UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(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, 2003

or

[ ]  Transition   Report  Pursuant  to Section   13 or  15(d) of the  Securities
     Exchange  Act of 1934  For the  transition  period  from  _____________  to
     _______________

                        Commission File Number 000-23543



                             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)



                                 (765) 362-2400
               (Registrant's telephone number including area code)

           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 _X_    NO___

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (Section  229.405 of this chapter) 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. ___

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). YES ___   NO _X_

The  aggregate   market  value  of  the   Registrant's   voting  stock  held  by
non-affiliates, as of June 30, 2003, was $29,340,000.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of March 26, 2004, was 2,100,000 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to  Shareholders  for the year ended  December 31,
2003, are  incorporated  into Part II.  Portions of the Proxy  Statement for the
2004 Annual Meeting of Shareholders are incorporated in Part I and Part III.

                            Exhibit Index on Page E-1
                               Page 1 of 35 pages
<PAGE>
<TABLE>
<CAPTION>

                             UNION COMMUNITY BANCORP

                                    Form 10-K

                                      INDEX

                                                                                          Page
                                                                                          ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>

FORWARD LOOKING STATEMENT .........................................................         3

PART I
   Item 1.    Business ............................................................         3
   Item 2.    Properties ..........................................................        29
   Item 3.    Legal Proceedings ...................................................        30
   Item 4.    Submission of Matters to a Vote of Security Holders .................        30
   Item 4.5   Executive Officers of the Registrant.................................        30

PART II

   Item 5.    Market for Registrant's Common Equity and Related Shareholder Matters        30
   Item 6.    Selected Financial Data .............................................        30
   Item 7.    Management's Discussion and Analysis of Financial Condition and
                Results of Operations .............................................        30
   Item 7A.   Quantitative and Qualitative Disclosures about Market Risk ..........        30
   Item 8.    Financial Statements and Supplementary Data .........................        31
   Item 9.    Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure ..............................................        31
   Item 9A.   Controls and Procedures .............................................        31

PART III

   Item 10.   Directors and Executive Officers of the Registrant ..................        31
   Item 11.   Executive Compensation ..............................................        32
   Item 12.   Security Ownership of Certain Beneficial Owners and Management and
                Related Stockholder Matters .......................................        32
   Item 13.   Certain Relationships and Related Transactions ......................        32
   Item 14.   Principal Accountant Fees and Services ..............................        32

PART IV

   Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....        33

SIGNATURES                                                                                 34

EXHIBITS                                                                                  E-1

</TABLE>
<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 (the "Holding  Company") is an Indiana  corporation
organized  in September  1997 to become a savings and loan holding  company upon
its acquisition of all the issued and outstanding capital stock of Union Federal
Savings and Loan  Association  ("Union  Federal,"  and together with the Holding
Company,  the  "Company") in connection  with Union  Federal's  conversion  from
mutual to stock form. The Holding Company became Union Federal's holding company
on December 29,  1997.  The  principal  asset of the Holding  Company  currently
consists of 100% of the issued and outstanding shares of capital stock, $.01 par
value  per  share,   of  Union  Federal.

     Union  Federal  was  organized  as  a  state-chartered   savings  and  loan
association in 1913. 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").

     On January 2, 2002, the Company acquired Montgomery  Financial  Corporation
("Montgomery"), the holding company of Montgomery Savings, a Federal Association
("Montgomery Savings"), a federally chartered thrift. Montgomery was merged with
and into the  Company  and  Montgomery  Savings  was merged  with and into Union
Federal.   MSA  Service   Corporation   ("MSA"),   an  Indiana  corporation  and
wholly-owned  subsidiary of Montgomery Savings, will continue as a subsidiary of
Union Federal.

     Union  Federal  conducts  its  business  from its main  office  located  in
Crawfordsville,  Indiana.  In addition,  Union Federal has two additional branch
offices in  Crawfordsville  and branch  offices in Covington,  Williamsport  and
Lafayette,  Indiana.  Four of the above  mentioned  branch offices were added in
connection with the acquisition of Montgomery.

     Union  Federal  offers a variety of lending,  deposit  and other  financial
services  to its retail and  commercial  customers.  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  mortgages on
one- to four-family  residential real estate.  Union Federal's deposits accounts
are insured up to applicable  limits by the Savings  Association  Insurance Fund
("SAIF") of the Federal Deposit Insurance  Corporation  ("FDIC").  Union Federal
offers a number of other financial services, which include: (i) residential real
estate loans; (ii) multi-family  loans, (iii) commercial real estate loans; (iv)
construction  loans;  (v) home improvement  loans and consumer loans,  including
single-pay  loans,  loans secured by deposits,  installment loans and commercial
loans;  (vi) money market demand accounts;  (vii) savings  accounts;  and (viii)
certificates of deposit.
<PAGE>

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  69.0% of its total
loan  portfolio  at December 31, 2003.  Union  Federal also offers  multi-family
mortgage loans,  commercial real estate loans,  construction  loans,  commercial
loans and  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 5.4% and 18.7%,  respectively,  of
Union  Federal's total loan portfolio at December 31, 2003.  Construction  loans
totaled  approximately  2.1% of Union  Federal's  total loans as of December 31,
2003. Commercial loans totaled approximately 4.5% of Union Federal's total loans
as of December 31, 2003.  Consumer loans, which consist of personal  installment
loans  and  savings  account  loans,  constituted  approximately  0.4% of  Union
Federal's total loan portfolio at December 31, 2003.

     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,
                                            -----------------------------------------------------------------------------------
                                                      2003                          2002                         2001
                                            -----------------------        ----------------------        ----------------------
                                                           Percent                        Percent                      Percent
                                              Amount       of Total         Amount       of Total         Amount       of Total
                                            ---------      --------        --------      --------        --------      --------
                                                                           (Dollars in thousands)
<S>                                          <C>             <C>           <C>             <C>          <C>             <C>

TYPE OF LOAN
Real estate mortgage loans:
         One- to four-family ...........     $154,297        68.97%        $163,890        75.03%       $  91,796       74.37%
         Multi-family ..................       11,982         5.36            7,098         3.25            7,095        5.75
         Commercial ....................       41,884        18.72           37,957        17.38           14,777       11.97
Real estate construction loans .........        4,740         2.12            2,429         1.11            2,230        1.80
Commercial loans .......................        9,992         4.47            6,433         2.95            7,342        5.95
Consumer loans .........................          817         0.36              614         0.28              198         .16
                                             --------       ------        ---------       ------         --------      ------
                  Gross loans receivable     $223,712       100.00%        $218,421       100.00%        $123,438      100.00%
                                             ========       ======         ========       ======         ========      ======

TYPE OF SECURITY

         One- to four-family real estate     $159,037        71.09%        $166,144        76.07%       $  93,275       75.56%
         Multi-family real estate ......       11,982         5.36            7,098         3.25            7,095        5.75
         Commercial real estate ........       41,884        18.72           38,132        17.46           15,528       12.58
         Deposits ......................           40         0.02              104         0.05               35         .03
         Other .........................       10,769         4.81            6,943         3.17            7,505        6.08
                                             --------       ------        ---------       ------         --------      ------
                  Gross loans receivable      223,712       100.00%         218,421       100.00%         123,438      100.00
Deduct:
Allowance for loan losses ..............        1,221         0.55            1,030         0.47              520         .43
Deferred loan fees (costs) .............         (345)       (0.15)            (126)       (0.05)             333         .27
Loans in process .......................        1,606         0.71              814         0.37              836         .69
                                             --------       ------        ---------       ------         --------      ------
         Net loans receivable ..........     $221,230        98.89%        $216,703        99.21%        $121,749       98.61%
                                             ========       ======         ========       ======         ========      ======
Mortgage Loans:
         Adjustable-rate ...............     $ 45,326        21.29%       $  38,464        18.20%       $  24,001       20.71%
         Fixed-rate ....................      167,577        78.71          172,910        81.80           91,897       79.29
                                             --------       ------        ---------       ------         --------      ------
                  Total ................     $212,903       100.00%        $211,374       100.00%        $115,898      100.00%
                                             ========       ======         ========       ======         ========      ======

</TABLE>
<PAGE>

     The following  table sets forth certain  information  at December 31, 2003,
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>


