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

(Mark One)

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

                  For the fiscal year ended December 31, 2001

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)



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


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


           Securities Registered Pursuant to Section 12(g) of the Act:

                         Common Stock, without par value
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (ss. 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. [ ]

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of February 19, 2002, was $33,846,000.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of March 22, 2002, was 2,443,897 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Annual Report to  Shareholders  for the year ended  December 31,
2001, are  incorporated  into Part II.  Portions of the Proxy  Statement for the
2002 Annual Meeting of Shareholders are incorporated in Part I and Part III.

                            Exhibit Index on Page E-1
                               Page 1 of 34 pages
<PAGE>
                             UNION COMMUNITY BANCORP
                                    Form 10-K
                                      INDEX


                                                                            Page

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

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

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

PART III
  Item 10.  Directors and Executive Officers of Registrant....................31
  Item 11.  Executive Compensation............................................31
  Item 12.  Security Ownership of Certain Beneficial Owners and Management....31
  Item 13.  Certain Relationships and Related Transactions....................31

PART IV
  Item 14. Exhibits, Financial Statement Schedules,
                and Reports on Form 8-K.......................................32

SIGNATURES....................................................................33

<PAGE>

                            FORWARD LOOKING STATEMENT


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


Item 1. Business


General

     Union Community Bancorp,  an Indiana corporation (the "Holding Company" and
together with "Union Federal",  as defined below, the "Company"),  was organized
in September  1997.  On December 29, 1997, it acquired the common stock of Union
Federal Savings and Loan  Association  ("Union  Federal") upon the conversion of
Union Federal from a federal  mutual  savings and loan  association to a federal
stock  savings and loan  association.  The Holding  Company  acquired all of the
common stock of Montgomery  Financial  Corporation ("MFC") in a transaction that
closed on January 2, 2002. In the transaction,  MFC was merged with and into the
Holding Company,  and Montgomery Savings, a Federal Association and wholly-owned
subsidiary of MFC, merged with and into Union Federal.

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

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

Lending Activities

     Union Federal has historically  concentrated its lending  activities on the
origination  of  loans  secured  by  first-mortgage   liens  for  the  purchase,
construction  or refinancing of one- to four-family  residential  real property.
One- to four-family residential mortgage loans continue to be the major focus of
Union Federal's loan  origination  activities,  representing  74.4% of its total
loan  portfolio  at December 31, 2001.  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 5.8% and 12.0%,  respectively,  of
Union  Federal's total loan portfolio at December 31, 2001.  Construction  loans
totaled  approximately  1.8% of Union  Federal's  total loans as of December 31,
2001. Commercial loans totaled approximately 6.0% of Union Federal's total loans
as of December 31, 2001.  Consumer loans, which consist of personal  installment
loans and passbook loans, constituted approximately .2% of Union Federal's total
loan portfolio at December 31, 2001.

     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,
                                                  2001                           2000                            1999
                                        ------------------------        ------------------------       ---------------------------
                                                         Percent                        Percent                         Percent
                                        Amount          of Total        Amount          of Total       Amount           of Total
                                        ------------------------        ------------------------       -------------------------
                                                                          (Dollars in thousands)
TYPE OF LOAN
Real estate mortgage loans:
<S>                                   <C>                 <C>           <C>              <C>          <C>               <C>
  One- to four-family                 $  91,796           74.37%        $  83,012        74.48%       $  80,552         74.27%
  Multi-family                            7,095            5.75             8,522         7.65            9,549           8.80
  Commercial                             14,777           11.97            12,878        11.55           12,410          11.44
Real estate construction loans            2,230            1.80             3,221         2.89            4,380           4.04
Commercial loans                          7,342            5.95             3,661         3.28            1,394           1.29
Consumer loans                              198             .16               165          .15              177            .16
                                      ---------          ------         ---------       ------        ---------         ------
  Gross loans receivable              $ 123,438          100.00%        $ 111,459       100.00%       $ 108,462         100.00%
                                      =========          ======         =========       ======        =========         ======

TYPE OF SECURITY
  One- to four-family real estate     $  93,275           75.56%        $  85,100        76.35%       $  83,558          77.04%
  Multi-family real estate                7,095            5.75             9,010         8.08           10,063           9.28
  Commercial real estate                 15,528           12.58            13,523        12.13           13,270          12.24
  Deposits                                   35             .03                49          .05              124            .11
  Other                                   7,505            6.08             3,777         3.39            1,447           1.33
                                      -----------        ------         ---------       ------        ---------         ------
  Gross loans receivable                123,438          100.00           111,459       100.00          108,462         100.00
Deduct:
Allowance for loan losses                   520             .43               480          .43              422            .39
Deferred loan fees                          333             .27               290          .26              334            .31
Loans in process                            836             .69             1,184         1.06            1,532           1.41
                                      ---------          ------         ---------       ------        ---------        -------
  Net loans receivable                $ 121,749           98.61%        $ 109,505        98.25%       $ 106,174         97.89%
                                      =========          ======         =========       ======        =========        =======
Mortgage Loans:
  Adjustable-rate                     $  24,001           20.71%        $  26,028        24.18%       $  21,724         20.32%
  Fixed-rate                             91,897           79.29            81,605        75.82           85,167          79.68
                                      ----------         ------         ---------       ------        ---------        -------
  Total                               $ 115,898          100.00%        $ 107,633       100.00%       $ 106,891        100.00%
                                      =========          ======         =========       ======        =========        ======
</TABLE>

