<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form10k-40813_92401.txt
<DESCRIPTION>10-K
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                     For the Fiscal Year Ended June 30, 2001


[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

             For the transition period from _________ to __________

                         Commission File Number: 0-29814


                         FIRST BANCORP OF INDIANA, INC.
             (Exact name of registrant as specified in its charter)


       INDIANA                                                  35-2061832
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

2200 West Franklin Street, Evansville, Indiana       47712
(Address of principal executive offices)           (Zip Code)


       Registrant's telephone number, including area code: (812) 423-3196
        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 $0.01 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [   ]

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates was $21.0 million, based upon the closing price of $13.00
as quoted on the Nasdaq National Market for September 13, 2001. Solely for
purposes of this calculation, the shares held by the directors and officers of
the registrant are deemed to be held by affiliates.

         The number of shares outstanding of the registrant's Common Stock as of
September 13, 2001 was 1,795,136.

                       DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders
          are incorporated by reference into Part III of this Form 10-K


<PAGE>

<TABLE>
<CAPTION>
                                      INDEX

                                     Part I
                                                                                                  Page
<S>                                                                                                <C>
Item 1.  Business...................................................................................3
Item 2.  Properties................................................................................26
Item 3.  Legal Proceedings.........................................................................27
Item 4.  Submission of Matters to a Vote of Securities Holders.....................................27

                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.....................27
Item 6.  Selected Financial Data...................................................................28
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.....29
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.................................39
Item 8.  Financial Statements and Supplementary Data...............................................39
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....39

                                    Part III

Item 10. Directors and Executive Officers of the Registrant........................................39
Item 11. Executive Compensation....................................................................39
Item 12. Security Ownership of Certain Beneficial Owners and Management............................39
Item 13. Certain Relationships and Related Transactions............................................39

                                     Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................40
</TABLE>




<PAGE>



                                     PART I

Item 1. BUSINESS

General

            First Bancorp of Indiana, Inc. ("First Bancorp"), headquartered in
Evansville, Indiana, is the holding company for First Federal Savings Bank
("First Federal"). First Bancorp's sole business activity is the ownership of
all of First Federal's capital stock. First Bancorp does not transact any
material business other than through its subsidiary, First Federal. First
Bancorp is subject to the regulation of the Office of Thrift Supervision ("OTS")
and the Securities and Exchange Commission ("SEC"). First Bancorp is listed on
the Nasdaq National Market under the symbol FBEI.

            First Federal operates as a community-oriented financial
institution. First Federal is regulated by the OTS and the Federal Deposit
Insurance Corporation ("FDIC"). First Federal's deposits have been federally
insured by the FDIC since 1934 and are currently insured by the FDIC under the
Savings Association Insurance Fund. First Federal has been a member of the
Federal Home Loan Bank System since 1934.

Market Area and Competition

            First Federal conducts its operations through seven offices located
in the Evansville, Indiana area. Most of First Federal's depositors live in the
areas surrounding its branches and most of First Federal's loans are made to
persons in Evansville and the surrounding counties. Evansville is in the
southwest corner of Indiana. The service sector (primarily medical services) is
the largest source of employment. However, manufacturing has played an
increasingly larger role in recent years with the addition or reopening of
several plants. The area's largest manufacturers produce pharmaceuticals, home
appliances, aluminum and plastic products, and automobiles. Employers include
Whirlpool Corporation, Bristol-Myers Squibb, Alcoa, AK Steel, General Electric
and Toyota Motor Corp. Unemployment is currently low and First Federal believes
the outlook for the area's economy is positive.

            First Federal faces intense competition for deposits and loan
originations from the many financial institutions conducting business within its
market area. Most of these financial institutions are larger than First Federal.
First Federal has faced additional significant competition for investors' funds
from short-term money market securities and other corporate and government
securities. First Federal's competition for loans comes principally from other
thrift institutions, commercial banks, credit unions, mortgage banking companies
and mortgage brokers.



                                        3

<PAGE>



Lending Activities

            The following table sets forth the composition of First Federal's
loan portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                            At June 30,
                                                -------------------------------------------------------------------
                                                        2001                    2000                   1999
                                                --------------------    --------------------   --------------------
                                                            Percent                Percent                Percent
                                                 Amount    of Total      Amount    of Total     Amount    of Total
                                                ---------  ---------    --------  ----------   --------  ----------
                                                                      (Dollars in thousands)
<S>                                              <C>           <C>       <C>           <C>      <C>           <C>
Mortgage loans:
   One- to four-family......................     $ 65,257      59.22%    $45,016       66.42%   $39,718       68.80%
   Construction.............................        4,405       4.00         559        0.83      1,403        2.43
   Commercial and multi-family..............        2,938       2.67          37        0.05         73        0.13
                                                 --------       ----    --------      ------   --------     -------
      Total mortgage loans..................       72,600      65.89      45,612       67.30     41,194       71.36
Credit line equity loans....................        5,895       5.35       1,284        1.89      1,020        1.77
Savings account loans.......................          369       0.33         200        0.30        127        0.22
Commercial business loans...................        4,415       4.01          --          --         --          --
Consumer loans..............................       26,910      24.42      20,680       30.51     15,389       26.65
                                                ---------    -------    --------     -------   --------     -------
      Total loans...........................      110,189     100.00%     67,776      100.00%    57,730      100.00%
                                                 --------     ======    --------      ======   --------      ======

Less:
   Undisbursed loan funds...................        2,502                    879                    981
   Net deferred loan fees...................          208                    124                    166
   Allowance for loan losses................          661                    396                    274
                                                ---------              ---------               --------

Net loans...................................     $106,818                $66,377                $56,309
                                                 ========                =======                =======
</TABLE>



         The following table sets forth certain information at June 30, 2001
regarding the dollar amount of loans maturing in First Federal's portfolio based
on their scheduled contractual principal repayments. Demand loans, loans having
no stated schedule of repayments and no stated maturity, and overdrafts are
reported as due in one year or less. Loan balances do not include undisbursed
loan funds, deferred loan fees and allowance for loan losses.


<TABLE>
<CAPTION>
                                                                  Amount Due
                                         -------------------------------------------------------------
                                                        After 1      After        After
                                                         Year       3 Years      5 Years
                                           Within       Through     Through      Through      Beyond
                                           1 Year       3 Years     5 Years      10 Years    10 Years      Total
                                         -----------  -----------  ----------   ----------  ----------   ----------
                                                                       (In thousands)
<S>                                          <C>          <C>         <C>          <C>         <C>         <C>

Mortgage loans:
   One- to four-family.................      $ 3,840      $ 5,981     $ 6,357      $14,599     $34,480     $ 65,257
   Construction........................          336        1,854         102          334       1,779        4,405
   Commercial and multi-family.........          508          550         444        1,002         434        2,938
Credit line equity loans...............          656        1,302       1,432        2,505          --        5,895
Savings account loans..................          369           --          --           --          --          369
Commercial business loans..............        1,239        2,222         259          695          --        4,415
Consumer loans.........................        6,908       13,892       5,997           75          38       26,910
                                            --------     --------   ---------     --------    --------    ---------
      Total............................      $13,856      $25,801     $14,591      $19,210     $36,731     $110,189
                                             =======      =======     =======      =======     =======     ========
</TABLE>

                                       4
<PAGE>

         The following table sets forth, as of June 30, 2001, the dollar amount
of all loans due or repricing after June 30, 2002, based on their scheduled
contractual principal payments, which have fixed interest rates and have
floating or adjustable interest rates.

<TABLE>
<CAPTION>

                                                                 Floating or
                                                                  Adjustable
                                                 Fixed-Rate          Rate
                                                ------------     -----------
                                                       (In thousands)
<S>                                               <C>             <C>
Mortgage loans:
   One- to four-family.................           $51,339         $10,078
   Construction........................             3,972              97
   Commercial and multi-family.........             2,345              85
Credit line equity loans...............               937           4,302
Savings account loans..................                --              --
Commercial business loans..............             1,712           1,464
Consumer loans.........................            19,952              50
                                                  -------         -------
         Total.........................           $80,257         $16,076
                                                  =======         =======
</TABLE>


         Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less than
their contractual terms because of prepayments. In addition, due-on-sale clauses
on loans generally give First Federal the right to declare loans immediately due
and payable in the event, among other things, that the borrower sells the real
property subject to the mortgage and the loan is not repaid. The average life of
mortgage loans tends to increase, however, when current mortgage loan market
rates are substantially higher than rates on existing mortgage loans and,
conversely, decreases when rates on existing mortgage loans are substantially
higher than current mortgage loan market rates.

         Residential Real Estate Loans. First Federal offers a variety of fixed
and adjustable-rate mortgage loan products. At June 30, 2001, 20.0% of First
Federal's residential real estate loans were subject to periodic interest rate
adjustments and 80.0% were fixed-rate loans. The loan fees charged, interest
rates and other provisions of First Federal's mortgage loans are determined by
First Federal on the basis of its own pricing criteria and market conditions.
Generally, all loans originated by First Federal conform to Fannie Mae
underwriting standards. First Federal's fixed-rate loans typically have
maturities of 15 to 30 years, although 30-year loans constitute the largest
percentage of originations. First Federal also offers five- and seven-year
balloon mortgages based on a 30-year amortization schedule. First Federal's
adjustable-rate mortgage ("ARM") loans are typically based on a 30-year
amortization schedule. Interest rates and payments on First Federal's ARM loans
generally are adjusted annually after a specified period ranging from one to ten
years to a rate typically equal to 2.75% above the one-year constant maturity
U.S. Treasury index. First Federal currently offers ARM loans with initial rates
below those which would prevail under the foregoing computation, determined by
First Federal based on market factors and competitive rates for loans having
similar features offered by other lenders for such initial periods. The maximum
amount by which the interest rate may be increased or decreased in a given
period on First Federal's ARM loans is generally 2% per adjustment period and
the lifetime interest rate cap is generally 6% over the initial interest rate of
the loan. First Federal qualifies the borrower based on the borrower's ability
to repay the ARM loan based on the maximum interest rate at the first
adjustment, in the case of one-year ARM loans, and based on the initial interest
rate in the case of ARM loans that adjust after three or more years. First
Federal does not originate negative amortization loans. The terms and conditions
of the ARM loans offered by First Federal, including the index for interest
rates, may vary from time to time. First Federal believes that the annual
adjustment feature of its ARM loans also provides flexibility to meet
competitive conditions as to initial rate concessions while preserving First
Federal's return on equity objectives by limiting the duration of the initial
rate concession.

         Borrower demand for ARM loans versus fixed-rate mortgage loans is a
function of the level of interest rates, the expectations of changes in the
level of interest rates and the difference between the initial interest rates
and fees charged for each type of loan. The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment.

                                        5

<PAGE>



         The retention of ARM loans in First Federal's loan portfolio helps
reduce First Federal's exposure to changes in interest rates. There are,
however, unquantifiable credit risks resulting from the potential of increased
costs due to changed rates to be paid by the customer. It is possible that,
during periods of rising interest rates, the risk of default on ARM loans may
increase as a result of repricing and the increased costs to the borrower.
Furthermore, because the ARM loans originated by First Federal generally
provide, as a marketing incentive, for initial rates of interest below the rates
which would apply were the adjustment index used for pricing initially
(discounting), these loans are subject to increased risks of default or
delinquency. Another consideration is that although ARM loans allow First
Federal to increase the sensitivity of its asset base to changes in interest
rates, the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate adjustment limits. Because of these considerations, First
Federal has no assurance that yields on ARM loans will be sufficient to offset
increases in First Federal's cost of funds.

         While fixed-rate, single-family residential real estate loans are
normally originated with 15- to 30-year terms, and First Federal permits its ARM
loans to be assumed by qualified borrowers, such loans typically remain
outstanding for substantially shorter periods. This is because borrowers often
prepay their loans in full upon sale of the property pledged as security or upon
refinancing the original loan. In addition, substantially all mortgage loans in
First Federal's loan portfolio contain due-on-sale clauses providing that First
Federal may declare the unpaid amount due and payable upon the sale of the
property securing the loan. First Federal enforces these due-on-sale clauses to
the extent permitted by law and as business judgment dictates. Thus, average
loan maturity is a function of, among other factors, the level of purchase and
sale activity in the real estate market, prevailing interest rates and the
interest rates payable on outstanding loans.

         Construction Loans. First Federal originates loans to individuals for
the construction of their personal residence. First Federal also makes loans to
local home builders. Construction loans to individuals are made on the same
terms as First Federal's residential mortgage loans, but provide for the payment
of interest only during the construction phase, which is usually six months. At
the end of the construction phase, the loan converts to a permanent mortgage
loan. First Federal's construction loans to builders generally have fixed
interest rates and are for a term of up to 18 months. Loans to builders are
usually made on a speculative basis, which means that the builder has not
identified a purchaser for the home at the time the loan is made. Builders are
evaluated on a case-by-case basis to establish a maximum credit limit, however
the maximum amount that First Federal will loan to any one builder is $750,000.
At June 30, 2001, First Federal had 25 outstanding construction loans to
builders totaling $2.2 million. First Federal occasionally originates loans for
the purchase of residential building lots. These loans have fixed interest rates
and most have terms of five years or less. At June 30, 2001, First Federal had
one such loan outstanding for $13,000.

         Construction lending is generally considered to involve a higher degree
of risk than single-family permanent mortgage lending because of the inherent
difficulty in estimating both a property's value at completion of the project
and the estimated cost of the project. The nature of these loans is such that
they are generally more difficult to evaluate and monitor. If the estimate of
construction cost proves to be inaccurate, First Federal may be required to
advance funds beyond the amount originally committed to permit completion of the
project. If the estimate of value upon completion proves to be inaccurate, First
Federal may be confronted with a project whose value is insufficient to assure
full repayment. Projects may also be jeopardized by disagreements between
borrowers and builders and by the failure of builders to pay subcontractors.
Loans to builders to construct homes for which no purchaser has been identified
carry more risk because the payoff for the loan is dependent on the builder's
ability to sell the property prior to the time that the construction loan is
due.

         First Federal has attempted to minimize the foregoing risks by, among
other things, monitoring the project and controlling the disbursement of funds.
Prior to making a commitment to fund a construction loan, First Federal requires
an appraisal of the property. First Federal also reviews and inspects each
project prior to disbursement of funds during the term of the construction loan.
In most cases, loan proceeds are disbursed after inspection of the project based
on percentage of completion.

         Commercial and Multi-Family Real Estate Loans. First Federal engages in
commercial and multi-family real estate lending. At June 30, 2001, commercial
and multi-family real estate loans in First Federal's portfolio totaled $2.9
million. The maximum loan-to-value ratio for a commercial or multi-family real
estate loan is 75%. The maximum term for a commercial or multi-family real
estate loan is 15 years and the maximum loan amount is $1,000,000.


                                       6
<PAGE>


         Loans secured by commercial and multi-family real estate generally are
larger and involve greater risks than one- to four-family residential mortgage
loans. Payments on loans secured by such properties are often dependent on
successful operation or management of the properties. Repayment of such loans
may be subject to a greater extent to adverse conditions in the real estate
market or the economy. First Federal seeks to minimize these risks in a variety
of ways, including limiting the size of such loans and strictly scrutinizing the
financial condition of the borrower, the quality of the collateral and the
management of the property securing the loan. The properties securing First
Federal's commercial and multi-family real estate loans are inspected by First
Federal's lending personnel before the loan is made. First Federal also obtains
appraisals on each property in accordance with applicable regulations.

         Commercial Business Loans. First Federal formed a commercial business
loan department in November 2000. First Federal makes commercial business loans
in its market area to a variety of professionals, sole proprietorships,
partnerships and corporations. First Federal offers a variety of commercial
lending products that include term loans for equipment financing, term loans for
business acquisitions, inventory financing and revolving lines of credit. In
most cases, fixed-rate loans have terms up to 5 years and are generally
amortized over a 15 year period. Revolving lines of credit generally will have
adjustable rates of interest and are governed by a borrowing base certificate,
payable on demand, subject to annual review and renewal. Business loans with
variable rates of interest adjust on a daily basis and are generally indexed to
prime rate as published in The Wall Street Journal. Furthermore, as
                           -----------------------
circumstances warrant, First Federal may utilize a loan agreement for commercial
loans.

         In making commercial business loans, First Federal considers a number
of factors, including the financial condition of the borrower, the nature of the
borrower's business, economic conditions affecting the borrower, First Federal's
market area, the management experience of the borrower, the debt service
capabilities of the borrower, the projected cash flows of the business and the
collateral. Commercial loans are generally secured by a variety of collateral,
including equipment, inventory and accounts receivable, and supported by
personal guarantees.

         Unlike mortgage loans, which generally are made on the basis of the
borrower's ability to make repayment from his or her employment or other income,
and which are secured by real property whose value tends to be more easily
ascertainable, commercial loans are larger in amount and of higher risk and
typically are made on the basis of the borrower's ability to repay the loan from
the cash flow of the borrower's business. As a result, the availability of funds
for the repayment of commercial loans may be substantially dependent on the
success of the business itself. Further, any collateral securing such loans may
depreciate over time, may be difficult to appraise and may fluctuate in value.
To manage these risks, First Federal performs a credit analysis for each
commercial loan at least annually.

         Consumer and Other Loans. First Federal originates unsecured consumer
loans and consumer loans secured by automobiles and, occasionally, boats and
other recreational vehicles. Automobile loans are secured by both new and used
cars and light trucks. Both new and used cars are financed for a period of up to
72 months and the rate on such loans is fixed for the term of the loan.

         Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciating assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, 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.
Furthermore, the application of various Federal and state laws, including
Federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans. Such loans may also give rise to claims and defenses
by a consumer loan borrower against an assignee of such loans such as First
Federal, and a borrower may be able to assert against such assignee claims and
defenses that it has against the seller of the underlying collateral.

         First Federal originates automobile loans through approximately 100
automobile dealers in southern Indiana, northwestern Kentucky and southern
Illinois. These dealers provide First Federal applications to finance vehicles
sold their dealerships. Although substantially all of the dealers through which
First Federal originates loans sell both new and used automobiles, most of the
loans First Federal originates are secured by used automobiles. First Federal
processes loan applications through "CreditDesk," an automated underwriting
program by Fair Isaac and Company, Inc.


                                       7
<PAGE>

Applications processed through "CreditDesk" receive a score which, along with
other underwriting criteria, determine if the application will be approved,
denied or approved at an increased interest rate or on other terms.

         During the year ended June 30, 2001, First Federal originated and
retained for its own portfolio $15.9 million in automobile loans. At June 30,
2001, indirect automobile loans constituted 22.2% of total loans. First Federal
has a contractual relationship with another financial institution under which it
sells indirect automobile loans on a flow basis for an origination fee of
approximately 1.50% of the loan amount. This contract defines the criteria to be
satisfied for loans to be eligible for sale to the purchasing institution. First
Federal sells all loans with servicing released and without recourse to First
Federal. Interest rates are determined by reference to the rate sheet in effect
on the date the loan was closed and approved by the financial institution
purchasing the loan. Under the terms of its arrangement, First Federal has no
minimum or maximum delivery requirements. This eliminates the risk that First
Federal will not be able to sell the loans and that an increase in market
interest rates will reduce the value of the loans before they can be sold.

         In fiscal year 2001, First Federal sold 64.1% of its indirect
automobile loan production and retained the remainder for its own portfolio,
increasing its consumer loan portfolio to $26.9 million. The loans sold were
primarily the ones with the highest credit quality. The loans retained for First
Federal's portfolio generally had a lower credit quality, but with a
correspondingly higher interest rate. First Federal intends to continue to sell
its high credit quality indirect automobile loan production in the future. First
Federal believes that it will benefit from the higher yields earned on consumer
loans and that the shorter duration of consumer loans will improve First
Federal's interest rate risk position. However, because consumer loans tend to
have a higher rate of default than mortgage loans and because full repayment of
defaulted loans is less likely when the loan is secured by a depreciating asset
like an automobile, First Federal expects that it will increase its allowance
for loan losses as its consumer loan portfolio grows. First Federal will
increase its allowance for loan losses by charging a provision for loan losses
against income.

