Message to Shareholders.....................................................   1
Selected Consolidated Financial Data........................................   2
Management's Discussion and Analysis........................................   3
Report of Independent Auditor...............................................  16
Consolidated Balance Sheet..................................................  17
Consolidated Statement of Income............................................  18
Consolidated Statement of Shareholders' Equity..............................  19
Consolidated Statement of Cash Flows........................................  20
Notes to Consolidated Financial Statements..................................  21
Directors and Officers......................................................  42
Shareholder Information.....................................................  43

DESCRIPTION OF BUSINESS

         Union  Community  Bancorp (the "Holding  Company" and together with the
Association,  as  defined  below,  the  "Company")  is  an  Indiana  corporation
organized in September,  1997, to become a savings and loan holding company upon
its acquisition of all the issued and outstanding capital stock of Union Federal
Savings  and  Loan  Association   ("Union  Federal"  or  the  "Association")  in
connection  with the  Association's  conversion  from mutual to stock form.  The
Holding Company became the  Association's  holding company on December 29, 1997;
therefore,  all historical  financial and other data contained for periods prior
to December 29, 1997 herein relate solely to the  Association  while  historical
financial and other data contained herein for the period after December 29, 1997
relate to the Company.  The  principal  asset of the Holding  Company  currently
consists of 100% of the issued and outstanding shares of capital stock, $.01 par
value per share, of the Association.

         The  Association  is a  federal  savings  and  loan  association  which
conducts its business  from a  full-service  office  located in  Crawfordsville,
Indiana.  The  Association  offers a  variety  of  lending,  deposit  and  other
financial  services to its retail and commercial  customers.  The  Association's
principal  business consists of attracting  deposits from the general public and
originating  mortgage  loans,  most of which are secured by one- to  four-family
residential  real property in Montgomery  County.  The  Association  also offers
multi-family loans, construction loans,  non-residential real estate loans, home
equity loans and consumer loans,  including  single-pay loans,  loans secured by
deposits,  installment loans and commercial loans. The Association  derives most
of its funds for lending from deposits of its customers, which consist primarily
of certificates of deposit, demand accounts and savings accounts.

<PAGE>

TO OUR SHAREHOLDERS:

On behalf of our  employees  and Board of  Directors,  I take great  pleasure in
providing you with the 1999 Annual  Report of  Shareholders  of Union  Community
Bancorp, the holding company for Union Federal Savings and Loan Association.

The past year was a good lending year. Net loans increased by approximately 17%,
or by $15.3 million,  to $106.2 million.  Our deposits  increased  moderately by
$4.1 million,  to $69.0 million,  while our total assets  increased by 11.5%, or
$12.5 million to $120.7 million.

In furtherance of our continuing  efforts to increase  shareholder  value, Union
Community  completed the repurchase of 288,963 shares of its  outstanding  stock
during 1999 at a cost of  approximately$3.4  million.  By reducing the number of
the  Corporation's  shares of  common  stock,  these  share  repurchases  have a
positive effect on our return on equity.  However,  the share  repurchases had a
negative  effect on our return on assets  because the  foregone  earnings on the
cash used for the  repurchase  decreased  our net  earnings  for the  year.  The
Corporation has now repurchased  441,050 shares at a cost of approximately  $5.3
million  and has  received  approval  from the Office of Thrift  Supervision  to
repurchase up to an additional 10% of our outstanding common stock during 2000.

We did not  experience  any  significant  problems in connection  with the "Y2K"
issue.  Each  of our  material  electronic  data  processing  systems  made  the
transition  from 1999 to 2000. Now we are on to the new millennium and our third
year as a savings and loan holding  company and as a stock savings  association.
Our entire  management  team and your  Board of  Directors  look  forward to the
challenges  which lie ahead with a renewed sense of anticipation and commitment.
We thank you, our customers and shareholders, for your support.

                                            Sincerely,



                                            /s/ Joseph E. Timmons
                                            Joseph E. Timmons,
                                            President & Chief Executive Officer

<PAGE>

                     SELECTED CONSOLIDATED FINANCIAL DATA OF
                     UNION COMMUNITY BANCORP AND SUBSIDIARY

     The  following  selected  consolidated  financial  data of the  Company  is
qualified  in its  entirety  by, and  should be read in  conjunction  with,  the
consolidated financial statements,  including notes thereto,  included elsewhere
in this Annual Report.
<TABLE>
<CAPTION>
                                                                              At  December 31,
                                                     ---------------------------------------------------------------
                                                       1999          1998        1997          1996         1995
                                                     ---------------------------------------------------------------
                                                                           (Dollars in thousands)

Summary of Selected Consolidated
Financial Condition Data:
<S>                                                  <C>           <C>          <C>           <C>           <C>
Total assets.......................................  $120,654      $108,162     $132,040      $82,789       $73,631
Loans, net.........................................   106,174        90,900       78,436       72,697        61,279
Cash and interest-bearing
        deposits in other banks (1)................     3,117         6,191       44,781        1,465         1,993
Investment securities available for sale...........       315           ---          ---          ---           ---
Investment securities held to maturity.............     7,522         8,026        5,820        5,747         7,423
Deposits...........................................    68,990        64,846       62,258       60,436        57,407
Stock subscriptions refundable.....................       ---           ---       22,687          ---           ---
Borrowings.........................................    12,496         1,793        3,573        7,880         2,642
Shareholders' equity...............................    38,280        40,531       42,906       13,910        13,024
</TABLE>

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                     ---------------------------------------------------------------
                                                        1999          1998        1997          1996         1995
                                                     ---------------------------------------------------------------
Summary of Operating Data:
<S>                                                    <C>           <C>          <C>          <C>           <C>
Total interest and dividend income.................    $8,470        $8,105       $6,801       $6,112        $5,729
Total interest expense.............................     3,817         3,415        3,836        3,424         3,148
                                                       ------        ------       ------      -------       -------
   Net interest income.............................     4,653         4,690        2,965        2,688         2,581
Provision for loan losses..........................        60           110          165           48            24
                                                       ------        ------       ------      -------       -------
   Net interest income after
     provision for loan losses.....................     4,593         4,580        2,800        2,640         2,557
                                                       ------        ------       ------      -------       -------
Other income (losses):
   Equity in losses of limited partnership.........       (44)         (121)        (158)        (173)         (249)
   Gain on sales of available for sale securities..        73           ---          ---          ---           ---
   Other...........................................       110            73           62           57            32
                                                       ------        ------       ------      -------       -------
     Total other income (losses)...................       139           (48)         (96)        (116)         (217)
                                                       ------        ------       ------      -------       -------
Other expenses:
   Salaries and employee benefits..................     1,069           850          480          461           481
   Net occupancy expenses..........................        47            39           39           39            66
   Equipment expenses..............................        27            28           22           20            20
   Deposit insurance expense.......................        44            46           31          495           127
   Legal and professional fees.....................       127           128           34           29            47
   Data processing.................................       122            77           66           57            49
   Other...........................................       323           296          289          201           232
                                                       ------        ------       ------      -------       -------
     Total other expenses..........................     1,759         1,464          961        1,302         1,022
                                                       ------        ------       ------      -------       -------
Income before income taxes.........................     2,973         3,068        1,743        1,222         1,318
Income taxes.......................................     1,003         1,094          545          336           326
                                                       ------        ------       ------      -------       -------
   Net income......................................    $1,970        $1,974       $1,198      $   886       $   992
                                                       ======        ======       ======      =======       =======
</TABLE>

Table continued on following page
<PAGE>
<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                                     ---------------------------------------------------------------
                                                        1999          1998        1997          1996         1995
                                                     ---------------------------------------------------------------
Supplemental Data:
<S>                                                     <C>             <C>
Basic earnings per share...........................     $  .81          $.70           ---          ---          ---
Diluted earnings per share.........................        .81           .70           ---          ---          ---
Dividends per share................................        .465          .355          ---          ---          ---
Dividend payout ratio..............................      57.41%         50.71%         ---          ---          ---
Interest rate spread during period.................       2.31           2.23         2.55%        2.54%        2.69%
Net yield on interest-earning assets (2) ..........       4.14           4.42         3.50         3.53         3.67
Return on assets (3)...............................       1.72           1.82         1.38         1.13         1.36
Return on equity (4)...............................       5.02           4.65         8.10         6.54         7.84
Other expenses to average assets (5)...............       1.53           1.35         1.11         1.66         1.41
Equity to assets (6)...............................      31.73          37.47        32.49        16.80        17.69
Average interest-earning assets to average
   interest-bearing liabilities....................     153.70         167.89       120.98       121.94       121.83
Non-performing assets to total assets (6)..........        .22            .32          .07          .59          .21
Allowance for loan losses to total loans
   outstanding (6).................................        .40            .40          .32          .22          .18
Allowance for loan losses to
   non-performing loans (6)........................     253.69         103.72       484.62        32.52        71.15
Net charge-offs to average
   total loans outstanding ........................        ---            ---          .10          ---          ---
Number of full service offices (6).................       1             1            1            1            1
</TABLE>


(1) Includes certificates of deposit in other financial institutions.
(2) Net interest income divided by average interest-earning assets.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Other expenses divided by average total assets.
(6) At end of period.
================================================================================

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

GENERAL

         The Holding Company was  incorporated  for the purpose of owning all of
the outstanding shares of Union Federal.  The following  discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with and with reference to the consolidated financial statements and
the notes thereto included herein.

         In  addition  to  the  historical  information  contained  herein,  the
following discussion contains forward-looking  statements that involve risks and
uncertainties.   The  Company's  operations  and  actual  results  could  differ
significantly from those discussed in the  forward-looking  statements.  Some of
the factors that could cause or  contribute  to such  differences  are discussed
herein but also include  changes in the economy and interest rates in the nation
and the Company's general market area. The forward-looking  statements contained
herein  include,  but are not limited to,  those with  respect to the  following
matters:

     1.   Management's determination of the amount of loan loss allowance;

     2.   The effect of changes in interest rates;

     3.   Changes in deposit insurance premiums; and

     4.   Proposed  legislation  that would eliminate the federal thrift charter
          and the separate federal regulation of thrifts.

Average Balances and Interest Rates and Yields

         The  following  tables  present for the years ended  December 31, 1999,
1998 and 1997, the balances, interest rates and average monthly balances of each
category  of  the  Company's   interest-earning   assets  and   interest-bearing
liabilities,  and the  interest  earned  or paid  on  such  amounts.  Management
believes  that the use of month-end  average  balances  instead of daily average
balances has not caused any material difference in the information presented.
<PAGE>
<TABLE>
<CAPTION>


                      AVERAGE BALANCE SHEET/YIELD ANALYSIS

                                                                  Year Ended December 31,
                                    ------------------------------------------------------------------------------------------------
                                                1999                          1998                              1997
                                    -----------------------------   -------------------------------   ------------------------------
                                    Average               Average   Average                Average    Average              Average
                                    Balance Interest(1)  Yield/Cost Balance  Interest(1)  Yield/Cost  Balance Interest(1) Yield/Cost
                                    ------- -----------  ---------- -------  -----------  ----------  ------- ----------- ----------
                                                                  (Dollars in thousands)

Assets:
Interest-earning assets:
<S>                                 <C>         <C>        <C>      <C>      <C>           <C>        <C>         <C>         <C>
   Interest-earning deposits....... $2,981      $123       4.13%    $11,441  $   600       5.24%      $3,821      $246        6.44%
   Mortgage-backed securities......  3,093       238       7.69       3,304      257       7.78        2,421       214        8.84
   Other investment securities.....  5,451       329       6.04       4,301      257       5.98        3,487       197        5.65
   Loans receivable (2)............100,056     7,710       7.71      86,421    6,932       8.02       74,382     6,090        8.19
   FHLB stock......................    876        70       7.99         735       59       8.03          676        54        7.99
                                   -------     -----               --------    -----                 -------    ------
     Total interest-earning assets.112,457     8,470       7.53     106,202    8,105       7.63       84,787     6,801        8.02
                                               -----                           -----                            ------
Non-interest earning assets, net of
   allowance for loan losses.......  2,173                            2,030                            2,039
                                  --------                         --------                          -------
     Total assets.................$114,630                         $108,232                          $86,826
                                  ========                         ========                          =======
Liabilities and shareholder's equity:
Interest-bearing liabilities:
   Savings deposits................ $3,389       134       3.95      $3,466      139       4.01       $3,845       159        4.14
   Interest-bearing demand......... 16,422       793       4.83      11,920      496       4.16       10,350       444        4.29
   Certificates of deposit......... 47,313     2,548       5.39      46,999    2,729       5.81       47,403     2,764        5.83
   Stock subscriptions refundable..    ---       ---        ---         ---      ---        ---        2,737       130        4.75
   FHLB advances...................  6,043       342       5.66         873       51       5.84        5,748       339        5.90
                                   -------     -----               --------    -----                 -------    ------
     Total interest-
        bearing liabilities........ 73,167     3,817       5.22      63,258    3,415       5.40       70,083     3,836        5.47
                                               -----                           -----                            ------
Other liabilities..................  2,199                            2,504                            1,960
                                  --------                         --------                          -------
     Total liabilities............. 75,366                           65,762                           72,043
Shareholders' equity............... 39,264                           42,470                           14,783
                                  --------                         --------                          -------
     Total liabilities and
         shareholders' equity.....$114,630                         $108,232                          $86,826
                                  ========                         ========                          =======
Net interest-earning assets........$39,290                          $42,944                          $14,704
Net interest income................           $4,653                          $4,690                            $2,965
                                              ======                          ======                            ======
Interest rate spread (3)...........                        2.31%                           2.23%                              2.55%
Net yield on weighted average
   interest-earning assets (4).....                        4.14%                           4.42%                              3.50%
   Average interest-earning
     assets to average interest-
     bearing liabilities........... 153.70%                         167.89%                           120.98%
</TABLE>

(1)  Interest  income on loans  receivable  includes loan fee income of $79,000,
     $88,000 and $97,000 for each of the years ended December 31, 1999, 1998 and
     1997, respectively.