                                                                            Due During Years Ended December 31,
                                            Balance     ---------------------------------------------------------------------------
                                        Outstanding at                                     2007      2009        2014        2019
                                          December 31,                                      to        to          to         and
                                              2003       2004       2005       2006        2008      2013        2018     following
                                        --------------  ------     ------     ------      ------    ------      ------    ---------
                                                                               (In thousands)
<S>                                         <C>         <C>        <C>        <C>        <C>        <C>        <C>         <C>
Real estate mortgage loans:
   Residential loans ...............        $154,297    $ 1,647    $   144    $   547    $ 3,676    $33,125    $49,988     $65,170
      Multi-family loans ...........          11,982        390         50         --        165      5,970      3,052       2,355
   Commercial loans ................          41,884      4,701        869        414      2,550      8,162     12,278      12,910
Construction loans .................           4,740      4,740         --         --         --         --         --          --
Commercial loans ...................           9,992      5,755        107      1,098      2,120        912         --          --
Loans secured by deposits ..........              40         40         --         --         --         --         --          --
Personal loans .....................             777        136         91         65        441         44         --          --
                                            --------    -------    -------    -------    -------    -------    -------     -------
         Total .....................        $223,712    $17,409    $ 1,261    $ 2,124    $ 8,952    $48,213    $65,318     $80,435
                                            ========    =======    =======    =======    =======    =======    =======     =======
</TABLE>


     The following  table sets forth, as of December 31, 2003, the dollar amount
of all loans due after one year that have fixed  interest  rates and floating or
adjustable interest rates.

                                           Due After December 31, 2004
                                  --------------------------------------------
                                  Fixed Rates      Variable Rates      Total
                                  -----------      --------------    ---------
                                                 (In thousands)
Real estate mortgage loans:
   Residential loans ......         $138,863          $13,787         $152,650
   Multi-family loans .....            9,240            2,352           11,592
   Commercial loans .......           14,862           22,321           37,183
Construction loans ........               --               --               --
Commercial loans ..........            1,919            2,318            4,237
Installment loans .........               --               --               --
Loans secured by deposits .              641               --              641
                                    --------          -------         --------
         Total ............         $165,525          $40,778         $206,303
                                    ========          =======         ========


     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-, 20- or 30-year period.

     Union  Federal also offers  adjustable-rate  mortgage  ("ARM")  loans.  The
interest  rate on ARM loans is indexed  to the one-,  three- or  five-year  U.S.
Treasury  securities yields adjusted to a constant  maturity.  Union Federal may
offer discounted initial interest rates on ARM loans,  however, it 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, 2003 provide for maximum rate adjustments per year and
over  the  life  of  the  loan  of 2%  and  6%,  respectively.  Union  Federal's
residential ARMs are amortized for terms up to 30 years.
<PAGE>

     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, 2003,  approximately
21.3% 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,  2003,  approximately  $154.3  million,  or 69.0% of Union
Federal's  portfolio  of loans,  consisted  of one- to  four-family  residential
loans.  Approximately  $1.2 million,  or 0.8% 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, 2003,  approximately $12.0 million, or
5.4% 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 fixed-rate  loans
with a maximum term of 15 years or as one-year  adjustable rate loans indexed to
the one-year U.S.  Treasury rate with an original term of up to 30 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, 2003 had a balance
of  approximately  $4.0  million  and was  secured by 32  properties  located in
Lafayette,   Indiana.  On  the  same  date,  Union  Federal  did  not  have  any
multi-family loan(s) 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,  2003,  Union  Federal's  largest
commercial loan had an outstanding  balance of $1.5 million and was secured by a
warehouse in Crawfordsville,  Indiana. At December 31, 2003, approximately $41.9
million,  or  18.7%  of Union  Federal's  total  loan  portfolio,  consisted  of
commercial  real estate  loans.  On the same date,  Union  Federal had ten loans
totaling $2.4 million 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).  At December  31, 2003,
approximately  $4.7 million,  or 2.1% of Union  Federal's  total loan portfolio,
consisted of construction loans. At December 31, 2003, the largest  construction
loan had an outstanding  balance of $238,000,  an unused  commitment of $78,000,
and was secured by a  single-family  residence in  Lafayette,  Indiana.  None of
Union Federal's  construction  loans were included in  non-performing  assets on
that date.
<PAGE>

     Construction  loans generally match the term of the construction  contract,
are written as fixed-rate or adjustable-rate  loans with interest  calculated on
the  amount  disbursed  under  the loan and are  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.

     Construction  loans may  provide a  comparable,  and in some cases  higher,
yield than  conventional  mortgage  loans,  however,  they also 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.

     Commercial  Loans.  Union Federal offers  commercial  loans,  which consist
primarily  of loans to  businesses  that are  secured by assets  other than real
estate. As of December 31, 2003,  commercial loans amounted to $10.0 million, or
4.5% of Union  Federal's  total loan  portfolio.  Commercial  loans tend to bear
somewhat greater risk than residential mortgage loans,  depending on the ability
of the underlying  enterprise to repay the loan.  Although commercial loans have
not historically  comprised a large portion of Union Federal's portfolio,  Union
Federal intends to increase the amount of loans it makes to small  businesses in
the future in order to increase its rate of return and diversify its  portfolio.
As of December  31,  2003,  two of Union  Federal's  commercial  loans  totaling
$29,000 were included in nonperforming assets.

     Consumer  Loans.  Union  Federal's  consumer  loans,  consisting of savings
account loans and personal installment loans, aggregated  approximately $817,000
at December  31,  2003,  or 0.4% of its total loan  portfolio.  Union  Federal's
savings  account loans are made up to 90% of the deposit account balance and, at
December  31,  2003,  accrued  at a rate of 6.4%.  This rate may change but will
always be at least 2% over the  underlying  passbook or  certificate  of deposit
rate. Interest on loans secured by deposits is paid  semi-annually.  At December
31, 2003, one of Union Federal's  consumer loans totaling $8,000 was 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  is  currently
investigating the process to originate loans for sale to the FHLMC.

     Union  Federal  confines  its  loan  origination  activities  primarily  to
Montgomery  County and the  surrounding  counties of Boone,  Hendricks,  Putnam,
Parke,  Tippecanoe,  Warren and  Fountain.  Union  Federal  has also  originated
several  loans in Marion  County.  At December 31, 2003,  Union Federal also had
nine loans which it originated,  totaling approximately $1.8 million, 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 evaluates 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.
<PAGE>

     Union Federal generally  requires  appraisals on all real property securing
its loans and requires a title insurance  policy or 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  plane.  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,  2003,  Union  Federal  held in its loan  portfolio
participations in mortgage loans aggregating $5.7 million that it purchased, all
of  which  were   serviced   by  others.   Included   within  this  amount  were
participations  in the  aggregate  amount of  $500,000  which  were  secured  by
property  located outside of Indiana.  The largest  participation  loan in Union
Federal's  portfolio  at  December  31, 2003 was a $1.0  million  interest in an
unsecured loan to a local school district.

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

<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                                            ------------------------------------------
                                                               2003            2002            2001
                                                            ----------      ----------      ----------
                                                                          (In thousands)

<S>                                                          <C>             <C>             <C>
Gross loans receivable at beginning of period .......        $218,421        $123,438        $111,459
Loans originated:
   Real estate mortgage loans:
      One-to-four family loans ......................          95,233          41,958          27,980
      Multi-family loans ............................           8,523           1,177               0
      Commercial loans ..............................          23,708          16,645           3,277
   Construction loans ...............................           3,810           3,607           2,129
   Commercial loans .................................          11,470          10,695          15,748
   Loans secured by deposits ........................              54             189              97
   Personal installment loans .......................             620             184             421
                                                             --------        --------        --------
          Total originations ........................         143,418          74,455          49,652
Loans acquired in acquisition .......................              --         117,033              --
Purchases (sales) of participation loans, net .......              --             450             376
Reductions:
   Principal loan repayments ........................         137,847          96,292          38,049
   Loans transferred to (from) foreclosed real estate             280             663               0
                                                             --------        --------        --------
           Total reductions .........................         138,127          96,955          38,049
                                                             --------        --------        --------
Total gross loans receivable at end of period .......        $223,712        $218,421        $123,438
                                                             ========        ========        ========
</TABLE>
<PAGE>

     Union  Federal's  residential  loan  originations  during  the  year  ended
December 31, 2003 totaled  $95.2  million,  compared to $42.0  million and $28.0
million in the years ended December 31, 2002 and 2001, 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 $250 on all 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, 2003, $4.0 million,  or 1.5% of the
Company's total assets, were non-performing  (non-performing loans, non-accruing
loans and foreclosed real estate) compared to $3.5 million or 1.3%, of its total
assets at December 31, 2002. At December 31, 2003,  residential  loans accounted
for $1.2 million of Union  Federal's  non-performing  assets.  Union Federal had
real estate owned  ("REO")  properties  in the amount of $359,000 as of December
31, 2003.

