FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
     (Mark One)

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

                   For the fiscal year ended December 31, 1998

or

[ ]  Transition  Report  Pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934

For the transition period from _____________ to _______________

Commission File Number      333-35799

                             UNION COMMUNITY BANCORP
             (Exact name of registrant as specified in its charter)

              INDIANA                                  35-2025237
   (State or other Jurisdiction              (I.R.S. Employer Identification
 of Incorporation or Organization)                       Number)


              221 East Main Street
            Crawfordsville,  Indiana                          47933
    (Address of Principal Executive Offices)                (Zip Code)

                Registrant's telephone numberincluding area code:
                                 (765) 362-2400

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                         Common Stock, Without Par Value
                                (Title of Class)

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

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

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of March 26 1999 was $29,758,300.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of December 31, 1998, was 2,889,663 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.


                            Exhibit Index on Page E-1
                               Page 1 of 29 Pages
<PAGE>


                             UNION COMMUNITY BANCORP
                                    Form 10-K
                                      INDEX
                                                                            Page
Forward Looking Statement...................................................   3

                                     PART I
     Item 1     Business....................................................   3
     Item 2.    Properties..................................................  25
     Item 3.    Legal Proceedings...........................................  26
     Item 4.    Submission of Matters to a Vote of Security Holders.........  26
     Item 4.5.  Executive Officers of the Registrant........................  26
PART II
     Item 5.    Market for Registrant's Common Equity and Related
                  Shareholder Matters.......................................  26
     Item 6.    Selected Financial Data.....................................  26
     Item 7.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.......................  26
     Item 7A.   Quantitative and Qualitative Disclosures about Market Risks.  26
     Item 8.    Financial Statements and Supplementary Data.................  26
     Item 9.    Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.......................  27
PART III
     Item 10.   Directors and Executive Officers of Registrant..............  27
     Item 11.   Executive Compensation......................................  27
     Item 12.   Security Ownership of Certain Beneficial 
                  Owners and Management.....................................  27
     Item 13.   Certain Relationships and Related Transactions..............  27

PART IV

     Item 14.   Exhibits, Financial Statement Schedules, 
                  and Reports on Form 8-K...................................  27

SIGNATURES          ........................................................  28


<PAGE>

                            FORWARD LOOKING STATEMENT

     This Annual Report on Form 10-K ("Form  10-K")  contains  statements  which
constitute  forward  looking  statements  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-K and include  statements  regarding the intent,  belief,
outlook, estimate or expectations of the Holding Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial  performance  of the  Holding  Company.  Readers of this Form 10-K are
cautioned that any such forward looking  statements are not guarantees of future
events or  performance  and  involve  risks and  uncertainties,  and that actual
results may differ materially from those in the forward looking  statements as a
result of various factors. The accompanying  information  contained in this Form
10-K  identifies  important  factors  that could cause such  differences.  These
factors include  changes in interest rates;  loss of deposits and loan demand to
other  savings and  financial  institutions;  substantial  changes in  financial
markets;  changes in real estate values and the real estate  market;  regulatory
changes; or unanticipated results in pending legal proceedings.

Item 1.  Business

General

         Union  Community   Bancorp,   an  Indiana   corporation  (the  "Holding
Company"),  was organized in September,  1997. On December 29, 1997, it acquired
the common stock of Union Federal Savings and Loan Association ("Union Federal")
upon the  conversion  of Union  Federal from a federal  mutual  savings and loan
association to a federal stock savings and loan association.

         Union  Federal  was  organized  as a  state-chartered  savings and loan
association in 1913.  Since then,  Union Federal has conducted its business from
its  full-service  office located in  Crawfordsville,  Indiana.  Union Federal's
principal  business consists of attracting  deposits from the general public and
originating  fixed-rate  and  adjustable-rate  loans secured  primarily by first
mortgage liens on one- to four-family  residential real estate.  Union Federal's
deposit accounts are insured up to applicable limits by the Savings  Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").

      Management  believes  that it has developed a solid  reputation  among its
loyal customer base because of its commitment to personal service and because of
strong  support  of the  local  community.  Union  Federal  offers a  number  of
financial  services,   including:   (i)  residential  real  estate  loans;  (ii)
multi-family loans; (iii) commercial real estate loans; (iv) construction loans;
(v) home improvement loans; (vi) money market demand accounts  ("MMDAs");  (vii)
passbook savings accounts; and (viii) certificates of deposit.

Lending Activities

      Union Federal has historically  concentrated its lending activities on the
origination  of  loans  secured  by  first-mortgage   liens  for  the  purchase,
construction  or refinancing of one- to four-family  residential  real property.
One- to four-family residential mortgage loans continue to be the major focus of
Union Federal's loan  origination  activities,  representing  77.2% of its total
loan  portfolio  at December 31, 1998.  Union  Federal also offers  multi-family
mortgage loans,  commercial  real estate loans,  construction  loans,  and, to a
limited extent,  consumer loans consisting of loans secured by deposits and home
improvement  loans.  Mortgage  loans  secured  by  multi-family  properties  and
commercial real estate totaled  approximately 11.4% and 6.8%,  respectively,  of
Union  Federal's total loan portfolio at December 31, 1998.  Construction  loans
totaled  approximately  4.3% of Union  Federal's  total loans as of December 31,
1998.  Consumer  loans,  which  consist of home  improvement  loans and passbook
loans, constituted  approximately .2% of Union Federal's total loan portfolio at
December 31, 1998.

     Loan  Portfolio  Data.  The following  table sets forth the  composition of
Union  Federal's  loan  portfolio by loan type and security type as of the dates
indicated,   including  a   reconciliation   of  gross  loans  receivable  after
consideration of the allowance for loan losses and loans in process.

<TABLE>
<CAPTION>

                                                                      At December 31,
                                         -------------------------------------------------------------------------
                                                1998                       1997                       1996
                                         ---------------------      --------------------      --------------------
                                                       Percent                   Percent                   Percent
                                         Amount       of Total      Amount      of Total      Amount      of Total
                                         ------       --------      ------      --------      ------      --------
                                                                         (Dollars in thousands)

TYPE OF LOAN Real estate mortgage loans:
<S>                                      <C>            <C>         <C>           <C>         <C>           <C>   
   One-to-four-family...............     $71,823        77.19%      $62,436       76.95%      $57,031       77.46%
   Multi-family.....................      10,609        11.40        10,197       12.57        10,920       14.83
   Commercial.......................       6,355         6.83         3,627        4.47         3,593        4.88
Real estate construction loans......       3,993         4.29         4,652        5.73         1,740        2.36
Commercial loans....................          51          .06           ---          ---          ---          ---
Consumer loans .....................         213          .23           223         .28           346         .47
                                         -------       ------       -------      ------       -------      ------ 
     Gross loans receivable.........     $93,044       100.00%      $81,135      100.00%      $73,630      100.00%
                                         =======       ======       =======      ======       =======      ====== 

TYPE OF SECURITY
   One-to-four-family real estate...     $73,130        78.60%      $64,730       79.78%      $58,271       79.14%
   Multi-family real estate.........      12,037        12.93        11,172       13.77        11,520       15.65
   Commercial real estate...........       7,666         8.24         5,094        6.28         3,593        4.88
   Deposits.........................         160          .17           139         .17           246         .33
   Other............................          51          .06           ---          ---          ---          ---
                                         -------       ------       -------      ------       -------      ------ 
     Gross loans receivable.........      93,044       100.00        81,135      100.00        73,630      100.00
                                         =======       ======       =======      ======       =======      ====== 
Deduct:
Allowance for loan losses...........         362          .39           252         .31           159         .22
Deferred loan fees..................         334          .36           325         .40           356         .48
Loans in process....................       1,448         1.55         2,122        2.62           418         .57
                                         -------       ------       -------      ------       -------      ------ 
   Net loans receivable.............     $90,900        97.70%      $78,436       96.67%      $72,697       98.73%
                                         =======       ======       =======      ======       =======      ====== 
Mortgage Loans:
   Adjustable-rate..................     $19,954        21.51%     $ 20,683       25.56%      $24,238       33.07%
   Fixed-rate.......................      72,826        78.49        60,229       74.44        49,046       66.93
                                         -------       ------       -------      ------       -------      ------ 
     Total..........................     $92,780       100.00%      $80,912      100.00%      $73,284      100.00%
                                         =======       ======       =======      ======       =======      ====== 

</TABLE>

     The following  table sets forth certain  information  at December 31, 1998,
regarding the dollar amount of loans maturing in Union  Federal's loan portfolio
based on the  contractual  terms to  maturity.  Demand  loans  having  no stated
schedule of repayments and no stated maturity are reported as due in one year or
less.  This  schedule  does not reflect the effects of possible  prepayments  or
enforcement of due-on-sale  clauses.  Management  expects that  prepayments will
cause actual maturities to be shorter.

<TABLE>
<CAPTION>


                                        Balance                         Due During Years Ended December 31,
                                    Outstanding at                                           2002       2004      2009       2014
                                     December 31,                                             to         to        to         and
                                         1998                 1999       2000       2001     2003       2008      2013     following
                                         ----                 ----       ----       ----     ----       ----      ----     ---------
                                                                                    (In thousands)
<S>                                     <C>                    <C>       <C>        <C>     <C>       <C>        <C>        <C>    
Real estate mortgage loans:
   Residential loans..................  $71,823                $97       $485       $237    $1,119    $22,254    $29,191    $18,440
Multi-family loans....................   10,609                ---        465        ---       285      3,826      4,269      1,764
   Commercial loans...................    6,355                ---          9          9        88      1,151      1,414      3,684
Construction loans....................    3,993                ---        914        514       ---        648      1,067        850
Commercial loans......................       51                 51        ---        ---       ---        ---        ---        ---
Loans secured by deposits.............      160                160        ---        ---       ---        ---        ---        ---
Home improvement loans................       53                  1          2         11         9         18         12        ---
                                        -------               ----     ------       ----    ------    -------    -------    -------
     Total............................  $93,044               $309     $1,875       $771    $1,501    $27,897    $35,953    $24,738
                                        =======               ====     ======       ====    ======    =======    =======    =======
</TABLE>

      The following table sets forth, as of December 31, 1998, the dollar amount
of all loans due after one year that have fixed  interest  rates and floating or
adjustable interest rates.

<TABLE>
<CAPTION>
                                                                           Due After December 31, 1999
                                                         Fixed Rates             Variable Rates                  Total
                                                         -----------             --------------                  -----
                                                                                 (In thousands)
Real estate mortgage loans:
<S>                                                         <C>                       <C>                       <C>    
   Residential loans.................................       $63,466                   $8,260                    $71,726
   Multi-family loans................................         4,021                    6,588                     10,609
   Commercial loans..................................         2,625                    3,730                      6,355
Construction loans...................................         2,619                    1,374                      3,993
Commercial loans.....................................           ---                      ---                        ---
Installment loans....................................           ---                      ---                        ---
Loans secured by deposits............................           ---                      ---                        ---
Home improvement loans...............................            52                      ---                         52
                                                            -------                  -------                    -------
   Total.............................................       $72,783                  $19,952                    $92,735
                                                            =======                  =======                    =======
</TABLE>

      One- to Four-Family  Residential  Loans.  Union Federal's  primary lending
activity consists of originating one- to four-family  residential mortgage loans
secured by property located in its primary market area. Union Federal  generally
does not originate one- to four-family  residential  mortgage loans if the ratio
of the loan amount to the lesser of the current cost or  appraised  value of the
property (the "Loan-to-Value Ratio") exceeds 95%. Union Federal requires private
mortgage  insurance  on loans with a  Loan-to-Value  Ratio in excess of 80%, and
factors  the cost of such  insurance  into the  annual  percentage  rate on such
loans.  Union Federal  originates and retains fixed rate loans which provide for
the payment of principal and interest over a 15- or 20-year  period,  or balloon
loans  having  terms of up to 15 years  with  principal  and  interest  payments
calculated using a 30-year amortization period.

      Union Federal also offers  adjustable-rate  mortgage  ("ARM")  loans.  The
interest rate on ARM loans is indexed to the one-year U.S.  Treasury  securities
yields  adjusted to a constant  maturity.  Union  Federal  may offer  discounted
initial  interest rates on ARM loans, but requires that the borrower qualify for
the ARM loan at the  fully-indexed  rate (the  index  rate plus the  margin).  A
substantial  portion of the ARM loans in Union  Federal's  portfolio at December
31, 1998 provide for maximum rate  adjustments per year and over the life of the
loan of 1% and 5%, respectively.  Union Federal's residential ARMs are amortized
for terms up to 25 years.