(2)  Total loans less loans in process.

(3)  Interest rate spread is calculated by subtracting weighted average interest
     rate  cost  from  weighted  average  interest  rate  yield  for the  period
     indicated.

(4)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.


<PAGE>

Interest Rate Spread

     The Company's  results of operations have been determined  primarily by net
interest income and, to a lesser extent,  fee income,  miscellaneous  income and
general and  administrative  expenses.  The  Company's  net  interest  income is
determined by the interest  rate spread  between the yields the Company earns on
interest-earning  assets and the rates it pays on interest-bearing  liabilities,
and by the  relative  amounts of  interest-earning  assets and  interest-bearing
liabilities.

     The following table sets forth the weighted average effective interest rate
that the Company  earned on its loan and  investment  portfolios,  the  weighted
average  effective cost of its deposits and advances,  the interest rate spread,
and net yield on  weighted  average  interest-earning  assets  for the  periods.
Average balances are based on average month-end  balances.  Management  believes
that the use of month-end average balances instead of daily average balances has
not caused any material difference in the information presented.
<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                            ------------------------------------------------
                                                            1999                  1998                  1997
                                                            ----                  ----                  ----
Weighted average interest rate earned on:
<S>                                                         <C>                   <C>                   <C>
   Interest-earning deposits.......................         4.13%                 5.24%                 6.44%
   Mortgage-backed securities......................         7.69                  7.78                  8.84
   Other investment securities.....................         6.04                  5.98                  5.65
   Loans receivable................................         7.71                  8.02                  8.19
   FHLB stock......................................         7.99                  8.03                  7.99
     Total interest-earning assets.................         7.53                  7.63                  8.02
Weighted average interest rate cost of:
   Savings deposits................................         3.95                  4.01                  4.14
   Interest-bearing demand.........................         4.83                  4.16                  4.29
   Certificates of deposit.........................         5.39                  5.81                  5.83
   Stock subscriptions refundable..................          ---                   ---                  4.75
   FHLB advances...................................         5.66                  5.84                  5.90
     Total interest-bearing liabilities............         5.22                  5.40                  5.47
Interest rate spread (1)...........................         2.31                  2.23                  2.55
Net yield on weighted average
   interest-earning assets (2).....................         4.14                  4.42                  3.50
</TABLE>

(1)    Interest  rate spread is  calculated  by  subtracting  combined  weighted
       average  interest rate cost from combined  weighted average interest rate
       earned for the period  indicated.  Interest  rate spread  figures must be
       considered  in  light  of  the   relationship   between  the  amounts  of
       interest-earning assets and interest-bearing liabilities.

(2)    The net yield on weighted average  interest-earning  assets is calculated
       by dividing  net  interest  income by weighted  average  interest-earning
       assets for the period indicated.

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-related  assets and  liabilities  have
affected the Company's interest income and expense during the periods indicated.
For each  category of  interest-earning  asset and  interest-bearing  liability,
information is provided on changes  attributable to (1) changes in rate (changes
in rate  multiplied by old volume) and (2) changes in volume  (changes in volume
multiplied  by old rate).  Changes  attributable  to both rate and volume  which
cannot be segregated  have been  allocated  proportionally  to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>


                                                       Increase (Decrease) in Net Interest Income
                                                       ------------------------------------------
                                                                                        Total
                                                       Due to          Due to            Net
                                                        Rate           Volume          Change
                                                        ----           ------          ------
                                                                   (In thousands)
<S>                                                     <C>              <C>             <C>
Year ended December 31, 1999 compared
to year ended December 31, 1998
   Interest-earning assets:
     Interest-earning deposits.....................     $(107)           $(370)          $(477)
     Mortgage-backed securities....................        (3)             (16)            (19)
     Other investment securities...................         3               69              72
     Loans receivable..............................      (281)           1,059             778
     FHLB stock....................................       ---               11              11
                                                        -----           ------          ------
       Total.......................................      (388)             753             365
                                                        -----           ------          ------
   Interest-bearing liabilities:
     Savings deposits..............................        (2)              (3)             (5)
     Interest-bearing demand.......................        89              208             297
     Certificates of deposit.......................      (199)              18            (181)
     FHLB advances.................................        (2)             293             291
                                                        -----           ------          ------
       Total.......................................      (114)             516             402
                                                        -----           ------          ------
   Net change in net interest income...............     $(274)            $237            $(37)
                                                        =====             ====            ====

Year ended December 31, 1998 compared
to year ended December 31, 1997
   Interest-earning assets:
     Interest-earning deposits.....................   $   (53)            $407            $354
     Mortgage-backed securities held to maturity...       (28)              71              43
     Other investment securities held to maturity..        12               48              60
     Loans receivable..............................      (126)             968             842
     FHLB stock....................................       ---                5               5
                                                        -----           ------          ------
       Total.......................................      (195)           1,499           1,304
                                                        -----           ------          ------
   Interest-bearing liabilities:
     Savings deposits..............................        (5)             (15)            (20)
     Interest-bearing demand.......................       (14)              66              52
     Certificates of deposit.......................       (12)             (23)            (35)
     Stock subscriptions refundable................       ---             (130)           (130)
     FHLB advances.................................        (3)            (285)           (288)
                                                        -----           ------          ------
       Total.......................................       (34)            (387)           (421)
                                                        -----           ------          ------
   Net change in net interest income...............     $(161)          $1,886          $1,725
                                                        =====           ======          ======

Year ended December 31, 1997 compared
to year ended December 31, 1996
   Interest-earning assets:
     Interest-earning deposits.....................   $    (6)           $ 185       $     179
     Mortgage-backed securities held to maturity...         7              (56)            (49)
     Other investment securities held to maturity..         4               18              22
     Loans receivable..............................        34              494             528
     FHLB stock....................................         1                8               9
                                                       ------            -----        --------
       Total.......................................        40              649             689
                                                       ------            -----        --------
   Interest-bearing liabilities:
     Savings deposits..............................         7                4              11
     Interest-bearing demand.......................        20               55              75
     Certificates of deposit.......................       (32)              80              48
     Stock subscriptions refundable................       ---              130             130
     FHLB advances.................................        21              127             148
                                                       ------            -----        --------
       Total.......................................        16              396             412
                                                       ------            -----        --------
   Net change in net interest income...............    $   24            $ 253        $    277
                                                       ======            =====        ========
</TABLE>

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

         Total assets increased approximately $12.5 million, or 11.5%, to $120.7
million at December 31,  1999,  from $108.2  million at December  31, 1998.  The
increase was primarily due to loan growth of $15.3 million  offset by a decrease
in cash and cash  equivalents of $3.1 million.  Net loans  increased by 16.8% to
$106.2 million due to an increase in customer  demand and an increased  focus by
the Company in the areas of commercial and consumer lending.

         Loans and Allowance  for Loan Losses.  Average loans for the year ended
December  31, 1999 were $100.1  million  compared to average  loans for the 1998
period of $86.4 million,  an increase of approximately  16%. The growth in loans
was funded by a decrease in short-term  interest  bearing deposits and increases
in deposits and FHLB  advances.  The average  rates on loans were 8.02% for 1998
and 7.71% for 1999,  a  decrease  of 31 basis  points.  As loans  increased  the
allowance for loan losses also  increased  from $362,000 at December 31, 1998 to
$422,000 at December 31, 1999.  The allowance for loan losses as a percentage of
total loans  remained  constant  from 1998 to 1999 at .40%.  The increase in the
allowance  for loan losses was a result of a $60,000  provision  for loan losses
for the year ended December 31, 1999. The ratio of the allowance for loan losses
to  non-performing  loans was 103.7% at December 31, 1998  compared to 253.7% at
December 31, 1999.  Nonperforming  loans decreased from $349,000 at December 31,
1998 to $166,000 at December 31, 1999.

         Deposits. Deposits increased $4.1 million to $69.0 million during 1999,
an increase  of 6.4%.  Increased  deposits  were  utilized to fund loan  growth.
Interest  bearing  demand  accounted  for the  majority  of the  growth  with an
increase of $6.0 million, or 50.5%,  during this period.  Average total deposits
increased $4.7 million,  or 7.6%, from $62.4 million for the year ended December
31, 1998 compared to $67.1 million for the year ended December 31, 1999.

         Borrowed  Funds.  Borrowed funds  increased $10.7 million from December
31,  1998 to  December  31,  1999.  The  increase  in total  borrowed  funds was
comprised of an increase in FHLB advances of $10.9 million and a decrease in the
note  payable  to  Pedcor  Investments  -  1993-XVI,  LP  ("Pedcor"),  a limited
partnership  organized to build, own and operate a 48-unit apartment complex, of
$183,000.  The note to  Pedcor  was  used to fund an  investment  in the  Pedcor
low-income  housing income tax credit limited  partnership and bears no interest
so long as there exists no event of default.  As with  deposits,  the  increased
borrowed funds were used to fund loan growth. Average FHLB advances increased to
$6.0 million for 1999 compared to $873,000 for 1998.

         Shareholders' Equity. Stockholders' equity decreased approximately $2.3
million to $38.3 million at December 31, 1999. The decrease was primarily due to
stock  repurchases  of $3.4 million and cash  dividends of $1.2  million.  These
decreases  were  offset by net income for year ended  December  31, 1999 of $2.0
million,  Employee  Stock  Ownership Plan shares earned of $122,000 and unearned
compensation amortization of $227,000.

Financial  Condition  at December 31, 1998  Compared to  Financial  Condition at
December 31, 1997

     Total  assets  decreased  $23.9  million,  or 18.1% at December  31,  1998,
compared to December  31,  1997.  The  decline  was  primarily  in cash and cash
equivalents,  which  decreased  $38.6  million  as the  result of the  Company's
payment of the stock  subscriptions  refundable of $22.7 million at December 31,
1997. This decrease in cash and cash  equivalents was offset by increases in net
loans and investment  securities  held to maturity.  Net loans  increased  $12.5
million,  or 15.9%, due primarily to an increase in customer demand.  Investment
securities held to maturity increased by $2.2 million, or 37.9%.

     Loans and Allowance for Loan Losses. Average loans increased $12.0 million,
or 16.2%,  from the period ended  December  31, 1997 to December  31, 1998.  The
growth in loans was  funded by stock  conversion  proceeds.  Average  loans were
$74.4  million for the 1997 period and $86.4  million for the 1998  period.  The
allowance for loan losses as a percentage of total loans  increased from .32% to
 .40% due to an  increase  in the  allowance  for loan  losses  from  $252,000 at
December  31,  1997 to  $362,000  at  December  31,  1998.  The  increase in the
allowance  for loan losses was a result of a $110,000  provision for loan losses
for the year ended December 31, 1998.  This increase in the allowance was due to
loan growth and an increase in non-performing  loans. The ratio of the allowance
for loan losses to non-performing loans was 484.6% at December 31, 1997 compared
to 103.7% at December 31, 1998.  Nonperforming  loans  increased from $52,000 at
December 31, 1997 to $349,000 at December 31,  1998.  Included in  nonperforming
loans at December 31, 1998 were $322,000 of impaired loans.

