.3 shall be made in accordance with Subsection 5.3 (a) or 5.3 (b) below, as applicable.

       (a) Normal form of payment.
       If after such termination, the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.3(a) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the date of the Director's voluntary termination, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the Director's termination. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a



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rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

       (b) Alternative Payout Option.
       If the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.3(b) shall be controlling with respect to retirement benefits.

       The balance of the Retirement Income Trust Fund, measured as of the Director's termination date, shall be paid to the Director in a lump sum within thirty (30) days of such termination. In the event the Director dies after becoming eligible for such payment, but before the actual payment is made, his Beneficiary shall be entitled to receive the



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lump sum benefit in accordance with this Subsection 5.3(b) within thirty (30) days of the date the Administrator receives notice of the Director's death.

      SECTION VI
      OTHER BENEFITS

      6.1 (a) Disability Benefit.
       If the Director's service is terminated prior to Retirement Age due to a disability which meets the criteria set forth below, the Director may request to receive the Disability Benefit in lieu of the retirement benefit(s) available pursuant to Section 5.1 (which is (are) not available prior to the Director's Benefit Eligibility Date).

       In any instance in which: (i) it is determined by a duly licensed, independent physician selected by the Bank, that the Director is no longer able, properly and satisfactorily, to perform his regular duties as an officer, because of ill health, accident, disability or general inability due to age, (ii) the Director requests payment under this Subsection in lieu of Subsection 5.1, and (iii) Board of Director approval is obtained to allow payment under this Subsection, in lieu of Subsection 5.1, the Director shall be entitled to the following lump sum benefit(s). The lump sum benefit(s) to which the Director is entitled shall be the balance of the Retirement Income Trust Fund. The benefit(s) shall be paid within thirty (30) days following the date of the Director's request for such benefit is approved by the Board of Directors.

       (b) Death Following Disability.
       In the event the Director dies after becoming eligible for such payment(s) but before the actual payment(s) is (are) made, his Beneficiary shall be entitled to receive the benefit(s) provided for in this Subsection 6.1(a) within thirty (30) days of the date the Administrator receives notice of the Director's death. Furthermore, the Bank shall make a direct, lump sum payment to the Director's Beneficiary in an amount equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit immediately and payable over the Payout Period



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less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor), but not required pursuant to Subsection 2.1(b) due to the Director's disability-related termination. Such lump sum payment, if approved by the Board of Directors, shall be payable to the Director's Beneficiary within thirty (30) days of such Board of Director approval.

      SECTION VII
      BENEFICIARY DESIGNATION

       The Director shall make an initial designation of primary and secondary Beneficiaries upon execution of this Agreement and shall have the right to change such designation, at any subsequent time, by submitting to (i) the Administrator, and (ii) the trustee of the Retirement Income Trust Fund, in substantially the form attached as Exhibit B to this Agreement, a written designation of primary and secondary Beneficiaries. Any Beneficiary designation made subsequent to execution of this Agreement shall become effective only when receipt thereof is acknowledged in writing by the Administrator.

SECTION VIII
NON-COMPETITION

      8.1 Non-Competition During Service.
       In consideration of the agreements of the Bank contained herein and of the payments to be made by the Bank pursuant hereto, the Director hereby agrees that, for as long as he remains a Director by the Bank, he will devote substantially all of his time, skill, diligence and attention to the business of the Bank, and will not actively engage, either directly or indirectly, in financial services or in any business or other activity which is, or may be deemed to be, in any way competitive with or adverse to the best interests of the business of the Bank, its affiliates, subsidiaries, or parent corporation, if any, unless the Director has the prior express written consent of the Bank.





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      8.2 Breach of Non-Competition Clause.
       (a) Continued Employment Following Breach.
       In the event (i) any material breach by the Director of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Director continues service at the Bank following such breach, all further Contributions to the Retirement Income Trust Fund shall immediately cease, and all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. The Director (or his Beneficiary) shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with Subpart (1) or (2) below, as applicable.

       (1) Director Lives Until Benefit Age
       If, following such breach, the Director lives until attaining his Benefit Age, he shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2(a)(1). The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after attaining his Benefit Age but before actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 8.2(a)(1) within thirty (30) days of the date of the Administrator receives notice of the Director's death.

       (2) Director Dies Prior to Benefit Age
       If, following such breach, the Director dies prior to attaining his Benefit Age, his Beneficiary shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2 (a)(2). The balance of the Retirement Income Trust Fund, measured as of the date of the Director's death, shall be paid to the Director's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.




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       (b) Termination of Service Following Breach.
       In the event (i) any material breach by the Director of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Director's service with the Bank is terminated due to such breach, such termination shall be deemed to be for Cause and the benefits payable to the Director shall be paid in accordance with Subsection 5.2 of this Agreement.

      SECTION IX
      DIRECTOR'S RIGHT TO ASSETS

       The rights of the Director, any Beneficiary, or any other person claiming through the Director under this Agreement, shall be solely those of an unsecured general creditor of the Bank. The Director, the Beneficiary, or any other person claiming through the Director, shall only have the right to receive from the Bank those payments or amounts so specified under this Agreement. The Director agrees that he, his Beneficiary, or any other person claiming through him shall have no rights or interests whatsoever in any asset of the Bank, including any insurance policies or contracts which the Bank may possess or obtain to informally fund this Agreement. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall not be deemed to be held under any trust for the benefit of the Director or his Beneficiaries, unless such asset is contained in the rabbi trust described in Section XII of this Agreement. Any such asset shall be and remain, a general, unpledged asset of the Bank in the event of the Bank's insolvency.

      SECTION X
      RESTRICTIONS UPON FUNDING

       The Bank shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement, other than those Contributions required to be made to the Retirement Income Trust Fund. The Director, his Beneficiaries or any successor in interest to him shall be and remain simply a general unsecured creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid



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compensation. The Bank reserves the absolute right in its sole discretion to either purchase assets to meet its obligations undertaken by this Agreement or to refrain from the same and to determine the extent, nature, and method of such asset purchases. Should the Bank decide to purchase assets such as life insurance, mutual funds, disability policies or annuities, the Bank reserves the absolute right, in its sole discretion, to replace such assets from time to time or to terminate its investment in such assets at any time, in whole or in part. At no time shall the Director be deemed to have any lien, right, title or interest in or to any specific investment or to any assets of the Bank. If the Bank elects to invest in a life insurance, disability or annuity policy upon the life of the Director, then the Director shall assist the Bank by freely submitting to a physical examination and by supplying such additional information necessary to obtain such insurance or annuities.

      SECTION XI
      ACT PROVISIONS

      11.1 Named Fiduciary and Administrator. The Bank, as Administrator, shall be the Named Fiduciary of this Agreement. As Administrator, the Bank shall be responsible for the management, control and administration of the Agreement as established herein. The Administrator may delegate to others certain aspects of the management and operational responsibilities of the Agreement, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

      11.2 Claims Procedure and Arbitration. In the event that benefits under this Agreement are not paid to the Director (or to his Beneficiary in the case of the Director's death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Administrator within sixty (60) days from the date payments are refused. The Administrator shall review the written claim and, if the claim is denied, in whole or in part, it shall provide in writing, within ninety (90) days of receipt of such claim, its specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim. Such writing by the Administrator shall further indicate the additional steps



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which must be undertaken by claimants if an additional review of the claim denial is desired.

       If claimants desire a second review, they shall notify the Administrator in writing within sixty (60) days of the first claim denial. Claimants may review this Agreement or any documents relating thereto and submit any issues and comments, in writing, they may feel appropriate. In its sole discretion, the Administrator shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement upon which the decision is based.

       If claimants continue to dispute the benefit denial based upon completed performance of this Plan or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to mediation, administered by the American Arbitration Association ("AAA") (or a mediator selected by the parties) in accordance with the AAA's Commercial Mediation Rules. If mediation is not successful in resolving the dispute, it shall be settled by arbitration administered by the AAA under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

      SECTION XII
      MISCELLANEOUS

      12.1 No Effect on Rights to Service. Nothing contained herein will confer upon the Director the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with the Director without regard to the existence of the Agreement.

      12.2 State Law. The Agreement is established under, and will be construed according to, the laws of the state of Indiana, to the extent such laws are not preempted by the Act and valid regulations published thereunder.



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      12.3 Severability. In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provisions held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

      12.4 Incapacity of Recipient. In the event the Director is declared incompetent and a conservator or other person legally charged with the care of his person or Estate is appointed, any benefits under the Agreement to which such Director is entitled shall be paid to such conservator or other person legally charged with the care of his person or Estate.

      12.5 Unclaimed Benefit. The Director shall keep the Bank informed of his current address and the current address of his Beneficiaries. The Bank shall not be obligated to search for the whereabouts of any person. If the location of the Director or his Beneficiary is not made known to the Bank by the time any payment is due, the Bank may discharge its obligation by payment to the Director's Estate. If there is no Estate in existence at such time or if such fact cannot be determined by the Bank, the Director and his Beneficiary(ies) shall thereupon forfeit any rights to the benefits provided for such Director and/or Beneficiary under this Agreement.

      12.6 Limitations on Liability. Notwithstanding any of the preceding provisions of the Agreement, no individual acting as an employee or agent of the Bank, or as a member of the Board of Directors shall be personally liable to the Director or any other person for any claim, loss, liability or expense incurred in connection with the Agreement.

      12.7 Gender. Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.

      12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this Agreement shall affect the right of the Director to participate in or be covered by any qualified or



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non-qualified pension, profit sharing, group, bonus or other supplemental compensation or fringe benefit agreement constituting a part of the Bank's existing or future compensation structure.

      12.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if the Director's death results from Suicide, whether sane or insane, within twenty-six (26) months after execution of this Agreement, all further Contributions to the Retirement Income Trust Fund shall thereupon cease, and no Contribution shall be made by the Bank to the Retirement Income Trust Fund in the year such death resulting from Suicide occurs (if not yet made). All benefits other than those available from previous Contributions to the Retirement Income Trust Fund under this Agreement shall be forfeited, and this Agreement shall become null and void. The balance of the Retirement Income Trust Fund, measured as of the Director's date of death, shall be paid to the Beneficiary within thirty (30) days of the date the Administrator receives notice of the Director's death.

      12.10 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Bank, its successors and assigns, and the Director, his successors, heirs, executors, administrators, and Beneficiaries.

      12.11 Headings. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed a part of this Agreement.

      12.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi trust into which the Bank shall contribute assets which shall be held therein, subject to the claims of the Bank's creditors in the event of the Bank's "Insolvency" (as defined in such rabbi trust agreement), until the contributed assets are paid to the Director and/or his Beneficiary in such manner and at such times as specified in this Agreement. It is the intention of the Bank that the contribution or contributions to the rabbi trust shall provide the Bank with a source of funds to assist it in meeting the liabilities of this Agreement.




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      12.13 Source of Payments. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank or the assets of the rabbi trust.

      SECTION XIII
      AMENDMENT/PLAN TERMINATION

      13.1 Amendment or Plan Termination. The Bank intends this Agreement to be permanent, but reserves the right to amend or terminate the Agreement when, in the sole opinion of the Bank, such amendment or termination is advisable, provided, however, that the Plan shall not be amended (other than an amendment that would terminate the Plan) following a Change in Control. However, any termination of the Agreement which is done in anticipation of or pursuant to a "Change in Control", as defined in Subsection 1.9, shall be deemed to trigger Subsection 2.1(b)(2) of the Agreement notwithstanding the Director's continued employment, and benefit(s) shall be paid from the Retirement Income Trust Fund in accordance with Subsection 13.2 below and with Subsections 2.1(b)(2). Any amendment or termination of the Agreement by the Bank shall be made pursuant to a resolution of the Board of Directors of the Bank and shall be effective as of the date of such resolution. No amendment or termination of the Agreement by the Bank shall directly or indirectly deprive the Director of all or any portion of the Director's Retirement Income Trust Fund as of the effective date of the resolution amending or terminating the Agreement. For purposes of this Section 13.1, a termination will be deemed to be made "in anticipation of a Change in Control" if it occurs within one year prior to a Change in Control (as defined herein). In the event that the appropriate regulatory authorities shall disapprove the Plan within the statutory time, and the Board is unable or unwilling to make amendments necessary to cause the appropriate regulatory authorities to approve the Plan, the Plan shall be null and void.