      ARM loans decrease the risk  associated  with changes in interest rates by
periodically  repricing,  but involve  other risks  because,  as interest  rates
increase, the underlying payments by the borrower also increase, thus increasing
the potential for default by the borrower.  At the same time, the  marketability
of the underlying collateral may be adversely affected by higher interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents,  and,  therefore,  is  potentially  limited in  effectiveness  during
periods of rapidly rising interest  rates.  At December 31, 1998,  approximately
21.5% of Union  Federal's real estate  mortgage  loans had  adjustable  rates of
interest.

      All of the one- to  four-family  residential  mortgage  loans  that  Union
Federal originates  include  "due-on-sale"  clauses,  which give it the right to
declare a loan  immediately  due and  payable  in the event  that,  among  other
things, the borrower sells or otherwise disposes of the real property subject to
the mortgage and the loan is not repaid.  However,  Union  Federal  occasionally
permits  assumptions  of existing  residential  mortgage loans on a case-by-case
basis.

      At December  31,  1998,  approximately  $71.8  million,  or 77.2% of Union
Federal's  portfolio  of loans,  consisted  of one- to  four-family  residential
loans.  Approximately $50,000, or .07% of total residential loans, were included
in  non-performing  assets as of that date.  See  "--Non-Performing  and Problem
Assets."

      Multi-Family Loans. At December 31, 1998,  approximately $10.6 million, or
11.4% of Union  Federal's  total loan  portfolio,  consisted  of mortgage  loans
secured by multi-family  dwellings  (those  consisting of more than four units).
Union Federal's  multi-family loans are generally written as one-year adjustable
rate loans indexed to the one-year  U.S.  Treasury rate with an original term of
up  to  20  years.   Union  Federal  writes   multi-family  loans  with  maximum
Loan-to-Value  ratios of 80%. Union Federal's  largest  multi-family  loan as of
December 31, 1998 had a balance of approximately $1.0 million and was secured by
28 duplexes located in Crawfordsville,  Indiana. On the same date, Union Federal
had $210,000 in multi-family loans included in non-performing assets.

      Multi-family  loans, like commercial real estate loans,  involve a greater
risk than do residential loans. See "-- Commercial Real Estate Loans" below.

      Commercial Real Estate Loans. Union Federal's commercial real estate loans
are secured by churches,  office  buildings,  and other  commercial  properties.
Union  Federal  generally  originates  commercial  real estate loans as one-year
adjustable  rate loans indexed to the one-year U.S.  Treasury  securities  yield
adjusted to a constant  maturity,  with a maximum term of 20 years and a maximum
Loan-to-Value  ratio of 80%. At  December  31,  1998,  Union  Federal's  largest
commercial  loan had an  outstanding  balance  of  $782,000  and was  secured by
commercial   property  in  Crawfordsville,   Indiana.   At  December  31,  1998,
approximately  $6.4 million,  or 6.8% of Union  Federal's  total loan portfolio,
consisted of commercial real estate loans.  On the same date,  Union Federal had
$89,000 or 15.7% of  commercial  real estate  loans  included in  non-performing
assets.

      Loans secured by commercial real estate  generally are larger than one- to
four-family  residential loans and involve a greater degree of risk.  Commercial
real estate  loans often  involve  large loan  balances to single  borrowers  or
groups of related borrowers. Payments on these loans depend to a large degree on
results of operations  and management of the properties and may be affected to a
greater extent by adverse conditions in the real estate market or the economy in
general.  Accordingly,  the nature of the loans  makes them more  difficult  for
management to monitor and evaluate.

      Construction  Loans. Union Federal offers  construction loans with respect
to residential  and commercial real estate and, in certain cases, to builders or
developers constructing such properties on a speculative basis (i.e., before the
builder/developer  obtains a commitment  from a buyer).  Union Federal  provides
construction  loans only to borrowers  who commit to permanent  financing on the
finished project.  At December 31, 1998,  approximately $4.0 million, or 4.3% of
Union  Federal's  total loan portfolio,  consisted of  construction  loans.  The
largest construction loan had a balance of $914,000 on December 31, 1998 and was
secured by a condominium project and golf course in Pittsboro,  Indiana. None of
Union Federal's  construction  loans were included in  non-performing  assets on
that date.

      Construction  loans generally match the term of the construction  contract
and are  written as  fixed-rate  loans with  interest  calculated  on the amount
disbursed under the loan and payable monthly.  The maximum  Loan-to-Value  Ratio
for a construction  loan is based upon the nature of the  construction  project.
For example,  a  construction  loan for a one- to  four-family  residence may be
written with a maximum Loan-to-Value Ratio of 95%, while a construction loan for
a multi-family project may be written with a maximum Loan-to-Value Ratio of 80%.
Inspections are made prior to any disbursement  under a construction loan. Union
Federal does not normally charge commitment fees for construction loans.

      While providing Union Federal with a comparable, and in some cases higher,
yield than  conventional  mortgage  loans,  construction  loans involve a higher
level of risk.  For  example,  if a project is not  completed  and the  borrower
defaults,  Union  Federal may have to hire  another  contractor  to complete the
project at a higher  cost.  Also,  a project  may be  completed,  but may not be
salable,  resulting in the borrower  defaulting and Union Federal's taking title
to the project.

      Consumer  Loans.  Union Federal's  consumer loans,  consisting of passbook
loans and home improvement loans, aggregated  approximately $213,000 at December
31, 1998, or .2% of its total loan portfolio.  Union Federal's home  improvement
loans  generally  have a fixed  rate  and a term  of up to  seven  years.  Union
Federal's  passbook loans are made up to 90% of the deposit account balance and,
at December 31, 1998,  accrued at a rate of 8.8%.  This rate may change but will
always be at least 3% over the  underlying  passbook or  certificate  of deposit
rate. Interest on loans secured by deposits is paid  semi-annually.  At December
31, 1998, none of Union Federal's consumer loans were included in non-performing
assets. See "-- Non-Performing and Problem Assets."

      Origination,  Purchase and Sale of Loans.  Union Federal  historically has
originated its mortgage loans pursuant to its own  underwriting  standards which
do not conform  with the  standard  criteria of the Federal  Home Loan  Mortgage
Corporation  ("FHLMC") or the Federal National Mortgage Association ("FNMA"). In
the event that Union Federal begins originating  fixed-rate residential mortgage
loans  for  sale to the  FHLMC  in the  secondary  market,  such  loans  will be
originated in accordance  with the guidelines  established by the FHLMC and will
be sold promptly  after they are  originated.  Union Federal has no intention to
originate loans for sale to the FHLMC at this time, however.

      Union  Federal  confines  its loan  origination  activities  primarily  to
Montgomery  County and the  surrounding  counties of Boone,  Hendricks,  Putnam,
Parke and Fountain.  Union Federal has also  originated  several loans in Marion
County.  At  December  31,  1998,  Union  Federal  also had six  loans  which it
originated, totaling approximately $641,000, secured by property located outside
of Indiana.  Union Federal's loan originations are generated from referrals from
existing   customers,   real  estate  brokers,   and  newspaper  and  periodical
advertising. Loan applications are underwritten and processed at Union Federal's
office.

      Union Federal's loan approval process is intended to assess the borrower's
ability to repay the loan,  the  viability  of the loan and the  adequacy of the
value of the  property  that will  secure  the loan.  To assess  the  borrower's
ability to repay,  Union Federal  studies the  employment and credit history and
information  on  the  historical  and  projected  income  and  expenses  of  its
mortgagors. All mortgage loans are approved or ratified by Union Federal's board
of directors.

      Union Federal generally requires  appraisals on all real property securing
its loans and requires an  attorney's  opinion and a valid lien on the mortgaged
real  estate.  Appraisals  for all real  property  securing  mortgage  loans are
performed  by  independent  appraisers  who are  state-licensed.  Union  Federal
requires fire and extended  coverage  insurance in amounts at least equal to the
principal  amount of the loan and also requires  flood  insurance to protect the
property  securing  its  interest  if the  property is in a flood  plain.  Union
Federal also generally  requires private mortgage  insurance for all residential
mortgage  loans  with  Loan-to-Value  Ratios of  greater  than 80%,  and  escrow
accounts  for  insurance  premiums  and  taxes for loans  that  require  private
mortgage insurance.

      Union Federal's  underwriting standards for consumer loans are intended to
protect against some of the risks inherent in making  consumer  loans.  Borrower
character, paying habits and financial strengths are important considerations.

      Union  Federal  occasionally  purchases  participation  interests in loans
originated by other financial  institutions in order to diversify its portfolio,
supplement  local  loan  demand  and  to  obtain  more  favorable  yields.   The
participations  that Union  Federal  purchases  normally  represent a portion of
residential  or  commercial  real  estate  loans  originated  by  other  Indiana
financial  institutions,  most of which  are  secured  by  property  located  in
Indiana.  As of December 31,  1998,  Union  Federal  held in its loan  portfolio
participations in mortgage loans aggregating $7.8 million that it purchased, all
of  which  were   serviced   by  others.   Included   within  this  amount  were
participations  in the  aggregate  amount of  $713,000  which  were  secured  by
property  located outside of Indiana.  The largest  participation  loan in Union
Federal's  portfolio  at  December  31,  1998 was a $914,000  interest in a loan
secured by a condominium project and golf course located in Pittsboro, Indiana.

      The following table shows Union  Federal's loan  origination and repayment
activity during the periods indicated:

<TABLE>
<CAPTION>


                                                                                      Year Ended December 31,
                                                                         ------------------------------------------------
                                                                         1998                  1997                  1996
                                                                         ----                  ----                  ----
                                                                                          (In thousands)
<S>                                                                      <C>                  <C>                     <C>    
Gross loans receivable
   at beginning of period.....................................           $81,135              $73,630                 $63,024
Loans originated:
     Real estate mortgage loans:
       One-to-four family loans...............................            24,763               18,116                  19,332
       Multi-family loans.....................................             1,052                  654                   1,532
       Commercial loans.......................................             3,763                  483                      45
     Construction loans.......................................             3,163                5,284                   2,220
     Commercial loans.........................................                51                  ---                     ---
     Loans secured by deposits................................               155                  161                     322
     Home improvement loans...................................                30                   85                      36
         Total originations...................................            32,977               24,783                  23,487
Purchases (sales) of participation loans, net.................               800                  500                   1,350
Reductions:
     Principal loan repayments................................            21,853               17,541                  14,211
     Transfers from loans to real estate owned................                15                  237                      20
         Total reductions.....................................            21,868               17,778                  14,231
                                                                         -------              -------                 -------
Total gross loans receivable at
   end of period..............................................           $93,044              $81,135                 $73,630
                                                                         =======              =======                 =======
</TABLE>

      Union  Federal's  residential  loan  originations  during  the year  ended
December 31, 1998 totaled  $24.8  million,  compared to $18.1  million and $19.3
million in the years ended December 31, 1997 and 1996, respectively.

      Origination  and Other  Fees.  Union  Federal  realizes  income  from late
charges,  checking  account service  charges,  and fees for other  miscellaneous
services.  Union Federal currently charges a commitment fee of $200 on all loans
and an additional $500 origination fee on construction loans. Union Federal also
may charge points on a mortgage loan as consideration for a lower interest rate,
although it does so infrequently. Late charges are generally assessed if payment
is not  received  within a specified  number of days after it is due.  The grace
period depends on the individual loan documents.

Non-Performing and Problem Assets

      After a mortgage loan becomes 30 days past due,  Union Federal  delivers a
delinquency  notice to the  borrower.  When loans are 30 to 60 days in  default,
Union Federal sends additional delinquency notices and makes personal contact by
telephone with the borrower to establish an acceptable repayment schedule.  When
loans become 60 days in default, Union Federal again contacts the borrower, this
time in person, to establish an acceptable  repayment schedule.  When a mortgage
loan is 90 days  delinquent,  Union  Federal  will have  either  entered  into a
workout  plan with the  borrower  or  referred  the matter to its  attorney  for
collection. Management is authorized to commence foreclosure proceedings for any
loan upon making a determination that it is prudent to do so.

      Union Federal  reviews  mortgage  loans on a regular basis and places such
loans on a non-accrual  status when they become 90 days  delinquent.  Generally,
when  loans are placed on a  non-accrual  status,  unpaid  accrued  interest  is
written off, and further income is recognized only to the extent received.