         First Federal originates home equity loans in the form of lines of
credit and fixed-rate term loans. At June 30, 2001, First Federal had $6.7
million of credit line equity loans and unused commitments to extend credit
under credit line equity loans of $7.4 million. Most of these loans are made to
existing customers. First Federal's home equity line of credit loans have
variable interest rates tied to the prime lending rate. First Federal imposes a
maximum loan-to- value ratio of 100% after considering both the first and second
mortgage loans. First Federal's home equity loans may have greater credit risk
than one- to four-family residential mortgage loans because they are secured by
mortgages subordinated to an existing first mortgage on the property, which, in
most cases, is held by First Federal.

         First Federal makes savings account loans for up to 90% of the
depositor's account balance. The interest rate is normally 2.0% or 3.0% above
the rate paid on the deposit account, depending on the type of account, and the
account must be pledged as collateral to secure the loan. Savings account loans
are payable on demand, although interest must be paid every six months.

         Loan Solicitation and Processing. Mortgage loan applicants come through
direct solicitation by First Federal's branch managers and commissioned loan
originators, as well as through referrals by realtors and past and present
customers. First Federal does not advertise extensively. All types of loans may
be originated and closed in any of First Federal's offices. Loans are serviced
from First Federal's main office.

         Loans can be approved by various employees and the Board of Directors
on a scale which requires approval by individuals or groups of individuals with
progressively higher levels of responsibility as the loan amount increases.

         Loan Originations, Sales and Purchases. In an effort to manage its
interest rate risk position, First Federal generally sells the fixed-rate
mortgage loans with terms in excess of 15 years that it originates. However,
since the beginning of 1998, First Federal has retained selected 30-year,
fixed-rate loans in order to build its loan portfolio and increase the yield on
its interest-earning assets. The sale of loans in the secondary mortgage market
reduces First Federal's risk that the interest rates paid to depositors will
increase while First Federal holds long-term, fixed-rate loans in its portfolio.
It also allows First Federal to continue to fund loans when savings flows
decline or funds are not otherwise available. First Federal generally sells
loans without recourse to Fannie Mae with servicing retained. Gains, net of
origination expense, from the sale of such loans are recorded at the time of
sale. Generally a loan is committed to be sold and a price for the loan is fixed
after the loan is approved by the Executive Committee and the interest rate


                                        8

<PAGE>


is approved by the customer. This eliminates the risk to First Federal that a
rise in market interest rates will reduce the value of a mortgage before it can
be sold.

         In the past First Federal has supplemented its loan originations
through the purchase of whole loans and loan participations. However, First
Federal has not purchased any loans or loan participations in many years.

         At June 30, 2001, First Federal was servicing loans for others (Fannie
Mae) amounting to approximately $8.7 million. Servicing loans for others
generally consists of collecting mortgage payments, maintaining escrow accounts,
disbursing payments to investors and foreclosure processing. Loan servicing
income is recorded on the accrual basis and includes servicing fees from
investors.

         The following table shows total loans originated, purchased, sold and
repaid during the periods indicated.

<TABLE>
<CAPTION>
                                                                Years Ended June 30,
                                                     ------------------------------------------
                                                        2001            2000           1999
                                                     -----------     ----------     -----------
                                                                   (In thousands)
                                                                     ----------
<S>                                                      <C>           <C>              <C>
Loans originated:
Mortgage loans:
   One- to four-family..........................         $22,023       $  9,600         $16,283
   Construction.................................           2,861          1,761           2,870
   Commercial and multi-family..................           3,010             --              --
Credit line equity loans........................           2,547          1,399           1,015
Savings account loans...........................             777            174              60
Commercial business loans.......................           6,236             --              --
Consumer loans..................................          34,771         43,670          18,010
                                                       ---------      ---------        --------
      Total loans originated....................          72,225         56,604          38,238

Loans purchased.................................          24,036             --              --

Loans sold......................................          29,280         31,215           5,822

Loan principal repayments.......................          24,601         14,572          10,245
Increase (decrease) in other items, net.........          (1,939)          (749)         (1,517)
                                                      ----------     ----------       ---------

Net increase (decrease) in loans receivable.....         $40,441        $10,068         $20,654
                                                         =======        =======         =======
</TABLE>



         Loan Commitments. First Federal issues commitments for fixed- and
adjustable-rate one- to four-family residential mortgage loans conditioned upon
the occurrence of certain events. Such commitments are made on specified terms
and conditions and are honored for up to 45 days from the date of loan approval.
First Federal had outstanding loan commitments of approximately $9.4 million at
June 30, 2001, $1.9 million of which were at fixed rates. At June 30, 2001,
First Federal also had commitments to fund $7.4 million of credit line equity
loans. See Note 12 of Notes to Consolidated Financial Statements.

         Loan Origination and Other Fees. First Federal, in most instances,
receives mortgage loan origination fees and discount "points." Loan fees and
points are a percentage of the principal amount of the mortgage loan which are
charged to the borrower for funding the loan. The amount of points charged by
First Federal generally is 1%. Current accounting standards require fees
received (net of certain loan origination costs) for originating loans to be
deferred and amortized into interest income over the contractual life of the
loan. Net deferred fees or charges associated with loans that are prepaid are
recognized as income adjustments at the time of prepayment. First Federal had
$374,000 of net deferred mortgage loan fees at June 30, 2001.


                                       9
<PAGE>




         In connection with its indirect automobile lending program, First
Federal pays the automobile dealers a flat fee for the origination of the loans.
These loan origination costs have been deferred and amortized over the
contractual life of the loan. At June 30, 2001, First Federal had $166,000 of
deferred loan charges related to its indirect automobile lending program.

         Nonperforming Assets and Delinquencies. First Federal generates reports
regarding delinquent loans at regular intervals each month to enable management
to track their status. First Federal also generates a series of notices at
regular intervals to inform mortgage loan borrowers when a required payment is
past due. In most cases, delinquencies are cured promptly; however, if by the
91st day of delinquency, or sooner if the borrower is chronically delinquent and
all reasonable means of obtaining payment on time have been exhausted,
foreclosure, according to the terms of the security instrument and applicable
law, is approved by the Board of Directors.

         When a consumer loan borrower fails to make a required payment on a
consumer loan by the payment due date, First Federal institutes collection
procedures. In most cases, delinquencies are cured promptly; however, if, by the
45th day following the grace period of delinquency no progress has been made, a
written notice is mailed informing the borrowers of their right to cure the
delinquency within 20 days and of First Federal's intent to begin legal action
if the delinquency is not corrected. Depending on the type of property held as
collateral, First Federal either obtains a judgment in small claims court or
takes action to repossess the collateral.

         Loans are placed on nonaccrual status when they become 90 days past
due. Nonaccrual loans are returned to accrual status when they become less than
90 days past due.

         The following table sets forth information with respect to First
Federal's nonperforming assets and restructured loans within the meaning of
Statement of Financial Accounting Standards No. 15 at the dates indicated.

<TABLE>
<CAPTION>
                                                                                           At June 30,
                                                                              -------------------------------------
                                                                                2001          2000          1999
                                                                              --------      --------      ---------
                                                                                      (Dollars in thousands)
<S>                                                                              <C>              <C>            <C>
Loans accounted for on a nonaccrual basis...............................          $146        $   85             $6
Accruing loans past due 90 days or more.................................            --            --             --
                                                                                ------        ------           ----
Nonperforming loans.....................................................           146            85              6
Real estate owned (net).................................................            --            --             --
Other repossessed assets................................................          $ 14            27             --
                                                                                 -----        ------           ----
      Total nonperforming assets........................................          $160          $112             $6
                                                                                  ====          ====             ==

Restructured loans......................................................            --            --             --

Total loans delinquent 90 days or more to net loans.....................          0.14%         0.13%          0.01%
Total loans delinquent 90 days or more to total assets..................          0.08%         0.07%          0.00%
Total nonperforming assets to total assets..............................          0.09%         0.09%          0.00%
</TABLE>



         Real Estate Owned. Real estate acquired by First Federal as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until it is sold. When property is acquired it is recorded at the lower of its
cost, which is the unpaid principal balance of the related loan plus foreclosure
costs, or fair market value. Subsequent to foreclosure, the property is carried
at the lower of the foreclosed amount or fair value. Upon receipt of a new
appraisal and market analysis, the carrying value is written down through a
charge to income, if appropriate. At June 30, 2001, First Federal had no real
estate owned.


                                       10
<PAGE>



         Asset Classification. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets must have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution
will sustain some loss if the deficiencies are not corrected. Doubtful assets
have the weaknesses of substandard assets with the additional characteristic
that the weaknesses make collection or liquidation in full on the basis of
currently existing facts, conditions and values questionable, and there is a
high possibility of loss. An asset classified loss is considered uncollectible
and of such little value that continuance as an asset of the institution without
establishment of a specific reserve is not warranted. If an asset or portion
thereof is classified loss, the insured institution establishes specific
allowances for loan losses for the full amount of the portion of the asset
classified loss. A portion of general loan loss allowances established to cover
possible losses related to assets classified substandard or doubtful may be
included in determining an institution's regulatory capital, while specific
valuation allowances for loan losses generally do not qualify as regulatory
capital. OTS regulations also require that assets that do not currently expose
an institution to a sufficient degree of risk to warrant classification as loss,
doubtful or substandard but do possess credit deficiencies or potential weakness
deserving management's close attention shall be designated "special mention" by
either the institution or its examiners.

         First Federal reviews and classifies its assets on a monthly basis. At
June 30, 2001 First Federal classified as substandard $154,000 of loans and
$14,000 of other assets. No assets were classified doubtful or loss as of that
date. At such date First Federal had loans aggregating $1.1 million classified
as special mention. First Federal had no impaired loans at June 30, 2001 or
2000.

         Allowance for Loan Losses. In originating loans, First Federal
recognizes that losses will be experienced and that the risk of loss will vary
with, among other things, the type of loan being made, the creditworthiness of
the borrower over the term of the loan, general economic conditions and, in the
case of a secured loan, the quality of the security for the loan. The allowance
method is used in providing for loan losses: all loan losses are charged to the
allowance and all recoveries are credited to it. The allowance for loan losses
is established through a provision for loan losses charged to First Federal's
income. The provision for loan losses is based on management's periodic
evaluation of First Federal's past loan 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.

         At June 30, 2001, First Federal had an allowance for loan losses of
$661,000, which represented 0.62% of total loans. Management believes that the
amount maintained in the allowances will be adequate to absorb losses inherent
in the portfolio. Although management believes that it uses the best information
available to make such determinations, future adjustments to the allowance for
loan losses may be necessary and results of operations could be significantly
and adversely affected if circumstances differ substantially from the
assumptions used in making the determinations. While First Federal believes it
has established its existing allowance for loan losses in accordance with
generally accepted accounting principles, there can be no assurance that First
Federal's regulators, in reviewing First Federal's loan portfolio, will not
request First Federal to increase significantly its allowance for loan losses.
In addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect First Federal's financial condition and results of operations.


                                       11
<PAGE>


         The following table sets forth an analysis of First Federal's allowance
for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                                  Years Ended June 30,
                                                                          ------------------------------------
                                                                           2001           2000           1999
                                                                          ------         ------         ------
                                                                                 (Dollars in thousands)
<S>                                                                         <C>            <C>            <C>
Allowance at beginning of period....................................        $396           $274           $250
Provision for loan losses...........................................         443            184             24
Recoveries..........................................................           6             19             --
Charge-offs.........................................................        (184)           (81)            --
                                                                          ------         ------          -----
Net charge-offs.....................................................         178             62             --
                                                                          ------         ------             --
   Allowance at end of period.......................................        $661           $396           $274
                                                                            ====           ====           ====

Ratio of allowance to total loans
   outstanding at the end of the period.............................        0.62%          0.59%          0.48%

Ratio of net charge-offs to average loans
   outstanding during the period....................................        0.21%          0.10%           N/A

Allowance for loan losses to nonperforming loans....................      452.74%        465.88%      4,566.67%
</TABLE>



         The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated.

<TABLE>
<CAPTION>
                                                                             At June 30,
                                                   ---------------------------------------------------------------
                                                           2001                 2000                  1999
                                                   -------------------- --------------------- --------------------
                                                                % of                 % of                  % of
                                                              Loans in             Loans in              Loans in
                                                                Each                 Each                  Each
                                                              Category             Category              Category
                                                              to Total             to Total              to Total
                                                    Amount     Loans     Amount      Loans     Amount     Loans
                                                   --------  ---------- --------- ----------- --------- ----------
                                                                       (Dollars in thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>       <C>
Mortgage loans...................................      $355       63.22%     $225       67.30%     $225      71.36%
Consumer and other loans.........................       261       30.10       171       32.70        49      28.64
Commercial loans.................................        45        6.68        --         N/A        --        N/A
Unallocated......................................        --         N/A        --         N/A        --        N/A
                                                    -------     -------   -------     -------   -------    -------
   Total allowance for loan losses...............      $661      100.00%     $396      100.00%     $274     100.00%
                                                       ====      ======      ====      ======      ====     ======
</TABLE>

                                       12
<PAGE>



Investment Activities

         First Federal is permitted under applicable law to invest in various
types of liquid assets, including U.S. Treasury obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank-Indianapolis, certificates of deposit of federally
insured institutions, certain bankers' acceptances and federal funds. Subject to
various restrictions, savings institutions may also invest a portion of their
assets in commercial paper, corporate debt securities and mutual funds. Savings
institutions like First Federal are also required to maintain an investment in
Federal Home Loan Bank stock and a minimum level of liquid assets.

         First Federal must categorize its investments as "held to maturity,"
"trading" or "available for sale," based on management's intent as to the
ultimate disposition of each security. Debt securities may be classified as
"held to maturity" and reported in financial statements at amortized cost only
if First Federal has the positive intent and ability to hold those securities to
maturity. Securities that might be sold in response to changes in market
interest rates, changes in the security's prepayment risk, increases in loan
demand, or other similar factors cannot be classified as "held to maturity."
Debt and equity securities held for current resale are classified as "trading."
Such securities are reported at fair value, and unrealized gains and losses on
such securities would be included in earnings. First Federal does not currently
use or maintain a trading account. Debt and equity securities not classified as
either "held to maturity" or "trading" are classified as "available for sale."
Such securities are reported at fair value, and unrealized gains and losses on
such securities are excluded from earnings and reported as a net amount in a
separate component of equity.

         First Federal's President determines appropriate investments in
accordance with the Board of Directors' approved investment policies and
procedures. Investments are made following certain considerations, which include
First Federal's liquidity position and anticipated cash needs and sources, which
in turn include outstanding commitments, upcoming maturities, estimated deposits
and anticipated loan amortization and repayments. Further, the effect that the
proposed investment would have on First Federal's credit and interest rate risk,
and risk-based capital is given consideration during the evaluation. The
interest rate, yield, settlement date and maturity are also reviewed. The Board
of Directors must ratify all investments up to $3 million and must provide its
prior approval for any investments above such amount.

         First Federal purchases investments to provide necessary liquidity for
day-to-day operations and to manage First Federal's interest rate risk and
overall credit risk profile. In recent years First Federal has purchased
mortgage- backed and related securities when investable funds exceed loan
demand.

         First Federal maintains a significant portfolio of mortgage-backed and
related securities. Almost all of these securities were issued by Fannie Mae,
Freddie Mac or Ginnie Mae. Mortgage-backed securities generally entitle First
Federal to receive a pro rata portion of the cash flows from an identified pool
of mortgages. Ginnie Mae certificates are guaranteed as to principal and
interest by the full faith and credit of the United States, while Fannie Mae and
Freddie Mac certificates are guaranteed by Fannie Mae and Freddie Mac.
Approximately 18.1% of First Federal's mortgage-backed securities are real
estate mortgage investment conduits ("REMICs"), which are created by redirecting
the cash flows from a pool of mortgages or mortgage-backed securities to create
two or more classes (or tranches) with different maturity or risk
characteristics designed to meet a variety of investor needs and preferences.
Management believes these securities represent attractive alternatives relative
to other investments due to the wide variety of maturity, repayment and interest
rate options available. Current investment practices of First Federal prohibit
the purchase of high risk REMICs. At June 30, 2001, 42.2% of First Federal's
mortgage-backed securities were adjustable rate and 57.8% were fixed rate.

         Of First Federal's $37.5 million mortgage-backed securities portfolio
at June 30, 2001, $9.5 million had contractual maturities within ten years and
$28.0 million had contractual maturities over ten years. However, the actual
maturity of a mortgage-backed security may be less than its stated maturity due
to prepayments of the underlying mortgages. Prepayments that are faster than
anticipated may shorten the life of the security and may result in a loss of any
premiums paid and thereby reduce the net yield on such securities. Although
prepayments of underlying mortgages depend on many factors, including the type
of mortgages, the coupon rate, the age of mortgages, the geographical location
of the underlying real estate collateralizing the mortgages and general levels
of market interest rates, the difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates generally is the
most significant determinant of the rate of prepayments. During periods of
declining mortgage interest rates, if

                                       13
<PAGE>


the coupon rate of the underlying mortgages exceeds the prevailing market
interest rates offered for mortgage loans, refinancing generally increases and
accelerates the prepayment of the underlying mortgages and the related security.
Under such circumstances, First Federal may be subject to reinvestment risk
because, to the extent that First Federal's mortgage-backed securities amortize
or prepay faster than anticipated, First Federal may not be able to reinvest the
proceeds of such repayments and prepayments at a comparable rate. In contrast to
mortgage-backed securities in which cash flow is received (and hence, prepayment
risk is shared) pro rata by all securities holders, the cash flow from the
mortgages or mortgage-backed securities underlying REMICs are segmented and paid
in accordance with a predetermined priority to investors holding various
tranches of such securities or obligations. A particular tranche of REMICs may
therefore carry prepayment risk that differs from that of both the underlying
collateral and other tranches.

         A portion of First Federal's investment portfolio consists of corporate
securities and commercial paper. First Federal's investment policy requires that
such investments have one of the two highest ratings by a nationally recognized
rating agency such as Standard & Poor's or Moody's. A high credit rating
indicates only that the rating agency believes there is a low risk of default.
However, all of First Federal's investment securities, including those that have
high credit ratings, are subject to market risk insofar as increases in market
rates of interest may cause a decrease in their market value. Corporate
securities are also subject to credit risk insofar as the payment obligations on
such securities are dependent on the successful operation of the issuer's
business. First Federal purchased corporate obligations, most of which have
fixed interest rates, because they offered a yield higher than that available
for U.S. Government agency obligations of similar duration.

         The following table sets forth First Federal's investment securities
portfolio at carrying value at the dates indicated.

<TABLE>
<CAPTION>
                                                                      At June 30,
                                                         --------------------------------------
                                                           2001           2000           1999
                                                         ---------      --------       --------
                                                                     (In thousands)
<S>                                                        <C>          <C>            <C>
Available for sale:
U.S. Government agency obligations....................     $ 1,023      $  1,001       $     --
Corporate obligations.................................         920         1,245             --
Mortgage-backed securities............................       4,980         6,295          2,973
                                                           -------       -------        -------
   Total available for sale...........................       6,923         8,541          2,973

Held to maturity:
U.S. Government agency obligations....................       2,000         8,000          4,000
Collateralized auto obligations.......................          --            --            557
Corporate obligations.................................       2,013         2,113          5,499
Mortgage-backed securities............................      32,544        25,596         27,964
Commercial paper......................................       3,493         2,783          1,983
                                                         ---------      ---------      ---------
   Total held to maturity.............................      40,050        38,492         40,003
                                                           -------      --------       --------
      Total...........................................     $46,973       $47,033        $42,976
                                                           =======       =======        =======
</TABLE>



         At June 30, 2001, First Federal held no securities by an issuer where
the aggregate book value of the securities exceeded 10% of the equity capital of
First Federal at June 30, 2001, except for securities issued by the U.S.
Government or U.S. Government agencies and corporations.


                                       14
<PAGE>


         The following table sets forth the maturities and weighted average
yields of the securities in First Federal's investment securities portfolio at
June 30, 2001. Expected maturities of mortgage-backed securities will differ
from contractual maturities due to scheduled repayments and because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties.