       Notwithstanding the above, if at any time after the final Contribution is made to the Retirement Income Trust Fund the Director elects to terminate the Retirement Income Trust Fund and receive a distribution of the assets of the Retirement Income Trust Fund, then upon such distribution this Agreement shall terminate.




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      13.2 Director's Right to Payment Following Plan Termination. In the event of a termination of the Agreement, the Director shall be entitled to the balance, if any, of his Retirement Income Trust Fund. However, if such termination is done in anticipation of or pursuant to a "Change in Control," such balance(s) shall include the final Contribution made pursuant to Subsection 2.1(b)(2). Payment of the balance(s) of the Director's Retirement Income Trust Fund shall not be dependent upon his continuation of employment with the Bank following the termination date of the Agreement. Payment of the balance(s) of the Director's Retirement Income Trust Fund shall be made in a lump sum within thirty (30) days of the date of termination of the Agreement.

SECTION XIV
EXECUTION

      14.1 This Agreement and the Steven Banks Grantor Trust Agreement set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous agreements or understandings between the parties hereto regarding the subject matter hereof, including the Director Shareholder Benefit Program Agreement for Steven Banks dated February 1, 2000, are merged into and superseded by this Agreement and the Steven Banks Grantor Trust Agreement.

      14.2 This Agreement shall be executed in triplicate, each copy of which, when so executed and delivered, shall be an original, but all three copies shall together constitute one and the same instrument.

[Remainder of page left intentionally blank.]












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       IN WITNESS WHEREOF, the Bank and the Director have caused this Agreement to be executed on the day and date first above written.

WITNESS:		FIRST FEDERAL SAVINGS BANK:
	By:	___________________________
___________________________	Title:	___________________________
WITNESS:		DIRECTOR:
___________________________		___________________________

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CONDITIONS AND ASSUMPTIONS



      1. The amount of the annual Contributions to the Retirement Income Trust Fund has been based on a formula which is defined in Subsection 1.12.

      2. Survivor's Benefit means an annual amount equal to Forty-Nine Thousand Five Hundred and Twenty-Eight Dollars ($49,528) at age 70 if paid entirely by the Bank.

       The definition of Survivor's Benefit has been incorporated into the Agreement for the sole purpose of actuarially establishing the maximum amount of annual Contributions to the Retirement Income Trust Fund and is intended to be an amount equal to the highest annual board fees received by the Director during the twelve (12) month period prior to the Director's Benefit Eligibility Date. The amount of any Survivor's Benefit payable pursuant to the Agreement will be a function of (i) the amount and time of Contributions to the Retirement Income Trust Fund and (ii) the actual investment experience of such Contributions.














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Exhibit A

AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT BENEFICIARY DESIGNATION

       The Director, under the terms of the Amended Director Shareholder Benefit Program Agreement executed by the Bank, dated the ___ day of _________, 2000, hereby designates the following Beneficiary(ies) to receive any guaranteed payments or death benefits under such Agreement, following his death:


PRIMARY BENEFICIARY: ____________________________________


SECONDARY BENEFICIARY: ____________________________________


       This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect.

       Such Beneficiary Designation is revocable.


DATE: ______________________, 20__

____________________________________
WITNESS ____________________________________
Director

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Exhibit B

AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT

TO: Bank:
      Attention:

       I hereby give notice of my election to change the form of payment of my Director Supplemental Retirement Income Benefit, as specified below. I understand that such notice, in order to be effective, must be submitted in accordance with the time requirements described in my Amended Director Shareholder Benefit Program Agreement.

_____       I hereby elect to change the form of payment of my benefits from monthly installments throughout my Payout Period to a lump sum benefit payment.

_____       I hereby elect to change the form of payment of my benefits from a lump sum benefit payment to monthly installments throughout my Payout Period. Such election hereby revokes my previous notice of election to receive a lump sum form of benefit payments.

___________________________________
Director
 

___________________________________
Date
 

Acknowleged:

By: ___________________________
 

Title: ___________________________
 

___________________________________
Date

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Exhibit C

AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENTAPPENDIX I

      The following no-load, no surrender charge life insurance policies are intended to comprise the hypothetical pool of life insurance, the increases in cash values of which are a component of the Contributions for each participant in the Amended Director Shareholder Benefit Program Agreement.

      If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive annual policy illustrations that assume the below-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contributions to the Retirement Income Trust Fund.

      In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Director and their beneficiaries shall have no ownership interest in such policies and shall always have no greater interest in the benefits under this Plan than that of unsecured creditors of the Bank.


      Life Insurance Company: Southland Life Insurance Company
      Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
      Assumed Purchase Date: February 7, 2000


      Life Insurance Company: Lincoln Benefit Life
      Single Premium Paid: Four Million Two Hundred Thousand Dollars ($4,200,000)
      Assumed Purchase Date: February 7, 2000











End.

EX-10.3

 

EXHIBIT 10.3

FORM OF EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT,
AS AMENDED, FOR STEVEN L. BANKS


FIRST AMENDMENT TO THE AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS


       WHEREAS, First Federal Savings Bank of Marion, in Marion, Indiana, now Mutual Federal Savings Bank (the "Bank") has adopted an Amended Executive Shareholder Benefit Plan for Steve Banks (the "Plan"), effective September 1, 2000, this First Amendment to the Plan is for the purpose of amending the Plan as follows:

       The Plan is hereby amended such that Paragraph 2 of Exhibit A is modified as follows:

       2. Survivor's Benefit means a monthly amount equal to Twenty-Nine Thousand and Eighty-Eight Dollars ($29,088).
      
       The Plan is hereby amended such that Appendix I is modified as follows:

       Life Insurance Company: Southland Life Insurance Company
       Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
       Assumed Purchase Date: February 7, 2000
       Assumed End Date: August 31, 2000

       Life Insurance Company: Lincoln Benefit Life
       Single Premium: Four Million Two Hundred Thousand Dollars ($4,200,000)
       Assumed Purchase Date: February 7, 2000
       Assumed End Date: August 31, 2000

       Life Insurance Company: Life Investors Insurance Company of America
       Single Premium: Five Million Five Hundred Thousand Dollars ($5,500,000)
       Assumed Purchase Date: September 1, 2000

       All other provisions of the Plan, which are not specifically modified by this First Amendment, are hereby incorporated and shall remain in full force and effect.




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       IN WITNESS WHEREOF, the Bank has caused this First Amendment to the Amended Executive Shareholder Benefit Program for Steven Banks to be executed on this ___________ day of ____________________, 2001.

WITNESS:	STEVEN BANKS
_________________________	_________________________
WITNESS:	MUTUAL FEDERAL SAVINGS BANK
_________________________	_________________________

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AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS

FIRST FEDERAL SAVINGS BANK

September 1, 2000

















Financial Institution Consulting Corporation 700 Colonial Road, Suite 260 Memphis, Tennessee 38117 WATS: 1-800-873-0089 FAX: (901) 684-7414 (901) 684-7400




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AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT FOR STEVE BANKS


       This Amended Executive Shareholder Benefit Program Agreement (the "Agreement"), effective as of the 1st day of September, 2000, formalizes the understanding by and between FIRST FEDERAL SAVINGS BANK OF MARION (the "Bank"), a federally chartered stock savings bank having its principal place of business in Indiana, and STEVEN L. BANKS (hereinafter referred to as "Executive"). Any reference herein to the "Holding Company" shall mean Marion Capital Holdings, Inc.

      W I T N E S S E T H :

       WHEREAS, the Executive is employed by the Bank; and

       WHEREAS, the Bank recognizes the valuable services heretofore performed by the Executive and wishes to encourage his continued employment; and

       WHEREAS, the Executive wishes to be assured that he will be entitled to a certain amount of additional compensation for some definite period of time from and after retirement from active service with the Bank or other termination of employment and wishes to provide his beneficiary with benefits from and after death; and

       WHEREAS, the Bank and the Executive wish to provide the terms and conditions upon which the Bank shall pay such additional compensation to the Executive after retirement or other termination of employment and/or death benefits to his beneficiary after death; and

       WHEREAS, the Bank has adopted this Amended Executive Shareholder Benefit Program Agreement which controls all issues relating to benefits as described herein;

       NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Bank and the Executive agree as follows:




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      SECTION I
      DEFINITIONS

       When used herein, the following words and phrases shall have the meanings below unless the context clearly indicates otherwise:

      1.1 "Act" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

      1.2 "Administrator" means the Bank.

      1.3 "Bank" means FIRST FEDERAL SAVINGS BANK OF MARION and any successor thereto.

      1.4 "Beneficiary" means the person or persons (and their heirs) designated as Beneficiary in Exhibit B of this Agreement to whom the deceased Executive's benefits are payable. If no Beneficiary is so designated, then the Executive's Spouse, if living, will be deemed the Beneficiary. If the Executive's Spouse is not living, then the Children of the Executive will be deemed the Beneficiaries and will take on a per stirpes basis. If there are no Children, then the Estate of the Executive will be deemed the Beneficiary.

      1.5 "Benefit Age" means the Executive's sixty-fifth (65th) birthday or, with proper notice, the actual date the Executive's full-time service with the Bank terminates.

      1.6 "Benefit Eligibility Date" means the date on which the Executive is entitled to receive any benefit(s) pursuant to Section(s) III or V of this Agreement. It shall be the first day of the month following the month in which the Executive attains his Benefit Age.

      1.7 "Board of Directors" means the board of directors of the Bank.

      1.8 "Cause" means personal dishonesty, willful misconduct, willful malfeasance, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or



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final cease-and-desist order, material breach of any provision of this Agreement, or gross negligence in matters of material importance to the Bank.
      1.9 "Change in Control" shall mean and include the following with respect to the Bank or the Holding Company:

(1) a Change in Control of a nature that would be required to be reported in response to Item I (a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or
(2) a change in control of the Bank within the meaning of 12 C.F.R. 574.4; or
(3) a Change in Control at such time as

(i) any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank representing Twenty Five Percent (25.0%) or more of the combined voting power of the Bank's outstanding securities ordinarily having the right to vote at the election of directors, except for any stock purchased by the Bank's Employee Stock Ownership Plan and/or trust; or
(ii) individuals who constitute the board of directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Bank's stockholders was approved by the Bank's nominating committee which is comprised of members of the Incumbent Board, shall be, for purposes of this clause (ii), considered as though he were a member of the Incumbent Board; or
(iii) merger, consolidation, or sale of all or substantially all of the assets of the Bank occurs; or
(iv) a proxy statement is issued soliciting proxies from the stockholders of the Bank by someone other than the current management of the Bank, seeking

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stockholder approval of a plan of reorganization, merger, or consolidation of the Bank with one or more corporations as a result of which the outstanding shares of the class of the Bank's securities are exchanged for or converted into cash or property or securities not issued by the Bank.