     Deposits.  Deposits increased $2.6 million to $64.8 million during 1998, an
increase  of  4.2%.  Increased  deposits  were  utilized  to fund  loan  growth.
Certificates  of  deposits  accounted  for the  majority  of the growth  with an
increase of $2.6 million,  or 5.7%,  during this period.  Average total deposits
increased $787,000,  or 1.3%, from $61.6 million for the year ended December 31,
1997 compared to $62.4 million for the year ended December 31, 1998.

     Borrowed  Funds.  Borrowed  funds  decreased $1.8 million,  or 49.8%,  from
December 31, 1997 to December 31, 1998.  The decline in total borrowed funds was
comprised of a decrease in FHLB advances of $1.6 million,  67.5%, and a decrease
in the note payable to Pedcor Investments - 1993-XVI,  LP ("Pedcor"),  a limited
partnership  organized to build, own and operate a 48-unit apartment complex, of
$179,000,  or 14.9%.  The note to Pedcor was used to fund an  investment  in the
Pedcor  low-income  housing income tax credit limited  partnership  and bears no
interest  so long as there  exists no event of  default.  Due to the  conversion
proceeds  available to fund loan growth,  it was not necessary to renew advances
as they  matured.  Average  FHLB  advances  decreased  to $873  million for 1998
compared to $5.7 million for 1997, a decrease of $4.9 million, or 84.8%.

     Shareholders'  Equity.  Shareholders'  equity  decreased  $2.4 million from
$42.9  million at December 31, 1997 to $40.5  million at December 31, 1998.  The
decrease was  primarily  due to the $1.8 million  contribution  made to fund the
recognition and retention  compensation  plan, stock repurchases of $1.9 million
and cash  dividends of $1.3 million.  These  decreases were offset by net income
for the year ended December 31, 1998 of $2.0 million,  Employee Stock  Ownership
Plan  shares  earned of  $149,000  and  unearned  compensation  amortization  of
$114,000.

Comparison of Operating Results For Years Ended December 31, 1999 and 1998

     General.  Net income decreased $4,000, or .2%, from $1,974,000 for the year
ended  December 31, 1998 to $1,970,000 for the year ended December 31, 1999. The
decrease was primarily due to an increase in total other expenses. The return on
average  assets was 1.72% and 1.82 % for the years ended  December  31, 1999 and
1998, respectively.

     Interest  Income.  Total interest income was $8.5 million for 1999 compared
to $8.1 million for 1998. The increase in interest income was due to an increase
in volume.  Average earning assets increased $6.3 million,  or 5.9%, from $106.2
million for 1998  compared  to $112.5  million  for 1999.  The average  yield on
interest-earning assets decreased from 7.6% for the year ended December 31, 1998
to 7.5% for the comparable period in 1999.

     Interest Expense.  Interest expense increased  $402,000,  or 11.8%, for the
year ended  December  31, 1999  compared to the year ended  December  31,  1998.
Average  interest-bearing  liabilities  increased $9.9 million,  or 15.6%,  from
$63.3  million  for the 1998  period to $73.2  million  during the 1999  period.
Average deposits increased by $4.7 million,  or 7.5%, from $62.4 million for the
1998  period  to  $67.1  million  for the 1999  period.  Average  FHLB  advances
increased  $5.2  million,  or 592.2%,  from $873,000 for the 1998 period to $6.0
million during the 1999 period.

     Net Interest Income. Net interest income decreased $37,000, or .8%, for the
year ended  December 31, 1999 compared to the year ended  December 31, 1998. The
decrease was  primarily  due to a decline in the net interest  margin from 4.4 %
for the year ended  December  31, 1998 to 4.1% for the year ended  December  31,
1999.

     Provision for Loan Losses. The provision for loan losses for the year ended
December 31, 1999 was $60,000  compared to $110,000 for the same period in 1998.
The  provision  and the related  increase in the  allowance for loan losses were
considered adequate, based on growth, size, condition and components of the loan
portfolio.

     Other Income  (Losses).  Other  income  (losses)  increased  from losses of
$48,000  for the year ended  December  31,  1998 to income of  $139,000  for the
comparable  period in 1999. This increase was in part due to $73,000 of gains on
sales of  securities  available for sale.  Securities  available for sale with a
cost of $523,000 were sold during the third quarter of 1999. In addition, equity
in losses  of the  limited  partnership  was down  $77,000  from 1998 due to the
operating  results of the limited  partnership.  The  investment  in the limited
partnership  represents  a 99% equity in Pedcor.  In addition to  recording  the
equity in the  losses of  Pedcor,  a benefit of  low-income  housing  income tax
credits in the amount of $178,000 for both 1999 and 1998 was recorded.

     Salaries and Employee  Benefits.  Salaries and employee  benefits were $1.1
million for the year ended  December 31, 1999  compared to $850,000 for the 1998
period,  and increase of $219,000,  or 25.8%. This increase was in part due to a
$114,000  increase  in  compensation  expense  related  to the  recognition  and
retention  compensation  plan  that  became  effective  on June  30,  1998.  The
remaining  increase  resulted  from  an  increase  in the  number  of  full-time
equivalent  employees and normal increases in employee  compensation and related
payroll taxes.

     Net  Occupancy  and Equipment  Expenses.  Occupancy  expenses and equipment
expenses increased $7,000, or 10.4%, during 1999 compared to 1998.

     Deposit Insurance  Expense.  Deposit insurance expense decreased $2,000, or
4.3%,  from $46,000 for the year ended December 31, 1998 to $44,000 for the same
period in 1999.

     Legal and Professional  Fees. Legal and professional fees were $127,000 for
the year ended  December 31, 1999  compared to $128,000  for the 1998 period,  a
decrease of $1,000.

     Data  Processing.  Data processing  expense  increased from $77,000 for the
year ended December 31, 1998 to $122,000 for the  comparable  period in 1999, an
increase  of  $45,000.  This  increase  was  due  to  approximately  $45,000  of
non-recurring  expenses  related to the  Company's  data  processing  conversion
during the first quarter of 1999.

     Other Expense. Other expenses,  consisting primarily of expenses related to
advertising,  directors'  fees,  supervisory  examination  fees,  supplies,  and
postage  increased  $27,000,  or 9.1% for 1999  compared to 1998.  The  increase
resulted from nominal increases in a variety of expense categories.

     Income Tax Expense.  Income tax expense decreased $91,000,  or 8.3%, during
1999  compared  to 1998.  The  effective  tax rate was  33.7%  and 35.7% for the
respective 1999 and 1998 periods.

Comparison of Operating Results For Years Ended December 31, 1998 and 1997

     General. Net income increased $776,000, or 64.8%, from $1.2 million for the
year ended  December  31, 1997 to $2.0  million for the year ended  December 31,
1998. The increase was primarily due to an increase in net interest income which
was primarily  attributable to the Company's stock issuance on December 29, 1997
which  resulted in net  proceeds  to the Company in the amount of  approximately
$27.8 million after costs and excluding the shares issued for the Employee Stock
Ownership Plan. The Company primarily used the proceeds of the stock offering to
invest in loans and short-term  interest-bearing  deposits and for the repayment
of Federal Home Loan Bank  advances,  which  resulted in increased  net interest
income.  The return on average  assets was 1.82% and 1.38 % for the years  ended
December 31, 1998 and 1997, respectively.

     Interest  Income.  Our total  interest  income  was $8.1  million  for 1998
compared to $6.8  million  for 1997.  The  increase  in interest  income was due
primarily  to an increase in volume.  Average  earning  assets  increased  $21.4
million,  or 25.3%,  from $84.8 million for 1997 compared to $106.2  million for
1998. The average yield on  interest-earning  assets decreased from 8.0% for the
year ended December 31, 1997 to 7.6% for the comparable period in 1998.

     Interest Expense.  Interest expense decreased  $421,000,  or 11.0%, for the
year ended  December  31, 1998  compared to the year ended  December  31,  1997.
Average interest-bearing liabilities decreased $6.8 million, or 9.7%, from $70.1
million for the 1997 period to $63.3  million  during the 1998  period.  Average
deposits increased by $787,000,  or 1.3%, from $61.6 million for the 1997 period
to $62.4  million for the 1998 period.  Average  FHLB  advances  decreased  $4.9
million,  or 84.8%, from $5.8 million for the 1997 period to $873,000 during the
1998 period.

     Net Interest Income. Net interest income increased $1.7 million,  or 58.2%,
for the year ended  December  31, 1998  compared to the year ended  December 31,
1997.  $1.9 million of the increase was  primarily due to the increase in volume
of earning assets. The net yield of weighted average interest-earning assets was
4.4% for the year ended  December 31, 1998  compared to 3.5% for the  comparable
1997 period.

     Provision for Loan Losses. The provision for loan losses for the year ended
December 31, 1998 was $110,000 compared to $165,000 for the same period in 1997.
The  provision  and the related  increase in the  allowance for loan losses were
considered adequate, based on growth, size, condition and components of the loan
portfolio.

     Other Losses.  Other losses decreased $48,000, or 50.0%, for the year ended
December 31, 1998 compared to the 1997 period  primarily due to decreased losses
of $37,000 from Union  Federal's  investment in a low-income  housing income tax
credit limited partnership. The investment in the limited partnership represents
a 99% equity in Pedcor.  In  addition to  recording  the equity in the losses of
Pedcor,  a benefit of  low-income  housing  income tax  credits in the amount of
$178,000 for both 1998 and 1997 was recorded.

     Salaries  and  Employee  Benefits.  Salaries  and  employee  benefits  were
$850,000 for the year ended  December 31, 1998 compared to $480,000 for the 1997
period, an increase of $370,000, or 77.1%. This increase resulted primarily from
$263,000 of  compensation  expense  related to the ESOP and the  recognition and
retention compensation plan. The remaining increase resulted from an increase in
the number of full-time  equivalent  employees and normal  increases in employee
compensation and related payroll taxes.

     Net  Occupancy  and Equipment  Expenses.  Occupancy  expenses and equipment
expenses increased $6,000, or 9.8%, during 1998 compared to 1997.

     Deposit Insurance Expense.  Deposit insurance expense increased $15,000, or
48.4%, from $31,000 for the year ended December 31, 1997 to $46,000 for the same
period in 1998.

     Legal and Professional  Fees. Legal and professional fees were $128,000 for
the year ended  December 31, 1998  compared to $34,000 for the 1997  period,  an
increase of  $94,000.  This  increase  was a result of the  additional  expenses
incurred as a public company.

     Data Processing.  Data processing expense increased $11,000, or 16.7%, from
$66,000 for the year ended  December  31, 1998 to $77,000 for the same period in
1999.

     Other Expense. Other expenses,  consisting primarily of expenses related to
service center fees, advertising, directors' fees, supervisory examination fees,
supplies,  and postage  increased $7,000, or 2.4% for 1998 compared to 1997. The
increase resulted from nominal increases in a variety of expense categories.

     Income Tax  Expense.  Income tax  expense  increased  $549,000,  or 100.7%,
during 1998 compared to 1997. The increase was directly  related to the increase
in taxable income for the period. The effective tax rate was 35.7% and 31.2% for
the respective 1998 and 1997 periods.