     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.

                                                   At December 31,
                                         ---------------------------------
                                           2003         2002        2001
                                         --------     --------     -------
                                                (Dollars in thousands)

Non-performing assets:
   Non-performing loans .............     $3,638       $3,069       $  682
   Foreclosed real estate ...........        359          432            9
                                          ------       ------       ------
      Total non-performing assets ...     $3,997       $3,501       $  691
                                          ======       ======       ======

Non-performing loans to total loans .       1.63%        1.41%         .55%

Non-performing assets to total assets       1.53%        1.30%         .49%


     Interest  income of $75,000,  $40,000 and  $39,000  was  recognized  on the
non-performing  loans  summarized  above for the years ended  December 31, 2003,
2002 and 2001, respectively.  Interest income of $295,000,  $328,000 and $57,000
would have been  recognized  under the  original  terms of these  non-performing
loans for the years ended December 31, 2003, 2002 and 2001, respectively.
<PAGE>

     At December 31, 2003,  Union  Federal held loans  delinquent  from 30 to 89
days totaling  approximately  $2.9 million.  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, 2003, 2002 and 2001,  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, 2003                           At December 31, 2002
                                        -------------------------------------------   -------------------------------------------
                                             30-89 Days          90 Days or More          30-89 Days           90 Days or More
                                        --------------------   --------------------   --------------------   --------------------
                                                   Principal              Principal              Principal              Principal
                                         Number     Balance     Number     Balance     Number     Balance     Number     Balance
                                        of Loans   of Loans    of Loans   of Loans    of Loans   of Loans    of Loans   of Loans
                                        --------   --------    --------   --------    --------   --------    --------   --------
                                                                          (Dollars in thousands)
<S>                                         <C>      <C>            <C>     <C>           <C>     <C>            <C>     <C>
One- to four-family loans .....             38       $1,766         21      $1,182        51      $2,441         39      $2,686
Commercial real estate loans ..              6        1,062         10       2,419         3       1,172          2         245
Multi-family loans ............             --           --         --          --        --          --          1         131
Personal installment loans ....             --           --          3           8         5          73          1           7
Commercial loans ..............              2           27          2          29         1          31         --          --
                                            --       ------         --      ------        --      ------         --      ------
          Total ...............             46       $2,855         36      $3,638        60      $3,717         43      $3,069
                                            ==       ======         ==      ======        ==      ======         ==      ======
Delinquent loans to total loans                                               2.93%                                        3.13%
                                                                              ====                                         ====
(TABLE CONTINUED BELOW)

                                                   At December 31, 2001
                                        -------------------------------------------
                                             30-89 Days          90 Days or More
                                        --------------------   --------------------
                                                   Principal              Principal
                                         Number     Balance     Number     Balance
                                        of Loans   of Loans    of Loans   of Loans
                                        --------   --------    --------   --------
                                                   (Dollars in thousands)

One- to four-family loans .....             13      $  742           5     $194
Commercial real estate loans ..              1          83           2      488
Multi-family loans ............              2       1,008          --       --
Personal installment loans ....             --          --          --       --
Commercial loans ..............
                                            --      ------          --     ----
          Total ...............             16      $1,833           7     $682
                                            ==      ======          ==     ====
Delinquent loans to total loans                                            2.06%
                                                                           ====
</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.
<PAGE>

     At December 31, 2003, the aggregate  amount of Union  Federal's  classified
assets were as follows:

                                  At December 31, 2003
                                  --------------------
                                     (In thousands)

Substandard assets .............         $3,474
Doubtful assets ................            781
Loss assets ....................             --
                                         ------
         Total classified assets         $4,255
                                         ======

     Union Federal regularly reviews its loan portfolio to determine whether any
loans require classification in accordance with applicable regulations. Included
in substandard and doubtful  assets at December 31, 2003,  Union Federal had two
commercial  real  estate  loans  in the  aggregate  sum of  $360,000  that  were
performing.  In addition,  one property  classified as foreclosed real estate is
included  in the  above  table.  The  loans  and  foreclosed  real  estate  were
classified as substandard and doubtful 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, 2003.  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, 2003.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                            ----------------------------------------------
                                                               2003               2002             2001
                                                            ----------         ----------       ----------
                                                                         (Dollars in thousands)

<S>                                                           <C>               <C>               <C>
Balance at beginning of period ......................         $ 1,030           $   520           $   480
Recoveries ..........................................               8                --                --
Gross charge-offs - residential loans ...............             (55)             (241)               --
Allowance acquired in acquisition ...................              --               379                --
Provision for losses on loans .......................             238               372                40
                                                              -------           -------           -------
         Balance end of period ......................         $ 1,221           $ 1,030           $   520
                                                              =======           =======           =======
Allowance for loan losses as a percent of total loans
         outstanding ................................             .55%              .47%              .43%
Ratio of net charge-offs to average loans outstanding             .02%              .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.
<PAGE>
<TABLE>
<CAPTION>
                                                                          At December 31,
                                              -------------------------------------------------------------------------
                                                      2003                      2002                      2001
                                              --------------------      --------------------       --------------------
                                                           Percent                   Percent                   Percent
                                                          of loans                 of loans                   of loans
                                                           in each                  in each                    in each
                                                          category                 category                   category
                                                          to total                 to total                   to total
                                               Amount      loans         Amount      loans          Amount      loans
                                              --------   ----------     --------   ----------      --------   ----------
                                                                        (Dollars in thousands)
<S>                                             <C>          <C>         <C>         <C>            <C>         <C>
Balance at end of period applicable to:
    Real estate mortgage loans:
       Residential ....................         $  292       68.97%      $  378      75.03%         $  117      74.37%
       Commercial .....................            626       18.72          507      17.38             165       5.75
       Multi-family ...................             60        5.36           50       3.25             108      11.97
    Construction loans ................              4        2.12            1       1.11               4       1.80
    Commercial loans ..................            155        4.47           81       2.95             121       5.95
    Loans secured by deposits .........             --        0.02           --       0.05              --        .03
    Personal installment loans ........             18        0.34           12       0.23               5        .13
   Unallocated ........................             66       --               1      --                 --      --
                                                ------      ------       ------     ------          ------     ------
         Total ........................         $1,221      100.00%      $1,030     100.00%         $  520     100.00%
                                                ======      ======       ======     ======          ======     ======

</TABLE>

Investments

     Investments.  The Company's investment portfolio generally consists of U.S.
Treasury and federal agency securities,  mortgaged-backed securities, marketable
equity securities, FHLB stock, an investment in Pedcor Investments - 2003 - LIX,
L.P. ("Pedcor 2003"), and an investment in Pedcor Investments - 1993 - XVI, L.P.
("Pedcor 1993"). At December 31, 2003,  approximately $12.3 million, or 4.7%, of
the Company's total assets consisted of such  investments.  The Company also had
$11.3 million,  or 4.3% of its assets, in  interest-earning  deposits as of that
date.

     The Pedcor 2003 and Pedcor  1993  investments  are in limited  partnerships
that were established to organize,  build, own, operate and lease  multi-family,
low- and moderate-income residential rental projects. 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.  In 2003,  Union Federal  invested $1.4 million in Pedcor 2003,
which is  establishing  a project  known as  Knollwood  Crossing II in Hamilton,
Butler County, Ohio. A subsidiary of Union Federal, UFS Service Corp.,  invested
in Pedcor 1993. See "--Service Corporation Subsidiary."