       The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities. The term "acquire" means obtaining ownership, control, power to vote or sole power of disposition of stock, directly or indirectly or through one or more transactions or subsidiaries, through purchase, assignment, transfer, exchange, succession or other means, including (1) an increase in percentage ownership resulting from a redemption, repurchase, reverse stock split or a similar transaction involving other securities of the same class; and (2) the acquisition of stock by a group of persons and/or companies acting in concert which shall be deemed to occur upon the formation of such group, provided that an investment advisor shall not be deemed to acquire the voting stock of its advisee if the advisor (a) votes the stock only upon instruction from the beneficial owner and (b) does not provide the beneficial owner with advice concerning the voting of such stock. The term "security" includes nontransferable subscription rights issued pursuant to a plan of conversion, as well as a "security," as defined in 15 U.S.C. § 78c(2)(1`); and the term "acting in concert" means (1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. Further, acting in concert with any person or company shall also be deemed to be acting in concert with any person or company that is acting in concert with such other person or company.

       Notwithstanding the above definitions, the Board, in its absolute discretion, may make a finding that a Change in Control of the Bank has taken place without the occurrence of any or all of the events enumerated above.

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      1.10 "Children" means all natural or adopted children of the Executive, and issue of any predeceased child or children.

      1.11 "Code" means the Internal Revenue Code of 1986, as amended from time to time.
      1.12 "Contribution(s)" means those annual contributions which the Bank is required to make to the Retirement Income Trust Fund on behalf of the Executive in accordance with Subsection 2.1(a) and this Subsection 1.12 of the Agreement. The following methodology for determining such contributions shall be: 54.55% of the difference, adjusted to take into account the Bank's tax rate, between the Bank's aggregate after-tax income derived from annual increases in the cash surrender value of the hypothetical pool of no-load, no-surrender charge life insurance policies described in Appendix I and the after-tax Cost of Funds Expense, for the Plan Year for which the annual contribution is made.
      
       If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive a annual policy illustrations that assume the above-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contribution to the Retirement Income Trust Fund.

       In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Executive and his beneficiar(ies) shall have no ownership interest in such policy and shall always have no greater interest in the benefits under this Agreement than that of an unsecured creditor of the Bank.

      1.13 "Cost of Funds Expense" means, an interest rate as hereinafter defined to be applied and compounded annually with respect to the after-tax cash flow related to the Agreement, including benefit payments and an initial premium sum of Five Million Five Hundred Thousand Dollars ($5,500,000). The interest rate shall be equal to 80% of the last available



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one (1) year advance rate from the Federal Home Loan Bank in Indianapolis as determined on January 1 of each Plan Year, or such other rate as is mutually agreed by the Bank and the Executive; provided, however, that it shall be 80% of 6.60% for the first Plan Year.

      1.14 "Disability Benefit" means the benefit payable to the Executive following a determination, in accordance with Subsection 6.1(a), that he is no longer able, properly and satisfactorily, to perform his duties at the Bank.

      1.15 "Effective Date" of this Agreement shall be September 1, 2000.

      1.16 "Estate" means the estate of the Executive.

      1.17 "Interest Factor" means monthly compounding, discounting or annuitizing, as applicable, at a rate of Seven Percent (7%) per annum.

      1.18 "Payout Period" means the time frame during which certain benefits payable hereunder shall be distributed. Payments shall be made in monthly installments commencing on the first day of the month following the occurrence of the event which triggers distribution and continuing for one hundred eighty (180) months. Should the Executive make a Timely Election to receive a lump sum benefit payment, the Executive's Payout Period shall be deemed to be one (1) month.

      1.19 "Plan Year" shall mean the calendar year; provided however, that the first Plan Year shall be February 1, 2000 through December 31, 2000.

      1.20 "Retirement Age" means the Executive's sixty-fifth (65th) birthday provided, however, that the Executive's actual retirement from full-time employment may occur on or after the Executive attains age sixty-five (65) and, in such case, the Executive's age at actual retirement shall be deemed the Retirement Age.



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      1.21 "Retirement Income Trust Fund" means the trust fund account established by the Bank and the Executive and into which annual Contributions will be made by the Bank on behalf of the Executive pursuant to Subsection 2.1. The contractual rights of the Bank and the Executive with respect to the Retirement Income Trust Fund shall be outlined in a separate writing to be known as the Steven Banks Grantor Trust agreement.

      1.22 "Spouse" means the individual to whom the Executive is legally married at the time of the Executive's death, provided, however, that the term "Spouse" shall not refer to an individual to whom the Executive is legally married at the time of death if the Executive and such individual have entered into a formal separation agreement or initiated divorce proceedings.
      1.23 "Suicide" means the act of intentionally killing oneself.

      1.24 "Supplemental Retirement Income Benefit" means an annual amount (before taking into account federal and state income taxes), payable in monthly installments throughout the Payout Period equal to the annuitized value, using the Interest Factor, of the Retirement Income Trust Fund.

      1.25 "Survivor's Benefit" means the benefit provided to Executive's Beneficiary payable over the Payout Period as set forth in Exhibit A.

      1.26 "Timely Election" means the Executive has made an election to change the form of his benefit payment(s) by filing with the Administrator a Notice of Election to Change Form of Payment (Exhibit C of this Agreement).

      SECTION II
      BENEFITS - GENERALLY

      2.1 (a) Retirement Income Trust Fund. The Executive shall establish the Steven Banks Grantor Trust into which the Bank shall be required to make annual Contributions on the Executive's behalf, pursuant to this Section II of the Agreement. A trustee shall be selected by the Executive. The trustee shall maintain an account, separate and distinct from the Executive's



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personal contributions, which account shall constitute the Retirement Income Trust Fund. The trustee shall be charged with the responsibility of investing all contributed funds. Distributions from the Retirement Income Trust Fund of the Steven Banks Grantor Trust may be made by the trustee to the Executive, for purposes of payment of any income or employment taxes due and owing on Contributions by the Bank to the Retirement Income Trust Fund, if any, and on any taxable earnings associated with such Contributions which the Executive shall be required to pay from year to year, under applicable law, prior to actual receipt of any benefit payments from the Retirement Income Trust Fund. To the extent this Agreement is inconsistent with the Steven Banks Grantor Trust agreement, the Steven Banks Grantor Trust Agreement shall supersede this Agreement.

       The annual Contributions required to be made by the Bank to the Retirement Income Trust Fund will be determined in accordance with Subsection 1.12. Contributions shall be made by the Bank to the Retirement Income Trust Fund (i) within seventy-five (75) days of establishment of such trust, and (ii) within the first thirty (30) days of the beginning of each subsequent Plan Year, unless this Section expressly provides otherwise.

       (b)(1) Contributions Made Annually
       The annual Contributions to the Retirement Income Trust Fund shall continue each year, unless this Subsection 2.1(b) specifically states otherwise, until the Plan Year of the Executive's termination of employment.

       (2) Termination Following a Change in Control
       If a Change in Control occurs at the Bank, followed within thirty-six (36) months by either (i) the Executive's involuntary termination of employment, or (ii) Executive's voluntary termination of employment after: (A) a material change in the Executive's function, duties, or responsibilities, which change would cause the Executive's position to become one of lesser responsibility, importance, or scope from the position the Executive held immediately following the Change in Control, (B) a relocation of the Executive's principal place of employment by more than fifty (50) miles from its location prior to the Change in Control, or (C) a material reduction in the benefits and perquisites to the Executive from those being



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provided immediately following the Change in Control, the Contribution set forth below shall be required of the Bank. The Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit at age 65 and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

       (3) Termination For Cause
       If the Executive is terminated for Cause pursuant to Subsection 5.2, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination for Cause occurs.

       (4) Involuntary Termination of Employment.
       If the Executive's employment with the Bank is involuntarily terminated for any reason, including a termination due to disability of the Executive but excluding termination for Cause, or termination following a Change in Control within thirty-six (36) months of such Change in Control, within thirty (30) days of such involuntary termination of employment, the Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit at age 65 and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

       (5) Death During Employment.
       If the Executive dies while employed by the Bank, the Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund equal to the current present value (using the Interest Factor) of the right to receive the Survivor's Benefit beginning 30 days after the Executive's date of death and payable over the Payout Period less



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the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

       (6) Voluntary Termination
       If the Executive voluntarily terminates employment, other than a voluntary termination following a Change of Control as set forth in Subsections 2.1(b)(2), no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination occurs.

      SECTION III
      RETIREMENT BENEFIT

      3.1 (a) Normal form of payment.
       If (i) the Executive is employed with the Bank until reaching his Retirement Age, and (ii) the Executive has not made a Timely Election to receive a lump sum benefit, this Subsection 3.1(a) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the Executive's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefit payments shall commence on the Executive's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Executive (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Executive may at anytime during the Payout Period request to receive the unpaid balance of his



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Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Executive, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Executive dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Executive's Beneficiary the monthly installments (or a continuation of such monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Executive's Beneficiary may request to receive the unpaid balance of the Executive's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Executive's death. Such lump sum payment shall be payable within thirty (30) days of such notice.

       (b) Alternative payout option.
       If (i) the Executive is employed with the Bank until reaching his Retirement Age, and (ii) the Executive has made a Timely Election to receive a lump sum benefit, this Subsection 3.1(b) shall be controlling with respect to retirement benefits.

       The balance of the Retirement Income Trust Fund, measured as of the Executive's Benefit Age, shall be paid to the Executive in a lump sum on his Benefit Eligibility Date. In the event the Executive dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 3.1(b) within thirty (30) days of the date the Administrator receives notice of the Executive's death.




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      SECTION IV
      PRE-RETIREMENT DEATH BENEFIT

      4.1 (a) Normal form of payment.
       If (i) the Executive dies while employed by the Bank, and (ii) the Executive has not made a Timely Election to receive a lump sum benefit, this Subsection 4.1(a) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Executive's Retirement Income Trust Fund, measured as of the later of (i) the Executive's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefits shall commence within thirty (30) days of the date the Administrator receives notice of the Executive's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Executive's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Executive's Beneficiary may request to receive the unpaid balance of the Executive's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Executive's death. Such lump sum payment shall be made within thirty (30) days of such notice.




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       (b) Alternative payout option.
       If (i) the Executive dies while employed by the Bank, and (ii) the Executive has made a Timely Election to receive a lump sum benefit, this Subsection 4.1(b) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Executive's Retirement Income Trust Fund, measured as of the later of (i) the Executive's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be paid to the Executive's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Executive's death.

SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF SERVICE PRIOR TO RETIREMENT AGE

      5.1 Involuntary Termination of Service Other Than for Cause.
       In the event the Executive's service with the Bank is involuntarily terminated prior to Retirement Age, for any reason including a Change in Control, but excluding (i) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection 6.1, (ii) the Executive's pre-retirement death, which shall be covered in Section IV, or (iii) termination for Cause, which shall be covered in Subsection 5.2, the Executive (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.1. Payments of benefits pursuant to this Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or 5.1(b) below, as applicable.

       (a) Normal form of payment.
       (1) Executive Lives Until Benefit Age
       If (i) after such termination, the Executive lives until attaining his Benefit Age, and (ii) the Executive has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(1) shall be controlling with respect to retirement benefits.




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       The Retirement Income Trust Fund, measured as of the Executive's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence on the Executive's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Executive (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Executive may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Executive, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Executive dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Executive's Beneficiary the monthly installments (or a continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Executive's Beneficiary may request to receive the unpaid balance of the Executive's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Executive's death. Such lump sum payment shall be made within thirty (30) days of such notice.




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       (2) Executive Dies Prior to Benefit Age
       If (i) after such termination, the Executive dies prior to attaining his Benefit Age, and (ii) the Executive has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(2) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the date of the Executive's death, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the date the Administrator receives notice of the Executive's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Executive's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Executive's Beneficiary may request to receive the unpaid balance of the Executive's Retirement Income Trust Fund in the form of a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Executive's death. Such lump sum payment shall be made within thirty (30) days of such notice.








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       (b) Alternative Payout Option.
       (1) Executive Lives Until Benefit Age
       If (i) after such termination, the Executive lives until attaining his Benefit Age, and (ii) the Executive has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(1) shall be controlling with respect to retirement benefits.