Liquidity and Capital Resources

         The  following is a summary of the Company's  cash flows,  which are of
three major types. Cash flows from operating activities consist primarily of net
income generated by cash.  Investing  activities generate cash flows through the
origination and principal  collection on loans as well as purchases and sales of
securities.  Investing  activities will generally  result in negative cash flows
when the Company experiences loan growth.  Cash flows from financing  activities
include savings deposits,  withdrawals and maturities and changes in borrowings.
The following table summarizes cash flows for each year in the three-year period
ended December 31, 1999.
<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                ---------------------------------------------------
                                                                  1999                 1998                  1997
                                                                -------              --------               -------
                                                                                 (In thousands)

<S>                                                              <C>                   <C>                   <C>
Operating activities..........................................   $2,099                $2,355                $1,367
                                                                -------              --------               -------
Investing activities:
Investment securities
     Purchases of investment securities
       available for sale.....................................     (812)                  ---                   ---
     Proceeds from sales of investment
       securities available for sale..........................      596                   ---                   ---
     Proceeds from maturities and paydowns of
     mortgage-backed securities held to maturity..............      731                   607                   639
     Purchases of other investment
       securities held to maturity............................   (1,415)               (9,204)               (1,200)
     Proceeds from maturities of
       investment securities held to maturity.................    1,200                 6,400                   500
Purchase of loans.............................................   (1,439)                 (800)                 (500)
Other net change in loans.....................................  (14,088)              (11,729)               (5,517)
Purchase of FHLB of Indianapolis Stock........................     (299)                  (37)                 (128)
Proceeds on sale of foreclosed real estate....................      100                     5                    76
Purchases of premises and equipment...........................      (45)                  (18)                  (23)
Other investing activities....................................       (3)                   (2)                   (3)
                                                                -------              --------               -------
     Net cash used by investing activities....................  (15,474)              (14,778)               (6,156)
                                                                -------              --------               -------
Financing activities:
Net change in
   Interest-bearing demand and savings deposits...............    6,316                   (28)                2,696
   Certificates of deposits...................................   (2,171)                2,616                  (874)
   Stock subscription escrow accounts.........................      ---               (22,687)               22,687
Proceeds from borrowings......................................   11,000                   ---                 1,500
Repayment of borrowings.......................................     (297)               (1,780)               (5,807)
Net change in advances by borrowers
   for taxes and insurance....................................       (5)                   54                    20
Cash dividends................................................   (1,118)                 (729)                  ---
Contribution of unearned compensation ........................      ---                (1,754)                  ---
Repurchase of common stock....................................   (3,424)               (1,859)                  ---
Proceeds from sale of common stock, net of costs..............      ---                   ---                27,883
                                                                -------              --------               -------
     Net cash provided (used) by financing activities.........   10,301               (26,167)               48,105
                                                                -------              --------               -------
Net increase(decrease) in cash and cash equivalents..........   $(3,074)             $(38,590)              $43,316
                                                                =======              ========               =======
</TABLE>

      Federal law requires that savings  associations  maintain an average daily
balance of liquid assets in an amount not less than 4% or more than 10% of their
withdrawable  accounts plus short-term  borrowings.  Liquid assets include cash,
certain time deposits, certain bankers' acceptances,  specified U.S. government,
state  or  federal  agency  obligations,   certain  corporate  debt  securities,
commercial paper, certain mutual funds, certain mortgage-related securities, and
certain  first-lien  residential  mortgage loans.  The OTS recently  amended its
regulation that implements  this statutory  liquidity  requirement to reduce the
amount  of  liquid  assets  a  savings  association  must  hold  from  5% of net
withdrawable  accounts and short-term  borrowings to 4%. The OTS also eliminated
the requirement  that savings  associations  maintain  short-term  liquid assets
constituting  at least 1% of their  average  daily  balance of net  withdrawable
deposit  accounts  and current  borrowings.  The  revised OTS rule also  permits
savings  associations  to calculate  compliance  with the liquidity  requirement
based upon their  average  daily  balance of liquid  assets  during each quarter
rather than during each month, as was required under the prior rule. The OTS may
impose  monetary  penalties  on  savings  associations  that fail to meet  these
liquidity requirements. As of December 31, 1999, Union Federal had liquid assets
of $5.6 million, and a regulatory liquidity ratio of 6.5%.

      Pursuant to OTS capital  regulations,  savings associations must currently
meet a 1.5% tangible capital requirement,  a 3% leverage ratio (or core capital)
requirement, and a total risk-based capital to risk-weighted assets ratio of 8%.
At December 31, 1999,  Union  Federal's  capital levels  exceeded all applicable
regulatory  capital  requirements  currently  in  effect.  The  following  table
provides the minimum regulatory capital requirements and Union Federal's capital
ratios as of December 31, 1999:

                                     At December 31, 1999
                           ---------------------------------------------------
                           OTS Requirement       Union Federal's Capital Level
                           ---------------       -----------------------------
                           % of               % of                    Amount
Capital Standard          Assets  Amount    Assets(1)      Amount    of Excess
----------------          ------  ------    ---------      ------    ---------
                                       (Dollars in thousands)
Tangible capital........   1.5%   $1,796      27.2%       $32,532     $30,736
Core capital (2)........   3.0     3,592      27.2         32,532      28,940
Risk-based capital......   8.0     5,245      50.3         32,954      27,709

(1)  Tangible and core capital levels are shown as a percentage of total assets;
     risk-based  capital  levels  are  shown as a  percentage  of  risk-weighted
     assets.

(2)  The  OTS  adopted  a core  capital  requirement  for  savings  associations
     comparable to that recently  adopted by the OCC for national banks. The new
     regulation,  which became effective on April 1, 1999,  requires at least 3%
     of total adjusted assets for savings  associations that receive the highest
     supervisory  rating for safety  and  soundness,  and 4% to 5% for all other
     savings  associations.  Union  Federal is in  compliance  with the  revised
     regulation.

         As of  December  31,  1999,  management  is not  aware  of any  current
recommendations by regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have, a material adverse effect on Union
Federal's liquidity, capital resources or results of operations.

Impact of Inflation

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

         The Company's primary assets and liabilities are monetary in nature. As
a  result,  interest  rates  have a more  significant  impact  on the  Company's
performance  than the effects of general  levels of inflation.  Interest  rates,
however,  do not  necessarily  move  in the  same  direction  or with  the  same
magnitude as the price of goods and services,  since such prices are affected by
inflation.  In a period of rapidly  rising  interest  rates,  the  liquidity and
maturities  structures of the Company's  assets and  liabilities are critical to
the maintenance of acceptable performance levels.

         The principal effect of inflation,  as distinct from levels of interest
rates, on earnings is in the area of noninterest expense.  Such expense items as
employee  compensation,  employee benefits and occupancy and equipment costs may
be  subject to  increases  as a result of  inflation.  An  additional  effect of
inflation  is the  possible  increase  in the  dollar  value  of the  collateral
securing loans that the Company has made. The Company is unable to determine the
extent,  if any, to which  properties  securing  its loans have  appreciated  in
dollar value due to inflation.

Quantitative and Qualitative Disclosures about Market Risks

         An important  component of Union Federal's  asset/liability  management
policy  includes  examining  the  interest  rate  sensitivity  of its assets and
liabilities and monitoring the expected  effects of interest rate changes on its
net portfolio value.

         An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period.  If Union Federal's
assets  mature  or  reprice  more  quickly  or  to a  greater  extent  than  its
liabilities,  Union  Federal's net portfolio value and net interest income would
tend to increase  during periods of rising  interest  rates but decrease  during
periods of falling interest rates. Conversely,  if Union Federal's assets mature
or reprice  more  slowly or to a lesser  extent  than its  liabilities,  its net
portfolio value and net interest income would tend to decrease during periods of
rising  interest rates but increase  during periods of falling  interest  rates.
Union  Federal's  policy has been to mitigate the interest rate risk inherent in
the historical  business of savings  associations,  the origination of long-term
loans funded by short-term deposits,  by pursuing certain strategies designed to
decrease the  vulnerability of its earnings to material and prolonged changes in
interest rates.

         Because of the lack of customer demand for adjustable rate loans in its
market area, Union Federal  primarily  originates  fixed-rate real estate loans,
which  accounted for  approximately  79.7% of its loan portfolio at December 31,
1999.  To manage the interest  rate risk of this type of loan  portfolio,  Union
Federal  limits  maturities  of  fixed-rate  loans to no more than 20 years.  In
addition,  Union Federal  continues to offer and attempts to increase its volume
of adjustable  rate loans when market  interest rates make these type loans more
attractive to customers.

         Management  believes it is critical to manage the relationship  between
interest  rates and the effect on Union  Federal's net portfolio  value ("NPV").
This approach  calculates the  difference  between the present value of expected
cash  flows  from  assets  and the  present  value of  expected  cash flows from
liabilities,  as well as cash  flows from  off-balance  sheet  contracts.  Union
Federal  manages assets and liabilities  within the context of the  marketplace,
regulatory  limitations and within limits  established by its Board of Directors
on the amount of change in NPV which is acceptable  given certain  interest rate
changes.

         The OTS issued a regulation,  which uses a net market value methodology
to measure the interest rate risk exposure of savings  associations.  Under this
OTS  regulation,  an  institution's  "normal" level of interest rate risk in the
event of an assumed change in interest rates is a decrease in the  institution's
NPV in an amount not  exceeding 2% of the present  value of its assets.  Savings
associations  with over  $300  million  in assets or less than a 12%  risk-based
capital  ratio are required to file OTS Schedule  CMR. Data from Schedule CMR is
used by the OTS to calculate  changes in NPV (and the related  "normal" level of
interest rate risk) based upon certain interest rate changes  (discussed below).
Associations  which  do not  meet  either  of the  filing  requirements  are not
required to file OTS Schedule CMR, but may do so  voluntarily.  As Union Federal
does not meet either of these requirements,  it is not required to file Schedule
CMR, although it does so voluntarily.  Under the regulation,  associations which
must file are  required  to take a deduction  (the  interest  rate risk  capital
component)  from their total  capital  available to  calculate  their risk based
capital  requirement  if their  interest rate exposure is greater than "normal."
The amount of that  deduction  is  one-half  of the  difference  between (a) the
institution's  actual  calculated  exposure to a 200 basis point  interest  rate
increase or  decrease  (whichever  results in the greater pro forma  decrease in
NPV) and (b) its "normal"  level of exposure which is 2% of the present value of
its assets.

         It is estimated  that at December 31, 1999,  NPV would decrease 20% and
30% in the event of 200 and 300 basis point  increases in market interest rates,
respectively,  compared to 15% and 23% for the same  increases  at December  31,
1998. Union Federal's NPV at December 31, 1999 would increase 15% and 22% in the
event of 200 and 300 basis point decreases in market rates, respectively. A year
earlier,  200 and 300 basis point decreases in market rates would have increased
NPV 9% and 15%, respectively.

          Presented  below,  as of December  31,  1999 and 1998,  is an analysis
performed  by the OTS of Union  Federal's  interest  rate  risk as  measured  by
changes in NPV for  instantaneous  and  sustained  parallel  shifts in the yield
curve, in 100 basis point increments,  up and down 300 basis points. At December
31, 1999, 2% of the present value of Union  Federal's  assets was  approximately
$2.4 million.  Because the interest  rate risk of a 200 basis point  increase in
market rates (which was greater than the interest rate risk of a 200 basis point
decrease)  was $6.3 million at December 31, 1999,  Union Federal would have been
required to deduct $2.0  million from its total  capital  available to calculate
its risk based capital  requirement if it had been subject to the OTS' reporting
requirements  under this methodology.  Union Federal's exposure to interest rate
risk  results  from  the  concentration  of  fixed  rate  mortgage  loans in its
portfolio.

 Change             Net Portfolio Value                 NPV as % of PV of Assets
In Rates         $ Amount         $ Change    % Change   NPV Ratio     Change
--------------------------------------------------------------------------------
       (Dollars in thousands)

   + 300 bp *      $22,656       $(9,490)      (30)%       20.81%     (615) bp
   + 200 bp         25,801        (6,345)      (20)        22.97      (399) bp
   + 100 bp         29,033        (3,112)      (10)        25.06      (190) bp
       0 bp         32,145                                 26.96
   - 100 bp         34,871         2,726         8         28.53        157 bp
   - 200 bp         37,056         4,910        15         29.72        276 bp
   - 300 bp         39,087         6,941        22         30.78        382 bp

             Interest Rate Risk Measures: 200 Basis Point Rate Shock

 Pre-Shock NPV Ratio: NPV as % of PV of Assets.....................  26.96%
 Exposure Measure: Post-Shock NPV Ratio............................  22.97%
 Sensitivity Measure: Change in NPV Ratio..........................  399 bp


 Change            Net Portfolio Value                 NPV as % of PV of Assets
In Rates     $ Amount          $ Change    % Change     NPV Ratio    Change
--------------------------------------------------------------------------------
                             (Dollars in thousands)

+ 300 bp *  $25,730           $(7,687)      (23)%         25.18%     (498) bp
+ 200 bp     28,509            (4,907)      (15)          27.08      (308) bp
+ 100 bp     31,161            (2,256)       (7)          28.79      (137) bp
    0 bp     33,417                                       30.16
- 100 bp     35,042             1,625         5           31.08         92 bp
- 200 bp     36,542             3,125         9           31.90        175 bp
- 300 bp     38,272             4,855        15           32.84        268 bp

             Interest Rate Risk Measures: 200 Basis Point Rate Shock

 Pre-Shock NPV Ratio: NPV as % of PV of Assets..........................  30.16%
 Exposure Measure: Post-Shock NPV Ratio.................................  27.08%
 Sensitivity Measure: Change in NPV Ratio...............................  308 bp

* Basis points (1 basis point equals .01%)

         As  with  any  method  of  measuring   interest   rate  risk,   certain
shortcomings  are  inherent  in the  methods of analysis  presented  above.  For
example,  although certain assets and liabilities may have similar maturities or
periods to repricing,  they may react in different  degrees to changes in market
interest  rates.  Also,  the  interest  rates on  certain  types of  assets  and
liabilities may fluctuate in advance of changes in market interest rates,  while
interest  rates  on  other  types  may  lag  behind  changes  in  market  rates.
Additionally, certain assets, such as adjustable-rate 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 likely
deviate significantly from those assumed in calculating the table.
<PAGE>


                          Independent Auditor's Report

Board of Directors
Union Community Bancorp
Crawfordsville, Indiana

We have audited the accompanying  consolidated  balance sheet of Union Community
Bancorp  and  subsidiary  as of  December  31,  1999 and 1998,  and the  related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended  December 31,  1999.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  the consolidated  financial  statements described above present
fairly, in all material respects,  the consolidated  financial position of Union
Community  Bancorp  and  subsidiary  as of December  31, 1999 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1999,  in  conformity  with  generally  accepted
accounting principles.