      Non-performing  Assets.  At December 31, 1998,  $349,000,  or .3% of Union
Federal's total assets, were non-performing  (non-performing loans, non-accruing
loans and  foreclosed  real estate)  compared to $98,000,  or .07%, of its total
assets at December 31, 1997. At December 31, 1998,  residential  loans accounted
for $50,000 of Union Federal's  non-performing assets. Union Federal had no real
estate owned ("REO") properties as of December 31, 1998.

      The table below sets forth the amounts and  categories of Union  Federal's
non-performing assets (non-performing loans, foreclosed real estate and troubled
debt  restructurings)  for the last three years. It is Union Federal's policy to
review all earned but uncollected  interest on all loans monthly to determine if
any portion thereof should be classified as uncollectible  for any loan past due
in excess  of 90 days.  Delinquent  loans  that are 90 days or more past due are
considered non-performing assets.

<TABLE>
<CAPTION>

                                                            At December 31,
                                              ------------------------------------------
                                                1998             1997              1996
                                                ----             ----              ----
                                                        (Dollars in thousands)
Non-performing assets:
<S>                                            <C>                 <C>            <C>  
   Non-performing loans.....................   $349                $52            $ 489
   Foreclosed real estate...................    ---                 46              ---
     Total non-performing assets............   $349                $98             $489

Non-performing loans to total loans.........    .38%               .07%             .67%

Non-performing assets to total assets.......    .32%               .07%             .59%
</TABLE>

      Interest  income of  $30,000,  $4,000  and  $10,000  for the  years  ended
December  31,  1998,  1997  and  1996,  respectively,   was  recognized  on  the
non-performing  loans summarized above.  Interest income of $33,000,  $5,000 and
$33,000 for the years ended  December  31,  1998,  1997 and 1996,  respectively,
would have been  recognized  under the  original  terms of these  non-performing
loans.

      At December 31, 1998,  Union Federal held loans  delinquent  from 30 to 89
days totaling approximately $423,000.  Other than in connection with these loans
and the other delinquent loans disclosed  elsewhere in this section,  management
was  not  aware  of  any  other  borrowers  who  were   experiencing   financial
difficulties.

     Delinquent  Loans.  The following  table sets forth certain  information at
December 31, 1998, 1997 and 1996,  relating to  delinquencies in Union Federal's
portfolio.  Delinquent  loans  that are 90 days or more past due are  considered
non-performing assets.
<TABLE>
<CAPTION>
                              At December 31, 1998                 At December 31, 1997              At December 31, 1996
                     --------------------------------------  -----------------------------------  --------------------------------
                          30-89 Days      90 Days or More       30-89 Days      90 Days or More     30-89 Days     90 Days or More
                     ------------------  ------------------  -----------------  ----------------  --------------  ----------------
                                Principal         Principal           Principal        Principal         Principal        Principal
                      Number    Balance    Number  Balance   Number    Balance Number   Balance  Number   Balance Number  Balance
                     of Loans   of Loans  of Loansof Loans  of Loans  of Loansof Loans of Loans of Loans of Loansof Loans of Loans
                     -------------------------------------------------------------------------------------------------------------
                                                (Dollars in thousands)
<S>                       <C>     <C>         <C>    <C>         <C>   <C>         <C>   <C>         <C>   <C>         <C>   <C> 
One- to four-
   family loans........   6       $406        3      $50         9     $300        4     $ 47        7     $226        8     $377
Commercial
   real estate loans...   1         17        2       89         1       48      ---      ---      ---      ---      ---      ---
Multi-family
   loans............... ---        ---        1      210         1      207      ---      ---      ---      ---        1      112
Loans secured
   by deposits......... ---        ---      ---      ---       ---      ---      ---      ---      ---      ---      ---      ---
Home improvement loans. ---        ---      ---      ---       ---      ---        1        5      ---      ---      ---      ---
                      -----       ----     ----     ----     -----     ----        -      ---     ----     ----     ----     ----
   Total...............   7       $423        6     $349        11     $555        5      $52        7     $226        9     $489
                          =       ====        =     ====        ==     ====        =      ===        =     ====        =     ====
Delinquent loans to
   total loans.........                              .85%                                 .77%                                .98%
                                                     ===                                  ===                                 === 
</TABLE>

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

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

      At December 31, 1998, the aggregate  amount of Union Federal's  classified
assets and its general and specific loss allowances were as follows:

                                                          At December 31, 1998
                                                          --------------------
                                                             (In thousands)

  Substandard assets..........................................      $840
  Doubtful assets.............................................       ---
  Loss assets.................................................       ---
                                                                   -----
      Total classified assets.................................      $840
                                                                   =====
  General loss allowances.....................................      $362
  Specific loss allowances....................................       ---
                                                                   -----
      Total allowances........................................      $362
                                                                   =====

      Union Federal  regularly  reviews its loan portfolio to determine  whether
any loans require  classification  in accordance  with  applicable  regulations.
Included  in  substandard  assets at  December  31,  1998,  Union  Federal had a
multi-family  loan in the amount of $491,000 that was  performing.  The loan was
classified as substandard as a result of a regulatory examination.

Allowance for Loan Losses

      The allowance for loan losses is maintained through the provision for loan
losses,  which  is  charged  to  earnings.  The  allowance  for loan  losses  is
determined in conjunction  with Union Federal's review and evaluation of current
economic  conditions  (including  those of its  lending  area),  changes  in the
character and size of the loan portfolio,  loan delinquencies (current status as
well as past and  anticipated  trends) and adequacy of collateral  securing loan
delinquencies,  historical and estimated net  charge-offs,  and other  pertinent
information  derived  from a  review  of the  loan  portfolio.  In  management's
opinion,  Union  Federal's  allowance  for loan  losses  is  adequate  to absorb
probable  losses  inherent in the loan portfolio at December 31, 1998.  However,
there can be no assurance that  regulators,  when reviewing Union Federal's loan
portfolio  in  the  future,  will  not  require  increases  in  Union  Federal's
allowances  for loan  losses or that  changes in  economic  conditions  will not
adversely affect its loan portfolio.

      Summary of Loan Loss  Experience.  The following table analyzes changes in
the allowance during the past three fiscal years ended December 31, 1998.

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                 ------------------------------------------------------
                                                                 1998                     1997                     1996
                                                                 ----                     ----                     ----
                                                                                   (Dollars in thousands)
<S>                                                              <C>                        <C>                       <C> 
Balance at beginning of period............................       $252                       $159                      $111
Gross charge-offs - Multi-family loans....................                                  (72)
Provision for losses on loans.............................        110                        165                        48
   Balance end of period..................................       $362                       $252                      $159
Allowance for loan losses as a percent of
   total loans outstanding................................        .40%                       .32%                      .22%
Ratio of net charge-offs to average
   loans outstanding......................................        ---                        .10%                      ---
</TABLE>

      Allocation of Allowance for Loan Losses.  The following  table presents an
analysis of the allocation of Union  Federal's  allowance for loan losses at the
dates  indicated.  The  allocation  of the  allowance  to each  category  is not
necessarily  indicative of future loss in any  particular  category and does not
restrict  Union  Federal's  use of the  allowance  to  absorb  losses  in  other
categories.

<TABLE>
<CAPTION>

                                                                           At December 31,
                                         ---------------------------------------------------------------------------------
                                                 1998                           1997                          1996
                                         ---------------------         -----------------------        --------------------
                                                       Percent                        Percent                       Percent
                                                      of loans                       of loans                      of loans
                                                       in each                        in each                       in each
                                                      category                       category                      category
                                                      to total                       to total                        total
                                         Amount         loans           Amount         loans           Amount        loans
                                         ------         -----           ------         -----           ------        -----
                                                                         (Dollars in thousands)
<S>                                         <C>       <C>                <C>           <C>                <C>        <C>   
Balance at end of period applicable to:
   Real estate mortgage loans:
     Residential...............             $75       77.19%             $  65         76.95%             $60        77.46%
     Commercial................              67        6.83                 29          4.47               13         4.88
     Multi-family..............             134       11.40                 82         12.57               75        14.83
   Construction loans..........              19        4.29                 10          5.73               11         2.36
   Commercial loans............             ---         .06
   Loans secured by deposits...             ---         .17                ---           .17              ---          .33
   Home improvement loans......             ---         .06                ---           .11              ---          .14
   Unallocated.................              67                             66           ---              ---          ---
                                           ----      ------               ----        ------             ----       ------ 
   Total.......................            $362      100.00%              $252        100.00%            $159       100.00%
                                           ====      ======               ====        ======             ====       ====== 

</TABLE>

Investments

     Investments.  Union Federal's  investment  portfolio  generally consists of
U.S.  Treasury and federal  agency  securities,  FHLB stock and an investment in
Pedcor Investments - 1993 - XVI, L.P. See "--Service Corporation Subsidiary." At
December 31, 1998, approximately $9.8 million, or 9.1%, of Union Federal's total
assets consisted of such  investments.  Union Federal also had $6.2 million,  or
5.7% of its assets, in interest-earning deposits as of that date.

     The amount of  interest-earning  deposits held by Union  Federal  increased
significantly   during  1997  as  a  result  of  the  Conversion.   Because  the
subscription offering for the Holding Company's Common Stock was oversubscribed,
Union Federal delivered refund checks during the last week of December,  1997 to
those  subscribers  whose purchase orders were not filled.  Many of those checks
had not cleared as of December 31, 1997,  thereby increasing the amount of funds
held by Union Federal in interest-bearing  deposits. In addition,  Union Federal
invested  some of the  proceeds  that it  received  from the stock  offering  in
interest-bearing  overnight  accounts  at  the  FHLB  Indianapolis,  which  also
increased the amount of its interest-bearing  deposits at December 31, 1997. The
amount of  interest-earning  deposits  decreased to $6.2 million at December 31,
1998 as a result of the payment of the stock  subscription  of $22.7 million and
increased investment in loans and investment securities during 1998.

      The following  table sets forth the amortized cost and the market value of
Union Federal's investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                At December 31,
                                        -----------------------------------------------------------------
                                              1998                   1997                    1996
                                        ------------------     ------------------     -------------------
                                        Amortized   Market     Amortized   Market     Amortized    Market
                                          Cost       Value       Cost       Value       Cost        Value
                                                                  (In thousands)
<S>                                    <C>        <C>          <C>        <C>          <C>        <C>    
Investment securities held to maturity:
   U.S. Treasury.......................$     ---  $     ---    $   350    $   350      $   350    $   348
   Federal agencies....................   4,500       4,479      3,346      3,351        2,645      2,611
   Mortgage-backed securities..........   3,526       3,696      2,124      2,302        2,752      2,933
     Total investment securities
       held to maturity................   8,026       8,175      5,820      6,003        5,747      5,892
Investment in limited partnership......   1,055          (1)     1,176         (1)       1,334         (1)
FHLB stock (2).........................     745         745        708        708          580        580
                                         ------                 ------                  ------
Total investments......................  $9,826                 $7,704                  $7,661
                                         ======                 ======                  ======
</TABLE>

(1)   Market values are not available

(2)   Market  value is based on the  price at which  stock  may be resold to the
      FHLB of Indianapolis.

         The  following  table sets forth the  amount of  investment  securities
(excluding  mortgage-backed  securities,  FHLB stock and  investment  in limited
partnership)  which mature during each of the periods indicated and the weighted
average yields for each range of maturities at December 31, 1998.

<TABLE>
<CAPTION>
                                                           Amount at December 31, 1998 which matures in
                                       ------------------------------------------------------------------------------------
                                            One Year             One Year            Five Years
                                             or Less           to Five Years        to Ten Years          After Ten Years
                                       ------------------------------------------------------------------------------------
                                       Amortized   Average  Amoritzed  Average   Amortized   Average     Amortized  Average
                                         Cost       Yield     Cost      Yield      Cost       Yield        Cost      Yield
                                       ---------   -------  ---------  -------   ---------   -------     ---------  -------
                                                                   (Dollars in thousands)

<S>                                      <C>       <C>       <C>         <C>        <C>        <C>        <C>       <C>  
Federal agency securities.............   $100      2.47%     $1,800      6.21%      $500       6.10%      $2,100    6.63%
</TABLE>

Mortgage-backed Securities

         The  following  table sets  forth the  composition  of Union  Federal's
mortgage-backed securities portfolio at the dates indicated.