       The balance of the Retirement Income Trust Fund, measured as of the Executive's Benefit Age, shall be paid to the Executive in a lump sum on his Benefit Eligibility Date. In the event the Executive dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 5.1(b)(1) within thirty (30) days of the date the Administrator receives notice of the Executive's death.

       (2) Executive Dies Prior to Benefit Age
       If (i) after such termination, the Executive dies prior to attaining his Benefit Age, and (ii) the Executive has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(2) shall be controlling with respect to pre-retirement death benefits.

       The balance of the Retirement Income Trust Fund, measured as of the date of the Executive's death, shall be paid to the Executive's Beneficiary within thirty (30) days of the date the Administrator receives notice of the Executive's death.

      5.2 Termination For Cause.
       If the Executive is terminated for Cause, all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. Furthermore, no further Contributions shall be required of the Bank for the year in which such termination for Cause occurs (if not yet made). The Executive shall be entitled to receive a benefit in accordance with this Subsection 5.2.




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       The balance of the Executive's Retirement Income Trust Fund shall be paid to the Executive in a lump sum on his Benefit Eligibility Date. In the event the Executive dies prior to his Benefit Eligibility Date, his Beneficiary shall be entitled to receive the balance of the Executive's Retirement Income Trust Fund in a lump sum within thirty (30) days of the date the Administrator receives notice of the Executive's death.

      5.3 Voluntary Termination of Service.
       In the event the Executive's service with the Bank is voluntarily terminated prior to Retirement Age, for any reason excluding (i) a Change in Control, or (ii) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection 6.1, the Executive (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.3. Payments of benefits pursuant to this Subsection 5.3 shall be made in accordance with Subsection 5.3 (a) or 5.3 (b) below, as applicable.

       (a) Normal form of payment.
       If after such termination, the Executive has not made a Timely Election to receive a lump sum benefit, this Subsection 5.3(a) shall be controlling with respect to retirement benefits.

       The Retirement Income Trust Fund, measured as of the date of the Executive's voluntary termination, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the Executive's termination. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Executive (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-




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expected rate of return. The Executive may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Executive, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Executive dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Executive's Beneficiary the monthly installments (or a continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Executive's Beneficiary may request to receive the unpaid balance of the Executive's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Executive's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Executive's death. Such lump sum payment shall be made within thirty (30) days of such notice.

       (b) Alternative Payout Option.
       If the Executive has made a Timely Election to receive a lump sum benefit, this Subsection 5.3(b) shall be controlling with respect to retirement benefits.
       The balance of the Retirement Income Trust Fund, measured as of the Executive's termination date, shall be paid to the Executive in a lump sum within thirty (30) days of such termination. In the event the Executive dies after becoming eligible for such payment, but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 5.3(b) within thirty (30) days of the date the Administrator receives notice of the Executive's death.




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      SECTION VI
      OTHER BENEFITS

      6.1 (a) Disability Benefit.
       If the Executive's service is terminated prior to Retirement Age due to a disability which meets the criteria set forth below, the Executive may request to receive the Disability Benefit in lieu of the retirement benefit(s) available pursuant to Section 5.1 (which is (are) not available prior to the Executive's Benefit Eligibility Date).
       In any instance in which: (i) it is determined by a duly licensed, independent physician selected by the Bank, that the Executive is no longer able, properly and satisfactorily, to perform his regular duties as an officer, because of ill health, accident, disability or general inability due to age, (ii) the Executive requests payment under this Subsection in lieu of Subsection 5.1, and (iii) Board of Director approval is obtained to allow payment under this Subsection, in lieu of Subsection 5.1, the Executive shall be entitled to the following lump sum benefit(s). The lump sum benefit(s) to which the Executive is entitled shall be the balance of the Retirement Income Trust Fund. The benefit(s) shall be paid within thirty (30) days following the date of the Executive's request for such benefit is approved by the Board of Directors.

       (b) Death Following Disability.
       In the event the Executive dies after becoming eligible for such payment(s) but before the actual payment(s) is (are) made, his Beneficiary shall be entitled to receive the benefit(s) provided for in this Subsection 6.1(a) within thirty (30) days of the date the Administrator receives notice of the Executive's death. Furthermore, the Bank shall make a direct, lump sum payment to the Executive's Beneficiary in an amount equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit immediately and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor), but not required pursuant to Subsection 2.1(b) due to the Executive's disability-related termination. Such lump sum payment, if approved by the Board of Directors, shall be payable to the Executive's Beneficiary within thirty (30) days of such Board of Director approval.




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      SECTION VII
      BENEFICIARY DESIGNATION

       The Executive shall make an initial designation of primary and secondary Beneficiaries upon execution of this Agreement and shall have the right to change such designation, at any subsequent time, by submitting to (i) the Administrator, and (ii) the trustee of the Retirement Income Trust Fund, in substantially the form attached as Exhibit B to this Agreement, a written designation of primary and secondary Beneficiaries. Any Beneficiary designation made subsequent to execution of this Agreement shall become effective only when receipt thereof is acknowledged in writing by the Administrator.
SECTION VIII
NON-COMPETITION

      8.1 Non-Competition During Employment.
       In consideration of the agreements of the Bank contained herein and of the payments to be made by the Bank pursuant hereto, the Executive hereby agrees that, for as long as he remains employed by the Bank, he will devote substantially all of his time, skill, diligence and attention to the business of the Bank, and will not actively engage, either directly or indirectly, in financial services or in any business or other activity which is, or may be deemed to be, in any way competitive with or adverse to the best interests of the business of the Bank, its affiliates, subsidiaries, or parent corporation, if any, unless the Executive has the prior express written consent of the Bank.

      8.2 Breach of Non-Competition Clause.
       (a) Continued Employment Following Breach.
       In the event (i) any material breach by the Executive of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Executive continues employment at the Bank following such breach, all further Contributions to the Retirement Income Trust Fund shall immediately cease, and all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. The Executive (or his Beneficiary) shall be entitled to



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receive a benefit from the Retirement Income Trust Fund in accordance with Subpart (1) or (2) below, as applicable.

       (1) Executive Lives Until Benefit Age
       If, following such breach, the Executive lives until attaining his Benefit Age, he shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2(a)(1). The balance of the Retirement Income Trust Fund, measured as of the Executive's Benefit Age, shall be paid to the Executive in a lump sum on his Benefit Eligibility Date. In the event the Executive dies after attaining his Benefit Age but before actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 8.2(a)(1) within thirty (30) days of the date of the Administrator receives notice of the Executive's death.

       (2) Executive Dies Prior to Benefit Age
       If, following such breach, the Executive dies prior to attaining his Benefit Age, his Beneficiary shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2 (a)(2). The balance of the Retirement Income Trust Fund, measured as of the date of the Executive's death, shall be paid to the Executive's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Executive's death.

       (b) Termination of Employment Following Breach.
       In the event (i) any material breach by the Executive of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Executive's employment with the Bank is terminated due to such breach, such termination shall be deemed to be for Cause and the benefits payable to the Executive shall be paid in accordance with Subsection 5.2 of this Agreement.




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      SECTION IX
      EXECUTIVE'S RIGHT TO ASSETS

       The rights of the Executive, any Beneficiary, or any other person claiming through the Executive under this Agreement, shall be solely those of an unsecured general creditor of the Bank. The Executive, the Beneficiary, or any other person claiming through the Executive, shall only have the right to receive from the Bank those payments or amounts so specified under this Agreement. The Executive agrees that he, his Beneficiary, or any other person claiming through him shall have no rights or interests whatsoever in any asset of the Bank, including any insurance policies or contracts which the Bank may possess or obtain to informally fund this Agreement. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall



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not be deemed to be held under any trust for the benefit of the Executive or his Beneficiaries, unless such asset is contained in the rabbi trust described in Section XII of this Agreement. Any such asset shall be and remain, a general, unpledged asset of the Bank in the event of the Bank's insolvency.

      SECTION X
      RESTRICTIONS UPON FUNDING

       The Bank shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement, other than those Contributions required to be made to the Retirement Income Trust Fund. The Executive, his Beneficiaries or any successor in interest to him shall be and remain simply a general unsecured creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Bank reserves the absolute right in its sole discretion to either purchase assets to meet its obligations undertaken by this Agreement or to refrain from the same and to determine the extent, nature, and method of such asset purchases. Should the Bank decide to purchase assets such as life insurance, mutual funds, disability policies or annuities, the Bank reserves the absolute right, in its sole discretion, to replace such assets from time to time or to terminate its investment in such assets at any time, in whole or in part. At no time shall the Executive be deemed to have any lien, right, title or interest in or to any specific investment or to any assets of the Bank. If the Bank elects to invest in a life insurance, disability or annuity policy upon the life of the Executive, then the Executive shall assist the Bank by freely submitting to a physical examination and by supplying such additional information necessary to obtain such insurance or annuities.

      SECTION XI
      ACT PROVISIONS

      11.1 Named Fiduciary and Administrator. The Bank, as Administrator, shall be the Named Fiduciary of this Agreement. As Administrator, the Bank shall be responsible for the management, control and administration of the Agreement as established herein. The Administrator may delegate to others certain aspects of the management and operational responsibilities of the Agreement, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

      11.2 Claims Procedure and Arbitration. In the event that benefits under this Agreement are not paid to the Executive (or to his Beneficiary in the case of the Executive's death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Administrator within sixty (60) days from the date payments are refused. The Administrator shall review the written claim and, if the claim is denied, in whole or in part, it shall provide in writing, within ninety (90) days of receipt of such claim, its specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim. Such writing by the Administrator shall further indicate the additional steps which must be undertaken by claimants if an additional review of the claim denial is desired.

       If claimants desire a second review, they shall notify the Administrator in writing within sixty (60) days of the first claim denial. Claimants may review this Agreement or any documents relating thereto and submit any issues and comments, in writing, they may feel appropriate. In its sole discretion, the Administrator shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement upon which the decision is based.




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       If claimants continue to dispute the benefit denial based upon completed performance of this Plan or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to mediation, administered by the American Arbitration Association ("AAA") (or a mediator selected by the parties) in accordance with the AAA's Commercial Mediation Rules. If mediation is not successful in resolving the dispute, it shall be settled by arbitration administered by the AAA under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

      SECTION XII
      MISCELLANEOUS

      12.1 No Effect on Employment Rights. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with the Executive without regard to the existence of the Agreement.

      12.2 State Law. The Agreement is established under, and will be construed according to, the laws of the state of Indiana, to the extent such laws are not preempted by the Act and valid regulations published thereunder.
      12.3 Severability. In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provisions held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

      12.4 Incapacity of Recipient. In the event the Executive is declared incompetent and a conservator or other person legally charged with the care of his person or Estate is appointed, any benefits under the Agreement to which such Executive is entitled shall be paid to such conservator or other person legally charged with the care of his person or Estate.




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      12.5 Unclaimed Benefit. The Executive shall keep the Bank informed of his current address and the current address of his Beneficiaries. The Bank shall not be obligated to search for the whereabouts of any person. If the location of the Executive or his Beneficiary is not made known to the Bank by the time any payment is due, the Bank may discharge its obligation by payment to the Executive's Estate. If there is no Estate in existence at such time or if such fact cannot be determined by the Bank, the Executive and his Beneficiary(ies) shall thereupon forfeit any rights to the benefits provided for such Executive and/or Beneficiary under this Agreement.

      12.6 Limitations on Liability. Notwithstanding any of the preceding provisions of the Agreement, no individual acting as an employee or agent of the Bank, or as a member of the Board of Directors shall be personally liable to the Executive or any other person for any claim, loss, liability or expense incurred in connection with the Agreement.