Olive LLP

Indianapolis, Indiana
January 21, 2000

<PAGE>

                     UNION COMMUNITY BANCORP AND SUBSIDIARY
                           Consolidated Balance Sheet
<TABLE>
<CAPTION>

December 31                                                                      1999              1998
-----------------------------------------------------------------------------------------------------------
Assets
<S>                                                                         <C>           <C>
   Cash                                                                     $    286,812  $         32,153
   Interest-bearing demand deposits                                            2,830,213         6,158,927
                                                                            ------------      ------------
       Cash and cash equivalents                                               3,117,025         6,191,080
   Investment securities

     Available for sale                                                          315,463
     Held to maturity (fair value of $7,199,000 and $8,175,000)                7,521,923         8,026,162
                                                                            ------------      ------------
       Total investment securities                                             7,837,386         8,026,162
   Loans, net of allowance for loan losses of $422,258 and $362,258          106,173,782        90,900,269
   Premises and equipment                                                        367,427           355,194
   Federal Home Loan Bank stock                                                1,043,700           744,500
   Investment in limited partnership                                           1,011,609         1,055,109
   Interest receivable                                                           823,768           714,691
   Other assets                                                                  278,942           174,687
                                                                             ------------      ------------
       Total assets                                                         $120,653,639      $108,161,692
                                                                             ============      ============

Liabilities

   Deposits

     Noninterest bearing                                                    $  1,151,075      $    656,796
     Interest bearing                                                         67,839,367        64,188,836
                                                                            ------------      ------------
       Total deposits                                                         68,990,442        64,845,632
   Federal Home Loan Bank advances                                            11,658,526           772,226
   Note payable                                                                  837,442         1,020,642
   Interest payable                                                              122,565           109,337
   Dividends payable                                                             315,591           270,567
   Other liabilities                                                             449,158           612,427
                                                                            ------------      ------------
       Total liabilities                                                      82,373,724        67,630,831
                                                                            ------------      ------------

Commitments and Contingent Liabilities

Shareholders' Equity
   Preferred stock, without par value
     Authorized and unissued--2,000,000 shares
   Common stock, without par value
     Authorized--5,000,000 shares

     Issued and outstanding--2,600,700 and 2,889,663 shares                    25,389,422        28,193,644
   Retained earnings                                                          15,912,206        15,708,073
   Accumulated other comprehensive income                                         15,385
   Unearned employee stock ownership plan (ESOP) shares                       (1,624,444)       (1,730,736)
   Unearned recognition and retention plan (RRP) shares                       (1,412,654)       (1,640,120)
                                                                            ------------      ------------
       Total shareholders' equity                                             38,279,915        40,530,861
                                                                            ------------      ------------
       Total liabilities and shareholders' equity                           $120,653,639      $108,161,692
                                                                            ============      ============
</TABLE>

See notes to consolidated financial statements.


<PAGE>

                     UNION COMMUNITY BANCORP AND SUBSIDIARY
                        Consolidated Statement of Income
<TABLE>
<CAPTION>

Year Ended December 31                                                 1999               1998             1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>               <C>
Interest and Dividend Income
   Loans                                                              $7,710,042       $6,932,194        $6,090,003
   Investment securities
     Mortgage-backed securities                                          237,665          256,870           214,121
     Other investment securities                                         329,441          257,305           196,937
   Dividends on Federal Home Loan Bank stock                              70,089           58,866            53,956
   Deposits with financial institutions                                  123,002          599,612           245,927
                                                                      ----------       ----------        ----------
       Total interest and dividend  income                             8,470,239        8,104,847         6,800,944
                                                                      ----------       ----------        ----------
Interest Expense
   Deposits                                                            3,474,851        3,364,222         3,366,097
   Stock subscription escrow accounts                                                                       130,411
   Federal Home Loan Bank advances                                       342,481           50,952           339,258
                                                                      ----------       ----------        ----------
       Total interest expense                                          3,817,332        3,415,174         3,835,766
                                                                      ----------       ----------        ----------
Net Interest Income                                                    4,652,907        4,689,673         2,965,178
   Provision for loan losses                                              60,000          110,000           165,000
                                                                      ----------       ----------        ----------
Net Interest Income After Provision for Loan Losses                    4,592,907        4,579,673         2,800,178
                                                                      ----------       ----------        ----------
Other Income (Losses)
   Equity in losses of limited partnership                               (43,500)        (121,000)         (157,800)
   Net realized gains on sales of available-for-sale securities           73,150
   Other income                                                          109,485           73,126            61,952
                                                                      ----------       ----------        ----------
       Total other income (losses)                                       139,135          (47,874)          (95,848)
                                                                      ----------       ----------        ----------
Other Expenses
   Salaries and employee benefits                                      1,068,985          849,909           479,726
   Net occupancy expenses                                                 46,989           38,741            39,159
   Equipment expenses                                                     26,967           28,182            22,436
   Deposit insurance expense                                              43,556           45,847            31,482
   Legal and professional fees                                           126,733          128,193            33,813
   Data processing                                                       121,994           76,901            66,002
   Other expenses                                                        323,871          295,413           288,704
                                                                      ----------       ----------        ----------
       Total other expenses                                            1,759,095        1,463,186           961,322
                                                                      ----------       ----------        ----------
Income Before Income Tax                                               2,972,947        3,068,613         1,743,008

   Income tax expense                                                  1,002,512        1,094,377           544,556
                                                                      ----------       ----------        ----------
Net Income                                                            $1,970,435       $1,974,236        $1,198,452
                                                                      ==========       ==========        ==========

Basic Earnings per Share                                              $      .81       $      .70

Diluted Earnings per Share                                                   .81              .70

See notes to consolidated financial statements.
<PAGE>


                     UNION COMMUNITY BANCORP AND SUBSIDIARY
                 Consolidated Statement of Shareholders' Equity

                                                                                Accumulated
                                   Common Stock                                    Other
                                 Shares               Comprehensive  Retained   Comprehensive   Unearned      Unearned
                               Outstanding  Amount       Income      Earnings      Income      ESOP Shares  Compensation   Total
                              -----------------------------------------------------------------------------------------------------
<S>                           <C>          <C>         <C>          <C>           <C>          <C>           <C>         <C>
Balances, January 1, 1997                                          $13,909,833                                          $13,909,833
   Comprehensive income
       Net income                                      $1,198,452    1,198,452                                            1,198,452
                                                       ==========
   Common stock issued
      in conversion,
      net of costs            3,041,750   $29,637,592                                                                    29,637,592
   Contribution for
      unearned ESOP shares                                                                    $(1,840,000)               (1,840,000)
Balances, December 31, 1997   3,041,750    29,637,592               15,108,285                 (1,840,000)               42,905,877
                              =======================              =================================================================
   Comprehensive income
       Net income                                      $1,974,236    1,974,236                                            1,974,236
                                                       ==========
   Cash dividends
      ($.355 per share)                                               (999,293)                                            (999,293)
   Purchase of common stock    (152,087)   (1,483,829)                (375,155)                                          (1,858,984)
   Contribution for unearned
       RRP shares                                                                                          $(1,753,853)  (1,753,853)
   Amortization of unearned
      compensation expense                                                                                     113,733      113,733
   ESOP shares earned                          39,881                                             109,264                   149,145
Balances, December 31, 1998   2,889,663    28,193,644               15,708,073                 (1,730,736)  (1,640,120)  40,530,861
                              -----------------------              -----------------------------------------------------------------
   Comprehensive income
       Net income                                      $1,970,435    1,970,435                                            1,970,435
   Other comprehensive income,
     net of tax
   Unrealized gains on
     securities, net of
     reclassification
     adjustment                                            15,385                 $15,385                                    15,385
                                                       ----------
   Comprehensive income                                $1,985,820
                                                       ==========
   Cash dividends
       ($.465 per share)                                            (1,162,604)                                          (1,162,604)
   Purchase of common stock    (288,963)   (2,820,059)                (603,698)                                          (3,423,757)
   Amortization of unearned
   compensation expense                                                                                        227,466      227,466
   ESOP shares earned                          15,837                                             106,292                   122,129
                              -----------------------              -----------------------------------------------------------------
Balances, December 31, 1999   2,600,700   $25,389,422              $15,912,206    $15,385     $(1,624,444) $(1,412,654) $38,279,915
                              =======================              =================================================================

</TABLE>

See notes to consolidated financial statements.


<PAGE>



                     UNION COMMUNITY BANCORP AND SUBSIDIARY
                      Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>

Year Ended December 31                                                   1999              1998             1997
-------------------------------------------------------------------------------------------------------------------
Operating Activities
<S>                                                                   <C>              <C>             <C>
   Net income                                                         $1,970,435       $1,974,236      $  1,198,452
   Adjustments to reconcile net income to net cash provided
       by operating activities
     Provision for loan losses                                            60,000          110,000           165,000
     Depreciation                                                         32,589           30,344            27,335
     Deferred income tax                                                  20,928          (40,926)           36,750
     Investment securities accretion, net                                (12,061)          (9,223)          (11,677)
     Gains on sale of investment securities available for sale           (73,150)
     Gains on sale of foreclosed real estate                                (284)          (2,500)           (5,565)
     Equity in losses of limited partnership                              43,500          121,000           157,800
     Amortization of unearned compensation expense                       227,466          113,733
     ESOP shares earned                                                  122,129          149,145
     Net change in
       Interest receivable                                              (109,077)        (133,165)         (127,922)
       Interest payable                                                   13,228           (9,530)           27,415
       Other assets                                                      (38,750)          (8,396)          (21,878)
       Other liabilities                                                (157,776)          60,780           (78,749)
                                                                     -----------       ----------       -----------
       Net cash provided by operating activities                       2,099,177        2,355,498         1,366,961
                                                                     -----------       ----------       -----------
Investing Activities
   Investment securities
     Purchases of investment securities available for sale              (812,492)
     Purchases of investment securities held to maturity              (1,415,000)      (9,203,586)       (1,200,000)
     Proceeds from sales of investment securities available for sale     595,655
     Proceeds from maturities and paydowns of mortgage-backed
       securities held to maturity                                       731,300          606,716           638,955
     Proceeds from maturities of investment
       securities held to maturity                                     1,200,000        6,400,000           500,000
   Net change in loans                                               (15,527,383)     (12,529,034)       (6,017,272)
   Purchases of premises and equipment                                   (44,822)         (18,178)          (23,331)
   Proceeds from sale of foreclosed real estate                          100,356            4,500            76,274
   Purchase of Federal Home Loan Bank of Indianapolis stock             (299,200)         (36,800)         (127,600)
   Other investing activity                                               (2,726)          (1,934)           (2,728)
                                                                     -----------       ----------       -----------
       Net cash used by investing activities                         (15,474,312)     (14,778,316)       (6,155,702)
                                                                     -----------       ----------       -----------
Financing Activities
   Net change in
     Interest-bearing demand and savings deposits                      6,316,311          (28,493)        2,695,812
     Certificates of deposit                                          (2,171,501)       2,616,080          (874,209)
     Stock subscription escrow accounts                                               (22,687,104)       22,687,104
   Proceeds from borrowings                                           11,000,000                          1,500,000
   Repayment of borrowings                                              (296,900)      (1,780,225)       (5,807,277)
   Cash dividends                                                     (1,117,580)        (728,726)
   Contribution of unearned compensation                                               (1,753,853)
   Repurchase of common stock                                         (3,423,757)      (1,858,984)
   Net change in advances by borrowers for taxes and insurance            (5,493)          54,376            19,981
   Proceeds from sale of common stock, net of costs                                                      27,882,967
                                                                      ----------       ----------       -----------
       Net cash provided (used) by financing activities               10,301,080      (26,166,929)       48,104,378
                                                                      ----------       ----------       -----------
Net Increase (Decrease) in Cash and Cash Equivalents                  (3,074,055)     (38,589,747)       43,315,637
Cash and Cash Equivalents, Beginning of Year                           6,191,080       44,780,827         1,465,190
                                                                      ----------       ----------       -----------
Cash and Cash Equivalents, End of Year                                $3,117,025       $6,191,080       $44,780,827
                                                                      ==========       ==========       ===========
Additional Cash Flows Information

   Interest paid                                                      $3,804,104       $3,424,704        $3,808,351
   Income tax paid                                                     1,087,326          984,063           527,433
   Stock issuance costs included in other liabilities                                                        85,375
   Common stock issued to ESOP leveraged with an employer loan                                            1,840,000
   Loans transferred to foreclosed real estate                           193,870           13,619           163,540
</TABLE>


See notes to consolidated financial statements.