<TABLE>
<CAPTION>
                                       Less Than              One to             Five to                Over
                                        One Year            Five Years          Ten Years            Ten Years
                                  --------------------  ------------------  ------------------   ------------------
                                   Amount      Yield     Amount     Yield    Amount    Yield      Amount    Yield
                                  ---------  ---------  -------  ---------  -------  ---------   --------  --------
                                                               (Dollars in thousands)
<S>                               <C>          <C>      <C>         <C>      <C>        <C>       <C>       <C>
Available for sale:
U.S. Government agency
   obligations................    $   --       -- %     $1,023      7.29%    $  --        -- %    $    --      -- %
Corporate obligations.........        --       --           --        --       920      5.03           --      --
Mortgage-backed securities....        --       --           --        --       507      7.62        4,473    7.92
                                 -------              --------               -----                -------
   Total available for sale...        --       --        1,023      7.29     1,427      5.95        4,473    7.92

Held to maturity:
U.S. Government agency
   obligations................        --       --           --                                      2,000    6.49
Corporate obligations.........     2,013     4.33           --                                         --      --
Mortgage-backed securities....         6     7.13          666      7.29      8,285     6.07       23,587    6.75
Commercial paper..............     3,493     4.28           --                   --       --           --      --
                                 -------              --------               ------               -------
   Total held to maturity.....     5,512     4.30          666      7.29      8,285     6.07       25,587    6.73
                                 -------              --------               ------               -------
         Total................    $5,512     4.30%      $1,689      7.29%    $9,712     6.05%     $30,060    6.91%
                                  ======                ======               ======               =======
</TABLE>

         The following table sets forth the carrying value of investment
securities which have fixed interest rates and have floating or adjustable
interest rates.

<TABLE>
<CAPTION>
                                                           At June 30, 2001
                                                      -------------------------
                                                                      Floating or
                                                        Fixed         Adjustable
                                                        Rates            Rates
                                                      --------          -------
                                                            (In thousands)
<S>                                                    <C>              <C>
Available for sale:
   U.S. Government agency obligations..........        $ 1,023          $    --
   Corporate obligations.......................             --              920
   Mortgage-backed securities..................          4,384              596
                                                       -------          -------
      Total available for sale.................          5,407            1,516
Held to maturity:
   U.S. Government agency obligations..........          2,000               --
   Corporate obligations.......................          2,013               --
   Mortgage-backed securities..................         17,323           15,221
   Commercial paper............................          3,493              --
                                                       -------          ------
      Total held to maturity...................         24,829           15,221
                                                       -------          -------
            Total investment securities........        $30,236          $16,737
                                                       =======          =======
</TABLE>


                                       15
<PAGE>



Deposit Activities and Other Sources of Funds

         General. Deposits and loan repayments are the major sources of First
Federal's funds for lending and other investment purposes. Scheduled loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are influenced significantly by general interest
rates and money market conditions. Borrowing from Federal Home Loan
Bank-Indianapolis is used to compensate for reductions in the availability of
funds from other sources. First Federal had no other borrowing arrangements at
June 30, 2001.

         Deposit Accounts. Substantially all of First Federal's depositors are
residents of the State of Indiana. Deposits are attracted from within First
Federal's market area through the offering of a broad selection of deposit
instruments, including NOW checking accounts, money market deposit accounts,
regular savings accounts, certificates of deposit and retirement savings plans.
Deposit account terms vary according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. In determining the terms of its deposit accounts, First Federal
considers current market interest rates, profitability to First Federal,
matching deposit and loan products and its customer preferences and concerns.
First Federal generally reviews its deposit mix and pricing weekly. In recent
years First Federal has offered amongst the highest deposit rates in its market
area in order to compete with larger financial institutions that provide a wider
range of products and services. First Federal has expanded its checking account
program as a means of attracting lower cost funding.

         The following table indicates the amount of First Federal's jumbo
certificates of deposit by time remaining until maturity as of June 30, 2001.
Jumbo certificates of deposit represent minimum deposits of $100,000.


Maturity Period                                          Amount
----------------                                    ---------------
                                                     (In thousands)

Three months or less....................                 $ 3,014
Over three through six months...........                   2,452
Over six through twelve months..........                   3,737
Over twelve months......................                   1,680
                                                         -------
      Total.............................                 $10,883
                                                         =======


         The following table sets forth the certificates of deposits in First
Federal classified by rates at the dates indicated.


                                             At June 30,
                                -------------------------------------
                                   2001          2000          1999
                                ---------     ---------     ---------
                                           (In thousands)

3.00 - 3.99%.................    $  4,228     $     220     $     563
4.00 - 4.99%.................      14,816        12,101        20,583
5.00 - 5.99%.................      27,896        35,581        23,846
6.00 - 6.99%.................      32,625        16,278        18,432
7.00 - 7.99%.................       8,483           588         1,302
8.00 - 8.99%.................          --             9            60
9.00 - 9.99%.................          --            --            --
                                -----------   -----------   ----------
      Total..................     $88,048       $64,777       $64,786
                                  =======       =======       =======


                                       16
<PAGE>


         The following table sets forth the amount and maturities of time
deposits at June 30, 2001.

<TABLE>
<CAPTION>
                                                            Amount Due
                                 -------------------------------------------------------------
                                  Less Than       1 - 2       2 - 3       3 - 4        After
                                   1 Year         Years       Years       Years       4 Years
                                 -----------    ---------    --------    --------    ---------
                                                          (In thousands)
<S>                                 <C>         <C>           <C>          <C>          <C>
3.00 - 3.99%...............         $  3,977    $     251     $    --      $   --       $   --
4.00 - 4.99%...............            9,999        3,483         689         465          180
5.00 - 5.99%...............           20,888        4,326       1,514         257          911
6.00 - 6.99%...............           24,101        7,766         298         254          206
7.00 - 7.99%...............            8,068          239         128          48
8.00 - 8.99%...............               --           --          --          --           --
                                   ---------    ---------    --------    --------      -------
      Total................          $67,033      $16,065      $2,629      $1,024       $1,297
                                     =======      =======      ======      ======       ======
</TABLE>



         The following table sets forth the balances and changes in dollar
amounts of deposits in the various types of accounts offered by First Federal
between the dates indicated.

<TABLE>
<CAPTION>
                                                                       At June 30,
                               --------------------------------------------------------------------------------
                                            2001                          2000                      1999
                               ------------------------------ -----------------------------  ------------------

                                           Percent                        Percent                      Percent
                                             of      Increase/              of      Increase/            of
                                Amount      Total    Decrease   Amount     Total    Decrease  Amount    Total
                               ---------  --------  --------- ---------  --------  --------  -------- ---------
                                                            (Dollars in thousands)
<S>                            <C>           <C>      <C>       <C>         <C>      <C>      <C>      <C>
Demand deposits............... $  26,591     20.97%   $14,395   $12,196     14.18%   $ (139)  $12,335   14.22%
Savings deposits..............    12,158      9.59      3,157     9,001     10.47      (600)    9,601   11.07
Certificates which mature:
   Within 1 year..............    67,033     52.87     33,477    33,556     39.03    (8,234)   41,790   48.19
   After 1 year, but within
      2 years.................    16,065     12.67     (8,179)   24,244     28.20     6,543    17,701   20.41
   After 2 years, but within
     5 years..................     4,535      3.58     (2,161)    6,696      7.79     1,844     4,852    5.60
   Certificates maturing
      thereafter..............       415      0.32        134       281      0.33      (162)      443    0.51
                                --------   -------   --------  --------   -------   -------   -------   -----

         Total................  $126,797    100.00%   $40,823   $85,974    100.00%   $ (748)  $86,722  100.00%
                                ========    ======    =======   =======    ======    ======   =======  ======

</TABLE>

         The following table sets forth the deposit activities of First Federal
for the periods indicated.


                                                  Years Ended June 30,
                                        --------------------------------------
                                           2001          2000          1999
                                        ----------    ----------    ----------
                                                    (In thousands)

Beginning balance ..................     $ 85,974      $ 86,722      $ 89,229
Net increase (decrease) before
   interest credited ...............       35,455        (3,439)       (5,499)
Interest credited ..................        5,368         2,691         2,992
                                         --------      --------      --------
Net increase (decrease) in deposits        40,823          (748)       (2,507)
                                         --------      --------      --------
Ending balance .....................     $126,797      $ 85,974      $ 86,722
                                         ========      ========      ========


                                       17
<PAGE>

         Borrowings. First Federal has the ability to use advances from the
Federal Home Loan Bank-Indianapolis to supplement its supply of lendable funds
and to meet deposit withdrawal requirements. The Federal Home Loan
Bank-Indianapolis functions as a central reserve bank providing credit for
savings and loan associations and certain other member financial institutions.
As a member, First Federal is required to own capital stock in the Federal Home
Loan Bank-Indianapolis and is authorized to apply for advances on the security
of such stock and certain of its mortgage loans and other assets (principally
securities which are obligations of, or guaranteed by, the U.S. Government)
provided certain creditworthiness standards have been met. Advances are made
under several different credit programs. Each credit program has its own
interest rate and range of maturities. Depending on the program, limitations on
the amount of advances are based on the financial condition of the member
institution and the adequacy of collateral pledged to secure the credit. At June
30, 2001, First Federal had a borrowing capacity of $51.0 million based on
available collateral.

         The following table sets forth certain information regarding First
Federal's use of Federal Home Loan Bank advances during the periods indicated.


                                                  Years Ended June 30,
                                       ----------------------------------------
                                          2001          2000           1999
                                       -----------   -----------    -----------
                                                (Dollars in thousands)

Maximum balance at any month end......   $15,000        $5,000         $3,645
Average balance.......................     8,397         2,404          2,656
Period end balance....................    15,000         5,000             --
Weighted average interest rate:
   At end of period...................     5.74%          6.47%           N/A
   During the period..................     6.09%          6.53%          5.57%


Personnel

         As of June 30, 2001, First Federal had 65 full-time employees and seven
part-time employees. The employees are not represented by a collective
bargaining unit and First Federal believes its relationship with its employees
is good.

Subsidiary Activities

         First Bancorp's sole subsidiary is First Federal. First Federal has one
subsidiary, FFSL Service Corporation, Inc. Federal savings associations
generally may invest up to 3% of their assets in service corporations, provided
that any amount in excess of 2% is used primarily for community, inner-city and
community development projects. At June 30, 2001, First Federal's equity
investment in its subsidiary was in compliance with these limitations. First
Federal used the service corporation in 1994 to purchase a $500,000 equity
interest in a limited partnership organized to build, own and operate a 44-unit
low-income apartment complex. The limited partnership generates low-income
housing credits of approximately $73,000 per year.



                                       18
<PAGE>



                           REGULATION AND SUPERVISION

General

         As a savings and loan holding company, First Bancorp is required by
federal law to file reports with, and otherwise comply with, the rules and
regulations of the Office of Thrift Supervision. First Federal is subject to
extensive regulation, examination and supervision by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. First Federal is a member of the Federal
Home Loan Bank System and, with respect to deposit insurance, of the Savings
Association Insurance Fund managed by the Federal Deposit Insurance Corporation.
First Federal must file reports with the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other savings
institutions. The Office of Thrift Supervision and/or the Federal Deposit
Insurance Corporation conduct periodic examinations to test First Federal's
safety and soundness and compliance with various regulatory requirements. This
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulatory
requirements and policies, whether by the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the Congress, could have a material
adverse impact on First Bancorp, First Federal and their operations. Certain of
the regulatory requirements applicable to First Bancorp and to First Federal are
referred to below or elsewhere herein. The description of statutory provisions
and regulations applicable to savings institutions and their holding companies
set forth in this Form 10-K does not purport to be a complete description of
such statutes and regulations and their effects on First Bancorp and First
Federal.

Holding Company Regulation

         First Bancorp is a nondiversified unitary savings and loan holding
company within the meaning of federal law. Under prior law, a unitary savings
and loan holding company, such as First Bancorp was not generally restricted as
to the types of business activities in which it may engage, provided that First
Federal continued to be a qualified thrift lender. See "Federal Savings
Institution Regulation - QTL Test." The Gramm-Leach-Bliley Act of 1999 provides
that no company may acquire control of a savings association after May 4, 1999
unless it engages only in the financial activities permitted for financial
holding companies under the law or for multiple savings and loan holding
companies as described below. Further, the Gramm-Leach-Bliley Act specifies that
existing savings and loan holding companies may only engage in such activities.
The Gramm-Leach-Bliley Act, however, grandfathered the unrestricted authority
for activities with respect to unitary savings and loan holding companies
existing prior to May 4, 1999, such as First Bancorp, so long as First Federal
continues to comply with the QTL Test. Upon any non-supervisory acquisition by
First Bancorp of another savings institution or savings bank that meets the
qualified thrift lender test and is deemed to be a savings institution by the
Office of Thrift Supervision, First Bancorp would become a multiple savings and
loan holding company (if the acquired institution is held as a separate
subsidiary) and would generally be limited to activities permissible for bank
holding companies under Section 4(c)(8) of Bank Holding Company Act, subject to
the prior approval of the Office of Thrift Supervision, and certain activities
authorized by Office of Thrift Supervision regulation.

         A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company without prior written approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance
Corporation. In evaluating applications by holding companies to acquire savings
institutions, the Office of Thrift Supervision considers the financial and
managerial resources and future prospects of First Bancorp and institution
involved, the effect of the acquisition on the risk to the deposit insurance
funds, the convenience and needs of the community and competitive factors.


                                       19
<PAGE>



         The Office of Thrift Supervision may not approve any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (i) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(ii) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.

         Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations do prescribe such restrictions
on subsidiary savings institutions as described below. First Federal must notify
the Office of Thrift Supervision 30 days before declaring any dividend to First
Bancorp. In addition, the financial impact of a holding company on its
subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.

Federal Savings Institution Regulation

         Business Activities. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal association,
e.g., commercial, non-residential real property loans and consumer loans, are
limited to a specified percentage of the institution's capital or assets.

         Capital Requirements. The Office of Thrift Supervision capital
regulations require savings institutions to meet three minimum capital
standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for
institutions receiving the highest rating on the CAMELS rating system) and an 8%
risk-based capital ratio. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating
on the CAMELS financial institution rating system), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
Office of Thrift Supervision regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.

         The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the Office of Thrift Supervision capital
regulation based on the risks believed inherent in the type of asset. Core (Tier
1) capital is defined as common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related surplus,
and minority interests in equity accounts of consolidated subsidiaries less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock, the
allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale
equity securities with readily determinable fair market values. Overall, the
amount of supplementary capital included as part of total capital cannot exceed
100% of core capital.

         The capital regulations also incorporate an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk- based capital requirements. For the present time, the Office of Thrift
Supervision has deferred implementation of the interest rate risk capital
charge. At June 30, 2001, First Federal met each of its capital requirements.


                                       20
<PAGE>


         The following table presents First Federal's capital position at June
30, 2001.

<TABLE>
<CAPTION>
                                                                                  Capital
                                                                         -------------------------
                               Actual        Required       Excess         Actual       Required
                               Capital       Capital        Amount         Percent       Percent
                              ---------    ------------   -----------    -----------   -----------
                                                     (Dollars in thousands)
<S>                             <C>           <C>          <C>             <C>            <C>
Tangible......................  $24,299       $2,590       $21,709         14.07%         1.50%
Core (Leverage)...............   24,299        6,907        17,392         14.07%         4.00%
Risk-based....................   24,960        8,315        16,645         24.01%         8.00%
</TABLE>



         Prompt Corrective Regulatory Action. The Office of Thrift Supervision
is required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core)
capital to risk-weighted assets of less than 4% or a ratio of core capital to
total assets of less than 4% (3% or less for institutions with the highest
examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2% is deemed to be
"critically undercapitalized." Subject to a narrow exception, the Office of
Thrift Supervision is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the Office of Thrift
Supervision within 45 days of the date a savings institution receives notice
that it is "undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Compliance with the plan must be guaranteed by any parent
holding company. In addition, numerous mandatory supervisory actions become
immediately applicable to an undercapitalized institution, including, but not
limited to, increased monitoring by regulators and restrictions on growth,
capital distributions and expansion. The Office of Thrift Supervision could also
take any one of a number of discretionary supervisory actions, including the
issuance of a capital directive and the replacement of senior executive officers
and directors.

         Insurance of Deposit Accounts. First Federal is a member of the Savings
Association Insurance Fund. The Federal Deposit Insurance Corporation maintains
a risk-based assessment system by which institutions are assigned to one of
three categories based on their capitalization and one of three subcategories
based on examination ratings and other supervisory information. An institution's
assessment rate depends upon the categories to which it is assigned. Assessment
rates for Savings Association Insurance Fund member institutions are determined
semiannually by the Federal Deposit Insurance Corporation and currently range
from zero basis points for the healthiest institutions to 27 basis points for
the riskiest.

         The Federal Deposit Insurance Corporation has authority to increase
insurance assessments. A significant increase in Savings Association Insurance
Fund insurance premiums would likely have an adverse effect on the operating
expenses and results of operations of First Federal. Management cannot predict
what insurance assessment rates will be in the future.

         In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation ("FICO") to recapitalize the predecessor to the Savings Association
Insurance Fund. During 2001, FICO payments for Savings Association Insurance
Fund members approximated 2.07 basis points.



                                       21
<PAGE>



         Insurance of deposits may be terminated by the Federal Deposit
Insurance Corporation upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the Federal Deposit Insurance Corporation or the Office of
Thrift Supervision. The management of First Federal does not know of any
practice, condition or violation that might lead to termination of deposit
insurance.

         Loans to One Borrower. Federal law provides that savings institutions
are generally subject to the limits on loans to one borrower applicable to
national banks. A savings institution may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired capital
and surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and surplus, if secured by specified readily-marketable collateral.

         QTL Test. The HOLA requires savings institutions to meet a qualified
thrift lender test. Under the test, a savings association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage- backed securities) in at least 9 months
out of each 12 month period.

         A savings institution that fails the qualified thrift lender test is
subject to certain operating restrictions and may be required to convert to a
bank charter. As of June 30, 2001, First Federal met the qualified thrift lender
test. Recent legislation has expanded the extent to which education loans,
credit card loans and small business loans may be considered "qualified thrift
investments."

         Limitation on Capital Distributions. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares and
payments to shareholders of another institution in a cash-out merger. Under the
regulations, an application to and the prior approval of the Office of Thrift
Supervision is required prior to any capital distribution if the institution
does not meet the criteria for "expedited treatment" of applications under
Office of Thrift Supervision regulations (i.e., generally, examination ratings
in the two top categories), the total capital distributions for the calendar
year exceed net income for that year plus the amount of retained net income for
the preceding two years, the institution would be undercapitalized following the
distribution or the distribution would otherwise be contrary to a statute,
regulation or agreement with Office of Thrift Supervision. If an application is
not required, the institution must still provide prior notice to Office of
Thrift Supervision of the capital distribution if, like First Federal, it is a
subsidiary of a holding company. In the event First Federal's capital fell below
its regulatory requirements or the Office of Thrift Supervision notified it that
it was in need of more than normal supervision, First Federal's ability to make
capital distributions could be restricted. In addition, the Office of Thrift
Supervision could prohibit a proposed capital distribution by any institution,
which would otherwise be permitted by the regulation, if the Office of Thrift
Supervision determines that such distribution would constitute an unsafe or
unsound practice.

         Transactions with Related Parties. First Federal's authority to engage
in transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including First Bancorp and its non-savings
institution subsidiaries) is limited by federal law. The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law. The
purchase of low quality assets from affiliates is generally prohibited. The
transactions with affiliates must be on terms and under circumstances, that are
at least as favorable to the institution as those prevailing at the time for
comparable transactions with non-affiliated companies. In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies and no savings
institution may purchase the securities of any affiliate other than a
subsidiary.


                                       22
<PAGE>



         First Federal's authority to extend credit to executive officers,
directors and 10% shareholders ("insiders"), as well as entities such persons
control, is also governed by federal law. Such loans are required to be made on
terms substantially the same as those offered to unaffiliated individuals and
not involve more than the normal risk of repayment. Recent legislation created
an exception for loans made pursuant to a benefit or compensation program that
is widely available to all employees of the institution and does not give
preference to insiders over other employees. The law limits both the individual
and aggregate amount of loans First Federal may make to insiders based, in part,
on First Federal's capital position and requires certain board approval
procedures to be followed.