      12.7 Gender. Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.

      12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this Agreement shall affect the right of the Executive to participate in or be covered by any qualified or non-qualified pension, profit sharing, group, bonus or other supplemental compensation or fringe benefit agreement constituting a part of the Bank's existing or future compensation structure.
      12.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if the Executive's death results from Suicide, whether sane or insane, within twenty-six (26) months after execution of this Agreement, all further Contributions to the Retirement Income Trust Fund shall thereupon cease, and no Contribution shall be made by the Bank to the Retirement Income Trust Fund in the year such death resulting from Suicide occurs (if not yet made). All benefits other than those available from previous Contributions to the Retirement Income Trust Fund under this Agreement shall be forfeited, and this Agreement shall become null and void. The balance of the Retirement Income Trust Fund, measured as of the Executive's date of death, shall be paid to the Beneficiary within thirty (30) days of the date the Administrator receives notice of the Executive's death.




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      12.10 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Bank, its successors and assigns, and the Executive, his successors, heirs, executors, administrators, and Beneficiaries.

      12.11 Headings. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed a part of this Agreement.

      12.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi trust into which the Bank shall contribute assets which shall be held therein, subject to the claims of the Bank's creditors in the event of the Bank's "Insolvency" (as defined in such rabbi trust agreement), until the contributed assets are paid to the Executive and/or his Beneficiary in such manner and at such times as specified in this Agreement. It is the intention of the Bank that the contribution or contributions to the rabbi trust shall provide the Bank with a source of funds to assist it in meeting the liabilities of this Agreement.

      12.13 Source of Payments. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank or the assets of the rabbi trust.

      SECTION XIII
      AMENDMENT/PLAN TERMINATION

      13.1 Amendment or Plan Termination. The Bank intends this Agreement to be permanent, but reserves the right to amend or terminate the Agreement when, in the sole opinion of the Bank, such amendment or termination is advisable, provided, however, that the Plan shall not be amended (other than an amendment that would terminate the Plan) following a Change in Control. However, any termination of the Agreement which is done in anticipation of or pursuant to a "Change in Control", as defined in Subsection 1.9, shall be deemed to trigger Subsection 2.1(b)(2) of the Agreement notwithstanding the Executive's continued employment, and benefit(s) shall be paid from the Retirement Income Trust Fund



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in accordance with Subsection 13.2 below and with Subsections 2.1(b)(2). Any amendment or termination of the Agreement by the Bank shall be made pursuant to a resolution of the Board of Directors of the Bank and shall be effective as of the date of such resolution. No amendment or termination of the Agreement by the Bank shall directly or indirectly deprive the Executive of all or any portion of the Executive's Retirement Income Trust Fund as of the effective date of the resolution amending or terminating the Agreement. For purposes of this Section 13.1, a termination will be deemed to be made "in anticipation of a Change in Control" if it occurs within one year prior to a Change in Control (as defined herein). In the event that the appropriate regulatory authorities shall disapprove the Plan within the statutory time, and the Board is unable or unwilling to make amendments necessary to cause the appropriate regulatory authorities to approve the Plan, the Plan shall be null and void.

       Notwithstanding the above, if at any time after the final Contribution is made to the Retirement Income Trust Fund the Executive elects to terminate the Retirement Income Trust Fund and receive a distribution of the assets of the Retirement Income Trust Fund, then upon such distribution this Agreement shall terminate.

      13.2 Executive's Right to Payment Following Plan Termination. In the event of a termination of the Agreement, the Executive shall be entitled to the balance, if any, of his Retirement Income Trust Fund. However, if such termination is done in anticipation of or pursuant to a "Change in Control," such balance(s) shall include the final Contribution made pursuant to Subsection 2.1(b)(2). Payment of the balance(s) of the Executive's Retirement Income Trust Fund shall not be dependent upon his continuation of employment with the Bank following the termination date of the Agreement. Payment of the balance(s) of the Executive's Retirement Income Trust Fund shall be made in a lump sum within thirty (30) days of the date of termination of the Agreement.









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SECTION XIV
EXECUTION

      14.1 This Agreement and the Steven Banks Grantor Trust Agreement set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous agreements or understandings between the parties hereto regarding the subject matter hereof, including the Executive Shareholder Benefit Program Agreement for Steven Banks dated February 1, 2000, are merged into and superseded by this Agreement and the Steven Banks Grantor Trust Agreement.

      14.2 This Agreement shall be executed in triplicate, each copy of which, when so executed and delivered, shall be an original, but all three copies shall together constitute one and the same instrument.

[Remainder of page left intentionally blank.]


















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       IN WITNESS WHEREOF, the Bank and the Executive have caused this Agreement to be executed on the day and date first above written.

WITNESS:		FIRST FEDERAL SAVINGS BANK:
	By:	___________________________
___________________________	Title:	___________________________
WITNESS:		EXECUTIVE:
___________________________		___________________________

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CONDITIONS AND ASSUMPTIONS



      1. The amount of the annual Contributions to the Retirement Income Trust Fund has been based on a formula which is defined in Subsection 1.12.

      2. Survivor's Benefit means a monthly amount equal to Twenty-Three Thousand Five Hundred and Two Dollars ($23,502) at age 65 from the Retirement Income Trust Fund.















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      Exhibit A

AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT BENEFICIARY DESIGNATION

       The Executive, under the terms of the Amended Executive Shareholder Benefit Program Agreement executed by the Bank, dated the ___ day of _________, 2000, hereby designates the following Beneficiary(ies) to receive any guaranteed payments or death benefits under such Agreement, following his death:


PRIMARY BENEFICIARY: ____________________________________

SECONDARY BENEFICIARY: ____________________________________


       This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect.

       Such Beneficiary Designation is revocable.


      DATE: ______________________, 20__

____________________________________
(WITNESS) ____________________________________
EXECUTIVE

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      Exhibit B

AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT

TO: Bank:
      Attention:

       I hereby give notice of my election to change the form of payment of my Executive Supplemental Retirement Income Benefit, as specified below. I understand that such notice, in order to be effective, must be submitted in accordance with the time requirements described in my Amended Executive Shareholder Benefit Program Agreement.

       I hereby elect to change the form of payment of my benefits from monthly installments throughout my Payout Period to a lump sum benefit payment.

       I hereby elect to change the form of payment of my benefits from a lump sum benefit payment to monthly installments throughout my Payout Period. Such election hereby revokes my previous notice of election to receive a lump sum form of benefit payments.

___________________________________
Executive
 

___________________________________
Date
 

Acknowleged:

By: ___________________________
 

Title: ___________________________
 

___________________________________
Date

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      Exhibit C

AMENDED EXECUTIVE SHAREHOLDER BENEFIT PROGRAM AGREEMENT APPENDIX I

      The following no-load, no surrender charge life insurance policies are intended to comprise the hypothetical pool of life insurance, the increases in cash values of which are a component of the Contributions for each participant in the Amended Executive Shareholder Benefit Program Agreement.

      If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive annual policy illustrations that assume the below-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contributions to the Retirement Income Trust Fund.

      In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Executive and their beneficiaries shall have no ownership interest in such policies and shall always have no greater interest in the benefits under this Plan than that of unsecured creditors of the Bank.


      Life Insurance Company: Southland Life Insurance Company
      Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
      Assumed Purchase Date: February 7, 2000


      Life Insurance Company: Lincoln Benefit Life
      Single Premium Paid: Four Million Two Hundred Thousand Dollars ($4,200,000)
      Assumed Purchase Date: February 7, 2000










End.

EX-10.4

EXHIBIT 10.4

FORM OF DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT,
AS AMENDED, FOR JERRY D. McVICKER

FIRST AMENDMENT TO THE
AMENDED DIRECTOR
SHAREHOLDER BENEFIT PROGRAM
AGREEMENT FOR JERRY McVICKER
 

             WHEREAS, First Federal Savings Bank of Marion, in Marion, Indiana, now Mutual Federal Savings Bank (the "Bank") has adopted an Amended Director Shareholder Benefit Plan for Jerry McVicker (the "Plan"), effective September 1, 2000, this First Amendment to the Plan is for the purpose of amending the Plan as follows:

             The Plan is hereby amended such that Paragraph 2 of Exhibit A is modified as follows:

             2. Survivor's Benefit means a monthly amount equal to Three Thousand Seven Hundred and Fifty Dollars ($3,750).

             The definition of Survivor's Benefit has been incorporated into the Agreement for the sole purpose of actuarially establishing the maximum amount of annual Contributions to the Retirement Income Trust Fund and is intended to be an amount equal to the highest annual board fees received by the Director during the twelve (12) month period prior to the Director's Benefit Eligibility Date. The amount of any Survivor's Benefit payable pursuant to the Agreement will be a function of (i) the amount and time of Contributions to the Retirement Income Trust Fund and (ii) the actual investment experience of such Contributions.
            
             The Plan is hereby amended such that Appendix I is modified as follows:

             Life Insurance Company: Southland Life Insurance Company
             Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
             Assumed Purchase Date: February 7, 2000
             Assumed End Date: August 31, 2000

             Life Insurance Company: Lincoln Benefit Life
             Single Premium: Four Million Two Hundred Thousand Dollars ($4,200,000)
             Assumed Purchase Date: February 7, 2000
             Assumed End Date: August 31, 2000

             Life Insurance Company: Life Investors Insurance Company of America
             Single Premium: Five Million Five Hundred Thousand Dollars ($5,500,000)
             Assumed Purchase Date: September 1, 2000

             All other provisions of the Plan, which are not specifically modified by this First Amendment, are hereby incorporated and shall remain in full force and effect.

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             IN WITNESS WHEREOF, the Bank has caused this First Amendment to the Amended Director Shareholder Benefit Program for Jerry McVicker to be executed on this _____________ day of _____________________, 2001.

WITNESS:	JERRY McVICKER
WITNESS:	MUTUAL FEDERAL SAVINGS BANK

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AMENDED DIRECTOR SHAREHOLDER
BENEFIT PROGRAM AGREEMENT
FOR JERRY McVICKER


FIRST FEDERAL SAVINGS BANK


September 1, 2000

















Financial Institution Consulting Corporation
700 Colonial Road, Suite 260
Memphis, Tennessee 38117
WATS: 1-800-873-0089
FAX: (901) 684-7414
(901) 684-7400

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AMENDED DIRECTOR SHAREHOLDER BENEFIT
FOR JERRY McVICKER


             This Amended Director Shareholder Benefit Program Agreement (the "Agreement"), effective as of the 1^st day of September, 2000, formalizes the understanding by and between FIRST FEDERAL SAVINGS BANK OF MARION (the "Bank"), a federally chartered stock savings bank having its principal place of business in Indiana, and Jerry McVicker (hereinafter referred to as "Director"). Any reference herein to the "Holding Company" shall mean Marion Capital Holdings, Inc.

            W I T N E S S E T H :

             WHEREAS, the Director serves the Bank; and

             WHEREAS, the Bank recognizes the valuable services heretofore performed by the Director and wishes to encourage his continued employment; and

             WHEREAS, the Director wishes to be assured that he will be entitled to a certain amount of additional compensation for some definite period of time from and after retirement from active service with the Bank or other termination of employment and wishes to provide his beneficiary with benefits from and after death; and

             WHEREAS, the Bank and the Director wish to provide the terms and conditions upon which the Bank shall pay such additional compensation to the Director after retirement or other termination of employment and/or death benefits to his beneficiary after death; and

             WHEREAS, the Bank has adopted this Amended Director Shareholder Benefit Program Agreement which controls all issues relating to benefits as described herein;

             NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Bank and the Director agree as follows:


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            SECTION I
            DEFINITIONS

             When used herein, the following words and phrases shall have the meanings below unless the context clearly indicates otherwise:

         1.1 "Act" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

         1.2 "Administrator" means the Bank.

         1.3 "Bank" means FIRST FEDERAL SAVINGS BANK OF MARION and any successor thereto.