     The following  table sets forth the amortized  cost and the market value of
the Company's investment portfolio at the dates indicated.
<PAGE>
<TABLE>
<CAPTION>

                                                                            At December 31,
                                              ------------------------------------------------------------------------------
                                                      2003                        2002                        2001
                                              --------------------        --------------------         ---------------------
                                              Amortized     Market        Amortized     Market         Amortized      Market
                                                Cost        Value            Cost        Value            Cost        Value
                                              ---------     ------        ---------     ------         ---------      ------
                                                                              (In thousands)
<S>                                             <C>         <C>            <C>          <C>             <C>          <C>
Investment securities:
Available for sale:
   Federal agencies ...................         $ 6,000     $5,908         $    --      $    --         $    --      $    --
Held to maturity:
   Federal agencies ...................              --         --             300          308             700          728
   Mortgage-backed securities .........             494        526           1,337        1,424           2,148        2,240
                                                -------    -------         -------      -------         -------      -------
            Total investment securities           6,494      6,434           1,637        1,732           2,848        2,968
Investment in limited partnership (1) .           2,215         --             837           --             857           --
FHLB stock (2) ........................           3,556      3,556           3,424        3,424           1,530        1,530
                                                -------                    -------                      -------
Total investments .....................         $12,265                    $ 5,898                      $ 5,235
                                                =======                    =======                      =======
-----------------------
(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.

</TABLE>

     The  following  table  sets  forth  the  amount  of  investment  securities
(excluding mortgage-backed securities,  marketable equity 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, 2003.

<TABLE>
<CAPTION>
                                                                  Amount at December 31, 2003 which matures in
                                             ---------------------------------------------------------------------------------------
                                                    One Year              One Year            Five Years
                                                    or Less            to Five Years         to Ten Years         After Ten Years
                                             --------------------   -------------------   -------------------   --------------------
                                             Amortized    Average   Amortized   Average   Amortized   Average   Amortized   Average
                                                Cost       Yield      Cost       Yield       Cost      Yield      Cost       Yield
                                             ---------    -------   ---------   -------   ---------   -------   ---------   --------
                                                                              (Dollars in thousands)
<S>                                             <C>                   <C>        <C>         <C>                   <C>
Federal agency securities...........            $--          --%      $6,000     2.59%       $--         --%       $--        --%

</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,
                                        -------------------------------------------------------------------------------------------
                                                      2003                          2002                           2001
                                        ----------------------------   ----------------------------   -----------------------------
                                        Amortized   Percent   Market   Amortized   Percent   Market   Amortized   Percent    Market
                                          Cost      of Total   Value     Cost      of Total  Value      Cost      of Total    Value
                                        ---------   --------  ------   ---------   --------  ------   ---------   --------   ------
                                                                              (In thousands)
<S>                                      <C>          <C>     <C>       <C>          <C>      <C>      <C>          <C>      <C>
Governmental National
  Mortgage Corporation ...............   $  152       30.8%   $  167    $  275       20.6%    $  304   $  477       22.2%    $  533
Federal Home Loan Mortgage
  Corporation ........................      305       61.7       322     1,019       76.2      1,077    1,619       75.4      1,657
Federal National Mortgage
  Corporation ........................       33        6.7        33        38        2.8         38       45        2.1         43
Other ................................        4        0.8         4         5        0.4          5        7         .3          7
                                         ------      -----    ------    ------      -----     ------   ------      -----     ------
   Total mortgage-backed securities...   $  494      100.0%   $  526    $1,337      100.0%    $1,424   $2,148      100.0%    $2,240
                                         ======      =====    ======    ======      =====     ======   ======      =====     ======
</TABLE>
<PAGE>

     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, 2003.

<TABLE>
<CAPTION>
                                          Amount at December 31, 2003 which matures in
                                ---------------------------------------------------------------
                                     One Year to          Five Years to            After
                                     Five Years            Ten Years             Ten 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>
Mortgage-backed securities...     $96        8.08%       $--         --%       $398       7.05%

</TABLE>

     The   following   table   sets  forth  the   changes  in  Union   Federal's
mortgage-backed securities portfolio for the years ended December 31, 2003, 2002
and 2001.

                                              For the Year Ended December 31,
                                              -------------------------------
                                                 2003       2002       2001
                                               --------   --------   --------
                                                       (In thousands)

Beginning balance ....................         $ 1,337    $ 2,148    $ 2,582
Purchases ............................              --         --         --
Repayments ...........................            (846)      (827)      (437)
Premium and discount amortization, net               3         16          3
                                               -------    -------    -------
Ending balance .......................         $   494    $ 1,337    $ 2,148
                                               =======    =======    =======


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,  Fountain,  Tippecanoe and Warren Counties through the offering of a
broad selection of deposit  instruments,  including fixed-rate savings 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 the four counties,  and  substantially  all of
its depositors are residents of those counties. 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.
<PAGE>

     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 savings accounts,  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.

<TABLE>
<CAPTION>


     An analysis of the Company's deposit accounts by type,  maturity,  and rate
at December 31, 2003, is as follows:

                                                Minimum     Balance at                 Weighted
                                                Opening    December 31,      % of       Average
Type of Account                                 Balance       2003         Deposits      Rate
---------------                                 -------    ------------    --------    --------
                                                           (Dollars in thousands)
<S>                                            <C>          <C>              <C>         <C>
Withdrawable:
         Fixed rate, savings accounts          $     10     $ 29,756         15.64%      1.48%
         Variable rate, money market .              500       54,807         28.82       1.70
         NOW accounts ................              100        7,675          4.04       1.00
         Demand deposits .............              100        3,930          2.07         --
                                                            --------        ------       ----
                  Total withdrawable .                        96,168         50.57       1.51

Certificates (original terms):
         3 months or less ............            1,000          295          0.15       1.05
         6 months ....................            1,000        3,155          1.66       1.34
         12 months ...................            1,000        8,427          4.43       2.13
         18 months ...................            1,000        7,100          3.73       2.56
         24 months ...................            1,000        5,917          3.11       2.97
         30 months ...................            1,000        5,593          2.94       3.27
         36 months ...................            1,000        6,328          3.33       3.84
         48 months ...................            1,000        4,416          2.32       4.34
         60 months ...................            1,000       15,990          8.41       4.93
Jumbo certificates - $100,000 and over          100,000       36,803         19.35       3.55
                                                            --------        ------       ----
Total certificates ...................                        94,024         49.43       3.50
                                                            --------        ------       ----
Total deposits .......................                      $190,192        100.00%      2.49%
                                                            ========        ======       ====

</TABLE>


     The  following   table   indicates  the  amount  of  the  Company's   other
certificates  of deposit of $100,000 or more by time remaining until maturity as
of December 31, 2003.

                                                   At December 31, 2003
                                                   --------------------
Maturity Period                                       (In thousands)
   Three months or less ........................         $12,320
   Greater than three months through six months            4,497
   Greater than six months through twelve months           8,752
   Over twelve months ..........................          11,234
                                                         -------
         Total .................................         $36,803
                                                         =======

<PAGE>

     The following table sets forth the dollar amount of savings deposits in the
various types of deposits that the Company  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
                                        2003      Deposits    2002        2002       Deposits   2001        2001       Deposits
                                    ------------  -------- ----------  ------------  -------- ---------  ------------  --------
                                                                        (Dollars in thousands)
<S>                                  <C>           <C>      <C>         <C>           <C>     <C>           <C>           <C>
Withdrawable:
   Fixed rate, savings
     accounts ................       $ 29,756      15.64%   $ (2,658)   $ 32,414      17.04%  $ 29,130      $ 3,284       4.02%
   Variable rate, money
     market ..................         54,807      28.82      11,714      43,093      22.66     18,860       24,233      29.66
   NOW accounts ..............          7,675       4.04       1,306       6,369       3.35      3,935        2,434       2.98
   Demand deposits ...........          3,930       2.07          80       3,850       2.02      2,817        1,033       1.26
                                     --------     ------    --------    --------     ------   --------      -------     ------
       Total withdrawable ....         96,168      50.57      10,442      85,726      45.07     54,742       30,984      37.92
                                     --------     ------    --------    --------     ------   --------      -------     ------
Certificates (original terms):
   3 months ..................            295       0.15         146         149       0.08        128           21        .03
   6 months ..................          3,155       1.66      (1,442)      4,597       2.42      1,813        2,784       3.41
   12 months .................          8,427       4.43         227       8,200       4.31      3,516        4,684       5.73
   18 months .................          7,100       3.73      (2,004)      9,104       4.79      5,023        4,081       4.99
   24 months .................          5,917       3.11      (3,051)      8,968       4.72      5,013        3,955       4.84
   30 months .................          5,593       2.94      (1,700)      7,293       3.83        (47)       7,340       8.98
   36 months .................          6,328       3.33        (615)      6,943       3.65      2,282        4,661       5.71
   48 months .................          4,416       2.32       1,873       2,543       1.34      1,518        1,025       1.26
   60 months .................         15,990       8.41       1,555      14,435       7.59      9,640        4,795       5.87
Jumbo certificates ...........         36,803      19.35      (5,430)     42,233      22.20     24,861       17,372      21.26
                                     --------     ------    --------    --------     ------   --------      -------     ------
Total certificates ...........         94,024      49.43     (10,441)    104,465      54.93     53,747       50,718      62.08
                                     --------     ------    --------    --------     ------   --------      -------     ------
Total deposits ...............       $190,192     100.00    $      1    $190,191     100.00%  $108,489      $81,702     100.00%
                                     ========     ======    ========    ========     ======   ========      =======     ======
</TABLE>