         Enforcement. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers and/or
directors to institution of receivership, conservatorship or termination of
deposit insurance. Civil penalties cover a wide range of violations and can
amount to $25,000 per day, or even $1 million per day in especially egregious
cases. The Federal Deposit Insurance Corporation has the authority to recommend
to the Director of the Office of Thrift Supervision that enforcement action to
be taken with respect to a particular savings institution. If action is not
taken by the Director, the Federal Deposit Insurance Corporation has authority
to take such action under certain circumstances. Federal law also establishes
criminal penalties for certain violations.

         Standards for Safety and Soundness. The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
The guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the Office of Thrift
Supervision determines that a savings institution fails to meet any standard
prescribed by the guidelines, the Office of Thrift Supervision may require the
institution to submit an acceptable plan to achieve compliance with the
standard.

Federal Home Loan Bank System

         First Federal is a member of the Federal Home Loan Bank System, which
consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank
provides a central credit facility primarily for member institutions. First
Federal, as a member of the Federal Home Loan Bank, is required to acquire and
hold shares of capital stock in that Federal Home Loan Bank in an amount at
least equal to 1.0% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20 of
its advances (borrowings) from the Federal Home Loan Bank, whichever is greater.
First Federal was in compliance with this requirement with an investment in
Federal Home Loan Bank stock at June 30, 2001 of $885,000.

         The Federal Home Loan Banks are required to provide funds for the
resolution of insolvent thrifts in the late 1980s and to contribute funds for
affordable housing programs. These requirements could reduce the amount of
dividends that the Federal Home Loan Banks pay to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. If dividends were reduced, or interest on future
Federal Home Loan Bank advances increased, First Federal's net interest income
would likely also be reduced. Recent legislation has changed the structure of
the Federal Home Loan Banks funding obligations for insolvent thrifts, revised
the capital structure of the Federal Home Loan Banks and implemented entirely
voluntary membership for Federal Home Loan Banks. Management cannot predict the
effect that these changes may have with respect to its Federal Home Loan Bank
membership.



                                       23
<PAGE>



Federal Reserve System

         The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate transaction accounts as follows: a
3% reserve ratio is assessed on net transaction accounts over $5.5 million to
and including $42.8 million; a 10% reserve ratio is applied above $42.8 million.
The first $5 million of otherwise reservable balances are exempted from the
reserve requirements. The amounts are adjusted annually. First Federal complies
with the foregoing requirements.


                           FEDERAL AND STATE TAXATION

Federal Taxation

         General. First Bancorp and First Federal report their income on a
fiscal year, consolidated basis and the accrual method of accounting, and are
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly First Federal's reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to First Bancorp or First Federal. For its 2001 taxable year, First
Bancorp is subject to a maximum federal income tax rate of 34%.

         Bad Debt Reserves. For fiscal years beginning prior to December 31,
1995, thrift institutions which qualified under certain definitional tests and
other conditions of the Internal Revenue Code were permitted to use certain
favorable provisions to calculate their deductions from taxable income for
annual additions to their bad debt reserve. A reserve could be established for
bad debts on qualifying real property loans (generally secured by interests in
real property improved or to be improved) under (i) the percentage of taxable
income method or (ii) the experience method. The reserve for nonqualifying loans
was computed using the experience method.

         Congress repealed the reserve method of accounting for bad debts for
tax years beginning after 1995 and required savings institutions to recapture
(i.e., take into income) certain portions of their accumulated bad debt
reserves. Thrift institutions eligible to be treated as "small banks" (assets of
$500 million or less) are allowed to use the experience method applicable to
such institutions, while thrift institutions that are treated as large banks
(assets exceeding $500 million) are required to use only the specific charge-off
method. Thus, the percentage of taxable income method of accounting for bad
debts is no longer available for any financial institution.

         A thrift institution required to change its method of computing
reserves for bad debts will treat such change as a change in method of
accounting, initiated by the taxpayer, and having been made with the consent of
the Internal Revenue Service. Any Section 481(a) adjustment required to be taken
into income with respect to such change generally will be taken into income
ratably over a six-taxable year period, beginning with the first taxable year
beginning after 1995, subject to a 2-year suspension if the "residential loan
requirement" is satisfied.

         Under the residential loan requirement provision, the required
recapture will be suspended for each of two successive taxable years, beginning
with First Federal's 1996 taxable year, in which First Federal originates a
minimum of certain residential loans based upon the average of the principal
amounts of such loans made by First Federal during its six taxable years
preceding its current taxable year.

         Distributions. If First Federal makes "non-dividend distributions" to
First Bancorp, such distributions will be considered to have been made from
First Federal's unrecaptured tax bad debt reserves (including the balance of its
reserves as of December 31, 1987) to the extent thereof, and then from First
Federal's supplemental reserve for losses on loans, to the extent thereof, and
an amount based on the amount distributed (but not in excess of the amount of
such reserves) will be included in First Federal's income. Non-dividend
distributions include distributions in excess of First Federal's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation. Dividends paid out of First Federal's current or accumulated
earnings and profits will not be so included in its income.


                                       24
<PAGE>


         The amount of additional taxable income triggered by a non-dividend is
an amount that, when reduced by the tax attributable to the income, is equal to
the amount of the distribution. Thus, if First Federal makes a non-dividend
distribution to First Bancorp, approximately one and one-half times the amount
of such distribution (but not in excess of the amount of such reserves) would be
includable in income for federal income tax purposes, assuming a 35% federal
corporate income tax rate. First Federal does not intend to pay dividends that
would result in a recapture of any portion of its bad debt reserves.

State Taxation

         Indiana imposes an 8.5% franchise tax based on a financial
institution's adjusted gross income as defined by statute. In computing adjusted
gross income, deductions for municipal interest, U.S. Government interest, the
bad debt deduction computed using the reserve method and pre-1990 net operating
losses are disallowed. First Federal's state franchise tax returns have not been
audited for the past five tax years.


                      EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain information regarding the
executive officers of First Bancorp.


Name                           Age (1)   Position
-------                        -------   --------

Harold Duncan.................   60      President, Chief Executive Officer and
                                         Chairman of the Board
Michael H. Head...............   43      Vice President
George J. Smith...............   45      Treasurer

----------------------------
(1)  As of June 30, 2001


         The following table sets forth certain information regarding the
executive officers of First Federal.


 Name                          Age (1)    Position
-------                        ------    --------

Harold Duncan.................   60       Chief Executive Officer
Michael H. Head...............   43       President and Chief Operating Officer
Kirby W. King.................   47       Executive Vice President
George J. Smith...............   45       Senior Vice President and Chief
                                          Financial Officer
Monica L. Stinchfield.........   45       Senior Vice President
Larry J. Northenor............   51       Senior Vice President
Dale Holt.....................   47       Senior Vice President
Richard S. Witte..............   48       Vice President
Christopher Viton.............   38       Vice President

----------------------------
(1)  As of June 30, 2001


         The executive officers of First Bancorp and First Federal are elected
annually and hold office until their successors have been elected and qualified
or until they are removed or replaced.



                                       25
<PAGE>



Biographical Information

         Harold Duncan joined First Federal in 1964 and served as a loan
officer, Assistant Vice President, Vice President, and Executive Vice President
before becoming President in 1990. Mr. Duncan added the title of Chief Executive
Officer in 1991. Since 1999, he has served as President and Chief Executive
Officer of First Bancorp.

         Michael H. Head joined First Federal in 1980. From 1984 to 1994, he
served as Vice President and manager of the loan department. In 1994, he became
Senior Vice President. In 1996, Mr. Head became Executive Vice President and in
1998 added the title of Chief Operating Officer. In October 2000, Mr. Head was
named President and Chief Operating Officer of First Federal. Since 1999, he has
served as Vice President of First Bancorp.

         Kirby W. King joined First Federal in January 1999 as Senior Vice
President-Consumer Lending and was named Executive Vice President in October,
2000. He was previously employed by United Fidelity Bank as Senior Vice
President.

         George J. Smith joined First Bancorp and First Federal in July 2001 as
Treasurer of First Bancorp and Senior Vice President and Chief Financial Officer
of First Federal. Previously, he was employed by the Office of Thrift
Supervision for 15 years in financial analyst and examiner positions. In
addition, Mr. Smith has served in the United States Army Reserve since 1985
following eight years on active duty.

         Monica L. Stinchfield joined First Federal in 1980. From 1985 to 1993
she served as Assistant Vice President and from 1993 to September 1998, she
served as Vice President. In 1996, Ms. Stinchfield became the manager of the
loan department and secondary market activity. In September 1998, Ms.
Stinchfield became Senior Vice President.

         Larry J. Northenor joined First Federal in August 2000 as Senior Vice
President-Commercial Lending. Prior to joining First Federal, Mr. Northenor had
worked for a number of Evansville financial institutions for the past 20 years
as either a lending officer or manager of the commercial lending department.

         Dale Holt joined First Federal in January 1999 as Vice
President-Consumer Lending and was named Senior Vice President-Consumer Lending
in October, 2000. He was previously employed by United Fidelity Bank as Vice
President.

         Richard S. Witte joined First Federal in 1997 and in October 1998
became Vice President. Mr. Witte is responsible for the savings department and
deposit services. Prior to joining First Federal, Mr. Witte was employed by
Evansville Federal Savings Bank for 21 years.

         Christopher Viton joined First Federal in December 1998 as an Assistant
Vice President-Consumer Lending and became a Vice President-Consumer Lending in
October 2000. Prior to joining First Federal, Mr. Viton was employed by United
Fidelity Bank as an Assistant Vice President.

ITEM 2. PROPERTIES

         First Federal currently conducts its business through its seven full
service banking offices, including its main banking office, all of which it
owns. First Federal has six offices in Evansville, Indiana and one office in
Newburgh, Indiana. The net book value of the land, buildings, furniture,
fixtures and equipment owned by First Federal was $3.2 million as of June 30,
2001.


                                       26
<PAGE>



ITEM 3. LEGAL PROCEEDINGS

         Periodically, there have been various claims and lawsuits involving
First Federal, such as claims to enforce liens, condemnation proceedings on
properties in which First Federal holds security interests, claims involving the
making and servicing of real property loans and other issues incident to First
Federal's business. In the opinion of management, after consultation with First
Federal's legal counsel, no significant loss is expected from any of such
pending claims or lawsuits. First Federal is not a party to any material pending
legal proceedings.

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

         None.


                                     PART II

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

         First Bancorp's common stock is listed on the Nasdaq National Market
under the symbol FBEI. According to the records of its transfer agent, First
Bancorp had approximately 445 stockholders of record as of September 13, 2001.
This number does not reflect stockholders who hold their shares in "street
name." The following table sets forth the high and low sale price of First
Bancorp's common stock as of the close of market and dividends paid in each of
the fiscal quarter's in the years ended June 30, 2000 and 2001.


                                   High              Low          Dividends
                                -----------      -----------     ------------
Fiscal 2000:
    First Quarter..........      $10.6250          $9.3750            --
    Second Quarter.........        9.9375           9.1250            --
    Third Quarter..........       10.0000           8.3750           $0.07
    Fourth Quarter.........       11.5000           9.0000            --
Fiscal 2001:
    First Quarter..........      $11.3750         $10.4375           $0.08
    Second Quarter.........       11.7500          10.6250            --
    Third Quarter..........       15.0000          11.5625           $0.10
    Fourth Quarter.........       16.0468          12.2968            --



                                       27
<PAGE>



ITEM 6. SELECTED FINANCIAL DATA

         The following table sets forth certain consolidated summary historical
financial information concerning the financial position of First Bancorp,
including its subsidiary, First Federal. The financial data is derived in part
from, and should be read in conjunction with, the consolidated financial
statements and related notes of First Bancorp. Information for periods prior to
1999 is for First Federal only.

<TABLE>
<CAPTION>
                                                                       At or For the Year Ended June 30,
                                                             ------------------------------------------------------
                                                                2001       2000       1999       1998       1997
                                                             ----------  --------   --------   --------   ---------
                                                                     (In thousands, except per share data)
<S>                                                            <C>       <C>        <C>        <C>         <C>
Selected Balance Sheet Data:
   Total assets..........................................      $175,612   $127,482  $124,800   $108,964    $110,747
   Other investment securities...........................         9,450     15,142    12,039     18,195      18,940
   Mortgage-backed securities............................        37,523     31,891    30,937     35,545      41,394
   Loans receivable, net.................................       106,818     66,377    56,309     35,655      32,164
   Deposit accounts......................................       126,797     85,974    86,722     89,229      88,560
   Borrowings............................................        15,000      5,000        --      3,645       7,050
   Stockholders' equity..................................        31,420     34,912    36,528     14,949      14,053


Selected Operating Data:
   Interest income........................................      $11,294     $8,548    $7,467     $7,715      $7,474
   Interest expense.......................................        6,377      4,179     4,529      4,977       4,763
                                                               --------    -------   -------    -------     -------
   Net interest income....................................        4,917      4,369     2,938      2,738       2,711
   Provision for loan losses..............................          443        184        24         --          --
                                                              ---------   -------- ---------  ---------   ---------
   Net interest income after provision for
      loan losses.........................................        4,474      4,185     2,914      2,738       2,711
   Noninterest income.....................................        1,921        868       323        601(1)      179
   Noninterest expense....................................        4,862      3,389     2,454      2,044       2,391(2)
                                                                -------    -------   -------    -------       -----
   Income before income taxes.............................        1,533      1,664       783      1,295         499
   Income taxes...........................................          374        518       210        415         112
                                                              ---------   --------  --------   --------     -------
         Net income.......................................       $1,159     $1,146   $   573    $   880     $   387
                                                                 ======     ======   =======    =======     =======
Per Share Data:
   Net income:
         Basic............................................       $ 0.63     $ 0.56       N/A        N/A         N/A
         Diluted..........................................         0.61       0.56       N/A        N/A         N/A
   Dividends..............................................         0.18       0.07       N/A        N/A         N/A
Weighted Average Shares Outstanding:
   Basic..................................................    1,840,179  2,045,964       N/A        N/A         N/A
   Diluted................................................    1,892,310  2,045,964       N/A        N/A         N/A
</TABLE>

-------------------
(1) Includes gains of $400,000 on the sale of a branch office and related
    deposits.
(2) Includes one-time assessment of $561,000 to recapitalize the Savings
    Association Insurance Fund.


                                       28
<PAGE>


<TABLE>
<CAPTION>
                                                                           At or For the Years Ended June 30,
                                                                --------------------------------------------------------
                                                                   2001        2000       1999       1998        1997
                                                                ----------  ---------- ---------- ----------  ----------
<S>                                                               <C>         <C>        <C>        <C>         <C>
Selected Financial Ratios:
  Performance Ratios:
   Return on average assets (1)...........................          0.72%       0.92%      0.49%      0.77%       0.35%
   Return on average equity (2)...........................          3.38        3.22       2.86       6.04        2.83
   Average equity as a percent of average total assets....         21.33       28.49      17.27      12.79       12.35
   Interest rate spread (3)...............................          2.49        2.50       2.04       2.03        2.08
   Net interest margin (4)................................          3.32        3.72       2.69       2.53        2.56
   Average interest-earning assets to average interest-bearing
      liabilities.........................................        119.24      134 24     115.81     110.75      110.71
   Noninterest expense as a percent of average total assets         3.02        2.72       2.11       1.79        2.16
   Dividend payout ratio..................................         28.57       12.50        N/A        N/A         N/A
Capital Ratios:
   Tangible...............................................         14.07       19.94      20.47      13.60       12.62
   Core...................................................         14.07       19.94      20.47      13.60       12.62
   Risk-based.............................................         24.01       38.38      40.95      34.75       37.35
Asset Quality Ratios:
   Nonperforming loans as a percent of total loans (5)....          0.14        0.13       0.01       0.00        0.08
   Nonperforming assets as a percent of total assets (6)..          0.09        0.09       0.00       0.00        0.02
   Allowance for loan losses as a percent of total loans .          0.62        0.59       0.48       0.70        0.77
   Allowance for loan losses as a percent of nonperforming loans  452.74      465.88   4,566.67        N/A      925.93
   Net charge-offs as a percent of average outstanding loans        0.21        0.10        N/A        N/A         N/A
</TABLE>


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

(1) Net income divided by average total assets.
(2) Net income divided by average total equity.
(3) Difference between weighted average yield on interest-earning assets and
    weighted average cost of interest-bearing liabilities.
(4) Net interest income as a percentage of average interest-earning assets.
(5) Nonperforming loans consist of loans accounted for on a nonaccrual basis and
    accruing loans 90 days or more past due.
(6) Nonperforming assets consist of nonperforming loans, real estate acquired in
    settlement of loans, other repossessed assets, and restructured loans.


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

General

         Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition and
results of operations of First Bancorp. The information contained in this
section should be read in conjunction with the consolidated financial statements
and accompanying notes contained in this report.

Forward-Looking Statements

         This Annual Report on Form 10-K contains certain forward-looking
statements which are based on certain assumptions and describe future plans,
strategies and expectations of First Bancorp. These forward-looking statements
are generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. First Bancorp's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of First Bancorp and the subsidiaries 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 or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
First Bancorp's market area and accounting principles and guidelines. These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. First
Bancorp does not undertake -- and specifically disclaims any obligation -- to
publicly release the result of any revisions which may be made to 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.

                                       29
<PAGE>



Operating Strategy

         First Bancorp's principal business currently consists of the operations
of First Federal. The principal business activity of First Federal consists of
attracting deposits from the general public and originating mortgage and
consumer loans. First Federal also maintains a substantial investment portfolio
of mortgage-backed and other securities. Earnings depend primarily upon net
interest income, which is the difference between the interest income First
Federal receives on its loan and investment portfolios and the interest it pays
on deposits and borrowings. First Federal's profitability is also affected by
the level of other income and expenses. Other income includes service charges,
fees and gains on sales of loans. Other expenses include compensation and
benefits, occupancy and equipment expenses, deposit insurance premiums and data
processing. First Federal's profitability is also significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates, government legislation and regulation, and monetary and fiscal
policies.

         First Federal's strategy is to operate as an independent, retail
financial institution dedicated to financing home ownership and other consumer
needs in Evansville, Indiana. First Federal's operating philosophy has been to
be conservative with respect to its underwriting standards and maintain a high
level of asset quality, while generating profits, remaining well capitalized and
providing a high level of customer service. First Federal's current business
strategy includes an emphasis on increasing its mortgage loan, consumer loan and
loan servicing portfolios. It also includes continued maintenance of a
substantial investment portfolio of U.S. government and agency securities and
investment grade mortgage-backed securities and deposit growth to support the
growth in loans and investments. First Federal intends to expand its mortgage
loan and loan servicing portfolios through increased origination efforts and not
by lowering its underwriting standards. First Federal also expects to continue
to expand its consumer lending activities through its indirect automobile
lending program. First Federal formed a commercial loan department which began
operations in November 2000.

Comparison of Financial Condition at June 30, 2001 and June 30, 2000

         Total consolidated assets increased $48.1 million, or 37.7%, from
$127.5 million at June 30, 2000, to $175.6 million at June 30, 2001. The
majority of this growth occurred in the loan portfolios and was the result of
the purchase of two local branch offices. These acquisitions also were primarily
responsible for the $3.9 million increase in fixed and intangible assets. Aside
from the $35.4 million of liabilities assumed in the acquisitions, growth was
funded primarily by borrowings from the Federal Home Loan Bank (FHLB) of
Indianapolis.

         Cash and cash equivalents, which are composed chiefly of demand
deposits in correspondent banks, including the FHLB, increased $4.1 million or
64.1% from $6.4 million at June 30, 2000, to $10.5 million at June 30, 2001. At
$47.0 million, total investment securities at June 30, 2001, remained virtually
unchanged from the preceding fiscal year end. The current balance of investment
securities includes $10 million purchased during fiscal 2001 as part of a
leveraging strategy.