         1.4 "Beneficiary" means the person or persons (and their heirs) designated as Beneficiary in Exhibit B of this Agreement to whom the deceased Director's benefits are payable. If no Beneficiary is so designated, then the Director's Spouse, if living, will be deemed the Beneficiary. If the Director's Spouse is not living, then the Children of the Director will be deemed the Beneficiaries and will take on a per stirpes basis. If there are no Children, then the Estate of the Director will be deemed the Beneficiary.

         1.5 "Benefit Age" means the Director's Seventieth (70th) birthday or, with proper notice, the actual date the Director's full-time service with the Bank terminates.

         1.6 "Benefit Eligibility Date" means the date on which the Director is entitled to receive any benefit(s) pursuant to Section(s) III or V of this Agreement. It shall be the first day of the month following the month in which the Director attains his Benefit Age.

         1.7 "Board of Directors" means the board of directors of the Bank.


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         1.8 "Cause" means personal dishonesty, willful misconduct, willful malfeasance, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease-and-desist order, material breach of any provision of this Agreement, or gross negligence in matters of material importance to the Bank.

         1.9 "Change in Control" shall mean and include the following with respect to the Bank or the Holding Company:

(1) a Change in Control of a nature that would be required to be reported in response to Item I (a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or

(2) a change in control of the Bank within the meaning of 12 C.F.R. 574.4; or

(3) a Change in Control at such time as

(i) any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank representing Twenty Five Percent (25.0%) or more of the combined voting power of the Bank's outstanding securities ordinarily having the right to vote at the election of directors, except for any stock purchased by the Bank's Employee Stock Ownership Plan and/or trust; or

(ii) individuals who constitute the board of directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Bank's stockholders was approved by the Bank's nominating committee which is comprised of members of the Incumbent Board, shall be, for purposes of this clause (ii), considered as though he were a member of the Incumbent Board; or

(iii) merger, consolidation, or sale of all or substantially all of the assets of the Bank occurs; or

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(iv) a proxy statement is issued soliciting proxies from the stockholders of the Bank by someone other than the current management of the Bank, seeking stockholder approval of a plan of reorganization, merger, or consolidation of the Bank with one or more corporations as a result of which the outstanding shares of the class of the Bank's securities are exchanged for or converted into cash or property or securities not issued by the Bank.

          The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities. The term "acquire" means obtaining ownership, control, power to vote or sole power of disposition of stock, directly or indirectly or through one or more transactions or subsidiaries, through purchase, assignment, transfer, exchange, succession or other means, including (1) an increase in percentage ownership resulting from a redemption, repurchase, reverse stock split or a similar transaction involving other securities of the same class; and (2) the acquisition of stock by a group of persons and/or companies acting in concert which shall be deemed to occur upon the formation of such group, provided that an investment advisor shall not be deemed to acquire the voting stock of its advisee if the advisor (a) votes the stock only upon instruction from the beneficial owner and (b) does not provide the beneficial owner with advice concerning the voting of such stock. The term "security" includes nontransferable subscription rights issued pursuant to a plan of conversion, as well as a "security," as defined in 15 U.S.C. § 78c(2)(1); and the term "acting in concert" means (1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. Further, acting in concert with any person or company shall also be deemed to be acting in concert with any person or company that is acting in concert with such other person or company.

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         Notwithstanding the above definitions, the Board, in its absolute discretion, may make a finding that a Change in Control of the Bank has taken place without the occurrence of any or all of the events enumerated above.

         1.10 "Children" means all natural or adopted children of the Director, and issue of any predeceased child or children.

         1.11 "Code" means the Internal Revenue Code of 1986, as amended from time to time.

         1.12 "Contribution(s)" means those annual contributions which the Bank is required to make to the Retirement Income Trust Fund on behalf of the Director in accordance with Subsection 2.1(a) and this Subsection 1.12 of the Agreement. The following methodology for determining such contributions shall be: 9.25% of the difference, adjusted to take into account the Bank's tax rate, between the Bank's aggregate after-tax income derived from annual increases in the cash surrender value of the hypothetical pool of no-load, no-surrender charge life insurance policies described in Appendix I and the after-tax Cost of Funds Expense for the Plan Year for which the annual contribution is to be made; provided, however, that in no event shall such yearly Contribution exceed that accrual necessary under the benefit/years of service method for the Bank to pay, beginning at the Benefit Eligibility Date, the Survivor's Benefit payable over the Payout Period.

         If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive a annual policy illustrations that assume the above-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contribution to the Retirement Income Trust Fund.

         In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Director and his beneficiar(ies) shall have no ownership interest in such policy and shall


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always have no greater interest in the benefits under this Agreement than that of an unsecured creditor of the Bank.

         1.13 "Cost of Funds Expense" means, an interest rate as hereinafter defined to be applied and compounded annually with respect to the after-tax cash flow related to the Agreement, including benefit payments and an initial premium sum of Five Million Five Hundred Thousand Dollars ($5,500,000). The interest rate shall be equal to 80% of the last available one (1) year advance rate from the Federal Home Loan Bank in Indianapolis as determined on January 1 of each Plan Year, or such other rate as is mutually agreed by the Bank and the Director; provided, however, that it shall be 80% of 6.60% for the first Plan Year.

         1.14 "Director" means a person serving as a Director, Advisory Director, or Director Emeritus of the Bank.

         1.15 "Disability Benefit" means the benefit payable to the Director following a determination, in accordance with Subsection 6.1(a), that he is no longer able, properly and satisfactorily, to perform his duties at the Bank.

         1.16 "Effective Date" of this Agreement shall be September 1, 2000.

         1.17 "Estate" means the estate of the Director.

         1.18 "Interest Factor" means monthly compounding, discounting or annuitizing, as applicable, at a rate of Seven Percent (7%) per annum.

         1.19 "Payout Period" means the time frame during which certain benefits payable hereunder shall be distributed. Payments shall be made in monthly installments commencing on the first day of the month following the occurrence of the event which triggers distribution and continuing for one hundred eighty (180) months. Should the Director make a Timely Election to receive a lump sum benefit payment, the Director's Payout Period shall be deemed to be one (1) month.


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         1.20 "Plan Year" shall mean the calendar year; provided however, that the first Plan Year shall be February 1, 2000 through December 31, 2000.

         1.21 "Retirement Age" means the Director's seventieth (70th) birthday provided, however, that the Director's actual retirement from full-time service may occur on or after the Director attains age seventy (70) and, in such case, the Director's age at actual retirement shall be deemed the Retirement Age.

         1.22 "Retirement Income Trust Fund" means the trust fund account established by the Bank and the Director and into which annual Contributions will be made by the Bank on behalf of the Director pursuant to Subsection 2.1. The contractual rights of the Bank and the Director with respect to the Retirement Income Trust Fund shall be outlined in a separate writing to be known as the Jerry McVicker Grantor Trust agreement.

         1.23 "Spouse" means the individual to whom the Director is legally married at the time of the Director's death, provided, however, that the term "Spouse" shall not refer to an individual to whom the Director is legally married at the time of death if the Director and such individual have entered into a formal separation agreement or initiated divorce proceedings.

         1.24 "Suicide" means the act of intentionally killing oneself.

         1.25 "Supplemental Retirement Income Benefit" means an annual amount (before taking into account federal and state income taxes), payable in monthly installments throughout the Payout Period equal to the annuitized value, using the Interest Factor, of the Retirement Income Trust Fund.

         1.26 "Survivor's Benefit" means the benefit provided to Director's Beneficiary payable over the Payout Period as set forth in Exhibit A.

         1.27 "Timely Election" means the Director has made an election to change the form of his benefit payment(s) by filing with the Administrator a Notice of Election to Change Form of Payment (Exhibit C of this Agreement).




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SECTION II
BENEFITS - GENERALLY

         2.1 (a) Retirement Income Trust Fund. The Director shall establish the Jerry McVicker Grantor Trust into which the Bank shall be required to make annual Contributions on the Director's behalf, pursuant to this Section II of the Agreement. A trustee shall be selected by the Director. The trustee shall maintain an account, separate and distinct from the Director's personal contributions, which account shall constitute the Retirement Income Trust Fund. The trustee shall be charged with the responsibility of investing all contributed funds. Distributions from the Retirement Income Trust Fund of the Jerry McVicker Grantor Trust may be made by the trustee to the Director, for purposes of payment of any income or employment taxes due and owing on Contributions by the Bank to the Retirement Income Trust Fund, if any, and on any taxable earnings associated with such Contributions which the Director shall be required to pay from year to year, under applicable law, prior to actual receipt of any benefit payments from the Retirement Income Trust Fund. To the extent this Agreement is inconsistent with the Jerry McVicker Grantor Trust agreement, the Jerry McVicker Grantor Trust Agreement shall supersede this Agreement.

         The annual Contributions required to be made by the Bank to the Retirement Income Trust Fund will be determined in accordance with Subsection 1.12. Contributions shall be made by the Bank to the Retirement Income Trust Fund (i) within seventy-five (75) days of establishment of such trust, and (ii) within the first thirty (30) days of the beginning of each subsequent Plan Year, unless this Section expressly provides otherwise.

         (b)(1) Contributions Made Annually
             The annual Contributions to the Retirement Income Trust Fund shall continue each year, unless this Subsection 2.1(b) specifically states otherwise, until the Plan Year of the Director's termination of service as a Director.

         (2) Termination Following a Change in Control




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         If a Change in Control occurs at the Bank, followed by the Director's involuntary termination of service as a Director of the Bank or by the Bank's failure to renominate and cause to be elected or failure to reappoint the Director as a Director of the Bank, including for reasons of disability, the Contribution set forth below shall be required of the Bank. The Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit at age 70 and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).

         (3) Termination For Cause
         If the Director is terminated for Cause pursuant to Subsection 5.2, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination for Cause occurs.

         (4) Involuntary Termination of Service.
         If the Director's service with the Bank is involuntarily terminated for any reason, excluding termination for Cause, or death, or termination following a Change in Control, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no contribution shall be required for the Plan Year in which such termination occurs.

         (5) Death During Employment.
         If the Director dies while employed by the Bank, the Bank shall be required to make an immediate lump sum contribution to the Retirement Income Trust Fund including (i) the full Contribution required for the Plan Year in which such termination occurs, if not yet made, plus (ii) the current present value (using the Interest Factor) of the right to receive the Survivor's Benefit immediately and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor).


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         (6) Voluntary Termination
         If the Director voluntarily terminates service or does not seek reappointment to the Board, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination occurs.

         (7) Disability Prior to Change in Control
         If the Director becomes entitled to disability benefits under Section VI prior to a Change in Control, no further Contribution(s) to the Retirement Income Trust Fund shall be required of the Bank, and if not yet made, no Contribution shall be required for the Plan Year in which such termination occurs.

SECTION III
RETIREMENT BENEFIT

         3.1 (a) Normal form of payment.
         If (i) the Director is employed with the Bank until reaching his Retirement Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 3.1(a) shall be controlling with respect to retirement benefits.

         The Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefit payments shall commence on the Director's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at



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anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a continuation of such monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be payable within thirty (30) days of such notice.

         (b) Alternative payout option.
         If (i) the Director is employed with the Bank until reaching his Retirement Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 3.1(b) shall be controlling with respect to retirement benefits.

         The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 3.1(b) within thirty (30) days of the date the Administrator receives notice of the Director's death.


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SECTION IV
PRE-RETIREMENT DEATH BENEFIT

         4.1 (a) Normal form of payment.
             If (i) the Director dies while employed by the Bank, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 4.1(a) shall be controlling with respect to pre-retirement death benefits.

         The balance of the Director's Retirement Income Trust Fund, measured as of the later of (i) the Director's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such benefits shall commence within thirty (30) days of the date the Administrator receives notice of the Director's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.