     The following  table sets forth certain  information  at December 31, 2001,
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                               2005      2007      2012     2017
                             December 31,                                 to         to       to       and
                                2001           2002    2003     2004     2006      2011      2016   following
                            --------------    ---------------------------------------------------------------
                                                                        (In thousands)

Real estate mortgage loans:
<S>                          <C>             <C>       <C>    <C>      <C>      <C>       <C>       <C>
  Residential loans          $  91,796       $  765    $175   $  576   $2,304   $24,793   $33,823   $29,360
    Multi-family loans           7,095           --     272      241      232     4,682     1,668        --
  Commercial loans              14,777          751       8        4      349     3,142     3,465     7,058
Construction loans               2,230          296      --       --       --       271       397     1,266
Commercial loans                 7,342        5,031     103      833      936       439        --        --
Loans secured by deposits           35           35      --       --       --        --        --        --
Personal loans                     163           84      --       22       57        --        --        --
                            ----------       ------    ----     -----  ------   -------   -------   -------
                  Total      $ 123,438       $6,962    $558   $1,676   $3,878   $33,327   $39,353   $37,684
                             =========       ======    ====   ======   ======   =======   =======   ========
</TABLE>

     The following  table sets forth, as of December 31, 2001, 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, 2002
                              ---------------------------------------------
                              Fixed Rates      Variable Rates       Total
                              ---------------------------------------------
                                             (In thousands)

Real estate mortgage loans:
  Residential loans             $80,247           $10,784         $  91,031
  Multi-family loans              4,294             2,801             7,095
  Commercial loans                5,067             8,959            14,026
Construction loans                 992                942             1,934
Commercial loans                   826              1,485             2,311
Installment loans                   79                 --                79
Loans secured by deposits           --                 --                --
                                ------            -------         ---------
         Total                  $91,505           $24,971         $ 116,476
                                =======           =======         =========

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

     Union  Federal also offers  adjustable-rate  mortgage  ("ARM")  loans.  The
interest rate on ARM loans is indexed to the one-year U.S.  Treasury  securities
yields  adjusted to a constant  maturity.  Union  Federal  may offer  discounted
initial  interest  rates on ARM loans,  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, 2001 provide for maximum  rate  adjustments  per year and over the
life of the loan of 1% and 5%,  respectively.  Union Federal's  residential ARMs
are amortized for terms up to 25 years.

     ARM loans  decrease the risk  associated  with changes in interest rates by
periodically  repricing,  but involve  other risks  because,  as interest  rates
increase, the underlying payments by the borrower also increase, thus increasing
the potential for default by the borrower.  At the same time, the  marketability
of the underlying collateral may be adversely affected by higher interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents,  and,  therefore,  is  potentially  limited in  effectiveness  during
periods of rapidly rising interest  rates.  At December 31, 2001,  approximately
20.7% 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,  2001,  approximately  $91.8  million,  or 74.4% of Union
Federal's  portfolio  of loans,  consisted  of one- to  four-family  residential
loans.  Approximately $194,000, or .2% 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, 2001,  approximately $7.1 million,  or
5.8% of Union  Federal's  total loan  portfolio,  consisted  of  mortgage  loans
secured by multi-family  dwellings  (those  consisting of more than four units).
Union Federal's  multi-family loans are generally written as one-year adjustable
rate loans indexed to the one-year  U.S.  Treasury rate with an original term of
up  to  20  years.   Union  Federal  writes   multi-family  loans  with  maximum
Loan-to-Value  ratios of 80%. Union Federal's  largest  multi-family  loan as of
December 31, 2001 had a balance of approximately  $877,000 and was secured by 28
duplexes located in Crawfordsville, Indiana. On the same date, Union Federal had
no multi-family loans included in non-performing assets.

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

     Commercial Real Estate Loans. Union Federal's  commercial real estate loans
are secured by churches,  office  buildings,  and other  commercial  properties.
Union  Federal  generally  originates  commercial  real estate loans as one-year
adjustable  rate loans indexed to the one-year U.S.  Treasury  securities  yield
adjusted to a constant  maturity,  with a maximum term of 20 years and a maximum
Loan-to-Value  ratio of 80%. At  December  31,  2001,  Union  Federal's  largest
commercial  loan had an  outstanding  balance of $1.7 million and was secured by
farm property in Montgomery  County. At December 31, 2001,  approximately  $14.8
million,  or  12.0%  of Union  Federal's  total  loan  portfolio,  consisted  of
commercial  real estate  loans.  On the same date,  Union Federal had a $488,000
commercial real estate loan included in non-performing assets.