         Net loans grew $40.4 million, or 60.8%, from $66.4 million at June 30,
2000, to $106.8 million at June 30, 2001. The increase was composed of $26.7
million of loans secured by one- to-four family residences, $6.4 million of
consumer loans, and $7.3 million of commercial purpose loans. The branch
purchases contributed $22.7 million of the loan growth. First Federal
traditionally has been a strong mortgage lender. In recent years, the consumer
lending operation has gained in prominence. First Federal originated $41.8
million of indirect automobile loans in fiscal 2001 of which it retained $13.6
million for its own portfolio. Management intends to continue selling 60% - 80%
of indirect automobile loan production.

         The allowance for loan losses increased from $396,000 at June 30, 2000,
to $661,000 at June 30, 2001. Relative to total loans, the allowance for loan
losses increased from 0.59% to 0.62% in fiscal 2001. At the same time,
nonperforming assets, including repossessions, increased only modestly from
$112,000 to $160,000. The ratios of the allowance for loan losses to total
nonperforming loans were 452.7% and 465.9% at June 30, 2001, and June 30, 2000,
respectively.


                                       30
<PAGE>



         Total deposits increased $40.8 million, or 47.4%, from $86.0 million at
June 30, 2000, to $126.8 million at June 30, 2001. As discussed above, the
change was principally the result of assuming $35.1 million of retail deposits
in the branch purchases. Borrowings from the FHLB increased from $5.0 million at
June 30, 2000, to $15.0 million at June 30, 2001. The proceeds from the
borrowings were used to fund the simultaneous purchase of an investment security
in a transaction intended to leverage First Bancorp's strong capital position.
Despite the large transaction, excess borrowing capacity remains substantial.

         Total stockholders' equity decreased $3.5 million from $34.9 million at
June 30, 2000, to $31.4 million at June 30, 2001. The largest component of the
decline was the 331,300 shares of First Bancorp stock repurchased during the
period at a total cost of $4.8 million. The effect of the treasury stock
purchase was partially offset by the $187,000 allocation of ESOP shares and
$199,000 vesting of restricted stock awards. In addition, First Bancorp
recognized net income of $1.2 million during the period and paid semiannual
dividends totaling $359,000. Also, unrealized gain on the portfolio of
available-for-sale securities, adjusted for deferred taxes, increased $100,000.

Comparison of Operating Results for the Years Ended June 30, 2001 and 2000

         General. At $1.2 million, net income for the year ended June 30, 2001,
was $12,000, or 1.1%, higher than the $1.1 million for the year ended June 30,
2000. The slight increase was attributable to greater net interest income and
nonrecurring revenue items that offset increased provisions for loan losses and
operating expenses. The return on average assets was 0.72% for fiscal 2001
compared to 0.92% the preceding year. The return on average equity was 3.38% for
fiscal 2001, slightly above the 3.22% for fiscal 2000.

         Net Interest Income. First Bancorp recognized net interest income of
$4.9 million in the year ended June 30, 2001, a $547,000 or 12.4% increase from
the $4.4 million recognized during the year ended June 30, 2000.

         Interest income increased $2.7 million to $11.3 million in the year
ended June 30, 2001, compared to $8.6 million for the year ended June 30, 2000.
Interest income from loans, which increased $2.1 million, accounted for most of
the change. Loans outstanding averaged $85.3 million with an average yield of
8.36% in fiscal 2001 compared with a $61.4 million average balance and 8.11%
average yield in fiscal 2000. In addition, interest income on investment
securities, institutional deposits, and miscellaneous investments increased
$355,000, $232,000, and $8,000, respectively.

         Interest expense increased $2.2 million to $6.4 million for the year
June 30, 2001, from $4.2 million during the year ended June 30, 2000. Average
deposits grew from $84.5 million in fiscal 2000 to $115.1 million in fiscal 2001
and the average cost of those deposits rose from 4.68% to 5.03% for the
respective periods.

         Provision for Loan Losses. The provision for loan losses reflects
management's periodic analysis of the loan portfolio based on information
available at that time. These analyses take into consideration, not only the
current level of nonperforming assets, but also the potential for future credit
problems. The provision for loan losses was $443,000 for the year ended June 30,
2001, compared to $184,000 the preceding year. During fiscal 2001, First Bancorp
allocated $130,000 of the provisions for mortgage loans, $268,000 for consumer
credits, and $45,000 for commercial nonmortgage loans.

         The higher provision for the period ended June 30, 2001, reflects the
substantial growth in the bank's mortgage and consumer loan portfolios, as well
as, production from the new commercial loan department. Respectively, these
portfolios increased $26.7 million, $6.4 million, and $7.3 million during fiscal
2001. In addition, a rising charge-off trend also prompted management to
increase the provision. Net charge-offs for the year ended June 30, 2001, were
$178,000 compared to $62,000 for the same period last year. While management
believes the allowance for loan losses to be sufficient given current
information, future events, conditions, or regulatory directives could
necessitate additions to the allowance for loan losses that may adversely affect
net income.

         Noninterest Income. Noninterest income totaled $1.9 million in fiscal
2001 compared to $868,000 in fiscal 2000, an increase of $1.0 million or 118.9%.
The increase included $408,000 of proceeds from a life insurance policy and a
$389,000 gain on the sale of land. In addition, various fees and service
charges, particularly those related to deposit accounts, rose $244,000 in fiscal
2001 to $388,000.


                                       31

<PAGE>



         Noninterest Expense. Total noninterest expense increased to $4.9
million in fiscal 2001 from $3.4 million in fiscal 2000, an increase of $1.5
million or 44.1%. Salaries and employee benefits totaled $2.9 million for the
year ended June 30, 2001, $1.0 million above the $1.9 million recorded in fiscal
2000. Approximately $400,000 of the increase in salaries and employee benefits
expense is attributable to the three branches added during the period along with
the new commercial loan department. In addition, stock awards were accrued for a
full twelve months in fiscal 2001 versus only two months of accrual in fiscal
2000. For the year ended June 30, 2001, such accruals totaled $165,000 compared
to $28,000 the preceding year. First Bancorp also was required to accelerate
$165,000 of post-retirement benefits due to a senior officer's unexpected death.
Upon completing one year of qualifying service, employees are eligible for
enrollment in First Bancorp's pension plan. Contributions to this plan totaled
$114,000 in fiscal 2001. Because the plan had been overfunded, First Bancorp's
contribution was only $19,000 in fiscal 2000. Medical insurance premiums and
employer FICA payments increased $29,000 and $50,000, respectively, for the year
ended June 30, 2001, compared to the same period in 2000. The balance of the
increase in salaries and employee benefits is mainly due to normal salary
increases for employees other than those noted above.

         Equipment expense increased $98,000, or 47.6%, from $206,000 for the
year ended June 30, 2000, to $304,000 for the year ended June 30, 2001. The
increase reflects an additional $72,000 for depreciation and $27,000 for
software licensing, maintenance agreements, and miscellaneous purchases and
repairs. Net occupancy expense increased $76,000, or 44.4%, during the same
period from $171,000 in fiscal 2000 to $247,000 in fiscal 2001. The higher
equipment and occupancy expenses were attributed largely to the addition of the
three new branches.

         In July 2000, First Federal converted to a new data processor and
teller platform. Among its many benefits, the new system offers greater
flexibility to design and implement new accounts and services. In addition, the
new platform provides enhanced data manipulation and reporting capabilities.
This change, coupled with the loan and deposit accounts acquired in the branch
purchases, resulted in a $79,000 increase in data processing expenditures from
$118,000 in fiscal 2000 to $197,000 in fiscal 2001.

         Other noninterest expense increased to $1.2 million in fiscal 2001 from
$935,000 in fiscal 2000, an increase of $225,000 or 24.1%. Amortization of
goodwill and core deposit premium associated with the branch purchases totaled
$100,000 since the November 2000 acquisitions. Item processing and other deposit
servicing costs also increased significantly during the year ended June 30,
2001, due to the number and characteristics of the accounts acquired in the
branch purchases. As a result of the significant increase in the number of
transaction accounts, related item processing expenses, excluding certain
accountholder transitioning costs, increased to $81,000 in fiscal 2001 from
$24,000 in fiscal 2000. In addition, office supplies and advertising expenses
increased $47,000 and $36,000, respectively, in fiscal 2001 compared to the
preceding year.

         Income Tax Expense. Total income tax expense was $374,000 in fiscal
2001 compared to $518,000 in 2000. Effective tax rates for the two fiscal years
were 24.4% and 31.1%, respectively. The lower effective tax rate is attributable
to the aforementioned life insurance proceeds, which are exempt from taxation,
received in fiscal 2001.

Comparison of Operating Results for the Years Ended June 30, 2000 and 1999

         General. Net income for the year ended June 30, 2000 increased
$573,000, or 100%, from $573,000 for the year ended June 30, 1999 to $1.1
million for the year ended June 30, 2000. This was primarily attributable to an
increase in net interest income as the net interest rate spread increased from
2.04% to 2.50% for the year ended June 30, 2000 as compared to same period
during 1999. The return on average assets was 0.92% for fiscal 2000 compared to
0.49% for fiscal 1999 and the return on average equity was 3.22% for fiscal 2000
compared to 2.86% for 1999.

         Net Interest Income. Net interest income for the year ended June 30,
2000 increased $1.5 million, or 51.7%, from $2.9 million during the year ended
June 30, 1999 to $4.4 million for the year ended June 30, 2000.

         The increase in net interest income was attributable in part to a $1.0
million increase in total interest income from $7.5 million for the year ended
June 30, 1999 to $8.5 million for the same period during 2000 and was primarily
the result of a $1.5 million increase in interest income from loans. Average
loans outstanding increased to $61.4 million with an average yield of 8.11% for
the year ended June 30, 2000 from $42.4 million with an average yield of 8.09%
for the same period in the prior year. This increase in interest income was
partially offset by a $76,000 decline in

                                       32
<PAGE>


interest income from investments and a $383,000 decline in interest income from
deposits with other financial institutions as funds invested in these assets
were reallocated to the loan portfolio.

         The increase in net interest income was also attributable to a $351,000
decline in interest expense from $4.5 million during the year ended June 30,
1999 to $4.2 million for the year June 30, 2000. This was primarily the result
of average deposits declining from $90.1 million for the year ended June 30,
1999 to $84.5 million for the year ended June 30, 2000, and the average cost of
those deposits declining from 4.78% to 4.68% for the same respective periods.

         Provision for Loan Losses. The provision for loan losses for the year
ended June 30, 2000 was $184,000 compared to $24,000 for the year ended June 30,
1999. The higher provision for the year ended June 30, 2000 reflected overall
growth in the loan portfolio. Net charge-offs for the year ended June 30, 2000
were $62,000 compared to zero for the same period last year.

         Noninterest Income. Noninterest income totaled $868,000 in fiscal 2000
compared to $324,000 in fiscal 1999, an increase of $544,000 or 167.9%. The
increase was attributable in part to a $446,000 increase in fee income generated
through the sale of loans which increased from $61,000 for the year ended June
30, 1999 to $507,000 for the same period ended June 30, 2000.

         The increase in noninterest income was also attributable to a $100,000
increase in other noninterest income which increased from $165,000 for the year
ended June 30, 1999 to $265,000 for the same period ended June 30, 2000. This
increase was primarily the result of an $89,000 gain from the payout of a life
insurance policy.

         Noninterest Expense. Total noninterest expense increased from $2.5
million in fiscal 1999 to $3.4 million in fiscal 2000, an increase of $935,000
or 37.4%. Salaries and employee benefits totaled $1.9 million during fiscal
2000, $516,000 higher than the $1.4 million recorded during fiscal 1999.
Approximately $230,000 of the increase in salaries and employee benefits expense
was attributable to the indirect lending department. Fiscal 1999 reflected only
six months of activity, as this department was established in January 1999,
while fiscal 2000 reflected a full twelve months of operation. Compensation
expense was also approximately $126,000 higher during fiscal 2000 as a result of
First Federal's ESOP. This was attributable to fiscal 1999 reflecting only three
months of benefits, as the ESOP was adopted in conjunction with First Bancorp's
initial public offering in April 1999, while fiscal 2000 reflects a full twelve
months of benefits. Compensation expense was also approximately $28,000 higher
for fiscal 2000 as result of awards made under the First Bancorp of Indiana,
Inc. 1999 Stock-Based Incentive Plan that was approved by shareholder's at the
annual meeting in November 1999. Incentive compensation and bonuses added
$47,000 to compensation expense for the year ended June 30, 2000 as compared to
the same period in 1999. Retirement and medical expenses were also higher
approximately $17,000 and $8,000, respectively for the year ended June 30, 2000
as compared to the same period in 1999. The balance of the increase in salaries
and employee benefits was mainly due to normal salary increases for employees
other than those noted above.

         Equipment expense increased $64,000, or 45.1%, from $142,000 for the
year ended June 30, 1999 to $206,000 for the same period ended June 30, 2000.
Depreciation and equipment expense increased $37,000 and $27,000 respectively,
during fiscal 2000, as compared to the same period in 1999. During fiscal 2000
First Federal purchased new ATM machines for three offices and continued to
invest in and upgrade equipment to enhance data communications within and
between offices. Additional investments in electronic equipment were also made
in preparation for a change in data processors, allowing First Federal to
provide better service to its customers, including Internet and telephone
banking services. First Federal also continued its investment in equipment and
software to automate the loan approval and underwriting process, reducing the
time from application to closing.

         Other noninterest expense increased from $560,000 during fiscal 1999 to
$935,000 during fiscal 2000, an increase of $375,000 or 67.0%. Approximately
$89,000 of the increase was due to legal and other fees incurred in settlement
of a lawsuit in connection with the acquisition of the indirect lending
department. The increased expense was also attributable to professional fees and
other expenses associated with being a public company, which increased $143,000,
an $83,000 increase in expenses associated with the new indirect lending
department, a $16,000 increase in advertising, and various other small increases
in several noninterest expense categories.



                                       33
<PAGE>



         Income Tax Expense. Total income tax expense was $518,000 in fiscal
2000 compared to $210,000 in 1999. The increase is attributable to increased
taxable income for fiscal 2000. The effective tax rates for the years ended June
30, 2000 and 1999 were 31.1% and 26.8%.

Average Balances, Interest and Average Yields/Cost

         The following table sets forth for the years ended June 30, 2001, 2000
and 1999 information regarding average balances of assets and liabilities as
well as the total dollar amounts of interest income from average
interest-earning assets and interest expense on average interest-bearing
liabilities and average yields and costs. Such yields and costs for the periods
indicated are derived by dividing income or expense by the average balances of
assets or liabilities, respectively, for the periods presented.

<TABLE>
<CAPTION>
                                                                         Years Ended June 30,
                                        -----------------------------------------------------------------------------------------
                                                    2001                        2000                            1999
                                        ---------------------------- ---------------------------   ------------------------------
                                                  Interest                     Interest                       Interest
                                         Average     and     Yield/   Average     and      Yield/   Average      and      Yield/
                                         Balance  Dividends   Cost    Balance  Dividends    Cost    Balance   Dividends    Cost
                                        --------- --------- -------- --------- ---------  -------  ---------  ---------   -------
                                                                          (Dollars in thousands)
<S>                                    <C>         <C>         <C>      <C>     <C>          <C>    <C>       <C>           <C>
Interest-earning assets:
   Loans receivable (1) .............  $ 85,278    $  7,126    8.36%  $ 61,353  $  4,976     8.11%  $ 42,472  $  3,436      8.09%
   Investment securities ............    49,898       3,382    6.78     46,716     3,027     6.48     49,607     3,103      6.26
   Deposits with financial
institutions ........................    11,472         682    5.94      8,101       450     5.55     15,715       833      5.30
   Federal funds sold ...............       717          41    5.72        666        37     5.56        703        35      4.98
   Other ............................       768          63    8.20        727        58     7.98        727        60      8.25
                                       --------    --------            -------  --------     ----   --------  --------
    Total interest-earning assets ...   148,133      11,294    7.62    117,563     8,548     7.27    109,224     7,467      6.84
Non-interest-earning assets .........    12,683                          7,203                         6,831
                                       --------                        -------                      --------
    Total assets ....................  $160,816                       $124,766                      $116,055
                                       ========                       ========                      ========

Interest-bearing liabilities:
   Demand and savings
      accounts ......................  $ 31,279         837    2.68   $ 21,496       558     2.60   $ 22,666       596      2.63
   Certificates of deposit ..........    83,812       4,955    5.91     63,038     3,400     5.39     67,482     3,710      5.50
                                       --------    --------           --------  --------            --------  --------
    Total deposits ..................   115,091       5,792    5.03     84,534     3,958     4.68     90,148     4,306      4.78
   Borrowings .......................     8,397         511    6.09      2,404       157     6.53      2,656       148      5.57
   Other ............................       748          74    9.89        641        64     9.98      1,508        75      4.97
                                       --------    --------           --------  --------            --------  --------
    Total interest-bearing
         liabilities.................   124,236       6,377    5.13     87,579     4,179     4.77     94,312     4,529      4.80
Non-interest-bearing liabilities.....     2,285                          1,640                         1,697
Stockholders' equity ................    34,295                         35,547                        20,046
                                       --------                       --------                      --------
    Total liabilities and
         stockholders' equity .......  $160,816                       $124,766                      $116,055
                                       ========                       ========                      ========

Net interest income .................              $  4,917                     $  4,369                      $  2,938
                                                   ========                     ========                      ========
Interest rate spread (2) ............                          2.49%                         2.50%                          2.04%
Net interest margin (3) .............                          3.32%                         3.72%                          2.69%
Ratio of average interest-earning
   assets to average interest
   bearing liabilities...............    119.24%                        134.24%                       115.81%
</TABLE>


(1)  Average loans receivable includes nonperforming loans. Interest income
     includes interest and fees on loans, but does not include interest on loans
     90 days or more past due.
(2)  Yield on interest-earning assets less cost of interest-bearing liabilities.
(3)  Net interest income as a percentage of average interest-earning assets.




                                       34
<PAGE>



Rate/Volume Analysis

         The following table sets forth the effects of changing rates and
volumes on net interest income of First Bancorp for the years ended June 30,
2001, 2000 and 1999. Information is provided with respect to (1) effects on
interest income attributable to changes in volume (changes in volume multiplied
by prior rate) and (2) effects on interest income attributable to changes in
rate (changes in rate multiplied by prior volume). Changes attributable to the
combined input of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.

<TABLE>
<CAPTION>
                                                         2001 vs. 2000                    2000 vs. 1999
                                               ------------------------------    ------------------------------
                                                Increase (Decrease)               Increase (Decrease)
                                                      Due to                             Due to
                                               ---------------------             --------------------
                                                 Rate       Volume      Net        Rate       Volume      Net
                                               --------    --------   -------    -------     --------   -------
                                                                        (In thousands)
<S>                                             <C>        <C>        <C>        <C>         <C>        <C>
Interest-earning assets:
   Loans receivable, net....................    $ 155      $1,995     $2,150     $   9       $1,531     $1,540
   Investment securities....................      143         212        355       109         (185)       (76)
   Deposits with financial institutions.....       33         199        232        38         (421)      (383)
   Federal funds sold.......................        1           3          4         4           (2)         2
   Other....................................        2           3          5        (2)          --         (2)
                                               ------     -------   --------     -----        -----     ------
      Total net change in income on
         interest-earning assets............      334       2,412      2,746       158          923      1,081
Interest-bearing liabilities:
   Demand and savings accounts..............       18         261        279        (8)         (30)       (38)
   Certificates of deposit..................      351       1,204      1,555       (69)        (241)      (310)
                                                -----      ------   --------     -----        -----     ------
      Total deposits........................      369       1,465      1,834       (77)        (271)      (348)
   Borrowings...............................      (11)        365        354        24          (15)         9
   Other....................................       (1)         11         10        (1)         (10)       (11)
                                               ------      ------   --------     -----        -----     ------
      Total net change in expense on
         Interest-bearing liabilities.......      357       1,841      2,198       (54)        (296)      (350)
                                                -----     -------   --------     -----       ------     ------
Net change in net interest income...........    $ (23)    $   571   $    548     $ 212       $1,219     $1,431
                                                ======    =======   ========     =====       ======     ======
</TABLE>


Market Risk Analysis

         Quantitative Aspects of Market Risk. First Bancorp does not maintain a
trading account for any class of financial instrument nor does it engage in
hedging activities or purchase high-risk derivative instruments. Furthermore,
First Bancorp is not subject to foreign currency exchange rate risk or commodity
price risk. For information regarding the sensitivity to interest rate risk of
First Bancorp's interest-earning assets and interest-bearing liabilities, see
the tables under Part I, Item 1, "Business --Lending Activities--Loan Portfolio
Composition," "--Investment Activities" and "--Deposit Activities and Other
Sources of Funds--Deposit Accounts."