<TABLE>
<CAPTION>

                                                                                    December 31,
                                                -----------------------------------------------------------------------------------
                                                            1998                        1997                        1996
                                                --------------------------  -------------------------    --------------------------
                                                Amortized  Percent  Market  Amortized  Percent Market    Amortized  Percent  Market
                                                  Cost    of Total   Value    Cost    of Total  Value      Cost    of Total   Value
                                                ---------  -------  ------  ---------  --------------    ---------  -------  ------
                                                                                   (In thousands)
Governmental National
<S>                                                <C>     <C>       <C>     <C>       <C>     <C>        <C>       <C>      <C>   
   Mortgage Corporation....................        $991    28.1%     $1,095  $1,223    57.6%   $1,348     $1,391    50.5%    $1,511
Federal Home Loan Mortgage Corporation.....       2,395    67.9       2,464     635    29.9       691      1,039    37.8      1,103
Federal National
   Mortgage Corporation....................         123     3.5         120     243    11.4       240        294    10.7        291
Other......................................          17      .5          17      23     1.1        23         28     1.0         28
                                                 ------   -----      ------  ------   -----    ------     ------   -----     ------
   Total mortgage- backed securities.......      $3,526   100.0%     $3,696  $2,124   100.0%   $2,302     $2,752   100.0%    $2,933
                                                 ======   =====      ======  ======   =====    ======     ======   =====     ======
</TABLE>

         The following table sets forth the amount of mortgage-backed securities
which  mature  during each of the periods  indicated  and the  weighted  average
yields for each range of maturities at December 31, 1998.
<TABLE>
<CAPTION>
                                                                        Amount at December 31, 1998 which matures in
                                                   ------------------------------------------------------------------------------
                                                          One Year                    One Year to                 After
                                                           or Less                     Five Years               Five Years
                                                   -----------------------      -----------------------    ----------------------
                                                                  Weighted                     Weighted                  Weighted
                                                   Amortized       Average      Amortized       Average    Amortized      Average
                                                     Cost           Yield         Cost           Yield       Cost          Yield
                                                   ---------      --------      ---------      --------    ---------     --------
                                                                             (Dollars in thousands)
<S>                                                    <C>          <C>             <C>           <C>       <C>            <C>  
Mortgage-backed securities......................       $37          7.00%           $11           8.95%     $3,478         7.44%
</TABLE>


      The   following   table  sets  forth  the   changes  in  Union   Federal's
mortgage-backed securities portfolio for the years ended December 31, 1998, 1997
and 1996.
                                          For the Year Ended
                                             December 31,
                                -----------------------------------------
                                  1998           1997              1996
                                 ------          ------            ------
                                           (In thousands)
Beginning balance..........      $2,124          $2,752            $3,423
Purchases..................       2,004             ---               ---
Repayments.................        (607)           (639)             (676)
Premium and discount
   amortization, net.......           5              11                 5
                                 ------          ------            ------
Ending balance.............      $3,526          $2,124            $2,752
                                 ======          ======            ======


Sources of Funds

      General.  Deposits have  traditionally been Union Federal's primary source
of funds for use in lending and investment activities.  In addition to deposits,
Union Federal derives funds from scheduled loan payments, investment maturities,
loan prepayments,  retained  earnings,  income on earning assets and borrowings.
While scheduled loan payments and income on earning assets are relatively stable
sources  of  funds,  deposit  inflows  and  outflows  can  vary  widely  and are
influenced  by  prevailing  interest  rates,  market  conditions  and  levels of
competition.  Borrowings  from  the  FHLB  of  Indianapolis  may be  used in the
short-term to compensate for  reductions in deposits or deposit  inflows at less
than projected levels.

      Deposits.   Union  Federal  attracts  deposits   principally  from  within
Montgomery  County  through  the  offering  of  a  broad  selection  of  deposit
instruments, including fixed-rate passbook accounts, NOW accounts, variable rate
money market accounts,  fixed-term certificates of deposit and savings accounts.
Union  Federal does not actively  solicit or advertise  for deposits  outside of
Montgomery County, and substantially all of its depositors are residents of that
county.  Deposit  account terms vary, with the principal  differences  being the
minimum balance required, the amount of time the funds remain on deposit and the
interest  rate.  Union  Federal  does not pay broker  fees for any  deposits  it
receives.

      Union Federal establishes the interest rates paid, maturity terms, service
fees and withdrawal  penalties on a periodic basis.  Determination  of rates and
terms are predicated on funds acquisition and liquidity requirements, rates paid
by competitors,  growth goals, and applicable regulations. Union Federal relies,
in part, on customer service and long-standing  relationships  with customers to
attract and retain its deposits.  Union Federal also closely prices its deposits
to the rates offered by its competitors.

      The flow of  deposits  is  influenced  significantly  by general  economic
conditions,  changes in money  market and other  prevailing  interest  rates and
competition.  The  variety of deposit  accounts  that Union  Federal  offers has
allowed it to be competitive in obtaining funds and to respond with  flexibility
to changes in consumer  demand.  Union  Federal has become more  susceptible  to
short-term  fluctuations in deposit flows as customers have become more interest
rate  conscious.  Union  Federal  manages the pricing of its deposits in keeping
with its asset/liability management and profitability objectives. Based on Union
Federal's experience,  management believes that its passbook,  NOW and MMDAs are
relatively  stable  sources of  deposits.  However,  the  ability to attract and
maintain certificates of deposit, and the rates paid on these deposits, has been
and will continue to be significantly affected by market conditions.

      An analysis of Union Federal's  deposit  accounts by type,  maturity,  and
rate at December 31, 1998, is as follows:

<TABLE>
<CAPTION>
                                                                    Minimum        Balance at                          Weighted
                                                                    Opening       December 31,          % of            Average
Type of Account                                                     Balance           1998            Deposits           Rate
-----------------------------------------------------------------------------------------------------------------------------
                                                                                       (Dollars in thousands)
<S>                                                             <C>                    <C>               <C>              <C>  
Withdrawable:
   Fixed rate, passbook accounts..............................  $      10              $3,410            5.26%            4.00%
   Variable rate, money market................................         10              10,794           16.65             4.87
   NOW accounts and other transaction accounts................        500               1,845            2.84             1.93
                                                                                      -------          ------    
     Total withdrawable.......................................                         16,049           24.75             4.35

Certificates (original terms):
   3 months or less...........................................      1,000                 101             .16             4.13
   6 months...................................................      1,000               3,186            4.91             4.75
   12 months..................................................      1,000               3,931            6.06             5.41
   18 months..................................................      1,000               8,055           12.42             5.57
   24 months..................................................      1,000               5,444            8.40             5.79
   30 months..................................................      1,000               8,990           13.86             5.78
   36 months .................................................      1,000               3,468            5.35             5.89
   48 months..................................................      1,000                 509             .78             5.99
   60 months..................................................      1,000               5,762            8.89             6.08
Jumbo certificates - $100,000 and over........................    100,000               9,351           14.42             6.00
                                                                                      -------          ------    
Total certificates............................................                         48,797           75.25             5.73
                                                                                      -------          ------    
Total deposits................................................                        $64,846          100.00%            5.39%
                                                                                      =======          ======
</TABLE>

      The following  table sets forth by various  interest rate  categories  the
composition of time deposits of Union Federal at the dates indicated:
<TABLE>
<CAPTION>


                                              At December 31,
                                  1998             1997               1996
                                  ----------------------------------------
(In thousands)
<S>                             <C>            <C>                <C>      
4.00 to 4.99%..............     $  4,193       $   3,622          $   4,760
5.00 to 5.99%..............       27,459          19,245             19,400
6.00 to 6.99%..............       17,119          22,894             20,954
7.00 to 7.99%..............           26             420              1,941
                                 -------         -------            -------
   Total...................      $48,797         $46,181            $47,055
                                 =======         =======            =======
</TABLE>


     The following table  represents,  by various interest rate categories,  the
amounts of time  deposits  maturing  during  each of the three  years  following
December  31,  1998.  Matured  certificates,  which have not been  renewed as of
December 31, 1998, have been allocated based upon certain rollover assumptions.

<TABLE>
<CAPTION>


                                       Amounts at December 31, 1998 Maturing In
                     ----------------------------------------------------------------------------
                     One Year                 Two                  Three             Greater Than
                      or Less                Years                 Years              Three Years
                      -------                -----                 -----              -----------
                                                    (In thousands)
<S>                   <C>                  <C>                    <C>                   <C>   
4.00 to 4.99%....    $  3,482            $     711
5.00 to 5.99%....      15,086                7,831                $2,882                $1,660
6.00 to 6.99%....      10,481                4,148                   775                 1,714
7.00 to 7.99%....          10                   17                   ---                   ---
                      -------              -------                ------                ------
   Total.........     $29,059              $12,707                $3,657                $3,374
                      =======              =======                ======                ======
</TABLE>

     The  following   table  indicates  the  amount  of  Union  Federal's  other
certificates  of deposit of $100,000 or more by time remaining until maturity as
of December 31, 1998.

                                                         At December 31, 1998
                                                         --------------------
     Maturity Period                                        (In thousands)
     Three months or less..............................          $2,707
     Greater than three months through six months......           1,259
     Greater than six months through twelve months.....           1,985
     Over twelve months................................           3,400
                                                                 ------
          Total........................................          $9,351
                                                                 ======

      The following  table sets forth the dollar  amount of savings  deposits in
the various types of deposits that Union Federal offers at the dates  indicated,
and the amount of  increase  or  decrease  in such  deposits  as compared to the
previous period.
<TABLE>
<CAPTION>
                                                                          DEPOSIT ACTIVITY
                                        -----------------------------------------------------------------------------------------
                                           Balance                Increase    Balance                Increase    Balance
                                             at                  (Decrease)     at                  (Decrease)     at
                                        December 31,     % of       from   December 31,     % of       from   December 31,   % of
                                            1998       Deposits     1997       1997       Deposits     1996       1996     Deposits
                                            ----       --------     ----       ----       --------     ----       ----     --------
                                                                       (Dollars in thousands)
Withdrawable:
<S>                                         <C>           <C>     <C>       <C>              <C>     <C>         <C>           <C>  
   Fixed rate, passbook accounts......      $3,410        5.26%   $(1,169)  $  4,579         7.35%   $   712     $3,867        6.40%
   Variable rate, money market........      10,794       16.65      1,669      9,125        14.66        510      8,615       14.25
   NOW accounts and other
     transaction accounts.............       1,845        2.84       (528)     2,373         3.81      1,474        899        1.49
                                           -------      ------     ------    -------       ------     ------    -------      ------ 
     Total withdrawable...............      16,049       24.75        (28)    16,077        25.82      2,696     13,381       22.14
Certificates (original terms):
   3 months...........................         101         .16                   101          .16        (48)       149         .25
   6 months...........................       3,186        4.91       (592)     3,778         6.07       (489)     4,267        7.06
   12 months..........................       3,931        6.06     (1,546)     5,477         8.80        244      5,233        8.66
   18 months..........................       8,055       12.42         69      7,986        12.83       (204)     8,190       13.55
   24 months..........................       5,444        8.40        270      5,174         8.31        678      4,496        7.44
   30 months..........................       8,990       13.86      2,375      6,615        10.62      1,133      5,482        9.07
   36 months .........................       3,468        5.35       (386)     3,854         6.19     (1,344)     5,198        8.60
   48 months..........................         509         .78        188        321          .52        (55)       376         .62
   60 months..........................       5,762        8.89        (53)     5,815         9.34       (793)     6,608       10.93
Jumbo certificates....................       9,351       14.42      2,291      7,060        11.34          4      7,056       11.68
                                           -------      ------     ------    -------       ------     ------    -------      ------ 
Total certificates....................      48,797       75.25      2,616     46,181        74.18       (874)    47,055       77.86
                                           -------      ------     ------    -------       ------     ------    -------      ------ 
Total deposits........................     $64,846      100.00%    $2,588    $62,258       100.00%    $1,822    $60,436      100.00%
                                           =======      ======     ======    =======       ======     ======    =======      ====== 
</TABLE>

     Total  deposits at  December  31, 1998 were  approximately  $64.8  million,
compared to  approximately  $60.4 million at December 31, 1996.  Union Federal's
deposit  base  depends  somewhat  upon the  manufacturing  sector of  Montgomery
County's  economy.   Although  Montgomery  County's   manufacturing   sector  is
relatively  diversified and does not significantly  depend upon any industry,  a
loss of a material portion of the manufacturing workforce could adversely affect
Union Federal's  ability to attract  deposits due to the loss of personal income
attributable  to the lost  manufacturing  jobs and the attendant loss in service
industry jobs.

      In the unlikely event of Union Federal's liquidation after the Conversion,
all claims of creditors  (including  those of deposit  account  holders,  to the
extent of their deposit  balances)  would be paid first followed by distribution
of the liquidation  account to certain deposit account holders,  with any assets
remaining thereafter  distributed to the Holding Company as the sole shareholder
of Union Federal.