<PAGE>

UNION COMMUNITY BANCORP 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 Union Community  Bancorp (Company) and
its  wholly  owned  subsidiary,  Union  Federal  Savings  and  Loan  Association
(Association) and the Association's  wholly owned subsidiary,  UFS Service Corp.
(UFS),  conform  to  generally  accepted  accounting  principles  and  reporting
practices followed by the thrift industry.  The more significant of the policies
are described below.

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

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

The Association generates mortgage and consumer loans and receives deposits from
customers  located  primarily  in  Montgomery  County,  Indiana and  surrounding
counties.  The  Association's  loans are generally  secured by specific items of
collateral  including real property,  consumer assets and business  assets.  UFS
invests in a low income housing partnership.

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

Investment  Securities--Debt  securities are classified as held to maturity when
the  Company  has the  positive  intent and  ability to hold the  securities  to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities not classified as held to maturity and marketable  equity  securities
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.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

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

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

The  determination  of the adequacy of the allowance for loan losses is based on
estimates  that are  particularly  susceptible  to  significant  changes  in the
economic  environment  and market  conditions.  Management  believes  that as of
December  31,  1999,  the  allowance  for  loan  losses  is  adequate  based  on
information  currently available.  A worsening or protracted economic decline in
the area within which the Association  operates would increase the likelihood of
additional  losses due to credit and market  risks and could create the need for
additional loss reserves.

Premises  and  equipment  are carried at cost net of  accumulated  depreciation.
Depreciation is computed using the straight-line method based principally on the
estimated  useful  lives  of  the  assets  which  range  from 5 to  31.5  years.
Maintenance  and repairs are  expensed as  incurred  while major  additions  and
improvements are  capitalized.  Gains and losses on dispositions are included in
current operations.

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

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

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

<PAGE>

UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)


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
Bank  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.

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

Earnings per share have been  computed  based upon the weighted  average  common
shares  outstanding  during each year.  Unearned  ESOP shares have been excluded
from the computation of average shares outstanding. Net income per share for the
periods  before  and  including  the  conversion  to a stock  savings  and  loan
association on December 29, 1997, is not meaningful.

Note 2 --      Conversion

On December 29, 1997, the Association  completed the conversion from a federally
chartered  mutual  institution to a federally  chartered  stock savings and loan
association  and the  formation  of the  Company as the  holding  company of the
Association.  As part of the conversion,  the Company issued 3,042,000 shares of
common stock at $10 per share.  Net proceeds of the  Company's  stock  issuance,
after costs of  $780,000  and  excluding  the shares  issued for the ESOP,  were
$27,798,000,  of which  $14,861,000  was used to  acquire  100% of the stock and
ownership of the  Association.  The  transaction was accounted for at historical
cost in a manner similar to that utilized in a pooling of interests.

Note 3 --      Investment Securities

                                                           1999
                                    --------------------------------------------
                                                   Gross       Gross
                                    Amortized   Unrealized  Unrealized   Fair
December 31                           Cost         Gains      Losses     Value
--------------------------------------------------------------------------------
Available for sale
   Marketable equity securities      $  290        $  25               $   315
Held to maturity
   Federal agencies                   4,715                     $329     4,386
   Mortgage-backed securities         2,807           85          79     2,813
                                    --------------------------------------------
       Total held to maturity         7,522           85         408     7,199
                                    --------------------------------------------
       Total investment securities   $7,812         $110        $408    $7,514
                                    ============================================



<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

                                                         1998
                                   ---------------------------------------------
                                                 Gross        Gross
                                   Amortized  Unrealized   Unrealized     Fair
December 31                          Cost        Gains       Losses       Value
--------------------------------------------------------------------------------
Held to maturity
   Federal agencies                 $4,500       $   7          $28      $4,479
    Mortgage-backed securities       3,526         174            4       3,696
                                   ---------------------------------------------
     Total investment securities    $8,026        $181          $32      $8,175
                                   =============================================

The amortized cost and fair value of securities held to maturity at December 31,
1999, 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
December 31                       Cost       Value         Cost          Value
------------------------------------------------------------------------------
One to five years                                          $2,415       $2,343
After ten years                                             2,300        2,043
                                ----------------------------------------------
                                                            4,715        4,386
Mortgage-backed securities                                  2,807        2,813
Marketable equity securities        $290       $315
                                ----------------------------------------------
Totals                              $290       $315        $7,522       $7,199
                                ==============================================

Securities  with a carrying value of $2,807,000  and $3,597,000  were pledged at
December 31, 1999 and 1998 to secure FHLB advances.

Proceeds from sales of securities  available for sale during 1999 were $596,000.
Gross gains of $73,000 were realized on those sales.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Mortgage-backed  securities  included in investment  securities held to maturity
above consist of the following:
<TABLE>
<CAPTION>
                                                                   1999
                                             --------------------------------------------
                                                           Gross        Gross
                                             Amortized  Unrealized   Unrealized     Fair
December 31                                    Cost        Gains       Losses       Value
-----------------------------------------------------------------------------------------
<S>                                           <C>            <C>                   <C>
Held to maturity
   Government National Mortgage Corporation   $  689         $59                   $  748
   Federal Home Loan Mortgage Corporation      2,043          26          $74       1,995
   Federal National Mortgage Corporation          63                        5          58
   Other                                          12                                   12
                                             --------------------------------------------
       Total mortgage-backed securities       $2,807         $85          $79      $2,813
                                             ============================================
</TABLE>

<TABLE>
<CAPTION>
                                                                        1998
                                              -----------------------------------------------------
                                                               Gross            Gross
                                               Amortized    Unrealized       Unrealized      Fair
December 31                                      Cost          Gains           Losses        Value
---------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>                         <C>
Held to maturity
   Government National Mortgage Corporation     $  991          $104                        $1,095
   Federal Home Loan Mortgage Corporation        2,395            69                         2,464
   Federal National Mortgage Corporation           123             1               $4          120
   Other                                            17                                          17
                                              -----------------------------------------------------
       Total mortgage-backed securities         $3,526          $174               $4       $3,696
                                              =====================================================
</TABLE>


Note 4 --      Loans and Allowance

December 31                                        1999              1998
-----------------------------------------------------------------------------
Real estate mortgage loans
   One-to-four family                             $ 80,552           $71,823
   Multi-family                                      9,549            10,609
   Commercial                                       12,410             6,355
Real estate construction loans                       2,848             2,545
Commercial loans                                     1,394                51
Individuals' loans for household and
    other personal expenditures                        177               213
                                                  ---------------------------
                                                   106,930            91,596
Deferred loan fees                                    (334)             (334)
Allowance for loan losses                             (422)             (362)
                                                  ---------------------------
       Total loans                                $106,174           $90,900
                                                  ===========================


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Year Ended December 31                        1999        1998         1997
--------------------------------------------------------------------------------
Allowance for loan losses
   Balances, beginning of year                $362        $252          $159
   Provision for losses                         60         110           165
   Loans charged off                                                     (72)
                                             ---------------------------------
   Balances, end of year                      $422        $362          $252
                                             =================================

Information on impaired loans is summarized below.

December 31                                                         1999    1998
Impaired loans for which the discounted cash flows or collateral
   value exceeds the carrying value of the loan                    $197    $322


Year Ended December 31                          1999         1998        1997
--------------------------------------------------------------------------------
Average balance of impaired loans                $214       $110         $33
Interest income recognized on impaired loans       21         10
Cash basis interest included above                 18         10


Note 5 --      Premises and Equipment

December 31                                                 1999         1998
--------------------------------------------------------------------------------
Land                                                        $146          $146
Buildings                                                    579           569
Equipment                                                    171           140
                                                            --------------------
       Total cost                                            896           855
Accumulated depreciation                                    (529)         (500)
                                                            --------------------
       Net                                                  $367          $355
                                                            ====================



<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 6 --      Investment in Limited Partnership

The  investment in limited  partnership of $1,012,000 and $1,055,000 at December
31,  1999 and 1998  represents  a 99  percent  equity  in Pedcor  Investments  -
1993-XVI, LP (Pedcor), a limited partnership organized to build, own and operate
a 48-unit apartment  complex.  In addition to recording its equity in the losses
of Pedcor,  the  Company  has  recorded  the  benefit of low income  housing tax
credits of  $178,000  for the years  ended  December  31,  1999,  1998 and 1997.
Condensed financial statements for Pedcor are as follows:

December 31                                              1999         1998
--------------------------------------------------------------------------------
Condensed statement of financial condition
   Assets

     Cash                                               $   21         $   31
     Land and property                                   2,178          2,235
     Other assets                                          175             19
                                                        ---------------------
       Total assets                                     $2,374         $2,285
                                                        =====================

Liabilities

   Notes payable--Association                           $  659         $  772
   Notes payable--other                                  1,338          1,256
   Other liabilities                                       161            159
                                                        ---------------------
       Total liabilities                                 2,158          2,187
Partners' equity                                           216             98
                                                        ---------------------
       Total liabilities and partners' equity           $2,374         $2,285
                                                        =====================


Year Ended December 31                       1999          1998          1997
--------------------------------------------------------------------------------
Condensed statement of operations
   Total revenue                            $ 253         $ 232         $ 219
   Total expenses                             318           354           340
                                            -----------------------------------
       Net loss                             $ (65)        $(122)        $(121)
                                            ===================================



<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 7 --      Deposits

December 31                                                    1999        1998
--------------------------------------------------------------------------------
Noninterest-bearing demand                                   $ 1,151     $   657
Interest-bearing demand                                       18,030      11,982
Savings deposits                                               3,184       3,410
Certificates and other time deposits of $100,000 or more      10,700       9,351
Other certificates and time deposits                          35,925      39,446
                                                             -------------------
       Total deposits                                        $68,990     $64,846
                                                             ===================

Certificates and other time deposits maturing in years ending December 31:
--------------------------------------------------------------------------------
2000                                                                     $25,447
2001                                                                      12,600
2002                                                                       4,317
2003                                                                       2,271
2004                                                                       1,990
                                                                         -------
                                                                         $46,625
                                                                         =======

Year Ended December 31                   1999             1998             1997
--------------------------------------------------------------------------------
Interest expense on deposits
   Interest-bearing demand             $  793           $  496           $  444
   Savings deposits                       134              139              159
   Certificates                         2,548            2,729            2,763
                                       -----------------------------------------
                                       $3,475           $3,364           $3,366
                                       =========================================




<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 8 --      Federal Home Loan Bank Advances

                                                              1999
                                                    ---------------------------
                                                                    Weighted
                                                                     Average
December 31                                         Amount            Rate
--------------------------------------------------------------------------------
Advances from FHLB
   Maturities in years ending
     2000                                           $11,124              5.76%
     2001                                               129              5.67
     2002                                               138              5.80
     2003                                               147              5.90
     2004                                               121              6.03
                                                    -------
                                                    $11,659              5.76%
                                                    =======


The  Association  has an  available  line  of  credit  with  the  FHLB  totaling
$5,000,000.  The line of credit  expires  March 1, 2000 and bears  interest at a
rate equal to the current  variable advance rate. There were no drawings on this
line of credit at December 31, 1999.