         First Bancorp uses interest rate sensitivity analysis to measure its
interest rate risk by computing changes in net portfolio value of its cash flows
from assets, liabilities and off-balance sheet items in the event of a range of
assumed changes in market interest rates. Net portfolio value represents the
market value of portfolio equity and is equal to the market value of assets
minus the market value of liabilities, with adjustments made for off-balance
sheet items. This analysis assesses the risk of loss in market risk sensitive
instruments in the event of a sudden and sustained 100 to 400 basis point
increase or decrease in market interest rates with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
First Bancorp measures interest rate risk by modeling the change in net
portfolio value over a variety of interest rate scenarios.


                                       35
<PAGE>


         The following table sets forth the change in First Bancorp's net
portfolio value at June 30, 2001 that would occur in the event of an immediate
change in interest rates, with no effect given to any steps that management
might take to counteract that change.


                Interest Rate Sensitivity of Net Portfolio Value
 ------------------------------------------------------------------------------
   Basis Point
     ("bp")              Net Portfolio Value          Portfolio Value of Assets
     ------       --------------------------------    -------------------------
Change in Rates   $ Amount    $ Change    % Change    NPV Ratio        Change
----------------   -------     -------     -------    ---------        ------
                               (Dollars in thousands)

     300           $18,107     $(9,958)      (35)%      10.93%        (485) bp
     200            21,463      (6,601)      (24)       12.65         (313)
     100            24,828      (3,237)      (12)       14.29         (149)
      0             28,065          --        --        15.78           --
    (100)           29,960       1,895         7        16.57           79
    (200)           30,481       2,416         9        16.68           90
    (300)           30,661       2,596         9        16.61           83


         The above table indicates that in the event of a sudden and sustained
increase in prevailing market interest rates, First Bancorp's net portfolio
value would be expected to decrease.

         Certain assumptions were utilized in preparing the preceding table.
These assumptions relate to interest rates, loan prepayment rates, deposit decay
rates, and the market values 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
table. 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 ARM loans, have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. Further, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.

         Qualitative Aspects of Market Risk. First Bancorp's principal financial
objective is to achieve long-term profitability while reducing its exposure to
fluctuating market interest rates. First Federal has sought to reduce the
exposure of its earnings to changes in market interest rates by attempting to
manage the mismatch between asset and liability maturities and interest rates.
In order to reduce the exposure to interest rate fluctuations, First Federal has
developed strategies to manage its liquidity and shorten its effective
maturities of certain interest-earning assets.

         Management has sought to decrease the average maturity of its assets
by:

(1) offering a variety of adjustable-rate residential mortgage loans and
    consumer loans, all of which are retained by First Federal for its
    portfolio;

(2) establishing an indirect automobile lending program through which it
    originates short-term, fixed- rate automobile loans;

(3) purchasing mortgage-backed and related securities with adjustable rates or
    estimated lives of five to ten years or less; and

(4) purchasing short- to intermediate-term investment securities.



                                       36
<PAGE>



         In addition, First Federal sells a portion of its long-term, fixed-rate
single-family residential mortgage loans for cash in the secondary market. The
retention of ARM loans and adjustable-rate mortgage-backed securities, which
reprice at regular intervals, helps to ensure that the yield on First Federal's
loan portfolio will be sufficient to offset increases in First Federal's cost of
funds. However, periodic and lifetime interest rate adjustment limits may
prevent ARM loans from repricing to market interest rates during periods of
rapidly rising interest rates. First Federal does not use any hedging techniques
to manage the exposure of its assets to fluctuating market interest rates. First
Federal relies on retail deposits as its primary source of funds and maintains a
moderate proportion of lower-costing passbook, NOW and money market accounts.
First Federal has attempted to lengthen the term of deposits by offering
certificates of deposit with terms of up to ten years. Management believes
retail deposits, compared to brokered deposits, reduce the effects of interest
rate fluctuations because they generally represent a more stable source of
funds.

Liquidity and Capital Resources

         First Federal's principal sources of funds are proceeds from maturities
of investment securities, principal payments received on mortgage-backed and
related securities, loan repayments and deposits. While scheduled payments from
the amortization of loans, investment securities and interest-bearing time
deposits are relatively predictable sources of funds, deposit flows and loan or
investment security prepayments are greatly influenced by general interest
rates, economic conditions, and competition. First Federal has been able to
generate sufficient cash through its deposits and has been able to maintain its
borrowings from the Federal Home Loan Bank at a relatively low level. Funds
borrowed from the Federal Home Loan Bank are generally matched against higher
yielding assets of like amounts with similar maturities to provide a built-in
margin of interest to First Federal.

         First Federal must maintain an adequate level of liquidity to ensure
the availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. First Federal invests excess funds in overnight
deposits and other short-term interest-earning assets to provide liquidity to
meet these needs. At June 30, 2001, cash and cash equivalents totaled $10.5
million, or 5.97% of total assets. At June 30, 2001, First Federal had
outstanding commitments to originate loans of $1.9 million. At the same time,
certificates of deposit which are scheduled to mature in one year or less
totaled $67.0 million. Based upon historical experience, management believes the
majority of maturing certificates of deposit will remain with First Federal. In
addition, management of First Federal believes that it can adjust the offering
rates of certificates of deposit to retain deposits in changing interest rate
environments. If a significant portion of these deposits are not retained by
First Federal, First Federal would be able to utilize Federal Home Loan Bank
advances to fund deposit withdrawals, which would result in an increase in
interest expense to the extent that the average rate paid on such advances
exceeds the average rate paid on deposits of similar duration.

         The primary investing activities of First Federal are originating loans
and purchasing investments and mortgage-backed securities. Proceeds from
maturities, net of purchases, of investment securities and principal payments
received on mortgage-backed and related securities, totaled $195,000 for the
year ended June 30, 2001, while loan originations and purchases in excess of
repayments totaled $40.8 million.

         First Federal's most significant financing activities are deposit
accounts and Federal Home Loan Bank borrowings. Additional Federal Home Loan
Bank borrowings of $10.0 million was the primary source of cash during 2001.
Cash inflow was somewhat offset by the purchase of $4.8 million of First Bancorp
stock.

         Management believes its ability to generate funds internally will
satisfy its liquidity requirements. If First Federal requires funds beyond its
ability to generate them internally, it has the ability to borrow funds from the
Federal Home Loan Bank. At June 30, 2001, First Federal had approximately $20.0
million remaining available to it under its borrowing arrangement with the
Federal Home Loan Bank. At June 30, 2001, First Federal had $15.0 million of
borrowings from the Federal Home Loan Bank.

         OTS regulations require First Federal to maintain specific amounts of
capital. As of June 30, 2001, First Federal complied with all regulatory capital
requirements as of that date with tangible, core and risk-based capital ratios
of 14.07%, 14.07% and 24.01%, respectively. For a detailed discussion of
regulatory capital requirements, see Part I, Item 1, "Regulation and
Supervision--Federal Savings Institution Regulation--Capital Requirements."


                                       37
<PAGE>


Impact of Accounting Pronouncements and Regulatory Policies

         Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," issued in June 1998 (as amended
by SFAS No. 137), standardizes the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts. The
statement requires entities to carry all derivative instruments in the statement
of financial position at fair value. The accounting for changes in the fair
value, gains and losses, of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if so, on
the reasons for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes in fair
value, cash flows or foreign currencies. The statement is effective for fiscal
years beginning after June 15, 2001. The statement is not expected to affect
First Bancorp because First Bancorp does not currently purchase derivative
instruments or enter into hedging activities.

         In September 2000, the FASB issued Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a replacement of FASB Statement No. 125, which revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, although it continues most of the
provisions of Statement No. 125 without reconsideration. The provisions of
Statement No. 140 are effective for periods after December 15, 2000. First
Bancorp does not expect the adoption of the provisions of Statement No. 140 to
have a material impact on its financial position or results of operations.

         In July 2001, the FASB issued Statement No. 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 141
requires the use of the purchase method of accounting for all business
combinations initiated after June 30, 2001, thereby eliminating the
pooling-of-interests method. Statement No. 141 also provides new criteria that
determine whether an acquired intangible asset should be recognized separately
from goodwill. Statement No. 142 provides guidance on how to account for
goodwill and intangible assets after a business combination has been completed.
Under Statement No. 142, goodwill and certain other intangible assets will no
longer be amortized and will be tested for impairment at least annually.
Intangible assets with a definite life will continue to be amortized. The
nonamortization and impairment rules will apply to existing goodwill and
intangible assets beginning with fiscal years starting after December 15, 2001.
Early adoption is permitted for companies with a fiscal year beginning after
March 15, 2001, provided that first-quarter financial statements have not
already been issued. First Federal has elected to adopt Statement No. 142
effective July 1, 2001. Adoption of Statement No. 142 will result in a decrease
in operating expenses of approximately $77,000 due to a reduction in the
amortization of intangible assets.


Effect of Inflation and Changing Prices

         The consolidated financial statements and related financial data
presented in this prospectus have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars, without
considering the change in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of
First Federal's operations. Unlike most industrial companies, virtually all the
assets and liabilities of a financial institution are monetary in nature. As a
result, interest rates generally have a more significant impact on a financial
institution's performance than do general levels of inflation. Interest rates do
not necessarily move in the same direction or to the same extent as the prices
of goods and services.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The above-captioned information appears in this report under Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and is incorporated herein by reference.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements listed at Item 14 of this Form 10-K are
incorporated by reference into this Item 8 of Part II of this Form 10-K.


                                       38
<PAGE>



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

         None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information relating to the directors and officers of First Bancorp
is incorporated herein by reference to First Bancorp's Proxy Statement for the
2001 Annual Meeting of Shareholders to be held on November 21, 2001 and to Part
I, Item 1, "Business--Executive Officers of the Registrant" of this report.
Reference is made to the cover page of this report for information regarding
compliance with Section 16(a) of the Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION

         The information regarding executive compensation is incorporated herein
by reference to First Bancorp's Proxy Statement for the 2001 Annual Meeting of
Shareholders to be held on November 21, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to First Bancorp's
Proxy Statement for the 2001 Annual Meeting of Shareholders to be held on
November 21, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information relating to certain relationships and related
transactions is incorporated herein by reference to First Bancorp's Proxy
Statement for the 2001 Annual Meeting of Shareholders to be held on November 21,
2001.



                                       39
<PAGE>



                                     PART IV

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

         (a)      (1) The following are filed as a part of this report:

                         o   Independent Auditors' Report

                         o   Consolidated Balance Sheets as of June 30, 2001 and
                             2000

                         o   Consolidated Statements of Income for the Years
                             Ended June 30, 2001, 2000 and 1999

                         o   Consolidated Statements of Stockholders' Equity for
                             the Years Ended June 30, 2001, 2000 and 1999

                         o   Consolidated Statements of Cash Flows for the Years
                             Ended June 30, 20001, 2000 and 1999

                         o   Notes to Consolidated Financial Statements

                  (2) All financial statement schedules are omitted because they
                      are not required or applicable, or the required
                      information is shown in the consolidated financial
                      statements or the notes thereto.

                  (3) Exhibits

3.1      Articles of Incorporation of First Bancorp of Indiana, Inc.(1)
3.2      Amended Bylaws of First Bancorp of Indiana, Inc.(2)
4.0      Form of Stock Certificate of First Bancorp of Indiana, Inc.(1)
10.1     First Federal Savings Bank Employee Stock Ownership Plan Trust
         Agreement(2)
10.2     Employment Agreement between First Bancorp of Indiana, Inc., First
         Federal Savings Bank and Harold Duncan(2)
10.3     Employment Agreement between First Bancorp of Indiana, Inc., First
         Federal Savings Bank and Michael H. Head(2)
10.4     First Federal Savings Bank Employee Severance Compensation Plan(2)
10.5     First Federal Savings Bank Director Deferred Compensation Plan(1)
10.6     First Bancorp of Indiana, Inc. 1999 Stock-Based Incentive Plan(3)
21.0     Subsidiary information is incorporated herein by reference to Part I,
         Item 1, "Business--Subsidiary Activities"
23.0     Consent of independent auditors

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

(1)    Incorporated herein by reference into this document from the Exhibits to
       Form S-1, Registration Statement and amendments thereto, initially filed
       on December 11, 1998, Registration No. 333-68793.
(2)    Incorporated herein by reference into this document from the Exhibits to
       the Annual Report on Form 10-K for the year ended June 30, 1999.
(3)    Incorporated herein by reference into this document from Exhibit 10 to
       the Quarterly Report on From 10-Q for the quarter ended December 31,
       1999.

       (b)      Reports on Form 8-K

                  (1) Form 8-K filed on April 17, 2001, reporting under Item 5,
                      First Bancorp's letter to Bradshaw Capital Management LLC
                      and Roosevelt Group LLC concerning the unsolicited offer
                      to be acquired by Pulaski Financial Corp.



                                       40
<PAGE>





                                   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.

                                        FIRST BANCORP OF INDIANA, INC.


Date: September 20, 2001                By:  /s/ Harold Duncan
      ------------------                     -----------------
                                             Harold Duncan
                                             President, Chief Executive Officer
                                             and Chairman of the Board



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


        Name              Title                                     Date
        ----              -----                                     ----

/s/ Harold Duncan         President, Chief Executive Officer  September 20, 2001
----------------------                                        ------------------
Harold Duncan             and Chairman of the Board
                          (principal executive officer)


/s/ Michael H. Head       Vice President and Director         September 20, 2001
----------------------                                        ------------------
Michael H. Head


/s/George J. Smith        Treasurer (principal financial      September 20, 2001
----------------------     and accounting officer)            ------------------
George J. Smith


/s/ Herbert V. Dassel     Director                            September 20, 2001
----------------------                                        ------------------
Herbert V. Dassel


/s/ Frank E. Kern         Director                            September 20, 2001
----------------------                                        ------------------
Frank E. Kern


/s/ James E. Will, Jr.    Director                            September 20, 2001
----------------------                                        ------------------
James E. Will, Jr.


/s/ Jerome A. Ziemer      Director                            September 20, 2001
----------------------                                        ------------------
Jerome A. Ziemer




<PAGE>







                         Independent Accountants' Report



Board of Directors
First Bancorp of Indiana, Inc.
Evansville, Indiana


We have audited the accompanying  consolidated balance sheet of First Bancorp of
Indiana,  Inc.  and  subsidiary  as of June 30,  2001 and 2000,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the  three  years in the  period  ended  June 30,  2001.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the consolidated  financial  statements described above present
fairly, in all material respects,  the consolidated  financial position of First
Bancorp of Indiana,  Inc. and  subsidiary as of June 30, 2001 and 2000,  and the
results of their  operations and their cash flows for each of the three years in
the  period  ended June 30,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States of America.



/s/ BKD, LLP
------------
BKD,LLP


Evansville, Indiana
August 3, 2001



<PAGE>


                         First Bancorp of Indiana, Inc.
                                 and Subsidiary


                           Consolidated Balance Sheet
<TABLE>
<CAPTION>

June 30                                                                        2001               2000
-----------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                 <C>
Assets
    Cash and due from banks                                               $   5,105,758       $   1,448,002
    Interest-bearing demand deposits                                          4,906,112           3,590,492
    Federal funds sold                                                          475,000           1,355,000
                                                                          -------------       -------------
               Cash and cash equivalents                                     10,486,870           6,393,494
    Interest-bearing deposits                                                   297,000           1,188,000
    Investment securities
        Available for sale                                                    6,922,693           8,541,057
        Held to maturity (fair value of $40,002,000 and $37,442,000)         40,050,086          38,492,081
                                                                          -------------       -------------
               Total investment securities                                   46,972,779          47,033,138
    Loans, net of allowance for loan losses of $661,000 and $396,000        106,818,459          66,377,404
    Premises and equipment                                                    3,150,100           1,647,253
    Federal Home Loan Bank stock                                                884,700             727,400
    Goodwill and intangible assets                                            2,359,579
    Other assets                                                              4,642,176           4,115,537
                                                                          -------------       -------------

               Total assets                                               $ 175,611,663       $ 127,482,226
                                                                          =============       =============


Liabilities
    Deposits
        Noninterest bearing                                               $   4,406,278       $     673,479
        Interest bearing                                                    122,390,548          85,300,789
                                                                          -------------       -------------
               Total deposits                                               126,796,826          85,974,268
    Long-term debt                                                           15,000,000           5,000,000
    Advances by borrowers for taxes and insurance                               578,800             339,217
    Other liabilities                                                         1,816,299           1,257,094
                                                                          -------------       -------------
               Total liabilities                                            144,191,925          92,570,579
                                                                          -------------       -------------

Commitments and Contingent Liabilities

Stockholders' Equity
    Preferred stock, $.01 par value
        Authorized and unissued--1,000,000 shares
    Common stock, $.01 par value
        Authorized--9,000,000 shares
        Issued and outstanding--2,272,400 shares                                 22,724              22,724
        Additional paid-in capital                                           21,868,686          21,841,913
    Retained earnings                                                        17,272,524          16,472,853
    Accumulated other comprehensive income                                      130,220              30,699
                                                                          -------------       -------------
                                                                             39,294,154          38,368,189
    Less:
    Unallocated employee stock ownership plan
        shares--143,926 and 159,070 shares                                   (1,469,218)         (1,623,809)
    Unallocated management recognition plan
        shares--66,009 and 90,896 shares                                       (620,696)           (826,222)
    Treasury stock, at cost--438,644 and 107,344 shares                      (5,784,502)         (1,006,511)
                                                                          -------------       -------------

               Total stockholders' equity                                    31,419,738          34,911,647
                                                                          -------------       -------------

               Total liabilities and stockholders' equity                 $ 175,611,663       $ 127,482,226
                                                                          =============       =============
</TABLE>



See notes to consolidated financial statements.

                                       2

<PAGE>

                         FIRST BANCORP OF INDIANA, INC.
                                 AND SUBSIDIARY

                        Consolidated Statement of Income

<TABLE>
<CAPTION>

Year Ended June 30                                                       2001              2000             1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>
Interest Income
    Loans receivable                                                  $ 7,125,968      $ 4,975,989      $ 3,436,286
    Investment securities                                               3,382,123        3,026,947        3,103,298
    Deposits with financial institutions                                  682,319          449,531          832,625
    Federal funds sold                                                     40,641           37,148           34,918
    Other interest and dividend income                                     62,767           58,272           59,492
                                                                       --------------------------------------------
           Total interest income                                       11,293,818        8,547,887        7,466,619
                                                                       --------------------------------------------

Interest Expense
    Deposits                                                            5,792,274        3,957,938        4,306,087
    Long-term debt                                                        511,216          157,136          148,040
    Other                                                                  73,801           63,378           74,862
                                                                       --------------------------------------------
           Total interest expense                                       6,377,291        4,178,452        4,528,989
                                                                       --------------------------------------------

Net Interest Income                                                     4,916,527        4,369,435        2,937,630

Provision for Loan Losses                                                 443,000          184,342           24,000
                                                                       --------------------------------------------

Net Interest Income After Provision for Loan Losses                     4,473,527        4,185,093        2,913,630
                                                                       --------------------------------------------

Noninterest Income
    Service charges on deposit accounts                                   246,818           53,508           52,783
    Net gain on loan sales                                                472,588          507,490           61,353
    Increase in cash surrender values of life insurance                   105,894           94,760           97,315
    Proceeds of life insurance in excess of cash surrender value          408,178
    Net gain on sales of premises and equipment                           387,516
    Other income                                                          299,963          211,988          112,365
                                                                       --------------------------------------------
           Total noninterest income                                     1,920,957          867,746          323,816
                                                                       --------------------------------------------

Noninterest Expense
    Salaries and employee benefits                                      2,932,118        1,920,250        1,404,244
    Net occupancy expense                                                 247,405          171,248          179,680
    Equipment expense                                                     304,115          205,526          141,812
    Deposit insurance expense                                              20,434           37,913           55,097
    Data processing fees                                                  196,646          118,366          113,633
    Other expenses                                                      1,160,741          935,488          559,673
                                                                       --------------------------------------------
           Total noninterest expense                                    4,861,459        3,388,791        2,454,139
                                                                       --------------------------------------------

Income Before Income Tax                                                1,533,025        1,664,048          783,307
    Income tax expense                                                    374,291          517,726          210,111
                                                                       --------------------------------------------

Net Income                                                            $ 1,158,734      $ 1,146,322      $   573,196
                                                                        ===========================================

Basic Earnings per Share                                              $      0.63      $      0.56
                                                                        ============================

Diluted Earnings per Share                                            $      0.61      $      0.56
                                                                        ============================
</TABLE>


See notes to consolidated financial statements.