     Total deposits were  approximately  $190.2 million at December 31, 2003 and
2002.  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, 2003,  Union Federal had  borrowings in the amount of $33.8 million
from the FHLB of Indianapolis  which bear fixed and variable  interest rates and
are due at various  dates  through  2015.  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")  $132,000  under a note  payable  that is not  included  in the
following table.
<PAGE>
<TABLE>
<CAPTION>


     The  following  table  presents  certain  information   relating  to  Union
Federal's borrowings at or for the years ended December 31, 2003, 2002 and 2001.

                                                                  At or for the Year
                                                                  Ended December 31,
                                                         -----------------------------------
                                                           2003           2002          2001
                                                         --------       -------       -------
                                                              (Dollars in thousands)
<S>                                                      <C>           <C>           <C>
FHLB Advances:
   Outstanding at end of period ...................      $33,814       $39,752       $25,406
   Average balance outstanding for period .........       38,399        40,579        14,143
   Maximum amount outstanding at any month-end
      during the period ...........................       40,186        42,875        25,406
   Weighted average interest rate during the period         4.69%         4.58%         5.13%
   Weighted average interest rate at end of period          5.25          5.03          3.35

</TABLE>
<TABLE>
<CAPTION>


Return on Equity and Assets
                                                            2003         2002        2001
                                                          --------     -------     -------
<S>                                                         <C>         <C>         <C>
Return on assets (net income divided by average
   total assets) .................................          0.85%       1.03%       1.44%
Return on equity (net income divided by average
   equity) .......................................          6.45        7.19        5.38
Dividend payout ratio (dividends per share divided
   by net income per share) ......................         51.78       41.94       64.52
Equity to assets ratio (average equity divided by
   average total assets) .........................         13.26       14.29       26.80

</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  has two  wholly-owned  subsidiaries.  MSA Service
Corporation  ("MSA")  engages  in  real  estate  development  and  is  currently
completing   the  sale  of  a   seven-unit   condominium   project   located  in
Crawfordsville,  Indiana.  Union  Federal also owns UFS Service  Corp.  ("UFS"),
whose sole asset is its investment in Pedcor 1993,  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 "Shady Knoll  Project").  Union Federal owns the limited partner
interest in Pedcor  1993.  The general  partner is Pedcor  Investments  LLC. The
Shady  Knoll  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.
<PAGE>

     UFS  committed to invest  approximately  $1.8 million in Pedcor 1993 at the
inception of the project in November  1993.  Through  December 31, 2003, UFS had
invested cash of  approximately  $1.7 million in Pedcor 1993 with one additional
annual  capital  contribution  remaining  to be paid in January  2004,  totaling
$132,000.  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 1993, and Pedcor 1993 currently owes
Union Federal  $121,000  pursuant to a promissory  note payable in  installments
through January 1, 2004 and bearing interest at an annual rate of 9%.

     UFS transferred the tax credits  resulting from Pedcor 1993's  operation of
the Shady Knoll Project to Union  Federal.  These tax credits were  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 the available tax credits  during the
carry forward period. Additionally, Pedcor 1993 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 1993 on the equity
method and, accordingly, has recorded its share of these losses as reductions to
its investment in Pedcor 1993,  which at December 31, 2003, was $815,000.  As of
December 31, 2003,  88% of the units in the Shady Knoll  Project were  occupied,
and 100% 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 1993.


Employees

     As of December 31, 2003,  Union Federal  employed 61 persons on a full-time
basis  and  2  part-time  employees.  None  of  Union  Federal's  employees  are
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,  participation in the Financial
Institutions Thrift Plan,  hospitalization/major  medical insurance,  dental and
eye care insurance,  long-term disability insurance and life insurance.  Also, a
Pentegra  Group  (formerly  known as  Financial  Institutions  Retirement  Fund)
defined  benefit  pension plan,  which is a  noncontributory,  multiple-employer
comprehensive pension plan (the"Pension Plan"), covers those full-time employees
who were  participants  in the Pension Plan on January 2, 2002. The Pension Plan
was frozen as of January 2, 2002.

     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"  in the  Companys  Proxy  Statement  for the  Annual  Meeting of
Shareholders  to be held on April 21,  2004,  which  sections  are  incorporated
herein by reference.




                                   COMPETITION

     Union  Federal  originates  most of its  loans to and  accepts  most of its
deposits from residents of Montgomery, Fountain, Tippecanoe and Warren Counties,
Indiana.  The home  office  of  Union  Federal  is  located  in  Crawfordsville,
Montgomery County,  Indiana and its branch offices are in Montgomery,  Fountain,
Tippecanoe and Warren  Counties.  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 the four county area. In total,  there
are  approximately  26 other financial  institutions  located in the four county
area.  Union  Federal  also  competes  with money  market  funds with respect to
deposit accounts.
<PAGE>

     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  federal  deposit  insurance  funds.  A  savings
association  must pay a semi-annual  assessment to the OTS based upon a marginal
assessment  rate that  decreases  as the asset size of the  savings  association
increases,  and which  includes a fixed-cost  component  that is assessed on all
savings associations.  The assessment rate that applies to a savings association
depends  upon the  institution's  size,  condition,  and the  complexity  of its
operations. During 2003, Union Federal's assessment was $31,000.

     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 its loans and investments,
regulatory approval of any merger or consolidation,  issuances or retirements of
Union  Federal's  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,  antitrust laws and regulations  protecting the  confidentiality of
consumer financial information.


Savings and Loan Holding Company Regulation

     The Holding  Company is  regulated as a  "non-diversified  savings and loan
holding  company"  within the meaning of the Home  Owners'  Loan Act, as amended
(the "HOLA"), and subject to regulatory oversight of the Director of the OTS. As
such, the Holding  Company is registered  with the OTS and is 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
obtaining the 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  currently  operates  as a unitary  savings  and loan
holding company.  Prior to the enactment of the Gramm-Leach-Bliley Act (the "GLB
Act") in 1999, there were no restrictions on the permissible business activities
of a unitary savings and loan holding company.  The GLB Act included a provision
that prohibits any new unitary  savings and loan holding  company,  defined as a
company that  acquires a thrift after May 4, 1999,  from  engaging in commercial
activities.  This provision also includes a grandfather  clause,  however,  that
permits a company that was a savings and loan holding company as of May 4, 1999,
or had an application to become a savings and loan holding  company on file with
the OTS as of that date,  to  acquire  and  continue  to control a thrift and to
continue  to  engage in  commercial  activities.  Because  the  Holding  Company
qualifies  under  this  grandfather  provision,  the GLB Act did not  affect the
Holding Company's authority to engage in diversified business activities.
<PAGE>

     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 be deemed to be a bank
holding company subject to all of the provisions of the Bank Holding Company Act
of 1956 and other  statutes  applicable to bank holding  companies,  to the same
extent as if the Holding  Company were a bank holding  company and Union Federal
were a bank.  See  "-Qualified  Thrift  Lender." At  December  31,  2003,  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
Union  Federal's  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  in which  multiple  savings and loan holding  companies  were
authorized (by  regulation) to directly  engage on March 5, 1987, 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 savings and loan 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.
<PAGE>

     No subsidiary savings association of a savings and loan holding company may
declare or pay a dividend or make a capital  distribution  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 system, which consists of 12 regional
banks.  The Federal  Housing  Finance Board  ("FHFB"),  an  independent  agency,
controls the FHLB System  including  the FHLB of  Indianapolis.  The FHLB System
provides a central credit facility primarily for member financial  institutions.
At  December  31,  2003,  Union  Federal's  investment  in  stock of the FHLB of
Indianapolis was $3.6 million.  For the fiscal year ended December 31, 2003, the
FHLB of Indianapolis paid approximately  $176,000 in cash and stock dividends to
Union Federal.