FHLB  advances are secured by  first-mortgage  loans and  investment  securities
totaling $80,867,000 and $73,501,000 at December 31, 1999 and 1998. Advances are
subject to restrictions or penalties in the event of prepayment.

Note 9 --      Note Payable

The note  payable to Pedcor  dated  February 1, 1994 in the  original  amount of
$1,809,792 bears no interest so long as there exists no event of default. In the
instances  where an event of default has occurred,  interest shall be calculated
at a rate equal to the lesser of 14% per annum or the highest  amount  permitted
by applicable law.

December 31                                                              1999
--------------------------------------------------------------------------------
Note payable to Pedcor Maturities in years ending:

     2000                                                                 $183
     2001                                                                  177
     2002                                                                  174
     2003                                                                  171
     2004                                                                  132
                                                                         ------
                                                                          $837
                                                                         ======
<PAGE>


UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 10 --     Income Tax

Year Ended December 31                            1999       1998        1997
--------------------------------------------------------------------------------
Income tax expense
   Currently payable
     Federal                                    $   726    $   848        $353
     State                                          256        287         155
   Deferred
     Federal                                         16        (27)         37
     State                                            5        (14)
                                                 -----------------------------
       Total income tax expense                  $1,003     $1,094        $545
                                                 =============================
Reconciliation of federal statutory
     to actual tax expense
   Federal statutory income tax at 34%           $1,011     $1,043        $593
   Effect of state income taxes                     172        180         102
   Tax credits                                     (178)      (178)       (178)
   Other                                             (2)        49          28
                                                 -----------------------------
       Actual tax expense                        $1,003     $1,094        $545
                                                 =============================
Effective tax rate                                 33.7%      35.7%       31.2%

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

December 31                                                    1999        1998
--------------------------------------------------------------------------------
Assets
   Allowance for loan losses                                   $173        $144
   Loan fees                                                                 15
   Pensions and employee benefits                                48          63
   Other                                                         19
                                                               -----------------
       Total assets                                             240         222
                                                               -----------------
Liabilities
   Depreciation                                                 (23)        (21)
   State income tax                                              (5)         (6)
   FHLB stock dividend                                          (23)        (23)
   Loan fees                                                    (16)
   Equity in partnership losses                                (107)        (87)
   Unrealized gain on securities available-for-sale             (10)
   Other                                                                     (5)
                                                               -----------------
       Total liabilities                                       (184)       (142)
                                                               -----------------
Valuation Allowance                                              (7)
                                                               -----------------
                                                              $  49       $  80
                                                               =================

The  valuation  allowance  at December  31,  1999 is $7,000,  all of which arose
during the current year.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Retained earnings include approximately  $2,632,000 for which no deferred income
tax  liability  has been  recognized.  This amount  represents  an allocation of
income to bad debt  deductions  as of December 31, 1987 for tax  purposes  only.
Reduction  of amounts so allocated  for purposes  other than tax bad debt losses
including  redemption  of bank  stock or  excess  dividends,  or loss of  "bank"
status, would create income for tax purposes only, which income would be subject
to the then-current  corporate  income tax rate. The unrecorded  deferred income
tax liability on the above amounts was approximately $1,043,000.

Note 11 --     Commitments and Contingent Liabilities

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

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

December 31                                                     1999     1998
--------------------------------------------------------------------------------
Commitments to extend credit                                   $3,762    $2,566
Standby letters of credit                                       3,215     2,514

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 Association  evaluates each customer's
credit worthiness on a case-by-case  basis. The amount of collateral obtained if
deemed  necessary  by the  Association  upon  extension  of  credit  is based on
management's credit evaluation.  Collateral held varies but may include accounts
receivable,  inventory,  property and equipment, and income-producing commercial
properties.

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

The Company and Association  have entered into an employment  agreement with the
president which provides for the continuation of salary and certain benefits for
a  specified  period of time under  certain  conditions.  Under the terms of the
agreement, these payments could occur in the event of a change in control of the
Company,  as  defined,  along with other  specific  conditions.  The  contingent
liability  under  the  agreement  in  the  event  of  a  change  in  control  is
approximately  $300,000.  The Company is not  required to pay any amounts  under
this agreement which cannot be deducted for federal income tax purposes.

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


<PAGE>

UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 12 --     Dividend and Capital Restrictions

Without  prior  approval,  current  regulations  allow  the  Association  to pay
dividends to the Company not exceeding  retained net income for the current year
plus  those for the  previous  two years.  The  Association  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  Association'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 Association 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  shareholders.  Except  for the  repurchase  of stock and  payment of
dividends, the existence of the liquidation account will not restrict the use or
application of net worth.  The initial  balance of the  liquidation  account was
$14,473,000.

At  December  31,  1999,  the  shareholders'   equity  of  the  Association  was
$32,532,000,  of which approximately $4,018,000 was available for the payment of
dividends.

Note 13 --     Regulatory Capital

The  Association  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 an association in
any of the undercapitalized  categories can result in actions by regulators that
could have a material  effect on an  association's  operations.  At December 31,
1999 and 1998, the Association is categorized as well  capitalized and meets all
subject capital adequacy  requirements.  There are no conditions or events since
December  31, 1999 that  management  believes  have  changed  the  Association's
classification.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

The Association's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
                                                                                    1999
                                                        ---------------------------------------------------------------
                                                                                Required for             To Be Well
                                                         Actual              Adequate Capital 1         Capitalized 1
  December 31                                            Amount     Ratio    Amount       Ratio       Amount     Ratio
-----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>       <C>           <C>        <C>         <C>
  Total risk-based capital 1 (to risk-weighted assets)  $32,954    50.3%     $5,245        8.0%       $6,557      10.0%
  Tier 1 capital 1 (to risk-weighted assets)             32,532    49.6%      2,623        4.0%        3,934       6.0%
  Core capital 1 (to adjusted total assets)              32,532    27.2%      3,592        3.0%        5,987       5.0%
  Core capital 1 (to adjusted tangible assets)           32,532    27.2%      2,395        2.0%                    N/A
  Tangible capital 1 (to adjusted total assets)          32,532    27.2%      1,796        1.5%                    N/A
  1 As defined by regulatory agencies
</TABLE>


<TABLE>
<CAPTION>
                                                                                    1998
                                                        ---------------------------------------------------------------
                                                                                Required for             To Be Well
                                                          Actual             Adequate Capital 1         Capitalized 1
  December 31                                             Amount     Ratio   Amount       Ratio       Amount     Ratio
-----------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>        <C>      <C>           <C>        <C>         <C>
  Total risk-based capital 1 (to risk-weighted assets)   $30,693    56.7%    $4,325        8.0%       $5,406      10.0%
  Tier 1 capital 1 (to risk-weighted assets)              30,331    56.1%     2,163        4.0%        3,245       6.0%
  Core capital 1 (to adjusted total assets)               30,331    28.3%     3,219        3.0%        5,365       5.0%
  Core capital 1 (to adjusted tangible assets)            30,331    28.3%     2,146        2.0%                    N/A
  Tangible capital 1 (to adjusted total assets)           30,331    28.3%     1,610        1.5%                    N/A
</TABLE>
  1 As defined by regulatory agencies

Note 14 --     Employee Benefit Plans

The Company provides pension  benefits for  substantially  all of its employees,
and is a participant in a pension fund known as the Pentegra Group. This plan is
a multi-employer  plan; separate actuarial  valuations are not made with respect
to each participating  employer.  Pension expense (benefit) was $2,000,  $2,000,
and $(4,000) for 1999, 1998, and 1997.

The Company has a  retirement  savings  401(k) plan in which  substantially  all
employees may participate.  The Company matches employees'  contributions at the
rate of 50% for the first 5% of base salary  contributed  by  participants.  The
Company's  expense for the plan was $8,000,  $10,000 and $11,000 for 1999, 1998,
and 1997.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

As part of the  conversion  in 1997,  the Company  established  an ESOP covering
substantially  all employees of the Company and  Association.  The ESOP acquired
184,000  shares of the Company  common stock at $10 per share in the  conversion
with funds provided by a loan from the Company.  Accordingly,  the $1,840,000 of
common  stock  acquired  by the ESOP is shown as a  reduction  of  shareholders'
equity.  Unearned ESOP shares  totaled  162,444 and 173,074 at December 31, 1999
and 1998 and had a fair value of $1,787,000  and $1,947,000 at December 31, 1999
and 1998.  Shares are released to  participants  proportionately  as the loan is
repaid.  Dividends on allocated  shares are recorded as dividends and charged to
retained earnings.  Dividends on unallocated shares, which may be distributed to
participants  or used to repay the loan,  are treated as  compensation  expense.
Compensation  expense is recorded  equal to the fair  market  value of the stock
when  contributions,  which are determined annually by the Board of Directors of
the Association, are made to the ESOP. ESOP expense for the years ended December
31, 1999 and 1998 was $122,000 and $149,000. There was no expense under the ESOP
for the year ended  December 31, 1997. At December 31, 1999, the ESOP had 21,556
allocated  shares,  162,444  suspense  shares  and no  committed-be-be  released
shares.  At December 31, 1998,  the ESOP had 10,926  allocated  shares,  173,074
suspense shares and no committed-to-be released shares.

In  connection  with the  conversion,  the  Board  of  Directors  established  a
Recognition and Retention Plan and Trust (RRP). The Bank contributed  $1,753,853
to the RRP for the  purchase  of 121,670  shares of Company  common  stock,  and
effective June 30, 1998, awards of grants for 78,900 of these shares were issued
to various  directors,  officers and employees of the Association.  These awards
generally are to vest and be earned by the recipient at a rate of 20 percent per
year,  commencing  June 30, 1999. The unearned  portion of these stock awards is
presented as a reduction of shareholders' equity. Expense under the plan for the
years ended December 31, 1999 and 1998 was $227,000 and $114,000.

Note 15 --     Stock Option Plan

Under  the  Company's  stock  option  plan  (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 at a
rate of 20 percent per year.  During 1998,  the Company  authorized the grant of
options for up to 304,175 shares of the Company's  common stock.  Effective June
30, 1998, the Company granted 186,000 of the options. The exercise price of each
option,  which  has a  ten-year  life,  was  equal  to the  market  price of the
Company's stock on the date of grant;  therefore,  no  compensation  expense was
recognized.

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.  No options were
granted in 1999.  The fair value of each option grant was estimated on the grant
date using an option-pricing model with the following assumptions:

                                                                        1998
--------------------------------------------------------------------------------
Risk-free interest rates                                                   5.5%
Dividend yields                                                            2.7%
Volatility factors of expected market price of common stock               14.0%
Weighted-average expected life of the options                           7 years



<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

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:

                                                        1999               1998
--------------------------------------------------------------------------------
Net income                          As reported         $1,970            $1,974
                                    Pro forma            1,872             1,876
Basic earnings per share            As reported            .81               .70
                                    Pro forma              .77               .67
Diluted earnings per share          As reported            .81               .70
                                    Pro forma              .77               .67

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 years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>


Year Ended December 31                                           1999                               1998
----------------------------------------------------------------------------------------------------------------------
                                                                          Weighted-                       Weighted-
                                                                          Average                          Average
   Options                                               Shares        Exercise Price       Shares      Exercise Price
----------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
Outstanding, beginning of year                           186,000          $14.59
Granted                                                                                    186,000         $14.59
                                                         -------                           -------
Outstanding, end of year                                 186,000          $14.59           186,000         $14.59
                                                         =======                           =======
Options exercisable at year end                           37,200
Weighted-average fair value of options
 granted during the year                                                                     $2.94
</TABLE>

As of December 31, 1999, the 186,000 options  outstanding have an exercise price
of $14.59 and a weighted-average remaining contractual life of 8.5 years.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 16 --     Related Party Transactions

The Association has entered into transactions with certain directors,  executive
officers,  significant  shareholders and their affiliates or associates (related
parties).  Such  transactions  were made in the  ordinary  course of business on
substantially  the same  terms  and  conditions,  including  interest  rates and
collateral,  as those  prevailing at the same time for  comparable  transactions
with other  customers,  and did not, in the opinion of management,  involve more
than normal credit risk or present other unfavorable features.

Balances, January 1, 1999                                               $2,093
 New loans, including renewals                                           1,184
 Payments, etc. including renewals                                        (291)
                                                                        ------
Balances, December 31, 1999                                             $2,986
                                                                        ======

Deposits from related  parties held by the Association at December 31, 1999, and
1998 totaled $1,930,000 and $1,826,000.