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         (b) Alternative payout option.
         If (i) the Director dies while employed by the Bank, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 4.1(b) shall be controlling with respect to pre-retirement death benefits.

         The balance of the Director's Retirement Income Trust Fund, measured as of the later of (i) the Director's death, or (ii) the date any final lump sum Contribution is made pursuant to Subsection 2.1(b), shall be paid to the Director's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.


SECTION V

BENEFIT(S) IN THE EVENT OF TERMINATION OF SERVICE

PRIOR TO RETIREMENT AGE

         5.1 Involuntary Termination of Service Other Than for Cause.
         In the event the Director's service with the Bank is involuntarily terminated prior to Retirement Age, for any reason including a Change in Control, but excluding (i) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection 6.1, (ii) the Director's pre-retirement death, which shall be covered in Section IV, or (iii) termination for Cause, which shall be covered in Subsection 5.2, the Director (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.1. Payments of benefits pursuant to this Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or 5.1 (b) below, as applicable.

         (a) Normal form of payment.
         (1) Director Lives Until Benefit Age
         If (i) after such termination, the Director lives until attaining his Benefit Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(1) shall be controlling with respect to retirement benefits.

         The Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the



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Payout Period. Such payments shall commence on the Director's Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

         (2) Director Dies Prior to Benefit Age
         If (i) after such termination, the Director dies prior to attaining his Benefit Age, and (ii) the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.1(a)(2) shall be controlling with respect to retirement benefits.


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         The Retirement Income Trust Fund, measured as of the date of the Director's death, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the date the Administrator receives notice of the Director's death. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director's Beneficiary shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director's Beneficiary may request to receive the unpaid balance of the Director's Retirement Income Trust Fund in the form of a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

         (b) Alternative Payout Option.
         (1) Director Lives Until Benefit Age
         If (i) after such termination, the Director lives until attaining his Benefit Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(1) shall be controlling with respect to retirement benefits.

         The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after becoming eligible for such payment (upon attainment of his Benefit Age), but before the actual payment is made, his Beneficiary shall be entitled to receive the lump



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sum benefit in accordance with this Subsection 5.1(b)(1) within thirty (30) days of the date the Administrator receives notice of the Director's death.

         (2) Director Dies Prior to Benefit Age
         If (i) after such termination, the Director dies prior to attaining his Benefit Age, and (ii) the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.1(b)(2) shall be controlling with respect to pre-retirement death benefits.

         The balance of the Retirement Income Trust Fund, measured as of the date of the Director's death, shall be paid to the Director's Beneficiary within thirty (30) days of the date the Administrator receives notice of the Director's death.

         5.2 Termination For Cause.
         If the Director is terminated for Cause, all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. Furthermore, no further Contributions shall be required of the Bank for the year in which such termination for Cause occurs (if not yet made). The Director shall be entitled to receive a benefit in accordance with this Subsection 5.2.

         The balance of the Director's Retirement Income Trust Fund shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies prior to his Benefit Eligibility Date, his Beneficiary shall be entitled to receive the balance of the Director's Retirement Income Trust Fund in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.

         5.3 Voluntary Termination of Service.
         In the event the Director's service with the Bank is voluntarily terminated prior to Retirement Age, for any reason including the Director's failure to seek reappointment to the Board but excluding (i) a Change in Control, or (ii) any disability related termination for which the Board of Directors has approved early payment of benefits pursuant to Subsection




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6.1, the Director (or his Beneficiary) shall be entitled to receive benefits in accordance with this Subsection 5.3. Payments of benefits pursuant to this Subsection 5.3 shall be made in accordance with Subsection 5.3 (a) or 5.3 (b) below, as applicable.

         (a) Normal form of payment.
         If after such termination, the Director has not made a Timely Election to receive a lump sum benefit, this Subsection 5.3(a) shall be controlling with respect to retirement benefits.

         The Retirement Income Trust Fund, measured as of the date of the Director's voluntary termination, shall be annuitized (using the Interest Factor) into monthly installments and shall be payable for the Payout Period. Such payments shall commence within thirty (30) days of the Director's termination. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is less than the rate of return used to annuitize the Retirement Income Trust Fund, no additional contributions to the Retirement Income Trust Fund shall be required by the Bank in order to fund the final benefit payment(s) and make up for any shortage attributable to the less-than-expected rate of return. Should Retirement Income Trust Fund assets actually earn a rate of return, following the date such balance is annuitized, which is greater than the rate of return used to annuitize the Retirement Income Trust Fund, the final benefit payment to the Director (or his Beneficiary) shall distribute the excess amounts attributable to the greater-than-expected rate of return. The Director may at anytime during the Payout Period request to receive the unpaid balance of his Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment is requested by the Director, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director gives notice to both the Administrator and trustee in writing. Such lump sum payment shall be payable within thirty (30) days of such notice. In the event the Director dies at any time after attaining his Benefit Age, but prior to commencement or completion of all monthly payments due and owing hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay to the Director's Beneficiary the monthly installments (or a continuation of the monthly installments if they have already commenced) for the balance of months remaining in the Payout Period, or (ii) the Director's Beneficiary may request to receive the unpaid balance of the Director's




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Retirement Income Trust Fund in a lump sum payment. If a lump sum payment is requested by the Beneficiary, payment of the balance of the Retirement Income Trust Fund in such lump sum form shall be made only if the Director's Beneficiary notifies both the Administrator and trustee in writing of such election within ninety (90) days of the Director's death. Such lump sum payment shall be made within thirty (30) days of such notice.

         (b) Alternative Payout Option.
         If the Director has made a Timely Election to receive a lump sum benefit, this Subsection 5.3(b) shall be controlling with respect to retirement benefits.

         The balance of the Retirement Income Trust Fund, measured as of the Director's termination date, shall be paid to the Director in a lump sum within thirty (30) days of such termination. In the event the Director dies after becoming eligible for such payment, but before the actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with this Subsection 5.3(b) within thirty (30) days of the date the Administrator receives notice of the Director's death.

SECTION VI
OTHER BENEFITS

         6.1 (a) Disability Benefit.
         If the Director's service is terminated prior to Retirement Age due to a disability which meets the criteria set forth below, the Director may request to receive the Disability Benefit in lieu of the retirement benefit(s) available pursuant to Section 5.1 (which is (are) not available prior to the Director's Benefit Eligibility Date).

         In any instance in which: (i) it is determined by a duly licensed, independent physician selected by the Bank, that the Director is no longer able, properly and satisfactorily, to perform his regular duties as an officer, because of ill health, accident, disability or general inability due to age, (ii) the Director requests payment under this Subsection in lieu of Subsection 5.1, and (iii) Board of Director approval is obtained to allow payment under this



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Subsection, in lieu of Subsection 5.1, the Director shall be entitled to the following lump sum benefit(s). The lump sum benefit(s) to which the Director is entitled shall be the balance of the Retirement Income Trust Fund. The benefit(s) shall be paid within thirty (30) days following the date of the Director's request for such benefit is approved by the Board of Directors.

         (b) Death Following Disability.
         In the event the Director dies after becoming eligible for such payment(s) but before the actual payment(s) is (are) made, his Beneficiary shall be entitled to receive the benefit(s) provided for in this Subsection 6.1(a) within thirty (30) days of the date the Administrator receives notice of the Director's death. Furthermore, the Bank shall make a direct, lump sum payment to the Director's Beneficiary in an amount equal to the current present value (using the Interest Factor) of the right to receive a Supplemental Retirement Income Benefit equal to the Survivor's Benefit immediately and payable over the Payout Period less the sum of all prior pre-tax Contributions to the Retirement Income Trust Fund (plus interest accrued on those Contributions using the Interest Factor), but not required pursuant to Subsection 2.1(b) due to the Director's disability-related termination. Such lump sum payment, if approved by the Board of Directors, shall be payable to the Director's Beneficiary within thirty (30) days of such Board of Director approval.

SECTION VII
BENEFICIARY DESIGNATION

         The Director shall make an initial designation of primary and secondary Beneficiaries upon execution of this Agreement and shall have the right to change such designation, at any subsequent time, by submitting to (i) the Administrator, and (ii) the trustee of the Retirement Income Trust Fund, in substantially the form attached as Exhibit B to this Agreement, a written designation of primary and secondary Beneficiaries. Any Beneficiary designation made subsequent to execution of this Agreement shall become effective only when receipt thereof is acknowledged in writing by the Administrator.


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SECTION VIII

NON-COMPETITION

         8.1 Non-Competition During Service.
         In consideration of the agreements of the Bank contained herein and of the payments to be made by the Bank pursuant hereto, the Director hereby agrees that, for as long as he remains a Director by the Bank, he will devote substantially all of his time, skill, diligence and attention to the business of the Bank, and will not actively engage, either directly or indirectly, in financial services or in any business or other activity which is, or may be deemed to be, in any way competitive with or adverse to the best interests of the business of the Bank, its affiliates, subsidiaries, or parent corporation, if any, unless the Director has the prior express written consent of the Bank.

         8.2 Breach of Non-Competition Clause.
         (a) Continued Employment Following Breach.
         In the event (i) any material breach by the Director of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Director continues service at the Bank following such breach, all further Contributions to the Retirement Income Trust Fund shall immediately cease, and all benefits under this Agreement, other than those which can be paid from previous Contributions to the Retirement Income Trust Fund (and earnings on such Contributions), shall be forfeited. The Director (or his Beneficiary) shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with Subpart (1) or (2) below, as applicable.

         (1) Director Lives Until Benefit Age
         If, following such breach, the Director lives until attaining his Benefit Age, he shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2(a)(1). The balance of the Retirement Income Trust Fund, measured as of the Director's Benefit Age, shall be paid to the Director in a lump sum on his Benefit Eligibility Date. In the event the Director dies after attaining his Benefit Age but before actual payment is made, his Beneficiary shall be entitled to receive the lump sum benefit in accordance with



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this Subsection 8.2(a)(1) within thirty (30) days of the date of the Administrator receives notice of the Director's death.

         (2) Director Dies Prior to Benefit Age
             If, following such breach, the Director dies prior to attaining his Benefit Age, his Beneficiary shall be entitled to receive a benefit from the Retirement Income Trust Fund in accordance with this Subsection 8.2 (a)(2). The balance of the Retirement Income Trust Fund, measured as of the date of the Director's death, shall be paid to the Director's Beneficiary in a lump sum within thirty (30) days of the date the Administrator receives notice of the Director's death.

         (b) Termination of Service Following Breach.
         In the event (i) any material breach by the Director of the agreements and covenants described in Subsection 8.1 occurs, and (ii) the Director's service with the Bank is terminated due to such breach, such termination shall be deemed to be for Cause and the benefits payable to the Director shall be paid in accordance with Subsection 5.2 of this Agreement.

SECTION IX
DIRECTOR'S RIGHT TO ASSETS

         The rights of the Director, any Beneficiary, or any other person claiming through the Director under this Agreement, shall be solely those of an unsecured general creditor of the Bank. The Director, the Beneficiary, or any other person claiming through the Director, shall only have the right to receive from the Bank those payments or amounts so specified under this Agreement. The Director agrees that he, his Beneficiary, or any other person claiming through him shall have no rights or interests whatsoever in any asset of the Bank, including any insurance policies or contracts which the Bank may possess or obtain to informally fund this Agreement. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall not be deemed to be held under any trust for the benefit of the Director or his Beneficiaries, unless such asset is contained in the rabbi trust described in Section XII of this Agreement. Any such asset shall be and remain, a general, unpledged asset of the Bank in the event of the Bank's insolvency.