      Borrowings.  Management  focuses on generating high quality loans and then
seeking the best source of funding from deposits,  investments or borrowings. At
December 31, 1998,  Union Federal had  borrowings in the amount of $772,000 from
the FHLB of  Indianapolis  which bear fixed and variable  interest rates and are
due at various  dates  through  2004.  Union  Federal is  required  to  maintain
eligible  loans in its  portfolio  of at least 160% of  outstanding  advances as
collateral  for advances from the FHLB of  Indianapolis.  Union Federal does not
anticipate  any  difficulty  in  obtaining  advances  appropriate  to  meet  its
requirements in the future. Union Federal also owes Pedcor Investments 1993-XVI,
L.P.  ("Pedcor")  $1.0 million  under a note payable that is not included in the
following table. See "--Service Corporation Subsidiary."

      The  following  table  presents  certain  information  relating  to  Union
Federal's borrowings at or for the years ended December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>

                                                                        At or for the Year
                                                                        Ended December 31,
                                                              1998             1997              1996
                                                              ---------------------------------------
                                                                    (Dollars in thousands)
FHLB Advances:
<S>                                                           <C>           <C>                <C>   
     Outstanding at end of period....................         $772          $2,373             $6,482
     Average balance outstanding for period..........          873           5,748              3,566
     Maximum amount outstanding at any
       month-end during the period...................        1,272           6,873              6,482
     Weighted average interest rate
       during the period.............................         5.84  %         5.90%              5.36  %
     Weighted average interest rate
       at end of period..............................         5.71  %         5.71%              5.52  %

Return on Equity and Assets
                                                              1998             1997              1996
                                                              ---------------------------------------
     Return on assets (net income
        divided by average total assets).............         1.82  %         1.38%              1.13  %
     Return on equity (net income
        divided by average equity)...................         4.65            8.10               6.54
     Dividend payout ratio (dividends
        per share divided by net
        income per share)............................        50.71             ---                ---
     Equity to assets ratio (average
        equity divided by average
        total assets)................................        39.24           17.03              17.31
</TABLE>

Service Corporation Subsidiary

      OTS  regulations  permit  federal  savings  associations  to invest in the
capital  stock,   obligations  or  other   specified   types  of  securities  of
subsidiaries  (referred to as "service  corporations") and to make loans to such
subsidiaries  and joint ventures in which such  subsidiaries are participants in
an  aggregate  amount not  exceeding  2% of the  association's  assets,  plus an
additional 1% of assets if the amount over 2% is used for specified community or
inner-city  development  purposes.  In  addition,   federal  regulations  permit
associations to make specified types of loans to such  subsidiaries  (other than
special purpose finance  subsidiaries)  in which the association  owns more than
10% of the stock, in an aggregate amount not exceeding 50% of the  association's
regulatory capital if the association's regulatory capital is in compliance with
applicable  regulations.  A savings  association  that  acquires  a  non-savings
association  subsidiary,  or that  elects  to  conduct a new  activity  within a
subsidiary,  must  give the FDIC  and the OTS at least 30 days  advance  written
notice.  The FDIC  may,  after  consultation  with the OTS,  prohibit  specified
activities if it determines  such  activities pose a serious threat to the SAIF.
Moreover,  a savings  association  must deduct  from  capital,  for  purposes of
meeting the core capital,  tangible capital and risk-based capital requirements,
its entire  investment in and loans to a subsidiary  engaged in  activities  not
permissible for a national bank (other than  exclusively  agency  activities for
its customers or mortgage banking subsidiaries).

      Union Federal  currently owns one subsidiary,  UFS Service Corp.  ("UFS"),
whose  sole asset is its  investment  in  Pedcor,  which is an  Indiana  limited
partnership  that was established to organize,  build,  own, operate and lease a
48-unit  apartment  complex in  Crawfordsville,  Indiana known as Shady Knoll II
Apartments (the  "Project").  Union Federal owns the limited partner interest in
Pedcor. The general partner is Pedcor Investments LLC. The Project,  operated as
a multi-family,  low- and  moderate-income  housing project, is completed and is
performing as planned.  Because UFS engages  exclusively in activities  that are
permissible for a national bank, OTS regulations permit Union Federal to include
its investment in UFS in its calculation of regulatory capital.

       A low- and moderate-income  housing project qualifies for certain federal
income tax credits if (i) it is a residential  rental  property,  (ii) the units
are used on a  nontransient  basis,  and  (iii)  20% or more of the units in the
project are occupied by tenants whose incomes are 50% or less of the area median
gross income,  adjusted for family size, or  alternatively,  at least 40% of the
units in the project are occupied by tenants  whose  incomes are 60% of the area
median gross income. Qualified low income housing projects generally must comply
with these and other rules for fifteen years,  beginning with the first year the
project  qualified for the tax credit, or some or all of the tax credit together
with interest may be recaptured. The tax credit is subject to the limitations on
the use of general business  credit,  but no basis reduction is required for any
portion of the tax credit claimed.

      UFS  committed  to  invest  approximately  $1.8  million  in Pedcor at the
inception of the project in November,  1993.  Through December 31, 1998, UFS had
invested cash of  approximately  $789,000 in Pedcor with five additional  annual
capital  contributions  remaining  to be paid in  January  of each year  through
January,  2004, totaling $1,021,000.  The additional  contributions will be used
for operating and other expenses of the partnership.  In addition, Union Federal
borrowed funds from the FHLB of  Indianapolis  to advance to Pedcor,  and Pedcor
currently owes Union Federal  $772,000  pursuant to a promissory note payable in
installments  through January 1, 2004 and bearing  interest at an annual rate of
9%.

       UFS transfers the tax credits  resulting  from Pedcor's  operation of the
Project to Union  Federal.  These tax credits will be available to Union Federal
through 2003.  Although Union Federal has reduced income tax expense by the full
amount of the tax  credit  available  each  year,  it has not been able to fully
utilize  available tax credits to reduce income taxes payable because it may not
use tax credits that would reduce its regular  corporate tax liability below its
alternative  minimum tax  liability.  Union Federal may carry forward unused tax
credits for a period of fifteen years and management believes that Union Federal
will be able to utilize  available tax credits during the carry forward  period.
Additionally,  Pedcor has  incurred  operating  losses in the early years of its
operations  primarily due to its  accelerated  depreciation  of assets.  UFS has
accounted for its  investment  in Pedcor on the equity method and,  accordingly,
has  recorded  its share of these  losses as  reductions  to its  investment  in
Pedcor,  which at December 31, 1998, was $1.1 million.  As of December 31, 1998,
98% of the units in the Project  were  occupied,  and all of the tenants met the
income test required for the tax credits. UFS does not engage in any activity or
hold any assets other than its investment in Pedcor.

      The following  summarizes  UFS's equity in Pedcor's losses and tax credits
recognized in Union Federal's consolidated financial statements.


<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                                     ---------------------------------
                                                     1998            1997         1996
                                                     ----            ----         ----
                                                                (In Thousands)
<S>                                                 <C>             <C>          <C>   
Investment in Pedcor:
   Net of equity in losses..................        $1,055          $1,176       $1,334

Equity in losses, net
   of income tax effect.....................       $   (73)         $  (95)      $ (104)
Tax credit..................................           178             178          178
Increase in after-tax net income from
   Pedcor investment........................        $  105          $   83       $   74
</TABLE>

Employees

      As of December 31, 1998,  Union Federal employed 14 persons on a full-time
basis.  Union  Federal  does  not have any  part-time  employees.  None of Union
Federal's employees is represented by a collective bargaining group.  Management
considers its employee relations to be good.

      Employee benefits for Union Federal's full-time  employees include,  among
other things, an employee stock ownership plan, a Pentegra Group (formerly known
as Financial  Institutions  Retirement  Fund)  defined  benefit  pension plan, a
noncontributory,   multiple-employer  comprehensive  pension  plan  (the"Pension
Plan"),  and  hospitalization/major  medical  insurance,  dental  and  eye  care
insurance,  long-term disability insurance, life insurance, and participation in
the Financial Institutions Thrift Plan.

      Management  considers its employee  benefits to be competitive  with those
offered by other  financial  institutions  and major  employers in the area. See
"Executive  Compensation" and "Certain Relationships and Related Transactions of
Union Federal."

                                   COMPETITION

      Union  Federal  originates  most of its loans to and  accepts  most of its
deposits from residents of Montgomery County,  Indiana. Union Federal is subject
to competition from various financial institutions, including state and national
banks,  state and  federal  savings  associations,  credit  unions,  and certain
nonbanking  consumer lenders that provide similar services in Montgomery  County
with  significantly  larger  resources than are available to Union  Federal.  In
total, there are 12 other financial  institutions  located in Montgomery County,
including  eight banks,  two credit unions and two other  savings  associations.
Union  Federal  also  competes  with money  market funds with respect to deposit
accounts.

      The primary  factors  influencing  competition  for  deposits are interest
rates,  service and convenience of office locations.  Union Federal competes for
loan  originations  primarily through the efficiency and quality of the services
that it provides  borrowers  and through  interest  rates and loan fees charged.
Competition  is affected by, among other  things,  the general  availability  of
lendable funds,  general and local economic  conditions,  current  interest rate
levels, and other factors that management cannot readily predict.

                                   REGULATION

General

      As a federally chartered,  SAIF-insured savings association, Union Federal
is subject to extensive  regulation by the OTS and the FDIC. For example,  Union
Federal must obtain OTS approval before it may engage in certain  activities and
must file reports with the OTS regarding its activities and financial condition.
The OTS  periodically  examines  Union  Federal's  books  and  records  and,  in
conjunction with the FDIC in certain situations, has examination and enforcement
powers.   This  supervision  and  regulation  are  intended  primarily  for  the
protection  of  depositors  and  the  federal  deposit  insurance  funds.  Union
Federal's  semi-  annual  assessment  owed to the OTS,  which  is  based  upon a
specified percentage of assets, is approximately $16,000.

      Union  Federal is also subject to federal and state  regulation as to such
matters as loans to officers,  directors,  or principal  shareholders,  required
reserves,  limitations  as to the nature  and  amount of loans and  investments,
regulatory  approval of any merger or consolidation,  issuance or retirements of
securities,  and  limitations  upon  other  aspects of  banking  operations.  In
addition,  Union Federal's  activities and operations are subject to a number of
additional  detailed,  complex and sometimes  overlapping federal and state laws
and regulations.  These include state usury and consumer credit laws, state laws
relating to fiduciaries,  the Federal Truth-In-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community  Reinvestment Act,  anti-redlining  legislation and antitrust
laws.

      The United States Congress is considering  legislation  that would require
all federal savings associations,  such as Union Federal, to either convert to a
national bank or a state-chartered bank by a specified date to be determined. In
addition,  under  the  legislation,  the  Holding  Company  likely  would not be
regulated  as a savings and loan  holding  company but rather as a bank  holding
company.  This  proposed  legislation  would  abolish the OTS and  transfer  its
functions  among the other federal  banking  regulators.  Certain aspects of the
legislation remain to be resolved and,  therefore,  no assurance can be given as
to whether or in what form the legislation  will be enacted or its effect on the
Holding Company and Union Federal.

Savings and Loan Holding Company Regulation

      As the holding  company for Union  Federal,  the Holding  Company  will be
regulated as a  "non-diversified  savings and loan holding  company"  within the
meaning of the Home Owners' Loan Act of 1933, as amended  ("HOLA"),  and subject
to regulatory oversight of the Director of the OTS. As such, the Holding Company
is registered with the OTS and thereby subject to OTS regulations, examinations,
supervision  and reporting  requirements.  As a subsidiary of a savings and loan
holding  company,  Union  Federal  is subject  to  certain  restrictions  in its
dealings with the Holding Company and with other  companies  affiliated with the
Holding Company.

      In general, the HOLA prohibits a savings and loan holding company, without
prior  approval of the Director of the OTS,  from  acquiring  control of another
savings  association or savings and loan holding  company or retaining more than
5% of the voting shares of a savings  association or of another  holding company
which is not a subsidiary.  The HOLA also restricts the ability of a director or
officer  of the  Holding  Company,  or any  person who owns more than 25% of the
Holding Company's stock,  from acquiring control of another savings  association
or savings and loan holding company without  obtaining the prior approval of the
Director of the OTS.

      The Holding Company's Board of Directors  presently intends to operate the
Holding  Company  as a  unitary  savings  and loan  holding  company.  There are
generally no restrictions on the  permissible  business  activities of a unitary
savings and loan holding company.