     All 12 FHLB's are required to provide funds to establish affordable housing
programs through direct loans or interest subsidies on advances to members to be
used for  lending at  subsidized  interest  rates for low- and  moderate-income,
owner-occupied  housing projects,  affordable rental housing,  and certain other
community  projects.  These contributions and obligations could adversely affect
the value of FHLB stock in the future.  A  reduction  in the value of such stock
may result in a corresponding reduction in Union Federal's capital.

     The FHLB of Indianapolis serves as a reserve or central bank for its member
institutions.  It is funded  primarily  from  proceeds  derived from the sale of
consolidated  obligations  of the FHLB System.  It makes  advances to members in
accordance with policies and procedures established by the FHLB and the Board of
Directors of the FHLB of Indianapolis.

     All FHLB  advances  must be  fully  secured  by  sufficient  collateral  as
determined by the FHLB.  Eligible  collateral  includes first mortgage loans not
more  than  90 days  delinquent  or  securities  evidencing  interests  therein,
securities (including mortgage-backed  securities) issued, insured or guaranteed
by the federal government or any agency thereof, cash or FHLB deposits,  certain
small business and  agricultural  loans of smaller  institutions and real estate
with readily  ascertainable  value in which a perfected security interest may be
obtained.  Other forms of collateral may be accepted as additional  security or,
under  certain  circumstances,  to renew  outstanding  advances.  All  long-term
advances are required to provide funds for  residential  home  financing and the
FHLB has  established  standards of community  service that members must meet to
maintain access to long-term advances.

     Interest rates charged for advances vary depending upon maturity,  the cost
of funds to the FHLB of Indianapolis and the purpose of the borrowing.


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.

     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.
<PAGE>

     In addition to the assessment for deposit insurance,  savings  institutions
are  required  to  pay on  bonds  issued  in the  late  1980s  by the  Financing
Corporation  ("FICO"),  which  is a  federally-chartered  corporation  that  was
organized to provide some of the  financing to resolve the thrift  crisis in the
1980s. By law, payments on FICO obligations have been shared equally between BIF
members and SAIF members since  January 1, 2000.  For the four quarters of 2003,
the FICO rates were 1.68, 1.62, 1.60 and 1.52 basis points, respectively.

     Although Congress has considered  merging the SAIF and the BIF, until then,
savings  associations  with SAIF deposits may not transfer deposits into the BIF
system without  paying  various exit and entrance  fees.  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 requires 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. 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, 2003,  Union
Federal was in compliance with all capital requirements imposed by law.

     The OTS issued a final rule in 1993  which  sets  forth a  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS delayed the implementation of this
rule,  however,  and in 2002  deleted this  interest  rate risk  component  from
capital  requirements  applicable  to  savings  associations.  The OTS has  also
revised its standards  regarding the management of interest rate risk to include
summary guidelines to assist savings associations in determining their exposures
to interest rate 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 operating  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.
<PAGE>

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, adequately capitalized,  undercapitalized,
significantly undercapitalized, and critically undercapitalized. At December 31,
2003,  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 it 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 also  restricts the amount of "capital  distributions"  that may be
made by savings associations. The 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 regulation  exempts certain savings  associations  from filing either a
notice or an application with the OTS before making any capital distribution and
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").  Based on Union  Federal's  retained net income  standard at
December 31, 2003,  Union Federal would be required to file an application  with
the OTS before making any capital distributions. 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  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 requires,  at a minimum, that Union Federal file a notice with the OTS
30 days before making any capital distributions to the Holding Company.
<PAGE>

     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.


Liquidity

     The  Financial  Regulatory  Relief  and  Economic  Efficiency  Act of  2000
repealed the former statutory requirement that all savings associations maintain
an average daily  balance of liquid assets in a minimum  amount of not less than
4% or more than 10% of their withdrawable  accounts plus short-term  borrowings.
The OTS  adopted an  interim  final  rule in March  2001 that  implemented  this
revised statutory  requirement,  although savings associations remain subject to
the OTS regulation that requires them to maintain sufficient liquidity to ensure
their safe and sound operation.


Safety and Soundness Standards

     The federal  banking  agencies  have  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, interest rate exposure, asset quality and earnings
standards.  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.


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 be
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.
<PAGE>

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% 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, 2003, Union
Federal  did not have any loans or  extensions  of credit to a single or related
group of borrowers in excess of its regulatory  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 that requires the association to
maintain  an  appropriate  level  of  qualified  thrift   investments   ("QTIs")
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-related  securities)  and  otherwise  to qualify as a QTL. 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, 2003,  Union Federal was in compliance
with its QTL  requirement,  with  approximately  80.6% 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; and (iii) it shall be bound by regulations  applicable
to national banks respecting payment of dividends. Three years after failing the
QTL  test the  association  must  dispose  of any  investment  or  activity  not
permissible  for a national  bank and a savings  association.  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.
<PAGE>

     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 Section  7701(a)(19) of the Code or the asset
composition test of Section 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,  which became  effective in 1996,  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
reciprocal basis.


Transactions with Affiliates

     Union  Federal is subject to  Sections  22(h),  23A and 23B of the  Federal
Reserve  Act,  which  limits  credit  transactions  between  a bank  or  savings
association and its executive officers and its affiliates. These provisions also
prescribe  terms and  conditions for bank  affiliate  transactions  deemed to be
consistent  with safe and sound  banking  practices,  and  restrict 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 and, as a result,  the Holding  Company is 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.
<PAGE>

Sarbanes-Oxley Act of 2002

     On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of
2002  (the   "Sarbanes-Oxley   Act").  The   Sarbanes-Oxley   Act  represents  a
comprehensive  revision  of  laws  affecting  corporate  governance,  accounting
obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all
companies  with  equity  or debt  securities  registered  under  the  Securities
Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new
requirements  for  audit  committees,  including  independence,  expertise,  and
responsibilities;   (ii)   additional   responsibilities   regarding   financial
statements for the Chief Executive  Officer and Chief  Financial  Officer of the
reporting  company;  (iii) new standards for auditors and  regulation of audits;
(iv) increased  disclosure and reporting  obligations for the reporting  company
and their directors and executive officers;  and (v) new and increased civil and
criminal  penalties for violation of the securities  laws.  Although the Holding
Company  anticipates that additional expense will be incurred to comply with the
provisions of the Sarbanes-Oxley Act and the resulting  regulations,  management
does not expect that such  compliance will have a material impact on our results
of operations or financial condition.


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.


Predatory Lending

     The Federal  Reserve  Board  issued a regulation  that became  effective on
October  1,  2002  that is  aimed  at  curbing  "predatory  lending."  The  term
"predatory lending"  encompasses a variety of practices,  but the term generally
is used to refer to abusive  lending  practices  involving  fraud,  deception or
unfairness.  Predatory lending typically  involves one or more of the following:
(i) making unaffordable loans based on the assets of the borrower rather than on
the  borrower's  ability to repay an obligation  ("asset-based  lending");  (ii)
inducing a borrower  to  refinance  a loan  repeatedly  in order to charge  high
points and fees each time the loan is  refinanced  ("loan  flipping");  or (iii)
engaging in fraud or deception to conceal the true nature of the loan obligation
from an unsuspecting or  unsophisticated  borrower.  The Federal Reserve Board's
new regulation,  which amends  Regulation Z, broadens the scope of loans subject
to the  protections  of the Home  Ownership  and Equity  Protection  Act of 1994
("HOEPA").  Among other things,  the regulation brings within the scope of HOEPA
first-lien  mortgage  loans with  interest  rates that are at least 8 percentage
points above Treasury securities having a comparable maturity. In addition,  the
regulation  requires  that the  cost of  optional  insurance  and  similar  debt
protection products paid by a borrower at closing be included in calculating the
finance charge paid by the borrower. HOEPA coverage is triggered if such finance
charges exceed 8 percent of the total loan.  Finally,  the regulation  restricts
creditors from engaging in repeated refinancings of their own HOEPA loans over a
short time  period when the  transactions  are not in the  borrower's  interest.
Lenders that violate the rules face cancellation of loans and penalties equal to
the finance  charges paid.  Union  Community is unable at this time to determine
the impact that these new  regulations,  or any similar state predatory  lending
regulations, may have on its financial condition or results of operation.
<PAGE>

USA Patriot Act of 2001

     On October 26, 2001, President Bush signed the USA Patriot Act of 2001. The
Patriot  Act  is  intended  to  strengthen  U.S.  law   enforcement's   and  the
intelligence  communities' abilities to work cohesively to combat terrorism on a
variety of fronts. The potential impact of the Act on financial  institutions of
all kinds is significant and wide ranging.  The Act contains sweeping anti-money
laundering  and financial  transparency  laws.  On April 30, 2003,  the Treasury
Department adopted final regulations requiring  institutions to incorporate into
their written money laundering plans a  board-approved  customer  identification
program  implementing  reasonable  procedures for: (i) verifying the identity of
any person seeking to open an account, to the extent reasonable and practicable;
(ii)  maintaining  records  of the  information  used  to  verify  the  person's
identity;  and (iii) determining whether the person appears on any list of known
or suspected terrorists or terrorist organizations. The Bank does not anticipate
that these requirements will materially affect its operations.