                                       3
<PAGE>

                         FIRST BANCORP OF INDIANA, INC.
                                 AND SUBSIDIARY

                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>

                                                                  Common Stock
                                                        ---------------------------    Additional
                                                            Shares                       Paid-in    Comprehensive    Retained
                                                          Outstanding      Amount        Capital        Income       Earnings
                                                        ------------------------------------------------------------------------
<S>                                                        <C>          <C>            <C>                         <C>
Balances, July 1, 1998                                                                                              $14,900,739
    Issuance of common stock                               2,272,400    $     22,724   $ 21,833,369
    Comprehensive income
        Net income                                                                                   $    573,196       573,196
        Other comprehensive income, net of tax
           Unrealized losses on securities                                                                (22,655)
                                                                                                     ------------
    Comprehensive income                                                                             $    550,541
                                                                                                     ============
    Employee Stock Ownership Plan shares allocated                                           (1,851)
                                                        -------------------------------------------                 ------------
Balances, June 30, 1999                                    2,272,400          22,724     21,831,518                  15,473,935
    Comprehensive income
        Net income                                                                                   $  1,146,322     1,146,322
        Other comprehensive income, net of tax
           Unrealized gains on securities                                                                   5,436
                                                                                                     ------------
    Comprehensive income                                                                             $  1,151,758

    Cash dividends ($0.07 per share)                                                                                   (147,404)
    Purchase of treasury stock
    Purchase of stock by Employee Stock Ownership Plan
    Transfer of shares to Management Recognition Plan
    Employee Stock Ownership Plan shares allocated                                           (9,578)
    Management Recognition Plan shares allocated                                               (843)
    Refund of conversion expenses                                                            20,816
                                                        -------------------------------------------                 ------------
Balances, June 30, 2000                                    2,272,400          22,724     21,841,913                  16,472,853
    Comprehensive income
        Net income                                                                                   $  1,158,734     1,158,734
        Other comprehensive income, net of tax
           Unrealized gains on securities                                                                  99,521
                                                                                                     ------------
    Comprehensive income                                                                             $  1,258,255
                                                                                                     ============

    Cash dividends ($0.18 per share)                                                                                   (359,063)
    Purchase of treasury stock
    Employee Stock Ownership Plan shares allocated                                          32,852
    Management Recognition Plan shares allocated                                            (6,079)
                                                        -------------------------------------------                -------------
Balances, June 30, 2001                                    2,272,400    $     22,724   $ 21,868,686                $ 17,272,524
                                                        ===========================================                =============
</TABLE>


<TABLE>
<CAPTION>

                                                        Accumulated
                                                           Other     Unallocated    Unallocated
                                                       Comprehensive    ESOP            MRP        Treasury
                                                           Income      Shares          Shares        Stock         Total
                                                       -----------------------------------------------------------------
<S>                                                      <C>         <C>             <C>         <C>          <C>
Balances, July 1, 1998                                  $    47,918                                           $ 14,948,657
    Issuance of common stock                                          $ (874,000)                               20,982,093
    Comprehensive income
        Net income                                                                                                 573,196
        Other comprehensive income, net of tax
           Unrealized losses on securities                  (22,655)                                               (22,655)

    Comprehensive income

    Employee Stock Ownership Plan shares allocated                        48,560         46,709
                                                       -------------------------------------------------------------------
Balances, June 30, 1999                                      25,263    (825,440)                                36,528,000
    Comprehensive income
        Net income                                                                                               1,146,322
        Other comprehensive income, net of tax
           Unrealized gains on securities                     5,436                                                  5,436
    Comprehensive income
    Cash dividends ($0.07 per share)                                                                              (147,404)
    Purchase of treasury stock                                                                   $(1,861,225)   (1,861,225)
    Purchase of stock by Employee Stock Ownership Plan                  (980,411)                                 (980,411)
    Transfer of shares to Management Recognition Plan                                 $(854,714)     854,714
    Employee Stock Ownership Plan shares allocated                       182,042                                   172,464
    Management Recognition Plan shares allocated                                         28,492                     27,649
    Refund of conversion expenses                                                                                   20,816
                                                       -------------------------------------------------------------------
Balances, June 30, 2000                                      30,699   (1,623,809)      (826,222)  (1,006,511)   34,911,647
    Comprehensive income
        Net income                                                                                               1,158,734
        Other comprehensive income, net of tax
           Unrealized gains on securities                    99,521                                                 99,521

    Comprehensive income


    Cash dividends ($0.18 per share)                                                                              (359,063)
    Purchase of treasury stock                                                                    (4,777,991)   (4,777,991)
    Employee Stock Ownership Plan shares allocated                       154,591                                   187,443
    Management Recognition Plan shares allocated                                        205,526                    199,447
                                                       -------------------------------------------------------------------
Balances, June 30, 2001                                  $  130,220  $(1,469,218)     $(620,696) $(5,784,502)  $31,419,738
                                                       ===================================================================
</TABLE>


See notes to consolidated financial statements.


                                       4

<PAGE>



                         FIRST BANCORP OF INDIANA, INC.
                                 AND SUBSIDIARY

                      Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>

Year Ended June 30                                                                  2001               2000               1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                <C>                <C>
Operating Activities
    Net income                                                                 $  1,158,734       $  1,146,322       $    573,196
    Adjustments to reconcile net income to net cash
        provided (used) by operating activities
        Provision for loan losses                                                   443,000            184,342             24,000
        Depreciation                                                                251,185            126,819            105,069
        Amortization of net loan origination fees                                   (92,545)            (4,528)           (45,000)
        Amortization of goodwill and intangible assets                              100,432
        Deferred income tax                                                        (234,000)           (37,000)          (109,000)
        Increase in cash surrender value of life insurance                         (105,894)           (94,000)           (97,315)
        Investment securities amortization, net                                      38,207             23,335             34,416
        Gain on sales of premises and equipment                                    (387,516)
        Loans originated for sale                                               (29,280,066)       (31,215,256)        (5,822,000)
        Proceeds from sales of loans originated for sale                         29,752,654         31,722,746          5,883,353
        Net gain on loan sales                                                     (472,588)          (507,490)           (61,353)
        Compensation expense related to employee stock
           ownership plan and management recognition plan                           386,890            200,113             46,709
        Net change in
           Other assets                                                            (388,058)           318,620           (930,474)
           Other liabilities                                                        559,205             88,426            383,386
                                                                                -------------------------------------------------
               Net cash provided (used) by operating activities                   1,729,640          1,952,449            (15,013)
                                                                                -------------------------------------------------
Investing Activities
    Net change in interest-bearing deposits                                         891,000            891,000            200,000
    Proceeds from maturities of securities available for sale                     1,820,206          1,531,700          1,372,969
    Purchases of securities held to maturity                                    (39,039,930)       (29,529,775)       (30,582,723)
    Proceeds from maturities of securities held to maturity                      37,414,957         23,926,893         39,904,489
    Net change in loans                                                         (40,791,510)       (10,248,318)       (20,632,897)
    Purchase of FHLB stock                                                         (157,300)
    Purchases of premises and equipment                                          (1,765,952)          (265,502)           (93,328)
    Proceeds from sales of premises and equipment                                   399,436
    Redemption of life insurance policy                                             127,753            195,000
    Purchase of financial institution branches, net of cash received             (2,460,011)
                                                                                -------------------------------------------------
               Net cash used by investing activities                            (43,561,351)       (13,499,002)        (9,831,490)
                                                                                -------------------------------------------------
Financing Activities
    Net change in
        Noninterest bearing, interest-bearing demand and savings deposits        17,552,559           (738,843)           906,079
        Certificates of deposit                                                  23,269,999             (9,000)        (3,413,000)
        Advances by borrowers for taxes and insurance                               239,583            (42,009)            25,385
    Proceeds of long-term debt                                                   10,000,000          5,000,000
    Repayment of long-term debt                                                                                        (3,645,000)
    Cash dividends                                                                 (359,063)          (147,404)
    Purchase of treasury stock                                                   (4,777,991)        (1,861,225)
    Issuance of stock, net of offering costs                                                                           20,982,093
    Purchase of stock by ESOP                                                                         (980,411)
    Refund of conversion expenses                                                                       20,816
                                                                                -------------------------------------------------
               Net cash provided by financing activities                         45,925,087          1,241,924         14,855,557
                                                                                -------------------------------------------------

Net Change in Cash and Cash Equivalents                                           4,093,376        (10,304,629)         5,009,054

Cash and Cash Equivalents, Beginning of Year                                      6,393,494         16,698,123         11,689,069
                                                                                -------------------------------------------------

Cash and Cash Equivalents, End of Year                                         $ 10,486,870       $  6,393,494       $ 16,698,123
                                                                                =================================================
Additional Cash Flows Information
    Interest paid                                                              $  5,807,291       $  4,082,452       $  4,517,989
    Income tax paid                                                                 606,600            758,319             98,768
</TABLE>


See notes to consolidated financial statements.

                                       5

<PAGE>



                         FIRST BANCORP OF INDIANA, 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 First Bancorp of Indiana, Inc.
(Company) and its wholly-owned subsidiary, First Federal Savings Bank (Bank),
conform to generally accepted accounting principles and reporting practices
followed by the thrift industry. The Bank has one wholly-owned subsidiary, FFSL
Service Corporation (FFSL). 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 savings and loan holding company whose principal activity is
the ownership and management of the Bank. The Bank operates under a federal
savings bank charter and provides full banking services in a single significant
business segment. As a federally-chartered savings bank, the Bank is subject to
regulation by the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation.

The Bank generates mortgage and consumer loans and receives deposits from
customers located primarily in Vanderburgh County, Indiana, and surrounding
counties. The Bank's loans are generally secured by specific items of
collateral, including real property and consumer assets. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent upon economic conditions in Southwestern
Indiana.

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

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 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.

Amortization of premiums and accretion of discounts are recorded 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.

Loans are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. The accrual of interest on impaired
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.

                                       6

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


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 June
30, 2001, the allowance for loan losses is adequate based on information
currently available. A worsening or protracted economic decline in the area
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 stated at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets. 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 (FHLB) stock is a required investment for institutions
that are members of the FHLB system. The required investment in the common stock
is based on a predetermined formula.

Intangible assets are being amortized using straight-line and accelerated
methods over periods ranging from 7 to 25 years. Such assets are periodically
evaluated as to the recoverability of their carrying value.

Treasury stock is stated at cost. Cost is determined by the first-in, first-out
method.

Stock options are granted for a fixed number of shares to employees with an
exercise price equal to the fair value of the shares at the date of grant. The
Company accounts for and will continue to account for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense for the stock option
grants.

Employee Stock Ownership Plan--The Company accounts for its employee stock
ownership plan (ESOP) in accordance with American Institute of Certified Public
Accountants (AICPA) Statement of Position 93-6, Employer's Accounting for
Employee Stock Ownership Plans. The cost of shares issued to the ESOP but not
yet allocated to participants are presented in the consolidated balance sheet as
a reduction of stockholders' equity. Compensation expense is recorded based on
the market price of the shares as they are committed to be released for
allocation to participant accounts. The difference between the market price and
the cost of the shares committed to be released is recorded as an adjustment to
paid-in capital. Dividends on allocated ESOP shares will be recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares will be
reflected as a reduction of debt.

Shares will be considered outstanding for earnings per share calculations when
they are committed to be released; unallocated shares are not considered
outstanding.

                                       7

<PAGE>


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.






                                       8
<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Earnings per share are computed based upon the weighted average common and
common equivalent shares outstanding for periods subsequent to the Bank's
conversion to a stock savings bank on April 7, 1999. Earnings per share for 1999
are not meaningful.

Reclassifications of certain amounts in the 2000 and 1999 financial statements
have been made to conform to the 2001 presentation.


Note 2 - Purchase of Branches

On November 18, 2000, the Bank purchased certain assets and assumed certain
liabilities related to two branches of a financial institution located in
Evansville, Indiana in exchange for $3,439,000. The assets included $9,092,000
of cash, $22,700,000 of loans, $979,000 of real and personal property,
$1,928,000 of goodwill, $532,000 of deposit-based intangibles, and $172,000 of
accrued interest receivable and other assets. The liabilities consisted of
$35,143,000 of customer deposits and $260,000 of accrued interest payable and
other liabilities. The goodwill is being amortized straight-line over 25 years
and the deposit-based intangibles are being amortized on an accelerated method
over 7 years.


Note 3 - Conversion to Stock Ownership

On April 7, 1999, the Bank consummated its conversion from a federally-chartered
mutual savings bank to a federally-chartered stock savings bank pursuant to the
Bank's Plan of Conversion. Concurrent with the formation of the Company, the
Company acquired 100% of the stock of the Bank and issued 2,272,400 shares of
Company common stock, with $.01 par value, at $10.00 per share. Net proceeds of
the Company's stock issuance, after costs of $868,000 and Employee Stock
Ownership Plan shares of $874,000, were approximately $20.98 million.




                                       9

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 4 - Investment Securities

<TABLE>
<CAPTION>
                                                                        Gross              Gross
                                                 Amortized           Unrealized          Unrealized            Fair
                                                    Cost                Gains              Losses              Value
                                               --------------------------------------------------------------------------
<S>                                                <C>                  <C>                                 <C>
At June 30, 2001
    Available for sale
        Federal agencies                           $  1,000             $  23                               $  1,023
        Corporate obligations                           917                 3                                    920
        Mortgage-backed securities                    4,780               200                                  4,980
                                               --------------------------------------------------------------------------
               Total available for sale               6,697               226                                  6,923
                                               --------------------------------------------------------------------------
    Held to maturity
        Federal agencies                              2,000                                $   51              1,949
        Corporate obligations                         2,013                 1                                  2,014
        Mortgage-backed securities                   32,544               198                 196             32,546
        Commercial paper                              3,493                                                    3,493
                                               --------------------------------------------------------------------------
               Total held to maturity                40,050               199                 247             40,002
                                               --------------------------------------------------------------------------

               Total investment securities          $46,747             $ 425              $  247            $46,925
                                               ==========================================================================

At June 30, 2000
    Available for sale
        Federal agencies                           $  1,000             $   1                               $  1,001
        Corporate obligations                         1,237                 8                                  1,245
        Mortgage-backed securities                    6,251                48              $    4              6,295
                                               --------------------------------------------------------------------------
               Total available for sale               8,488                57                   4              8,541
                                               --------------------------------------------------------------------------
    Held to maturity
        Federal agencies                              8,000                                   304              7,696
        Corporate obligations                         2,113                                     4              2,109
        Mortgage-backed securities                   25,596                10                 751             24,855
        Commercial paper                              2,783                                     1              2,782
                                               --------------------------------------------------------------------------
               Total held to maturity                38,492                10               1,060             37,442
                                               --------------------------------------------------------------------------

               Total investment securities          $46,980               $67              $1,064            $45,983
                                               ==========================================================================
</TABLE>

                                       10

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


The amortized cost and fair market value of securities available for sale and
held to maturity at June 30, 2001, 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.

                                  Available for Sale          Held to Maturity
                                 -----------------------------------------------
                                  Amortized      Fair      Amortized       Fair
                                    Cost         Value        Cost        Value
--------------------------------------------------------------------------------

Within one year                                             $ 5,506      $ 5,507
One to five years                 $ 1,000      $ 1,023
Five to ten years                     917          920
After ten years                                               2,000        1,949
                                  ----------------------------------------------
                                    1,917        1,943        7,506        7,456
Mortgage-backed securities          4,780        4,980       32,544       32,546
                                  ----------------------------------------------

           Totals                 $ 6,697      $ 6,923      $40,050      $40,002
                                  ==============================================

During 2000, debt securities with an amortized cost of $7,085,276 were
transferred from held to maturity to available for sale in conjunction with the
Company's adoption of Statement of Financial Accounting Standard (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities. The securities had
an unrealized gain of approximately $49,000.


Note 5 - Loans and Allowance

June 30                                     2001           2000          1999
--------------------------------------------------------------------------------

Real estate loans                       $  69,662      $  45,612      $  41,194
Credit line equity loans                    5,895          1,284          1,020
Commercial loans                            7,353
Loans to depositors secured by savings        369            200            127
Consumer loans                             26,910         20,680         15,389
                                        ---------------------------------------
                                          110,189         67,776         57,730
Undisbursed portion of loans               (2,502)          (879)          (981)
Deferred loan fees                           (208)          (124)          (166)
Allowance for loan losses                    (661)          (396)          (274)
                                        ---------------------------------------

               Total loans              $ 106,818      $  66,377      $  56,309
                                        =======================================

Allowance for loan losses
    Balances, July 1                    $     396      $     274      $     250
    Provision for losses                      443            184             24
    Recoveries on loans                         6             19
    Loans charged off                        (184)           (81)
                                        ---------------------------------------
    Balances, June 30                   $     661      $     396      $     274
                                        =======================================


                                       11


<PAGE>


FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


The Bank has not had any significant impaired loans during each of the years
ended June 30, 2001, 2000 and 1999.

Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheet. The unpaid balances of these loans were $8,711,000
and $9,647,000 at June 30, 2001 and 2000.


Note 6 - Premises and Equipment

June 30                                  2001                         2000
--------------------------------------------------------------------------------

Land                                     $1,213                      $   649
Buildings                                 2,661                        1,891
Equipment                                 1,459                        1,039
                                     -------------------------------------------
        Total cost                        5,333                        3,579
Accumulated depreciation                 (2,183)                      (1,932)
                                     -------------------------------------------

        Net                              $3,150                       $1,647
                                     ===========================================


                                       12

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 7 - Other Assets and Other Liabilities

June 30                                                   2001          2000
--------------------------------------------------------------------------------

Other assets
    Interest receivable
        Investment securities                            $   381       $   439
        Loans                                                562           306
    Cash surrender value of life insurance                 2,035         2,057
    Investment in limited partnership                        120           172
    Net deferred tax asset                                   467           306
    Accounts receivable--dealer draft                        203           181
    Prepaid expenses and other                               874           655
                                                       -------------------------

           Total                                          $4,642        $4,116
                                                       =========================


Other liabilities
    Interest payable
        Deposits                                         $   606       $   145
        Other borrowings                                     318           209
    Deferred directors' fees and officer compensation        671           523
    Accrued expenses                                         221           380
                                                       -------------------------

           Total                                          $1,816        $1,257
                                                       =========================

The investment in limited partnership of $120,000 and $172,000 at June 30, 2001
and 2000 represents a 40 percent equity interest in Vann Park II, L.P., a
limited partnership organized to build, own and operate a 44-unit apartment
complex. In addition to recording its equity in the losses of $52,000, $55,000
and $51,000, the Bank has recorded the benefit of low-income housing tax credits
of $73,000 for each of the years in the three-year period ended June 30, 2001.