Note 17 --     Earnings Per Share

Earnings per share (EPS) were computed as follows:

                                               Year Ended December 31, 1999
                                            ------------------------------------
                                                         Weighted      Per-Share
                                            Income    Average Shares    Amount
--------------------------------------------------------------------------------
Basic Earnings Per Share
   Income available to common shareholders   $1,970      2,444,080       $.81

Effect of Dilutive Securities
   Stock options
                                             ---------------------
Diluted Earnings Per Share
   Income available to common shareholders
     and assumed conversions                 $1,970      2,444,080       $.81
                                             =================================

Options  to  purchase  186,000  shares of common  stock at $14.59 per share were
outstanding  at December 31, 1999,  but were not included in the  computation of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares.


<PAGE>



UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

                                                 Year Ended December 31, 1999
                                              ----------------------------------
                                                          Weighted     Per-Share
                                              Income   Average Shares   Amount
--------------------------------------------------------------------------------
Basic Earnings Per Share
   Income available to common shareholders     $1,974     2,804,584      $.70

Effect of Dilutive Securities
   Stock options                                                  9
                                               --------------------
Diluted Earnings Per Share
   Income available to common shareholders
     and assumed conversions                   $1,974     2,804,593      $.70
                                               ==============================


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.

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

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

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

Interest    Receivable/Payable--The    fair    value   of    accrued    interest
receivable/payable approximates carrying values.

Deposits--Fair  values  for  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.

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

Federal  Home  Loan  Bank  Advances--The  fair  value  of these  borrowings  are
estimated using a discounted cash flow  calculation,  based on current rates for
similar debt.

Note Payable--Limited  Partnership--The fair value of the borrowing is estimated
using a discounted  cash flow  calculation,  based on current  rates for similar
debt.
<PAGE>

UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Off-Balance  Sheet  Commitments--Commitments  include  commitments  to originate
mortgage and consumer loans, 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.

The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>


                                                                     1999                               1998
                                                          -------------------------------------------------------------
                                                          Carrying            Fair           Carrying            Fair
December 31                                                Amount             Value           Amount             Value
-----------------------------------------------------------------------------------------------------------------------
Assets
<S>                                                         <C>               <C>              <C>              <C>
   Cash and cash equivalents                                $3,117            $3,117           $ 6,191          $ 6,191
   Investment securities available for sale                    315               315
   Investment securities held to maturity                    7,522             7,199             8,026            8,175
   Loans, net                                              106,174           103,846            90,900           92,365
   Stock in FHLB                                             1,044             1,044               745              745
   Interest receivable                                         824               824               715              715

Liabilities
   Deposits                                                 68,990            68,735            64,846           61,460
   Borrowings
     FHLB advances                                          11,659            11,646               772              781
     Notes payable--limited partnership                        837               712             1,021              835
   Interest payable                                            123               123               109              109
   Advances by borrowers for taxes and insurance               270               270               275              275

</TABLE>

<PAGE>

UNION COMMUNITY BANCORP 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:

                             Condensed Balance Sheet

<TABLE>
<CAPTION>
December 31                                                   1999         1998
--------------------------------------------------------------------------------
Assets
<S>                                                         <C>          <C>
   Cash                                                     $ 5,555      $10,243
   Investment securities available-for-sale                     315
   Investment in subsidiary                                  32,532       30,332
   Other assets                                                 216          238
                                                            --------------------
       Total assets                                         $38,618      $40,813
                                                            ====================
Liability--other                                            $   338      $   282
Shareholders' Equity                                         38,280       40,531
                                                            --------------------
       Total liabilities and shareholders' equity           $38,618      $40,813
                                                            ====================
</TABLE>

<TABLE>
<CAPTION>
                          Condensed Statement of Income

Year Ended December 31                                                   1999               1998              1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>              <C>
Income
   Interest income                                                     $      11         $      4
   Other income                                                              175               81
                                                                          -----------------------------------------
                                                                             186               85
                                                                          -----------------------------------------
Expenses
   Salaries and employee benefits                                             80               65
   Legal and professional fees                                                83               97
   Other expenses                                                             17               14
                                                                          -----------------------------------------
       Total expenses                                                        180              176
                                                                          -----------------------------------------
Income (loss) before income tax and equity
   in undistributed income of subsidiaries                                     6              (91)

Income tax benefit (expense)                                                   9              (20)
                                                                          -----------------------------------------
Loss before equity in undistributed income of subsidiaries                    (3)             (71)

Equity in undistributed income of subsidiaries                             1,973            2,045            $1,198
                                                                          -----------------------------------------
Net Income                                                                $1,970           $1,974            $1,198
                                                                          =========================================
</TABLE>


<PAGE>

UNION COMMUNITY BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

                        Condensed Statement of Cash Flows
<TABLE>
<CAPTION>


Year Ended December 31                                                   1999              1998              1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>               <C>
Operating Activities
   Net income                                                             $1,970         $  1,974          $  1,198
   Adjustments to reconcile net income to
     net cash provided by operating activities                            (1,900)          (2,165)           (1,198)
                                                                          -----------------------------------------
       Net cash provided (used) by operating activities                       70             (191)
                                                                          -----------------------------------------
Investing Activities
   Purchases of investments available for sale                              (812)
   Proceeds from sales of investments available for sale                     596
                                                                          -----------------------------------------
       Net cash used by investing activities                                (216)
                                                                          -----------------------------------------
Financing Activities
   Net proceeds from issuance of stock                                                                       27,883
   Capital contribution to Association                                                                      (14,861)
   Cash dividend                                                          (1,118)            (729)
   Repurchase of common stock                                             (3,424)          (1,859)
                                                                          -----------------------------------------
       Net cash provided (used) by financing activities                   (4,542)          (2,588)           13,022
                                                                          -----------------------------------------
Net Change in Cash                                                        (4,688)          (2,779)

Cash at Beginning of Year                                                 10,243           13,022
                                                                          -----------------------------------------
Cash at End of Year                                                       $5,555          $10,243           $13,022
                                                                          =========================================
</TABLE>



<PAGE>

                             DIRECTORS AND OFFICERS


                               BOARD OF DIRECTORS

                                Joseph E. Timmons
                              Chairman of the Board
                      President and Chief Executive Officer
                   Union Federal Savings and Loan Association

         Philip L. Boots                             Samuel H. Hildebrand
         President, Boots Brothers                   President, Village
         Oil Company, Inc.                           Traditions, Inc.

         Marvin L. Burkett                           John M. Horner
         Farmer (Retired)                            President, Horner
                                                     Pontiac Buick, Inc.

         Phillip E. Grush                            Harry A. Siamas
         Optometrist                                 Attorney

                       OFFICERS OF UNION COMMUNITY BANCORP

 Joseph E. Timmons            Ronald L. Keeling        Denise E. Swearingen
 Chairman of the Board        Vice President           Secretary and Treasurer
 President and
 Chief Executive Officer

             OFFICERS OF UNION FEDERAL SAVINGS AND LOAN ASSOCIATION

     Joseph E. Timmons                            Ronald L. Keeling
     President and                                Senior Loan Officer
     Chief Executive Officer                      Vice President and
                                                  Assistant Secretary

     Denise E. Swearingen                         Alan L. Grimble
     Secretary, Controller/                       Vice President
     Treasurer

<PAGE>

DIRECTORS AND OFFICERS

      Philip L.  Boots  (age 53) has served  since  1985 as  President  of Boots
Brothers Oil Company, Inc., a petroleum marketer that operates gasoline outlets,
convenience grocery stores and car washes in the Crawfordsville area.

      Marvin  L.  Burkett  (age 72) has  worked  as a  self-employed  farmer  in
Montgomery County since 1956. He currently is semi-retired from farming.

      Phillip  E.  Grush  (age 68)  worked  as a  self-employed  optometrist  in
Crawfordsville  from 1960 until  September,  1996 when he sold his practice.  He
currently  works for Dr.  Michael  Scheidler  in  Crawfordsville  as a part-time
employee/consultant.

      Samuel H.  Hildebrand,  II (age 60) a resident of Montgomery  County since
1964, has served in management  positions at R R Donnelley & Sons Co.,  Crawford
Industries,  Inc.,  and Atapco  Custom  Products.  Since 1995,  he has served as
President of  Hildebrand's  Village  Traditions,  Inc. The company is engaged in
property management as well as custom fabrication of rain gutter systems through
its Custom Flo Division.

      John M.  Horner  (age 63) has served as the  president  of Horner  Pontiac
Buick, Inc. in Crawfordsville since 1974.

      Harry A. Siamas (age 49) has  practiced law in  Crawfordsville  since 1976
and has served as Union Federal's attorney for 18 years.

      Joseph E.  Timmons (age 65) has served as  President  and Chief  Executive
Officer of Union Federal since 1974 and of UFS Service Corp. since its inception
in 1994. He has been an employee of Union Federal since 1954.

<PAGE>

                            SHAREHOLDER INFORMATION

MARKET INFORMATION

         The  Association  converted  from a  federal  mutual  savings  and loan
association to a federal stock savings and loan associaiton  effective  December
29, 1997,  and  simultaneously  formed a savings and loan holding  company,  the
Holding  Company.  The Holding  Company's  Common Stock, is traded on the NASDAQ
National  Market System under the symbol "UCBC." As of February 21, 2000,  there
were approximately 352 record holders of the Holding Company's Common Stock.

         Any  dividends  paid  by  the  Holding   Company  will  be  subject  to
determination  and declaration by the Board of Directors in its  discretion.  In
determining  the level of any  future  dividends,  the Board of  Directors  will
consider,  among other factors,  the  following:  tax  considerations;  industry
standards;  economic  conditions;  capital  levels;  regulatory  restrictions on
dividend  payments by the  Association  to the  Holding  Company;  and,  general
business practices.

         The Holding  Company is not subject to OTS regulatory  restrictions  on
the  payment  of  dividends  to its  shareholders  although  the  source of such
dividends   will  depend  in  part  upon  the  receipt  of  dividends  from  the
Association.  Applicable law restricts the amount of dividends Union Federal may
pay to the Holding Company without obtaining the prior approval of the OTS to an
amount that does not exceed  Union  Federal's  year-to-date  net income plus its
retained net income for the preceding two years. The Holding Company is subject,
however,  to the  requirements of Indiana law, which generally limit the payment
of dividends to amounts that will not affect the ability of the Holding Company,
after the dividend has been distributed, to pay its debts in the ordinary course
of business  and will not exceed the  difference  between the Holding  Company's
total  assets  and  total  liabilities  plus  preferential  amounts  payable  to
shareholders  with  rights  superior  to those  of the  holders  of the  Holding
Company's common stock.

         In addition to the foregoing, the portion of the Association's earnings
which has been  appropriated  for bad debt  reserves  and  deducted  for federal
income tax purposes  cannot be used by the  Association to pay cash dividends to
the  Holding  Company  without  the  payment  of  federal  income  taxes  by the
Associaiton   at  the  then  current  income  tax  rate  on  the  amount  deemed
distributed,  which would include any federal income taxes  attributable  to the
distribution.  The Holding Company does not contemplate any  distribution by the
Assciation  that  would  result in a  recapture  of the  Association's  bad debt
reserve or otherwise create federal tax liabilities.

                                     Stock Price               Dividends
Quarter Ended                     High        Low              Per Share
March 31, 1998                  $15 7/8    $14                   $0.075
June 30, 1998                    15 5/8     14 1/8                0.085
September 30, 1998               14 7/8     10 3/4                0.095
December 31, 1998                13          9 13/16              0.100
March 31, 1999                   12 1/2     11 1/8                0.105
June 30, 1999                    12         10 1/4                0.110
September 30, 1999               12 1/2     10 13/16              0.120
December 31, 1999                12 3/8      8 7/8                0.130

TRANSFER AGENT AND REGISTRAR

The Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza, MD - 1090F5
Cincinnati, Ohio 45202
(513) 579-5320 or (800) 837-2755

GENERAL COUNSEL

Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana  46204

INDEPENDENT AUDITOR

Olive LLP
201 N. Illinois Street, Suite 700S
Indianapolis, Indiana  46204

SHAREHOLDERS AND GENERAL INQUIRIES

     The Company  filed an Annual  Report on Form 10-K for its fiscal year ended
December 31, 1999 with the  Securities and Exchange  Commission.  Copies of this
annual report may be obtained without charge upon written request to:

     Joseph E. Timmons
     President and Chief Executive Officer
     Union Community Bancorp
     221 East Main Street
     Crawfordsville, Indiana 47933