Fair Credit Reporting Act Amendment

     The Fair and Accurate Credit  Transactions Act of 2003 (the "FACT Act") was
signed into law by President  Bush on December 4, 2003.  The FACT Act amends the
Fair Credit Reporting Act and makes permanent  certain federal  preemptions that
form the basis for a  national  credit  reporting  system.  The FACT Act is also
intended  to  (i)  address  identity  theft,  (ii)  increase  access  to  credit
information, (iii) enhance the accuracy of credit reporting, (iv) facilitate the
opt-out by consumers from certain marketing  solicitations,  (v) protect medical
information, and (vi) promote financial literacy. The statute will affect credit
reporting  agencies  (commonly  referred  to  as  "credit  bureaus"),  financial
institutions, other users of credit reports and those who furnish information to
credit bureaus.  Union Community does not anticipate that this  legislation will
have a significant adverse effect on its business.


                                    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. 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,  the Company has been reporting its income
and expenses on the accrual method of accounting.  The Company's  federal income
tax returns have not been audited in recent years.
<PAGE>

State Taxation

     The Company is subject to  Indiana's  Financial  Institutions  Tax ("FIT"),
which is imposed at a flat rate of 8.5% on apportioned  "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.

     The Company's  state  income tax returns have not been audited in recent
years.


Item 2. Properties.

     The  following  table  provides  certain  information  with  respect to the
Company's offices as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                 Net Book
                                                                                 Value of
                                                        Year                     Property,      Approximate
                                       Owned or      Opened or       Total      Furniture &       Square
Description and Address                 Leased        Acquired      Deposits     Fixtures         Footage
----------------------------           --------     ------------    --------    -----------     -----------
                                                              (Dollars in thousands)
<S>                 <C>                                 <C>         <C>           <C>             <C>
Main Office:
221 East Main Street
Crawfordsville, IN  47933                Owned          1888        $137,526      $2,450          19,100

Mall Office:
1688 Crawfordsville Square Drive
Crawfordsville, IN  47933               Leased          2001        $  1,795      $   54           1,100

Mill Street Office:
816 South Mill Street
Crawfordsville, IN  47933                Owned          2002        $  6,353      $  347           3,200

Covington Office:
417 Liberty Street
Covington, IN  47932                     Owned          2002        $ 15,384      $  399           2,800

Williamsport Office:
118 North Monroe Street
Williamsport, IN  47993                  Owned          2002        $ 20,647      $  326           5,100

Lafayette Office:
50 West 250 South
Lafayette, IN  47909                     Owned          2002        $  8,487      $  812           3,700

</TABLE>


     Union  Federal  also owned one  building  located at 119 East Main  Street,
Crawfordsville,  Indiana,  which was acquired in the  acquisition  of Montgomery
Savings, A Federal Association ("Montgomery"). This building was sold in January
2004 with a gain on the sale of $23,000 being recorded.  The building  contained
approximately  16,000 square feet and was  previously  used by Montgomery as its
main  office.  The net book  value of the  building  at  December  31,  2003 was
$240,000.  The  accounting,  compliance,  and a portion  of the item  processing
functions were housed in this facility until the completion of the remodeling of
the 221 East Main Street  location  when the 119 East Main Street  location  was
vacated.
<PAGE>

     Union  Federal  has also  contracted  for  data  processing  and  reporting
services  from  Aurum  Technology  in  Plano,  Texas.  The  cost of  these  data
processing services is approximately $33,000 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 $5,500 per month.


Item 3. Legal Proceedings.

     Although  the  Company 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.

     None.


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 and President
         Alan L. Grimble                Chief Executive Officer
         J. Lee Walden                  Chief Financial Officer
         Denise E. Swearingen           Secretary and Treasurer


     Joseph E.  Timmons  (age 69) has served as Chairman  and  President  of the
Holding  Company  since 1997 and  President of Union  Federal since 1974. He has
also served as President of UFS Service Corp. since its inception in 1994 and of
MSA Service  Corp.  since its  acquisition  in 2002.  He has been an employee of
Union Federal since 1954.

     Alan L. Grimble (age 48) has served as the Chief  Executive  Officer of the
Holding  Company and Union  Federal  since 2002. He has worked for Union Federal
since 1998.

     J. Lee Walden (age 56) has served as Chief Financial Officer of the Holding
Company and Union Federal  since the 2002  acquisition  of Montgomery  Financial
Corp. and Montgomery  Savings.  He had previously worked for Montgomery  Savings
since 1984.

     Denise E. Swearingen (age 45) has served as the Holding Company'  Secretary
and Treasurer since 1997 and as Chief Operations  Officer of Union Federal since
2002. She has worked for Union Federal since 1983.


                                     PART II

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

     The information required by this item is included in the material under the
heading  "Shareholder  Information"  on page 44 of the  Holding  Company's  2003
Shareholder   Annual  Report  (the  "Shareholder   Annual  Report"),   which  is
incorporated herein by this reference.


Item 6. Selected Financial Data.

     The information required by this item is included in the material under the
heading  "Selected  Consolidated  Financial Data of Union Community  Bancorp and
Subsidiary"  on  pages  2 and 3 of  the  Shareholder  Annual  Report,  which  is
incorporated herein by this reference.
<PAGE>

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

     The information  required by this item is included on pages 3 through 18 of
the Shareholder Annual Report, which is incorporated herein by this reference.


Item 7A. Quantitative and Qualitative Disclosures about Market Risks.

     The information required by this item is included on pages 17 and 18 of the
Shareholder Annual Report, which is incorporated herein by this reference.


Item 8. Financial Statements and Supplementary Data.

     The Holding Company's  Consolidated  Financial Statements and Notes thereto
contained  on  pages  20  through  41  of  the  Shareholder  Annual  Report  are
incorporated  herein by this  reference.  The  Holding  Company's  supplementary
financial  information  required  by  this  item is  included  on page 16 of the
Shareholder Annual Report, which is incorporated herein by this 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.


Item 9A.  Controls and Procedures.

     As  of  December  31,  2003,  an  evaluation  was  carried  out  under  the
supervision  and with the  participation  of the Holding  Company's  management,
including  its Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness of the Holding  Company's  disclosure  controls and procedures (as
defined in Exchange  Act Rules  13a-15(e)  and  15d-15(e)  under the  Securities
Exchange Act of 1934).  Based on their  evaluation,  the Holding Company's Chief
Executive  Officer and Chief  Financial  Officer have concluded that the Holding
Company's  disclosure  controls  and  procedures  are,  to  the  best  of  their
knowledge,  effective to ensure that information required to be disclosed by the
Holding  Company in reports  that it files or submits  under the Exchange Act is
recorded,  processed,  summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

     The Holding Company's management, including its Chief Executive Officer and
Chief Financial  Officer,  also have concluded that during the Holding Company's
fiscal quarter ended December 31, 2003,  there have been no significant  changes
in the  Holding  Company's  internal  controls  or in other  factors  that could
significantly  affect the internal controls including any corrective action with
regard to significant deficiencies and material weaknesses.



                                    PART III

     Certain  information in this Part III is  incorporated  by reference to the
Holding  Company's  Proxy Statement for its Annual Meeting of Shareholders to be
held on April  20,  2004,  to be filed  within  120 days  after  the year  ended
December 31, 2003 (the "2004 Proxy Statement").