      Notwithstanding  the above rules as to permissible  business activities of
unitary  savings  and  loan  holding  companies,   if  the  savings  association
subsidiary of such a holding  company fails to meet the Qualified  Thrift Lender
("QTL") test,  then such unitary  holding  company  would become  subject to the
activities  restrictions  applicable to multiple holding companies.  (Additional
restrictions  on securing  advances from the FHLB also apply.) See  "--Qualified
Thrift Lender." At December 31, 1998,  Union Federal's asset  composition was in
excess of that required to qualify as a Qualified Thrift Lender.

      If the  Holding  Company  were  to  acquire  control  of  another  savings
association other than through a merger or other business combination with Union
Federal,  the Holding Company would thereupon become a multiple savings and loan
holding  company.  Except where such acquisition is pursuant to the authority to
approve  emergency  thrift   acquisitions  and  where  each  subsidiary  savings
association meets the QTL test, the activities of the Holding Company and any of
its  subsidiaries   (other  than  Union  Federal  or  other  subsidiary  savings
associations)  would  thereafter  be subject to further  restrictions.  The HOLA
provides that, among other things,  no multiple savings and loan holding company
or  subsidiary  thereof  which is not a savings  association  shall  commence or
continue for a limited period of time after becoming a multiple savings and loan
holding  company or subsidiary  thereof,  any business  activity  other than (i)
furnishing  or  performing   management   services  for  a  subsidiary   savings
association,  (ii)  conducting  an insurance  agency or escrow  business,  (iii)
holding,  managing, or liquidating assets owned by or acquired from a subsidiary
savings  association,  (iv) holding or managing properties used or occupied by a
subsidiary savings association, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by the FSLIC by regulation as of
March 5, 1987, to be engaged in by multiple  holding  companies,  or (vii) those
activities  authorized by the Federal  Reserve Board (the "FRB") as  permissible
for  bank  holding  companies,  unless  the  Director  of the OTS by  regulation
prohibits  or limits such  activities  for savings and loan  holding  companies.
Those activities  described in (vii) above must also be approved by the Director
of the OTS before a multiple holding company may engage in such activities.

      The  Director of the OTS may also  approve  acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
associations  in more than one state,  if the multiple  savings and loan holding
company involved controls a savings  association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the  laws of the  state in which  the  association  to be  acquired  is  located
specifically permit associations to be acquired by state-chartered  associations
or savings and loan holding  companies  located in the state where the acquiring
entity is located (or by a holding  company that controls  such  state-chartered
savings associations).  Also, the Director of the OTS may approve an acquisition
resulting in a multiple  savings and loan holding  company  controlling  savings
associations  in more than one  state in the case of  certain  emergency  thrift
acquisitions.

      Indiana  law  permits  federal  and  state  savings   association  holding
companies with their home offices  located outside of Indiana to acquire savings
associations  whose home offices are located in Indiana and savings  association
holding  companies with their principal  place of business in Indiana  ("Indiana
Savings  Association Holding Companies") upon receipt of approval by the Indiana
Department of Financial  Institutions.  Moreover,  Indiana  Savings  Association
Holding  Companies  may acquire  savings  associations  with their home  offices
located outside of Indiana and savings  association holding companies with their
principal place of business  located outside of Indiana upon receipt of approval
by the Indiana Department of Financial Institutions.

      No subsidiary  savings  association of a savings and loan holding  company
may declare or pay a dividend on its permanent or  nonwithdrawable  stock unless
it  first  gives  the  Director  of the  OTS 30  days  advance  notice  of  such
declaration  and payment.  Any dividend  declared  during such period or without
giving notice shall be invalid.

Federal Home Loan Bank System

      Union  Federal  is a member of the FHLB of  Indianapolis,  which is one of
twelve  regional  FHLBs.  Each FHLB serves as a reserve or central  bank for its
members within its assigned region.  It is funded primarily from funds deposited
by savings  associations  and  proceeds  derived  from the sale of  consolidated
obligations of the FHLB system.  It makes loans to members  (i.e.,  advances) in
accordance with policies and procedures established by the Board of Directors of
the FHLB.  All FHLB advances  must be fully secured by sufficient  collateral as
determined  by  the  FHLB.  The  Federal  Housing  Finance  Board  ("FHFB"),  an
independent   agency,   controls  the  FHLB  System,   including   the  FHLB  of
Indianapolis.

      As a member,  Union Federal is required to purchase and maintain  stock in
the FHLB of  Indianapolis  in an  amount  equal to at least 1% of its  aggregate
unpaid  residential   mortgage  loans,  home  purchase  contracts,   or  similar
obligations at the beginning of each year. At December 31, 1998, Union Federal's
investment in stock of the FHLB of Indianapolis  was $745,000.  The FHLB imposes
various  limitations on advances such as limiting the amount of certain types of
real  estate-related  collateral to 30% of a member's capital and limiting total
advances to a member.  Interest  rates charged for advances vary  depending upon
maturity,  the cost of funds to the FHLB of Indianapolis  and the purpose of the
borrowing.

      The FHLBs are  required to provide  funds for the  resolution  of troubled
savings  associations  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.  For the fiscal year ended  December 31, 1998,  dividends paid by
the FHLB of Indianapolis to Union Federal totaled approximately  $59,000, for an
annual rate of 8.0%.

Insurance of Deposits

      Deposit Insurance.  The FDIC is an independent federal agency that insures
the  deposits,  up to  prescribed  statutory  limits,  of banks and  thrifts and
safeguards  the safety and soundness of the banking and thrift  industries.  The
FDIC administers two separate  insurance funds, the BIF for commercial banks and
state savings banks and the SAIF for savings  associations such as Union Federal
and banks that have  acquired  deposits from savings  associations.  The FDIC is
required to maintain designated levels of reserves in each fund. As of September
30,  1996,  the  reserves  of the SAIF were  below the  level  required  by law,
primarily  because a significant  portion of the assessments  paid into the SAIF
have been used to pay the cost of prior thrift  failures,  while the reserves of
the BIF met the level  required by law in May, 1995.  However,  on September 30,
1996,  provisions  designed to  recapitalize  the SAIF and eliminate the premium
disparity  between the BIF and SAIF were signed into law.  See "--  Assessments"
below.

      Assessments.   The  FDIC  is  authorized  to  establish   separate  annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF.  The FDIC may  increase  assessment  rates for either fund if necessary to
restore the fund's  ratio of reserves  to insured  deposits to the target  level
within a reasonable  time and may  decrease  these rates if the target level has
been met. The FDIC has established a risk-based  assessment system for both SAIF
and BIF members.  Under this system,  assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's  risk level is
determined  based on its  capital  level  and the  FDIC's  level of  supervisory
concern about the institution.

      On September 30, 1996, President Clinton signed into law legislation which
included  provisions  designed  to  recapitalize  the  SAIF  and  eliminate  the
significant  premium  disparity between the BIF and the SAIF. Under the new law,
Union Federal was charged a one-time special  assessment equal to $.657 per $100
in assessable deposits at March 31, 1995. Union Federal recognized this one-time
assessment as a non-recurring operating expense of $362,000 ($219,000 after tax)
during the three-month  period ending September 30, 1996, and Union Federal paid
this  assessment on November 27, 1996. The  assessment was fully  deductible for
both federal and state income tax  purposes.  Beginning  January 1, 1997,  Union
Federal's  annual deposit  insurance  premium was reduced from .23% to .0644% of
total  assessable   deposits.   BIF  institutions  pay  lower  assessments  than
comparable SAIF  institutions  because BIF institutions pay only 20% of the rate
paid by SAIF  institutions on their deposits with respect to obligations  issued
by the  federally-chartered  corporation which provided some of the financing to
resolve the thrift crisis in the 1980's ("FICO"). The 1996 law also provides for
the merger of the SAIF and the BIF by 1999,  but not until such time as bank and
thrift  charters  are  combined.  Until  the  charters  are  combined,   savings
associations  with SAIF  deposits may not transfer  deposits into the BIF system
without  paying  various  exit and entrance  fees,  and SAIF  institutions  will
continue to pay higher FICO assessments. Such exit and entrance fees need not be
paid if a SAIF institution  converts to a bank charter or merges with a bank, as
long as the resulting bank continues to pay applicable insurance  assessments to
the SAIF, and as long as certain other conditions are met.

Savings Association Regulatory Capital

      Currently,  savings  associations  are subject to three  separate  minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 3% of
total assets. Core capital is generally defined as common  shareholders'  equity
(including retained income), noncumulative perpetual preferred stock and related
surplus,   certain  minority  equity   interests  in  subsidiaries,   qualifying
supervisory  goodwill,  purchased mortgage servicing rights and purchased credit
card relationships  (subject to certain limits) less nonqualifying  intangibles.
The OTS recently  amended this requirement to require a core capital level of 3%
of total  adjusted  assets for  savings  associations  that  receive the highest
rating  for  safety  and  soundness,   and  4%  to  5%  for  all  other  savings
associations. This amendment becomes effective April 1, 1999. Under the tangible
capital requirement,  a savings association must maintain tangible capital (core
capital less all intangible  assets except purchased  mortgage  servicing rights
which may be included after making the above-noted adjustment in an amount up to
100% of tangible capital) of at least 1.5% of total assets. Under the risk-based
capital  requirements,  a minimum  amount of  capital  must be  maintained  by a
savings  association  to account for the relative risks inherent in the type and
amount  of  assets  held by the  savings  association.  The  risk-based  capital
requirement   requires  a  savings  association  to  maintain  capital  (defined
generally for these purposes as core capital plus general  valuation  allowances
and  permanent  or maturing  capital  instruments  such as  preferred  stock and
subordinated  debt  less  assets  required  to be  deducted)  equal  to  8.0% of
risk-weighted  assets.  Assets are  ranked as to risk in one of four  categories
(0-100%).  A credit  risk-free  asset,  such as  cash,  requires  no  risk-based
capital,  while an asset with a significant  credit risk,  such as a non-accrual
loan,  requires a risk  factor of 100%.  Moreover,  a savings  association  must
deduct from capital, for purposes of meeting the core capital,  tangible capital
and risk-based  capital  requirements,  its entire  investment in and loans to a
subsidiary engaged in activities not permissible for a national bank (other than
exclusively   agency   activities   for  its   customers  or  mortgage   banking
subsidiaries).  At December 31, 1998,  Union Federal was in compliance  with all
capital requirements imposed by law.

      The OTS has  promulgated  a rule  which  sets  forth the  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS has delayed the  implementation of
this rule, however.  The rule requires savings  associations with "above normal"
interest rate risk  (institutions  whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain  additional capital for interest rate risk under the
risk-based  capital  framework.  If the OTS were to implement  this  regulation,
Union Federal would be exempt from its provisions  because it has less than $300
million in assets and its  risk-based  capital ratio exceeds 12%.  Union Federal
nevertheless  measure  its  interest  rate  risk  in  conformity  with  the  OTS
regulation and, as of December 31, 1998,  Union Federal would have been required
to deduct  $1.4  million  from its total  capital  available  to  calculate  its
risk-based  capital  requirement.  See "Item 7A.  Quantitative  and  Qualitative
Disclosures about Market Risk."

      If an association is not in compliance with the capital requirements,  the
OTS is required to prohibit asset growth and to impose a capital  directive that
may  restrict,  among other  things,  the  payment of  dividends  and  officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operations activities of
the association,  imposing a capital directive, cease and desist order, or civil
money  penalties,  or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.

Prompt Corrective Regulatory Action.

      The  Federal  Deposit  Insurance  Corporation   Improvement  Act  of  1991
("FedICIA")   requires,   among  other  things,  that  federal  bank  regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital requirements.  For these purposes,  FedICIA establishes
five capital tiers: well capitalized, adequatelycapitalized, under capitialized,
significantly undercapitalzied, and critically undercapitalized. At December 31,
1998,  Union Federal was  categorized  as "well  capitalized,"  meaning that its
total risk-based capital ratio exceeded 10%, its Tier I risk-based capital ratio
exceeded 6%, its leverage  ratio  exceeded 5%, and Union Federal was not subject
to a  regulatory  order,  agreement or directive to meet and maintain a specific
capital level for any capital measure.

      The FDIC may order savings associations which have insufficient capital to
take corrective actions. For example, a savings association which is categorized
as  "undercapitalized"  would be  subject  to  growth  limitations  and would be
required  to submit a capital  restoration  plan,  and a  holding  company  that
controls  such a savings  association  would be required to  guarantee  that the
savings   association   complies  with  the  restoration  plan.   "Significantly
undercapitalized"   savings   associations   would  be  subject  to   additional
restrictions.  Savings  associations  deemed  by  the  FDIC  to  be  "critically
undercapitalized"  would  be  subject  to  the  appointment  of  a  receiver  or
conservator.