Note 8 - Deposits

June 30                                                   2001           2000
--------------------------------------------------------------------------------

Demand deposits                                          $26,591       $12,196
Savings deposits                                          12,158         9,001
Certificates of deposit of $100,000 or more               10,883         8,109
Other certificates of deposit                             77,165        56,668
                                                       -------------------------

           Total deposits                               $126,797       $85,974
                                                       =========================


                                       13

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Certificates maturing in years ending June 30:

    2002                                       $67,033
    2003                                        16,065
    2004                                         2,629
    2005                                         1,024
    2006                                           882
    Thereafter                                     415
                                            ---------------

                                               $88,048
                                            ===============


Note 9 - Long-Term Debt

June 30                                                  2001           2000
--------------------------------------------------------------------------------

Federal Home Loan Bank advances
    Fixed rate of 6.465%, due in January 2005          $  5,000        $5,000
    Fixed rate of 5.370%, due in February 2011           10,000
                                                     ---------------------------

               Total Federal Home Loan Bank advances    $15,000        $5,000
                                                     ===========================

The Federal Home Loan Bank advances are secured by first-mortgage loans and
investment securities totaling $22,727,000. Advances are subject to penalties in
the event of prepayment.

                                       14

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 10 - Income Tax

<TABLE>
<CAPTION>

Year Ended June 30                                                    2001             2000            1999
----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>             <C>
Income tax
    Currently payable
        Federal                                                       $494             $436            $229
        State                                                          114              119              90
    Deferred
        Federal                                                       (199)             (52)            (92)
        State                                                          (35)              15             (17)
                                                                 -----------------------------------------------

           Total income tax expense                                   $374             $518            $210
                                                                 ===============================================

Reconciliation of federal statutory to actual tax expense
    Federal statutory income tax at 34%                               $521             $566            $266
    State income taxes, net of federal benefit                          52               88              48
    Cash surrender value of life insurance                             (36)             (32)            (33)
    Tax credits                                                        (73)             (73)            (73)
    Proceeds from life insurance                                      (142)
    Other                                                               52              (31)              2
                                                                 -----------------------------------------------

           Actual tax expense                                         $374             $518            $210
                                                                 ===============================================
</TABLE>

A cumulative net deferred tax asset is included in other assets. The components
of the asset are as follows:

<TABLE>
<CAPTION>
June 30                                                               2001             2000
---------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>
Assets
    Differences in accounting for loan losses                         $245             $142
    Differences in accounting for loan fees                             13               19
    Deferred compensation and directors fees                           401              256
    Other                                                               53               44
                                                                 ----------------------------
               Total assets                                            712              461
                                                                 ----------------------------

Liabilities
    Differences in depreciation methods                                (97)             (81)
    Federal Home Loan Bank dividends                                   (52)             (51)
    Unrealized gain on securities available for sale                   (96)             (23)
                                                                 ----------------------------
               Total liabilities                                      (245)            (155)
                                                                 ----------------------------

                                                                      $467             $306
                                                                 ============================
</TABLE>


                                       15

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Retained earnings at June 30, 2001 and 2000 include approximately $4,102,000 for
which no deferred income tax liability has been recognized. This amount
represents an allocation of income to bad debt deductions 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 amount was approximately $1,395,000.


Note 11 - Other Comprehensive Income

<TABLE>
<CAPTION>
                                                                                             2001
                                                              ------------------------------------------------------------------
                                                                Before-Tax                   Tax                   Net-of-Tax
Year Ended June 30                                                Amount                   Expense                   Amount
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                      <C>                       <C>
Unrealized gains on securities:
    Unrealized holding gains arising during the year                $173                     $(74)                     $99
                                                              ==================================================================


                                                                                             2000
                                                              ------------------------------------------------------------------
                                                                Before-Tax                   Tax                   Net-of-Tax
Year Ended June 30                                                Amount                   Expense                   Amount
--------------------------------------------------------------------------------------------------------------------------------

Unrealized gains on securities:
    Unrealized holding gains arising during the year                  $9                      $(4)                      $5
                                                              ==================================================================

                                                                                             1999
                                                              ------------------------------------------------------------------
                                                                Before-Tax                   Tax                   Net-of-Tax
Year Ended June 30                                                Amount                   Benefit                   Amount
--------------------------------------------------------------------------------------------------------------------------------

Unrealized losses on securities:
    Unrealized holding losses arising during the year               $(35)                     $12                     $(23)
                                                              ==================================================================
</TABLE>


                                       16

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 12 - Commitments and Contingent Liabilities

In the normal course of business, there are outstanding commitments and
contingent liabilities, such as guarantees and commitments to extend credit
which are not included in the accompanying consolidated 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 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 balance sheet.

                                                              June 30
                                                    ----------------------------
                                                       2001             2000
                                                    ----------------------------

Loan commitments
    At variable rates                                 $7,442           $3,299
    At fixed rates ranging from 6.375% to 9.500%       1,926              230
                                                    ----------------------------

                                                      $9,368           $3,529
                                                    ============================

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.

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 determination of such possible claims or
lawsuits will not have a material adverse effect on the consolidated financial
position of the Company.


Note 13 - Dividends and Capital Restrictions

Without prior approval, current regulations allow the Bank to pay dividends to
the Company not exceeding net income for the current year plus those for the
preceding two 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 Bank's 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 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 accounts was $15,268,982.

                                       17

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 14 - 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 capital, and
Tier 1 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 June 30, 2001 and 2000, the
Bank is categorized as well capitalized and met all subject capital adequacy
requirements. There are no conditions or events since June 30, 2001 that
management believes have changed the Bank's classification.

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

<TABLE>
<CAPTION>
                                                                                         Required for               To Be Well
                                                                  Actual               Adequate Capital*           Capitalized*
                                                          --------------------------------------------------------------------------
                                                            Amount       Ratio         Amount     Ratio         Amount       Ratio
                                                          --------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>         <C>          <C>         <C>
As of June 30, 2001
    Total risk-based capital* (to risk-
        weighted assets)                                   $24,960       24.01%        $8,315      8.00%        $10,394     10.00%
    Tier 1 capital* (to risk-weighted assets)               24,299       23.38          4,157      4.00           6,236      6.00
    Core capital* (to adjusted total assets)                24,299       14.07          6,907      4.00           8,634      5.00
    Core capital* (to adjusted tangible assets)             24,299       14.07          3,454      2.00             N/A       N/A
    Tangible capital* (to adjusted total assets)            24,299       14.07          2,590      1.50             N/A       N/A

As of June 30, 2000
    Total risk-based capital* (to risk-
        weighted assets)                                   $25,661       38.38%        $5,349      8.00%         $6,686     10.00%
    Tier 1 capital* (to risk-weighted assets)               25,265       38.31          2,674      4.00           4,012      6.00
    Core capital* (to adjusted total assets)                25,265       19.94          5,070      4.00           6,368      5.00
    Core capital* (to adjusted tangible assets)             25,265       19.94          2,535      2.00             N/A       N/A
    Tangible capital* (to adjusted total assets)            25,265       19.94          1,901      1.50             N/A       N/A

*As defined by regulatory agencies

</TABLE>

                                       18

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 15 - Employee Benefit Plans

Pension Plan
The Bank is a participant in a pension fund known as the Financial Institutions
Retirement Fund (FIRF). This plan is a multi-employer plan; separate actuarial
valuations are not made with respect to each participating employer. Pension
expense was $113,890, $19,300 and $2,200 for 2001, 2000 and 1999. This plan
provides pension benefits for substantially all of the Bank's employees.

401(k) Plan
The Bank has a retirement savings Section 401(k) plan in which substantially all
employees may participate. The Bank matches employees' contributions at the rate
of 50% of the first 6% of base salary contributed by participants. The Bank's
expense for the plan was $29,900, $22,900 and $23,400 for 2001, 2000 and 1999.

Supplemental Retirement Plan
The Bank also has supplemental retirement plan arrangements for the benefit of
certain officers. These arrangements are funded by life insurance contracts
which have been purchased by the Bank. The Bank's expense for the plan was
$173,800, $50,100 and $45,100 for the years ended June 30, 2001, 2000 and 1999.
Of the $173,800 of expense recorded during the year ended June 30, 2001,
$130,000 was attributable to the death of a plan participant. The Bank also
established 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 also funded by life insurance contracts which
have been purchased by the Bank. The Bank's expense for the plan was $57,660,
$51,200 and $43,900 for the years ended June 30, 2001, 2000 and 1999.

Employee Stock Ownership Plan
In connection with the conversion, the Bank established an employee stock
ownership plan for the benefit of substantially all of its employees. At June
30, 1999, the ESOP had borrowed $874,000 from the Company and used those funds
to acquire 87,400 shares of the Company's stock at $10 per share. During 2000,
the ESOP borrowed an additional $980,411 from the Company and used those funds
to acquire 94,392 shares of the Company's stock at an average price of $10.39
per share.

Shares issued to the ESOP are allocated to ESOP participants based on principal
repayments made by the ESOP on the loan from the Company. The loan is secured by
shares purchased with the loan proceeds and will be repaid by the ESOP with
funds from the Bank's discretionary contributions to the ESOP and earnings on
ESOP assets. Dividends on unallocated ESOP shares will be applied to reduce the
loan. Principal payments are scheduled to occur in even annual amounts over a
12-year period. However, in the event contributions exceed the minimum debt
service requirements, additional principal payments will be made.


                                       19

<PAGE>

FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Stock totaling 15,144, 17,866, and 4,856 shares for 2001, 2000, and 1999 with an
average fair value of $12.38, $9.65, and $9.62 per share were committed to be
released, resulting in ESOP compensation expense of approximately $187,400,
$172,500, and $46,700. Shares held by the ESOP at June 30 are as follows:

<TABLE>
<CAPTION>
                                                                        2001                   2000
---------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>
Allocated shares                                                         37,866              22,722
Shares distributed to participants                                         (413)                  0
Unallocated shares                                                      143,926             159,070
                                                                -----------------------------------------

               Total ESOP shares                                        181,379             181,792
                                                                =========================================

               Fair value of unallocated shares at June 30           $1,842,253          $1,710,003
                                                                =========================================
</TABLE>


Management Recognition Plan
On April 25, 2000, the Company established a Management Recognition Plan (MRP)
to enable the Company to retain executive personnel of experience and ability in
key positions of responsibility. The plan is authorized to acquire and grant
90,896 shares of the Company's common stock. The funds used to acquire these
shares will be contributed by the Bank. Participants vest in the plan over five
years at the rate of 20% per year. As of June 30, 2000, all 90,896 shares
authorized under the plan had been acquired and granted. No shares had been
distributed or forfeited as of June 30, 2000. As of June 30, 2001, 22,021 shares
had been distributed. This total includes 3,837 shares that vested immediately
and were distributed upon the death of a plan participant. For the years ended
June 30, 2001 and 2000, approximately $200,200 and $27,600 was recorded as
compensation expense under the plan.


Note 16 - Stock Option Plan

The Company has an incentive stock option plan in which 227,240 shares have been
reserved for future issuance by the Company to directors and employees of the
Company and its subsidiary. The plan provides for a term of ten years, after
which no awards may be made, unless earlier terminated by the Board of
Directors. During 2000, options to purchase 204,516 shares were granted at
$9.125 per share. No options were granted during 2001.

Under the Company's incentive stock option plan, 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 stock option awards which vest
according to a schedule fixed by a committee made up of two or more
"disinterested" directors of the Company. The options become fully exercisable
upon vesting.

                                       20

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro
forma disclosures of net income and earnings per share as if the Company had
accounted for its employee stock options under that Statement. The fair value of
each option grant was estimated using an option-pricing model with the following
assumptions:

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

Risk-free interest rate                                             6.0%
Dividend yield                                                      2.5%
Volatility factor of expected market price of common stock          19.9%

Weighted-average expected life of the options                     10 years

Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this statement are as follows:

                                                        2001          2000
                                                    ------------------------

Net income                       As reported          $1,159        $1,146
                                 Pro forma             1,034           924

Basic earnings per share         As reported           $0.63         $0.56
                                 Pro forma              0.56          0.45

Diluted earnings per share       As reported           $0.61         $0.56
                                 Pro forma              0.55          0.45

The following is a summary of the status of the Company's stock option plan and
changes in that plan as of and for the year ended June 30, 2001 and 2000.

<TABLE>
<CAPTION>

Year Ended June 30                                              2001                          2000
------------------------------------------------------------------------------------------------------------------
                                                                      Weighted-                      Weighted-
                                                                       Average                        Average
               Options                                 Shares       Exercise Price     Shares     Exercise Price
------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>           <C>             <C>
Outstanding, beginning of year                        204,516           $9.125              0
Granted                                                     0                         204,516         $9.125
Exercised                                                   0                               0
Forfeited/expired                                           0                               0
                                                     --------                         -------

Outstanding, end of year                              204,516           $9.125        204,516         $9.125
                                                     ========                        ========

Options exercisable at year end                       114,976           $9.125         45,448         $9.125
                                                     ========                        ========
Weighted-average fair value of options granted
    during the year                                                                                  $  3.91
</TABLE>


As of June 30, 2001, the 204,516 options outstanding have an exercise price of
$9.125 and a remaining contractual life of 8.8 years.

                                       21

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 17 - Earnings Per Share

Earnings per share were computed as follows:

<TABLE>
<CAPTION>
                                                                          Year Ended June 30, 2001
                                                  ----------------------------------------------------------------------
                                                                                   Weighted
                                                                                    Average                  Per Share
                                                        Income                      Shares                     Amount
                                                  ----------------------------------------------------------------------
<S>                                                     <C>                        <C>                        <C>
    Net Income                                          $1,159
                                                  -------------------
    Basic Earnings Per Share
        Income available to common stockholders         $1,159                     1,840,179                  $0.63

    Effect of Dilutive Securities
        Stock options                                                                 52,131
                                                  ------------------------------------------------

    Diluted Earnings Per Share
        Income available to common stockholders
           and assumed conversions                      $1,159                     1,892,310                  $0.61
                                                  ======================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                                           Year Ended June 30, 2000
                                                  ----------------------------------------------------------------------
                                                                                   Weighted
                                                                                    Average                  Per Share
                                                        Income                      Shares                     Amount
                                                  ----------------------------------------------------------------------
<S>                                                     <C>                        <C>                        <C>
    Net Income                                          $1,146
                                                  -------------------
    Basic Earnings Per Share
        Income available to common stockholders         $1,146                     2,045,964                  $0.56

    Effect of Dilutive Securities
        Stock options                                                                  7,307
                                                  ------------------------------------------------

    Diluted Earnings Per Share
        Income available to common stockholders
           and assumed conversions                      $1,146                     2,053,271                  $0.56
                                                  ======================================================================
</TABLE>



                                       22

 <PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 18 - 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.

Interest-bearing Deposits--The fair value of interest-bearing time deposits
approximates carrying value.

Investment Securities--Fair values are based on quoted market prices.

Loans--For both short-term loans and variable-rate loans that reprice frequently
and with no significant change in credit risk, fair values are based on carrying
values. The fair values for certain mortgage loans, including one-to-four family
residential, are based on quoted market prices of similar loans sold in
conjunction with securitization transactions, adjusted for differences in loan
characteristics. The fair value for other 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.

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

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

Cash Surrender Value of Life Insurance--The fair values of cash surrender values
of life insurance 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. The carrying amounts for variable rate, fixed-term certificates of deposit
approximate their fair values 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.

Long-term Debt--The fair value of these borrowings are estimated using a
discounted cash flow calculation, based on current rates for similar debt. 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 value 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 amounts of these commitments,
which are immaterial, are reasonable estimates of the fair value of these
financial instruments.

                                       23

<PAGE>



FIRST BANCORP OF INDIANA, 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:

<TABLE>
<CAPTION>
                                                                 2001                               2000
                                                  --------------------------------------------------------------------
                                                      Carrying          Fair              Carrying          Fair
June 30                                                Amount           Value              Amount           Value
----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>                 <C>            <C>
Assets
      Cash and cash equivalents                       $  10,487        $10,487             $  6,393       $  6,393
      Interest-bearing deposits                             297            297                1,188          1,188
      Investment securities available for sale            6,923          6,923                8,541          8,541
      Investment securities held to maturity             40,050         40,002               38,492         37,442
      Loans, net                                        106,818        107,283               66,377         64,354
      Interest receivable                                   943            943                  745            745
      FHLB stock                                            885            885                  727            727
      Cash surrender value of life insurance              2,035          2,035                2,057          2,057

Liabilities
      Deposits                                          126,797        126,900               85,974         84,051
      Long-term debt                                     15,000         15,433                5,000          4,935
      Interest payable                                      924            924                  354            354
</TABLE>


                                       24

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 19 - 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:

<TABLE>
<CAPTION>

                             Condensed Balance Sheet

June 30                                                           2001                2000
------------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>
Assets
    Interest-bearing demand deposits                            $  1,107            $  1,007
    Investment in common stock of subsidiary                      26,789              25,296
    Loans to First Federal Savings Bank                            3,543               8,649
    Other assets                                                      10                   7
                                                            ------------------------------------

               Total assets                                      $31,449             $34,959
                                                            ====================================

Liabilities--Other liabilities                                  $     29            $     47

Stockholders' Equity                                              31,420              34,912
                                                            ------------------------------------

               Total liabilities and stockholders' equity        $31,449             $34,959
                                                            ====================================
</TABLE>


                                       25

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

<TABLE>
<CAPTION>

Note 20 - Condensed Statement of Income

Year Ended June 30                                                   2001                2000
----------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>
Income--Other income                                                $  410              $  505

Expense--Other expenses                                                157                 185
                                                                 --------------------------------

Income before income tax and equity in undistributed
    income of subsidiary                                              253                 320

Income tax expense                                                    100                 127
                                                                 --------------------------------

Income before equity in undistributed income of subsidiary            153                 193

Equity in undistributed income of subsidiary                        1,006                 953
                                                                 --------------------------------

Net Income                                                         $1,159              $1,146
                                                                 ================================
</TABLE>

                                       26

<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


<TABLE>
<CAPTION>

                                                Condensed Statement of Cash Flows

Year Ended June 30                                                                               2001                 2000
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                 <C>
Operating Activities
    Net income                                                                                   $1,159              $1,146
    Adjustments to reconcile net income to net cash
        provided by operating activities
        Equity in undistributed income of subsidiary                                             (1,006)               (953)
        Net change in
           Other assets                                                                              (4)                 40
           Other liabilities                                                                        (18)                 (4)
                                                                                         ---------------------------------------
               Net cash provided by operating activities                                            131                 229
                                                                                         ---------------------------------------

Investing Activities
    Net change in loans to subsidiary                                                             5,106                 212
    Purchase of subsidiary stock
                                                                                         ---------------------------------------
               Net cash provided by investing activities                                          5,106                 212
                                                                                         ---------------------------------------

Financing Activities
    Cash dividends                                                                                 (359)               (147)
    Purchase of treasury stock                                                                   (4,778)             (1,861)
    Refund of conversion expenses                                                                                        11
                                                                                         ---------------------------------------
               Net cash used by financing activities                                             (5,137)             (1,997)
                                                                                         ---------------------------------------

Net Change in Cash and Equivalents                                                                  100              (1,556)

Cash and Cash Equivalents, Beginning of Year                                                      1,007               2,563
                                                                                         ---------------------------------------

Cash and Cash Equivalents, End of Year                                                           $1,107              $1,007
                                                                                         =======================================
</TABLE>


                                       27


<PAGE>



FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


Note 21 - Quarterly Financial Data

The following is a summary of selected quarterly results of operations for the
years ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>

                                                                            Quarter Ended
                                                                            (unaudited)
                                    -------------------------------------------------------------------------------------------
Fiscal 2001                                June 30             March 31                   December 31           September 30
-------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                  <C>                           <C>                    <C>
Net interest income                         $1,259               $1,310                        $1,220                 $1,128
Provision for loan losses                      105                   59                           234                     45
Noninterest income                             748                  275                           665                    233
Noninterest expense                          1,461                1,311                         1,140                    950
Income before income tax                       441                  215                           511                    366
Net income                                     409                  157                           342                    251

                                                                           Quarter Ended
                                                                            (unaudited)
                                    -------------------------------------------------------------------------------------------
Fiscal 2000                                June 30             March 31                   December 31           September 30
-------------------------------------------------------------------------------------------------------------------------------

Net interest income                         $1,145               $1,120                        $1,079                 $1,025
Provision for loan losses                       45                   45                            49                     45
Noninterest income                             240                  182                           226                    220
Noninterest expense                            851                  823                           952                    763
Income before income tax                       489                  434                           304                    437
Net income                                     358                  287                           211                    290
</TABLE>




</TEXT>
</DOCUMENT>