Item 10. Directors and Executive Officers of the Registrant.

     The  Holding  Company  has  adopted a Code of Ethics  that  applies  to all
employees, including the principal executive, financial and accounting officers,
and to all  directors.  A copy of the Code of Ethics is  attached to this Annual
Report on Form 10-K as Exhibit 14. The other  information  required by this item
is  incorporated  by reference to the sections in the 2004 Proxy  Statement with
the captions  "Proposal I - Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance."
<PAGE>

Item 11. Executive Compensation.

     The  information  required by this item is incorporated by reference to the
section of the 2004 Proxy  Statement with the caption  "Proposal I - Election of
Directors- Management Remuneration and Related Transactions."


Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
     Related Stockholder Matters.

Equity Compensation Plans

     The  following  table  provides  information,  as  of  December  31,  2003,
regarding the  securities  authorized  for issuance  under the company's  equity
compensation plan.

<TABLE>
<CAPTION>
                                                                                            Number of Securities
                                          Number of                                        Remaining Available For
                                      Securities To Be            Weighted-Average          Future Issuance Under
                                     Issued Upon Exercise        Exercise Price of        Equity Compensation Plans
                                   of Outstanding Options,      Outstanding Options,        (Excluding Securities
                                     Warrants and Rights        Warrants and Rights        Reflected In Column (a))
Plan Category                                (a)                         (b)                          (c)
--------------------------         -----------------------      ---------------------     --------------------------
<S>                                        <C>                          <C>                        <C>
Equity compensation plans
   approved by security holders:
      Union Community Bancorp
         Stock Option Plan .......         203,000                      $14.85                     93,175
      Union Community Bancorp
         Recognition and Retention
         Plan and Trust ("RRP") ..         121,670                          --                     12,270(1)
Equity compensation plans not
   approved by security holders ..            None                          --                         --
                                           -------                      ------                     -------
         Total ...................         324,670                      $14.85(2)                  105,445
                                           =======                      ======                     =======
----------------
(1)  Column (a) includes  28,000 shares granted to directors and management that
     have not yet vested.  In addition,  81,400 shares  granted to directors and
     management  have fully  vested and shares  have been  issued in  connection
     therewith.
(2)  The total in column (b) includes only the  weighted-average  price of stock
     options,  as the  restricted  shares awarded under the RRP have no exercise
     price.

</TABLE>


     The other information required by this item is incorporated by reference to
the sections in the 2004 Proxy  Statement with the captions  "Voting  Securities
and Principal Holders Thereof" and "Proposal I - Election of Directors."


Item 13. Certain Relationships and Related Transactions.

     The  information  required by this item is incorporated by reference to the
section of the 2004 Proxy  Statement with the caption  "Proposal I - Election of
Directions - Transactions With Certain Related Persons."


Item 14. Principal Accountant Fees and Services.

     The  information  required by this item is incorporated by reference to the
section of the 2004 Proxy Statement with the caption "Proposal II - Ratification
of Auditors - Accountants' Fees."
<PAGE>


                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

     (a)  The  following  documents  are filed as part of this Annual  Report on
          Form 10-K:

<TABLE>
<CAPTION>
                                                                                        Annual Report
                                                                                           Page No.

<S>                                                                                           <C>
          (1)  Financial Statements:
               Independent Accountants' Report ......................................         19
               Consolidated Balance Sheets at December 31, 2003 and 2002 ............         20
               Consolidated Statements of Income for the Years Ended December 31,
                  2003, 2002 and 2001 ...............................................         21
               Consolidated Statements of Shareholders' Equity for the Years Ended
               December 31, 2003, 2002 and 2001 .....................................         22
               Consolidated Statements of Cash Flows for the Years Ended December 31,
                  2003, 2002 and 2001 ...............................................         23
               Notes to Consolidated Financial Statements ...........................        24-41

</TABLE>

          (2)  Schedules:

          (3)  Exhibits:

               The  Exhibits  listed in the Exhibit  Index are  incorporated  by
               reference herein.

     (b)  Reports on Form 8-K.

          The Holding  Company filed a Current Report on Form 8-K on October 22,
          2003, to furnish a copy of the press release announcing its results of
          operations for the quarter ended September 30, 2003.

     (c)  The exhibits filed herewith or  incorporated  by reference  herein are
          set forth on the Exhibit Index on page E-1.

     (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, 2004                   By: /s/ Alan L. Grimble
                                            ------------------------------------
                                            Alan L. Grimble,
                                            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, 2004.

         Signatures                                           Title
Date

(1) Principal Executive Officer:                                )
                                                                )
                                                                )
    /s/ Alan L. Grimble                 Chief Executive Officer )
    ----------------------------------                          )
    Alan L. Grimble                                             )
                                                                )
                                                                )
(2) Principal Financial and Accounting                          )
    Officer:                                                    )
                                                                )
                                                                ) March 29, 2004
                                                                )
    /s/ J. Lee Walden                   Chief Financial Officer )
    ----------------------------------                          )
    J. Lee Walden                                               )
                                                                )
                                                                )
                                                                )
(3) The Board of Directors:                                     )
                                                                )
                                                                )
    /s/ Philip L. Boots                 Director                )
    ----------------------------------                          )
    Philip L. Boots                                             )
                                                                )
                                                                )
    /s/ Marvin L. Burkett               Director                )
    ----------------------------------                          )
    Marvin L. Burkett                                           )
                                                                )
                                                                )
    /s/ Mark E. Foster                  Director                )
    ----------------------------------                          )
    Mark E. Foster                                              )

<PAGE>

                                                                )
                                                                )
    /s/ Phillip E. Grush                Director                )
    ----------------------------------                          )
    Phillip E. Grush                                            )
                                                                )
                                                                )
    /s/ Samuel H. Hildebrand            Director                )
    ----------------------------------                          )
    Samuel H. Hildebrand                                        )
                                                                )
                                                                )
    /s/ John M. Horner                  Director                )
    ----------------------------------                          )
    John M. Horner                                              )
                                                                )
                                                                )
    /s/ C. Rex Henthorn                 Director                ) March 29, 2004
    ----------------------------------                          )
    C. Rex Henthorn                                             )
                                                                )
                                                                )
    /s/ Joseph M. Malott                Director                )
    ----------------------------------                          )
    Joseph M. Malott                                            )
                                                                )
                                                                )
    /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  (incorporated by reference to
          Exhibit 3(1) to the  Registrant's  Registration  Statement on form S-1
          filed with the  Commission  on  September17,  1997 (the  "Registration
          Statement")).

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

   10(2)* Union Community Bancorp Stock Option Plan (incorporated by reference
          to Exhibit 10(2) to the Registration Statement).

     (3)* Union Federal Savings and Loan  Association  Recognition and Retention
          Plan and Trust  (incorporated  by  reference  to Exhibit  10(3) to the
          Registration Statement).

     (4)  Union  Community  Bancorp  Employee  Stock  Ownership  Plan and  Trust
          Agreement   (incorporated   by  reference  to  Exhibit  10(4)  to  the
          Registration Statement).

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

     (6)  Exempt Loan and Share  Purchase  Agreement,  between Trust Under Union
          Community  Bancorp Exempt Stock Ownership Plan and Trust Agreement and
          Union Community Bancorp (incorporated by reference to Exhibit 10(6) to
          the Registration Statement).

     (7)* Employment   Agreement,   between  Union  Federal   Savings  and  Loan
          Association  and Alan L.  Grimble,  dated July 1, 2001,  and the first
          amendment  thereto  dated  as  of  April  17,  2002  (incorporated  by
          reference to Exhibit  10(7) to the  Registrants  2003 Annual Report on
          Form 10-K filed with the  Commission  on March 28,  2003  ("2003  Form
          10-K")).

     (8)* Employment   Agreement,   between  Union  Federal   Savings  and  Loan
          Association and J. Lee Walden,  dated January 2, 2002 (incorporated by
          reference to Exhibit 10(8) of the 2003 Form 10-K).

   13     2003 Annual Report

   14     Code of Ethics

   21     Subsidiaries of the Registrant

   23     Consent of Independent Accountants

   31(1)  Certification

   31(2)  Certification

   32     Certification

*Compensation plans or arrangements in which directors or executive officers are
     eligible to participate.