Dividend Limitations

         The OTS recently adopted a regulation, which becomes effective on April
1,  1999,  that  revises  the  current   restrictions  that  apply  to  "capital
distributions" by savings associations. The amended regulation defines a capital
distribution  as  a  distribution  of  cash  or  other  property  to  a  savings
association's  owners,  made on  account  of their  ownership.  This  definition
includes a savings association's  payment of cash dividends to shareholders,  or
any payment by a savings association to repurchase, redeem, retire, or otherwise
acquire  any of its  shares  or debt  instruments  that  are  included  in total
capital,  and any extension of credit to finance an  affiliate's  acquisition of
those shares or interests.  The amended  regulation  does not apply to dividends
consisting  only of a savings  association's  shares or rights to purchase  such
shares.

         The amended  regulation  exempts certain savings  associations from the
current  requirement  that all savings  associations  file either a notice or an
application with the OTS before making any capital distribution. As revised, the
regulation requires a savings association to file an application for approval of
a proposed capital  distribution with the OTS if the association is not eligible
for expedited  treatment under OTS's application  processing rules, or the total
amount  of  all  capital   distributions,   including   the   proposed   capital
distribution,  for the applicable  calendar year would exceed an amount equal to
the  savings  association's  net income  for that year to date plus the  savings
association's retained net income for the preceding two years (the "retained net
income  standard").  At December 31, 1998,  Union Federal's  retained net income
standard was approximately $3.1 million. A savings association must also file an
application for approval of a proposed  capital  distribution  if, following the
proposed  distribution,  the  association  would  not  be  at  least  adequately
capitalized  under  the OTS  prompt  corrective  action  regulations,  or if the
proposed  distribution  would violate a prohibition  contained in any applicable
statute,  regulation,  or agreement  between the  association and the OTS or the
FDIC.

         The amended regulation  requires a savings association to file a notice
of a proposed capital  distribution in lieu of an application if the association
or the proposed capital distribution do not meet the conditions described above,
and:  (1) the  savings  association  will not be at least well  capitalized  (as
defined  under the OTS  prompt  corrective  action  regulations)  following  the
capital  distribution;  (2) the capital distribution would reduce the amount of,
or retire any part of the savings  association's  common or preferred  stock, or
retire any part of debt instruments such as notes or debentures  included in the
association's  capital  under the OTS  capital  regulation;  or (3) the  savings
association is a subsidiary of a savings and loan holding company. Because Union
Federal is a  subsidiary  of a savings  and loan  holding  company,  this latter
provision will require, at a minimum,  that Union Federal file a notice with the
OTS 30 days before making any capital distributions to the Holding Company.

         In addition to these regulatory  restrictions,  Union Federal's Plan of
Conversion imposes additional limitations on the amount of capital distributions
it may make to the  Holding  Company.  The  Plan of  Conversion  requires  Union
Federal to  establish  and  maintain a  liquidation  account  for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders and prohibits
Union Federal from making capital  distributions  to the Holding  Company if its
net  worth  would be  reduced  below the  amount  required  for the  liquidation
account.

Limitations on Rates Paid for Deposits

      Regulations  promulgated by the FDIC pursuant to FedICIA place limitations
on the ability of insured depository  institutions to accept, renew or roll over
deposits by offering rates of interest which are  significantly  higher than the
prevailing  rates of interest on deposits  offered by other  insured  depository
institutions having the same type of charter in the institution's  normal market
area. Under these regulations,  "well-capitalized"  depository  institutions may
accept,  renew or roll  such  deposits  over  without  restriction,  "adequately
capitalized"  depository  institutions  may accept,  renew or roll such deposits
over with a waiver from the FDIC (subject to certain restrictions on payments of
rates) and "undercapitalized"  depository  institutions may not accept, renew or
roll such deposits over. The  regulations  contemplate  that the  definitions of
"well capitalized,"  "adequately capitalized" and "undercapitalized" will be the
same as the  definition  adopted by the  agencies to  implement  the  corrective
action provisions of FedICIA. Management does not believe that these regulations
will have a materially adverse effect on Union Federal's current operations.

Safety and Soundness Standards

      On February 2, 1995, the federal banking agencies adopted final safety and
soundness  standards for all insured  depository  institutions.  The  standards,
which were issued in the form of guidelines rather than  regulations,  relate to
internal   controls,   information   systems,   internal  audit  systems,   loan
underwriting  and  documentation,  compensation  and interest rate exposure.  In
general,  the standards are designed to assist the federal  banking  agencies in
identifying and addressing  problems at insured depository  institutions  before
capital becomes impaired.  If an institution fails to meet these standards,  the
appropriate  federal  banking  agency may  require the  institution  to submit a
compliance  plan.  Failure to submit a compliance plan may result in enforcement
proceedings.  On August 27,  1996,  the  federal  banking  agencies  added asset
quality and earning standards to the safety and soundness guidelines.

Real Estate Lending Standards

      OTS  regulations  require  savings  associations to establish and maintain
written  internal  real estate  lending  policies.  Each  association's  lending
policies  must  be  consistent  with  safe  and  sound  banking   practices  and
appropriate  to the size of the  association  and the  nature  and  scope of its
operations.   The  policies  must  establish   loan  portfolio   diversification
standards;  establish prudent underwriting  standards,  including  loan-to-value
limits, that are clear and measurable;  establish loan administration procedures
for the  association's  real  estate  portfolio;  and  establish  documentation,
approval,   and  reporting   requirements   to  monitor   compliance   with  the
association's  real estate  lending  policies.  The  association's  written real
estate lending policies must be reviewed and approved by the association's Board
of Directors at least annually. Further, each association is expected to monitor
conditions  in its real  estate  market  to  ensure  that its  lending  policies
continue to be appropriate for current market conditions.

Loans to One Borrower

      Under OTS regulations,  Union Federal may not make a loan or extend credit
to a single or related  group of  borrowers  in excess of 15% of its  unimpaired
capital and  surplus.  Additional  amounts may be lent,  not in excess of 10% of
unimpaired capital and surplus,  if such loans or extensions of credit are fully
secured by readily  marketable  collateral,  including  certain  debt and equity
securities but not including real estate.  In some cases, a savings  association
may lend up to 30 percent of unimpaired  capital and surplus to one borrower for
purposes  of  developing  domestic  residential   housing,   provided  that  the
association meets its regulatory capital requirements and the OTS authorizes the
association to use this expanded lending authority.  At December 31, 1998, Union
Federal  did not have any loans or  extensions  of credit to a single or related
group of borrowers in excess of its lending limits.  Management does not believe
that the  loans-to-one-borrower  limits will have a significant  impact on Union
Federal's business operations or earnings.

Qualified Thrift Lender

      Savings  associations  must meet a QTL test. If Union Federal maintains an
appropriate   level  of  qualified  thrift   investments   ("QTIs")   (primarily
residential    mortgages   and   related    investments,    including    certain
mortgage-related  securities) and otherwise qualifies as a QTL, it will continue
to enjoy full borrowing  privileges from the FHLB of Indianapolis.  The required
percentage  of QTIs is 65% of  portfolio  assets  (defined  as all assets  minus
intangible  assets,  property used by the association in conducting its business
and liquid assets equal to 10% of total assets). Certain assets are subject to a
percentage  limitation  of  20%  of  portfolio  assets.  In  addition,   savings
associations may include shares of stock of the FHLBs,  FNMA, and FHLMC as QTIs.
Compliance  with the QTL test is  determined  on a monthly  basis in nine out of
every twelve  months.  As of December 31, 1998,  Union Federal was in compliance
with its QTL requirement,  with  approximately  90.04% of its assets invested in
QTIs.

      A savings association which fails to meet the QTL test must either convert
to a bank (but its deposit  insurance  assessments and payments will be those of
and paid to the SAIF) or be subject to the following  penalties:  (i) it may not
enter into any new activity except for those permissible for a national bank and
for a savings  association;  (ii) its branching  activities  shall be limited to
those  of a  national  bank;  (iii) it shall  not be  eligible  for any new FHLB
advances; and (iv) it shall be bound by regulations applicable to national banks
respecting  payment of  dividends.  Three years  after  failing the QTL test the
association must (i) dispose of any investment or activity not permissible for a
national  bank and a savings  association  and (ii) repay all  outstanding  FHLB
advances.  If such a savings  association  is  controlled  by a savings and loan
holding  company,  then such holding  company  must,  within a  prescribed  time
period,  become  registered as a bank holding  company and become subject to all
rules  and  regulations   applicable  to  bank  holding   companies   (including
restrictions as to the scope of permissible business activities).

Acquisitions or Dispositions and Branching

      The Bank  Holding  Company  Act  specifically  authorizes  a bank  holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located.  Similarly,
a savings and loan  holding  company may  acquire  control of a bank.  Moreover,
federal  savings  associations  may  acquire  or  be  acquired  by  any  insured
depository  institution.   Regulations  promulgated  by  the  FRB  restrict  the
branching authority of savings associations  acquired by bank holding companies.
Savings  associations  acquired by bank  holding  companies  may be converted to
banks if they continue to pay SAIF premiums,  but as such they become subject to
branching and activity restrictions applicable to banks.

      Subject  to  certain  exceptions,  commonly-controlled  banks and  savings
associations  must reimburse the FDIC for any losses suffered in connection with
a failed  bank or  savings  association  affiliate.  Institutions  are  commonly
controlled  if one is owned by another or if both are owned by the same  holding
company.  Such claims by the FDIC under this provision are subordinate to claims
of depositors,  secured creditors,  and holders of subordinated debt, other than
affiliates.

      The OTS has adopted  regulations which permit nationwide  branching to the
extent  permitted by federal  statute.  Federal  statutes permit federal savings
associations to branch outside of their home state if the association  meets the
domestic  building  and loan  test in  ss.7701(a)(19)  of the Code or the  asset
composition  test of ss.7701(c) of the Code.  Branching that would result in the
formation of a multiple  savings and loan holding  company  controlling  savings
associations  in more  than one  state is  permitted  if the law of the state in
which the savings association to be acquired is located specifically  authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their  holding  companies  in the state where the  acquiring  association  or
holding company is located. Moreover, Indiana banks and savings associations are
permitted  to  acquire  other  Indiana  banks and  savings  associations  and to
establish branches throughout Indiana.

      Finally,  The Riegle-Neal  Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal  Act") permits bank holding companies to acquire banks
in other  states and,  with state  consent  and subject to certain  limitations,
allows banks to acquire  out-of-state  branches either through merger or de novo
expansion.  The State of Indiana  enacted  legislation  establishing  interstate
branching  provisions for Indiana  state-chartered  banks  consistent with those
established by the Riegle-Neal Act (the "Indiana  Branching  Law").  The Indiana
Branching Law authorizes Indiana banks to branch interstate by merger or de novo
expansion,  provided that such  transactions  are not permitted to  out-of-state
banks  unless the laws of their home  states  permit  Indiana  banks to merge or
establish de novo banks on a reciprocial basis. The Indiana Branching Law became
effective March 15, 1996.

Transactions with Affiliates

      Union  Federal is subject to  Sections  22(h),  23A and 23B of the Federal
Reserve Act, which restrict financial  transactions between banks and affiliated
companies.  The statute  limits  credit  transactions  between a bank or savings
association and its executive officers and its affiliates,  prescribes terms and
conditions for bank affiliate transactions deemed to be consistent with safe and
sound  banking  practices,  and  restricts  the  types  of  collateral  security
permitted in connection with a bank's extension of credit to an affiliate.

Federal Securities Law

      The shares of Common  Stock of the Holding  Company  have been  registered
with the SEC under the 1934 Act. The Holding Company is therefore subject to the
information,   proxy  solicitation,   insider  trading  restrictions  and  other
requirements  of the 1934 Act and the rules of the SEC  thereunder.  After three
years following Union Federal's conversion to stock form, if the Holding Company
has fewer than 300 shareholders, it may deregister its shares under the 1934 Act
and cease to be subject to the foregoing requirements.

      Shares of Common Stock held by persons who are  affiliates  of the Holding
Company may not be resold without  registration  unless sold in accordance  with
the resale  restrictions  of Rule 144 under the 1933 Act. If the Holding Company
meets the current public information requirements under Rule 144, each affiliate
of the  Holding  Company  who  complies  with the other  conditions  of Rule 144
(including  those that require the affiliate's  sale to be aggregated with those
of certain other persons)  would be able to sell in the public  market,  without
registration,  a number of shares not to exceed, in any three-month  period, the
greater of (i) 1% of the  outstanding  shares of the Holding Company or (ii) the
average  weekly  volume of trading in such  shares  during  the  preceding  four
calendar weeks.