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SECTION X
RESTRICTIONS UPON FUNDING

         The Bank shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement, other than those Contributions required to be made to the Retirement Income Trust Fund. The Director, his Beneficiaries or any successor in interest to him shall be and remain simply a general unsecured creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Bank reserves the absolute right in its sole discretion to either purchase assets to meet its obligations undertaken by this Agreement or to refrain from the same and to determine the extent, nature, and method of such asset purchases. Should the Bank decide to purchase assets such as life insurance, mutual funds, disability policies or annuities, the Bank reserves the absolute right, in its sole discretion, to replace such assets from time to time or to terminate its investment in such assets at any time, in whole or in part. At no time shall the Director be deemed to have any lien, right, title or interest in or to any specific investment or to any assets of the Bank. If the Bank elects to invest in a life insurance, disability or annuity policy upon the life of the Director, then the Director shall assist the Bank by freely submitting to a physical examination and by supplying such additional information necessary to obtain such insurance or annuities.

SECTION XI
ACT PROVISIONS

         11.1 Named Fiduciary and Administrator. The Bank, as Administrator, shall be the Named Fiduciary of this Agreement. As Administrator, the Bank shall be responsible for the management, control and administration of the Agreement as established herein. The Administrator may delegate to others certain aspects of the management and operational responsibilities of the Agreement, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

         11.2 Claims Procedure and Arbitration. In the event that benefits under this Agreement are not paid to the Director (or to his Beneficiary in the case of the Director's death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made



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to the Administrator within sixty (60) days from the date payments are refused. The Administrator shall review the written claim and, if the claim is denied, in whole or in part, it shall provide in writing, within ninety (90) days of receipt of such claim, its specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim. Such writing by the Administrator shall further indicate the additional steps which must be undertaken by claimants if an additional review of the claim denial is desired.

         If claimants desire a second review, they shall notify the Administrator in writing within sixty (60) days of the first claim denial. Claimants may review this Agreement or any documents relating thereto and submit any issues and comments, in writing, they may feel appropriate. In its sole discretion, the Administrator shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement upon which the decision is based.

         If claimants continue to dispute the benefit denial based upon completed performance of this Plan or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to mediation, administered by the American Arbitration Association ("AAA") (or a mediator selected by the parties) in accordance with the AAA's Commercial Mediation Rules. If mediation is not successful in resolving the dispute, it shall be settled by arbitration administered by the AAA under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

SECTION XII
MISCELLANEOUS

         12.1 No Effect on Rights to Serve. Nothing contained herein will confer upon the Director the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with the Director without regard to the existence of the Agreement.



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         12.2 State Law. The Agreement is established under, and will be construed according to, the laws of the state of Indiana, to the extent such laws are not preempted by the Act and valid regulations published thereunder.
         12.3 Severability. In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provisions held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

         12.4 Incapacity of Recipient. In the event the Director is declared incompetent and a conservator or other person legally charged with the care of his person or Estate is appointed, any benefits under the Agreement to which such Director is entitled shall be paid to such conservator or other person legally charged with the care of his person or Estate.

         12.5 Unclaimed Benefit. The Director shall keep the Bank informed of his current address and the current address of his Beneficiaries. The Bank shall not be obligated to search for the whereabouts of any person. If the location of the Director or his Beneficiary is not made known to the Bank by the time any payment is due, the Bank may discharge its obligation by payment to the Director's Estate. If there is no Estate in existence at such time or if such fact cannot be determined by the Bank, the Director and his Beneficiary(ies) shall thereupon forfeit any rights to the benefits provided for such Director and/or Beneficiary under this Agreement.

         12.6 Limitations on Liability. Notwithstanding any of the preceding provisions of the Agreement, no individual acting as an employee or agent of the Bank, or as a member of the Board of Directors shall be personally liable to the Director or any other person for any claim, loss, liability or expense incurred in connection with the Agreement.

         12.7 Gender. Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.



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         12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this Agreement shall affect the right of the Director to participate in or be covered by any qualified or non-qualified pension, profit sharing, group, bonus or other supplemental compensation or fringe benefit agreement constituting a part of the Bank's existing or future compensation structure.
         12.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if the Director's death results from Suicide, whether sane or insane, within twenty-six (26) months after execution of this Agreement, all further Contributions to the Retirement Income Trust Fund shall thereupon cease, and no Contribution shall be made by the Bank to the Retirement Income Trust Fund in the year such death resulting from Suicide occurs (if not yet made). All benefits other than those available from previous Contributions to the Retirement Income Trust Fund under this Agreement shall be forfeited, and this Agreement shall become null and void. The balance of the Retirement Income Trust Fund, measured as of the Director's date of death, shall be paid to the Beneficiary within thirty (30) days of the date the Administrator receives notice of the Director's death.

         12.10 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Bank, its successors and assigns, and the Director, his successors, heirs, executors, administrators, and Beneficiaries.

         12.11 Headings. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed a part of this Agreement.

         12.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi trust into which the Bank shall contribute assets which shall be held therein, subject to the claims of the Bank's creditors in the event of the Bank's "Insolvency" (as defined in such rabbi trust agreement), until the contributed assets are paid to the Director and/or his Beneficiary in such manner and at such times as specified in this Agreement. It is the intention of the Bank that the contribution or contributions to the rabbi trust shall provide the Bank with a source of funds to assist it in meeting the liabilities of this Agreement.


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         12.13 Source of Payments. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank or the assets of the rabbi trust.


SECTION XIII
AMENDMENT/PLAN TERMINATION

         13.1 Amendment or Plan Termination. The Bank intends this Agreement to be permanent, but reserves the right to amend or terminate the Agreement when, in the sole opinion of the Bank, such amendment or termination is advisable, provided, however, that the Plan shall not be amended (other than an amendment that would terminate the Plan) following a Change in Control. However, any termination of the Agreement which is done in anticipation of or pursuant to a "Change in Control", as defined in Subsection 1.9, shall be deemed to trigger Subsection 2.1(b)(2) of the Agreement notwithstanding the Director's continued service, and benefit(s) shall be paid from the Retirement Income Trust Fund in accordance with Subsection 13.2 below and with Subsections 2.1(b)(2). Any amendment or termination of the Agreement by the Bank shall be made pursuant to a resolution of the Board of Directors of the Bank and shall be effective as of the date of such resolution. No amendment or termination of the Agreement by the Bank shall directly or indirectly deprive the Director of all or any portion of the Director's Retirement Income Trust Fund as of the effective date of the resolution amending or terminating the Agreement. For purposes of this Section 13.1, a termination will be deemed to be made "in anticipation of a Change in Control" if it occurs within one year prior to a Change in Control (as defined herein). In the event that the appropriate regulatory authorities shall disapprove the Plan within the statutory time, and the Board is unable or unwilling to make amendments necessary to cause the appropriate regulatory authorities to approve the Plan, the Plan shall be null and void.

         Notwithstanding the above, if at any time after the final Contribution is made to the Retirement Income Trust Fund the Director elects to terminate the Retirement Income Trust Fund and receive a distribution of the assets of the Retirement Income Trust Fund, then upon such distribution this Agreement shall terminate.



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         13.2 Director's Right to Payment Following Plan Termination. In the event of a termination of the Agreement, the Director shall be entitled to the balance, if any, of his Retirement Income Trust Fund. However, if such termination is done in anticipation of or pursuant to a "Change in Control," such balance(s) shall include the final Contribution made pursuant to Subsection 2.1(b)(2). Payment of the balance(s) of the Director's Retirement Income Trust Fund shall not be dependent upon his continuation of service with the Bank following the termination date of the Agreement. Payment of the balance(s) of the Director's Retirement Income Trust Fund shall be made in a lump sum within thirty (30) days of the date of termination of the Agreement.


SECTION XIV

EXECUTION

         14.1 This Agreement and the Jerry McVicker Grantor Trust Agreement set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous agreements or understandings between the parties hereto regarding the subject matter hereof, including the Director's Shareholder Benefit Plan Agreement date February 1, 2000, are merged into and superseded by this Agreement and the Jerry McVicker Grantor Trust Agreement.

         14.2 This Agreement shall be executed in triplicate, each copy of which, when so executed and delivered, shall be an original, but all three copies shall together constitute one and the same instrument.


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         IN WITNESS WHEREOF, the Bank and the Director have caused this Agreement to be executed on the day and date first above written.

WITNESS:	FIRST FEDERAL SAVINGS BANK:
	By: ___________________________________________
__________________________________________	Title: __________________________________________
WITNESS:	DIRECTOR:
__________________________________________	__________________________________________

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CONDITIONS AND ASSUMPTIONS


        1. The amount of the annual Contributions to the Retirement Income Trust Fund has been based on a formula which is defined in Subsection 1.12.

        2. Survivor's Benefit means an actuarially determined annual amount equal to Thirty-Two Thousand Four Hundred and Thirty-One Dollars ($32,431) at age 70 if paid entirely by the Bank.

        The definition of Survivor's Benefit has been incorporated into the Agreement for the sole purpose of actuarially establishing the maximum amount of annual Contributions to the Retirement Income Trust Fund and is intended to be an amount equal to the highest annual board fees received by the Director during the twelve (12) month period prior to the Director's Benefit Eligibility Date. The amount of any Survivor's Benefit payable pursuant to the Agreement will be a function of (i) the amount and time of Contributions to the Retirement Income Trust Fund and (ii) the actual investment experience of such Contributions.





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Exhibit A


DIRECTOR SUPPLEMENTAL RETIREMENT
INCOME AGREEMENT
BENEFICIARY DESIGNATION

           The Director, under the terms of the Amended Director Shareholder Benefit Program Agreement executed by the Bank, dated the ___ day of _________, 2000, hereby designates the following Beneficiary(ies) to receive any guaranteed payments or death benefits under such Agreement, following his death:


           PRIMARY BENEFICIARY: ____________________________________

           SECONDARY BENEFICIARY: ____________________________________


           This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect.

           Such Beneficiary Designation is revocable.


           DATE: ______________________, 20__

______________________________	______________________________
WITNESS	Director

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Exhibit B


AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT
NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT

            TO: Bank:
             Attention:

             I hereby give notice of my election to change the form of payment of my Director Supplemental Retirement Income Benefit, as specified below. I understand that such notice, in order to be effective, must be submitted in accordance with the time requirements described in my Amended Director Shareholder Benefit Program Agreement.

            _____ I hereby elect to change the form of payment of my benefits from monthly installments throughout my Payout Period to a lump sum benefit payment.

            _____ I hereby elect to change the form of payment of my benefits from a lump sum benefit payment to monthly installments throughout my Payout Period. Such election hereby revokes my previous notice of election to receive a lump sum form of benefit payments.

______________________________
Director

______________________________
Date

Acknowledged:

By: ______________________________

Title: ______________________________

______________________________
Date

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Exhibit C


AMENDED DIRECTOR SHAREHOLDER BENEFIT PROGRAM AGREEMENT

APPENDIX I

            The following no-load, no surrender charge life insurance policies are intended to comprise the hypothetical pool of life insurance, the increases in cash values of which are a component of the Contributions for each participant in the Amended Director Shareholder Benefit Program Agreement.

            If such contracts for life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive annual policy illustrations that assume the below-described policies were purchased, or were not subsequently surrendered or lapsed. Such illustrations will be received from the insurance company and will indicate the increases in policy cash surrender values for purposes of calculating the Contributions to the Retirement Income Trust Fund.

            In either case, references to life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Director and their beneficiaries shall have no ownership interest in such policies and shall always have no greater interest in the benefits under this Plan than that of unsecured creditors of the Bank.


            Life Insurance Company: Southland Life Insurance Company
            Single Premium: One Million Three Hundred Thousand Dollars ($1,300,000)
            Assumed Purchase Date: February 7, 2000


            Life Insurance Company: Lincoln Benefit Life
            Single Premium Paid: Four Million Two Hundred Thousand Dollars ($4,200,000)
            Assumed Purchase Date: February 7, 2000





End.