Community Reinvestment Act Matters

      Federal law requires  that ratings of  depository  institutions  under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a  four-unit  descriptive  rating --  outstanding,  satisfactory,  needs to
improve,  and  substantial  noncompliance  --  and a  written  evaluation  of an
institution's  performance.  Each FHLB is required  to  establish  standards  of
community  investment  or service that its members must  maintain for  continued
access to long-term  advances from the FHLBs.  The standards take into account a
member's  performance under the CRA and its record of lending to first-time home
buyers.  The OTS has  designated  Union  Federal's  record of meeting  community
credit needs as satisfactory.

                                    TAXATION

Federal Taxation

      Historically,  savings  associations,  such as Union  Federal,  have  been
permitted to compute bad debt deductions using either the bank experience method
or the percentage of taxable income method.  However,  for years beginning after
December 31, 1995,  no savings  association  may use the  percentage  of taxable
income method of computing  its  allowable bad debt  deduction for tax purposes.
Instead,  all  savings  associations  are  required to compute  their  allowable
deduction  using  the  experience  method.  As a  result  of the  repeal  of the
percentage  of  taxable  income  method,  reserves  taken  after  1987 using the
percentage of taxable income method generally must be included in future taxable
income over a six-year  period,  although a two-year  delay may be permitted for
associations meeting a residential mortgage loan origination test. Union Federal
will recapture  approximately $55,000 over a six-year period that began with the
year ended December 31, 1996. In addition,  the pre-1988  reserve,  for which no
deferred taxes have been recorded, need not be recaptured into income unless (i)
the savings  association  no longer  qualifies as a bank under the Code, or (ii)
the savings association pays out excess dividends or distributions.

      Depending on the composition of its items of income and expense, a savings
association may be subject to the alternative minimum tax. A savings association
must pay an  alternative  minimum  tax on the  amount  (if any) by which  20% of
alternative minimum taxable income ("AMTI"),  as reduced by an exemption varying
with AMTI,  exceeds the regular tax due.  AMTI  equals  regular  taxable  income
increased or decreased by certain tax  preferences  and  adjustments,  including
depreciation  deductions in excess of that allowable for alternative minimum tax
purposes, tax-exempt interest on most private activity bonds issued after August
7, 1986  (reduced by any related  interest  expense  disallowed  for regular tax
purposes), the amount of the bad debt reserve deduction claimed in excess of the
deduction  based on the  experience  method  and 75% of the  excess of  adjusted
current  earnings over AMTI (before this  adjustment and before any  alternative
tax net  operating  loss).  AMTI may be reduced only up to 90% by net  operating
loss  carryovers,  but  alternative  minimum  tax paid can be  credited  against
regular tax due in later years.

      For federal  income tax  purposes,  Union  Federal has been  reporting its
income and expenses on the accrual method of accounting. Union Federal's federal
income tax returns have not been audited in recent years.

State Taxation

      Union Federal is subject to Indiana's Financial  Institutions Tax ("FIT"),
which is imposed at a flat rate of 8.5% on "adjusted  gross  income."  "Adjusted
gross  income,"  for purposes of FIT,  begins with taxable  income as defined by
Section 63 of the Code and,  thus,  incorporates  federal  tax law to the extent
that it affects the  computation of taxable  income.  Federal  taxable income is
then adjusted by several Indiana  modifications.  Other  applicable  state taxes
include generally applicable sales and use taxes plus real and personal property
taxes.

      Union  Federal's  state income tax returns have not been audited in recent
years.

Item 2.   Properties.

         The following table provides certain  information with respect to Union
Federal's office as of December 31, 1998:
<TABLE>
<CAPTION>
                                                                                                 Net Book
                                                                                                 Value of
                                                                                                 Property,            Approximate
    Description                  Owned or           Year            Total           Furniture &             Square
    and Address                   leased           Opened         Deposits           Fixtures               Footage
    -----------                   ------           ------         --------           --------               -------
                                                           (Dollars in thousands)
<C>                               <C>                  <C>            <C>                 <C>                  <C>   
221 East Main Street               Owned            1913           $64,846             $355                 19,065
Crawfordsville, Indiana 47933
</TABLE>

      Union Federal owns computer and data  processing  equipment  which it uses
for transaction processing, loan origination, and accounting. The net book value
of Union Federal's electronic data processing equipment was approximately $2,200
at December 31, 1998.

      Union  Federal  has also  contracted  for data  processing  and  reporting
services from Intrieve, Incorporated in Cincinnati, Ohio. The cost of these data
processing services is approximately $5,500 per month.

      Union Federal has also executed a  Correspondent  Services  Agreement with
the FHLB of  Indianapolis  under which it  receives  item  processing  and other
services for a fee of approximately $1,100 per month.

      Union Federal also receives income from leasing office space on the second
floor of its building and parking  spaces  located  behind its  building.  Union
Federal's gross income from renting the office space was $28,000 for fiscal year
ended December 31, 1998 and December 31, 1997. Union Federal's gross income from
renting the parking spaces was  approximately  $10,000 for the fiscal year ended
December 31, 1998 and approximately $9,000 for the year ended December 31, 1997.

Item 3.  Legal Proceedings.

         Although Union Federal is involved, from time to time, in various legal
proceedings  in the  normal  course of  business,  there are no  material  legal
proceedings  to which it presently is a party or to which any of its property is
subject.

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

         No matter was submitted to a vote of the Holding Company's shareholders
during the quarter ended December 31, 1998.

Item 4.5.  Executive Officers of the Registrant.

         The executive officers of the Holding Company are identified below. The
executive  officers of the Holding  Company are elected  annually by the Holding
Company's Board of Directors.

 Name                          Position with Holding Company
 ----                          -----------------------------
 Joseph E. Timmons             Chairman of the Board, President 
                                   and Chief Executive Officer
 Denise E. Swearingen          Secretary and Treasurer
 Ronald L. Keeling             Vice President

         Joseph E. Timmons (age 64) has served as President and Chief  Executive
Officer of the Holding  Company  since 1997,  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.

         Denise  E.  Swearingen  (age 40) has  served as the  Holding  Company's
Secretary  and  Treasurer  since  1997  and as  Union  Federal's  Secretary  and
Controller/Treasurer since 1995. She has worked for Union Federal since 1983.

         Ronald L.  Keeling  (age 47) has served as the Holding  Company's  Vice
President since 1997, as Union Federal's Vice President and Assistant  Secretary
since  1984 and as Senior  Loan  Officer  since  1979.  He has  worked for Union
Federal since 1971.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters.

         The  information  required by this item is incorporated by reference to
the  material  under the  heading  "Shareholder  Information"  on page 42 of the
Holding  Company's  1998  Shareholder  Annual  Report (the  "Shareholder  Annual
Report").

Item 6.  Selected Financial Data.

         The  information  required by this item is incorporated by reference to
the material under the heading "Selected Consolidated Financial Data" on pages 2
and 3 of the Shareholder Annual Report.

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

         The  information  required by this item is incorporated by reference to
pages 3 through 18 of the Shareholder Annual Report.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risks

         The  information  required by this item is incorporated by reference to
pages 16 through 18 of the Shareholder Annual Report.

Item 8.  Financial Statements and Supplementary Data.

         The  Holding  Company's  Consolidated  Financial  Statements  and  
Notes  thereto  contained  on  pages 19  through  39 of the Shareholder Annual 
Report are incorporated herein by reference.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

         There were no such  changes  or  disagreements  during  the  applicable
period.

                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.

     The  information  required  by this  item  with  respect  to  Directors  is
incorporated  by  reference  to  pages  2 to 4 of the  Holding  Company's  Proxy
Statement  for its Annual  Shareholder  meeting  to be held April 21,  1999 (the
"1999 Proxy  Statement").  The  information  concerning  the  Holding  Company's
executive officers is included in Item 4.5 in Part I of this report.

Item 11.      Executive Compensation.

      The  information  required  by this  item with  respect  to  Directors  is
incorporated  by reference to pages 5 to 7 of the Holding  Company's  1999 Proxy
Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

      The  information  required  by this  item with  respect  to  Directors  is
incorporated  by reference to pages 3 to 4 of the Holding  Company's  1999 Proxy
Statement.

Item 13.  Certain Relationships and Related Transactions.

      The  information  required  by this  item with  respect  to  Directors  is
incorporated  by  reference  to  page  7 of the  Holding  Company's  1999  Proxy
Statement.

                                     PART IV

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

(a)      List the following documents filed as part of the report:

                                                                   Annual Report
                                                                      Page No.
                                                                      --------
         Financial Statements                                           19
         Consolidated Balance Sheet at December 31, 1998, and 1997      20
         Consolidated Statement of Income for the Years Ended 
         December 31, 1998, 1997, and 1996                              21
         Consolidated Statement of Shareholders' 
         Equity for the Years Ended
         December 31, 1998, 1997, and 1996.                             22
         Consolidated Statement of Cash Flows for the Years 
         Ended December 31, 1998, 1997, and 1996                        23
         Notes to Consolidated Financial Statements                     24

(b)      Reports on Form 8-K.

         The  Holding  Company  filed no reports on Form 8-K during the  quarter
ended December 31, 1998.

(c)      The exhibits filed herewith or incorporated by reference herein are set
         forth on the Exhibit Index on page E-1.  Included in those  exhibits is
         an executive  compensation  plan and arrangement which is identified as
         Exhibit 10(5).

(d)      All  schedules  are omitted as the required  information  either is not
         applicable or is included in the Consolidated  Financial  Statements or
         related notes.

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirement  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on behalf of the undersigned, thereto duly authorized.

                                            UNION COMMUNITY BANCORP


Date:  March 29, 1999                       By: /s/ Joseph E. Timmons
                                            ------------------------------------
                                            Joseph E. Timmons, President and
                                            Chief Executive Officer



         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 29th day of March, 1999.

     Signatures                          Title                    Date

(1)  Principal Executive Officer:



     /s/ Joseph E. Timmons                                  )
     ---------------------------                            )
     Joseph E. Timmons               President and          )
                                     Chief Executive Officer)
                                                            )
                                                            )
(2)  Principal Financial and                                )
     Accounting Officer:                                    )
                                                            )
                                                            )
                                                            )
     /s/ Denise E. Swearingen        Treasurer              )
     ---------------------------                            )
     Denise E. Swearingen                                   )
                                                            )
                                                            )  March 29, 1999
                                                            )
(3)  The Board of Directors:                                )
                                                            )
                                                            )
     /s/ Philip L. Boots             Director               )
     Philip L. Boots                                        )
                                                            )
                                                            )
     /s/ Marvin L. Burkett           Director               )
     ---------------------------                            )
     Marvin L. Burkett                                      )
                                                            )
                                                            )
     /s/ Phillip E. Grush            Director               )
     ---------------------------                            )
     Phillip E. Grush                                       )
                                                            )
                                                            )
     /s/ Samuel H. Hillenbrand                              )
     ---------------------------                            )
     Samuel H. Hillenbrand           Director               )
                                                            )
                                                            )

<PAGE>

     /s/ John M. Horner              Director               )
     ---------------------------                            )
     John M. Horner                                         )
                                                            )
                                                            )   March 29, 1999
     /s/ Harry A. Siamas             Director               )
     ---------------------------                            )
     Harry A. Siamas                                        )
                                                            )
                                                            )
     /s/ Joseph E. Timmons           Director               )
     ---------------------------                            )
     Joseph E. Timmons                                      )
                                                            )

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.       Description                        

         3(1)     Registrant's  Articles of  Incorporation  are  incorporated by
                  reference to to Exhibit 3(1) to the Registration Statement

         (2)      Registrant's  Code of By-Laws is  incorporated by reference to
                  to Exhibit 3(2) to the Registration Statement

         10(4)    Union  Community  Bancorp  Employee  Stock  Ownership Plan and
                  Trust Agreement

         (5)      Employment  Agreement  between Union Federal  Savings and Loan
                  Association and Joseph E. Timmons incorporated by reference to
                  to Exhibit 10(5) to the Registration Statement

         (6)      Exempt Loan and Share Purchase  Agreement  between Trust under
                  Union  Community  Bancorp  Employee  Stock  Ownership Plan and
                  Trust Agreement and Union Community Bancorp

         13       1998 Shareholder Annual Report

         21       Subsidiaries of the Registrant

         23       Consent of independent certified public accountants

         27       Financial Data Schedule (filed electronically)