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

     Construction Loans. Union Federal offers construction loans with respect to
residential  and commercial  real estate and, in certain  cases,  to builders or
developers constructing such properties on a speculative basis (i.e., before the
builder/developer  obtains a commitment  from a buyer).  Union Federal  provides
construction  loans only to borrowers  who commit to permanent  financing on the
finished project.  At December 31, 2001,  approximately $2.2 million, or 1.8% of
Union  Federal's  total loan  portfolio,  consisted of  construction  loans.  At
December 31, 2001, the largest  construction loan had an outstanding  balance of
$173,000,  an  unused  commitment  of  $213,000,  and was  secured  by an office
building complex in Avon,  Indiana.  None of Union Federal's  construction loans
were included in non-performing assets on that date.

     Construction  loans generally match the term of the construction  contract,
are written as fixed-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, 2001,  commercial loans amounted to $7.3 million,  or
6.0% 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, 2001, none of Union Federal's  commercial loans were included
in nonperforming assets.

     Consumer  Loans.  Union Federal's  consumer  loans,  consisting of passbook
loans and  personal  installment  loans,  aggregated  approximately  $198,000 at
December 31, 2001, or .2% of its total loan portfolio.  Union Federal's passbook
loans are made up to 90% of the deposit  account  balance  and, at December  31,
2001,  accrued at a rate of 8.2%.  This rate may  change  but will  always be at
least 3% over the underlying  passbook or certificate of deposit rate.  Interest
on loans secured by deposits is paid  semi-annually.  At December 31, 2001, none
of Union Federal's  consumer loans were included in non-performing  assets.  See
"-- Non-Performing and Problem Assets."

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

     Union  Federal  confines  its  loan  origination  activities  primarily  to
Montgomery  County and the  surrounding  counties of Boone,  Hendricks,  Putnam,
Parke and Fountain.  Union Federal has also  originated  several loans in Marion
County.  At  December  31,  2001,  Union  Federal  also had eight loans which it
originated,  totaling  approximately  $1.3 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.

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

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

     Union  Federal  occasionally  purchases  participation  interests  in loans
originated by other financial  institutions in order to diversify its portfolio,
supplement  local  loan  demand  and  to  obtain  more  favorable  yields.   The
participations  that Union  Federal  purchases  normally  represent a portion of
residential  or  commercial  real  estate  loans  originated  by  other  Indiana
financial  institutions,  most of which  are  secured  by  property  located  in
Indiana.  As of December 31,  2001,  Union  Federal  held in its loan  portfolio
participations in mortgage loans aggregating $6.3 million that it purchased, all
of  which  were   serviced   by  others.   Included   within  this  amount  were
participations  in the  aggregate  amount of  $638,000  which  were  secured  by
property  located outside of Indiana.  The largest  participation  loan in Union
Federal's  portfolio  at  December  31,  2001 was a $735,000  interest in a loan
secured by a nursing home located in Greensburg, Indiana.

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

<TABLE>
<CAPTION>


                                                              Year Ended December 31,
                                                ---------------------------------------------
                                                   2001              2000             1999
                                                ------------      ------------     ----------
                                                                 (In thousands)
<S>                                                <C>             <C>             <C>
Gross loans receivable at beginning of period      $111,459        $108,462        $  93,044
Loans originated:
  Real estate mortgage loans:
    One-to-four family loans                         27,980          10,794           23,539
    Multi-family loans                                    0               0              908
    Commercial loans                                  3,277           1,753            3,461
  Construction loans                                  2,129           2,435            4,719
  Commercial loans                                   15,748           5,796            3,655
  Loans secured by deposits                              97              18              224
  Personal installment loans                            421             110              392
                                                   --------        --------        ---------
     Total originations                              49,652          20,906           36,898
Purchases (sales) of participation loans, net           376             375            1,139
Reductions:
  Principal loan repayments                          38,049          18,372           22,424
  Loans transferred to (from)
        foreclosed real estate                            0             (88)             195
                                                   --------        ---------       ---------
     Total reductions                                38,049           18,284          22,619
                                                   --------        ---------       ---------
Total gross loans receivable at end of period      $123,438         $111,459       $ 108,462
                                                   ========        =========       =========


</TABLE>

     Union  Federal's  residential  loan  originations  during  the  year  ended
December 31, 2001 totaled  $28.0  million,  compared to $10.8  million and $23.5
million in the years ended December 31, 2000 and 1999, respectively.

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


Non-Performing and Problem Assets


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

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

     Non-performing  Assets.  At December  31, 2001,  $691,000,  or .5% of Union
Federal's total assets, were non-performing  (non-performing loans, non-accruing
loans and  foreclosed  real estate)  compared to $415,000,  or .3%, of its total
assets at December 31, 2000. At December 31, 2001,  residential  loans accounted
for $194,000 of Union Federal's  non-performing  assets.  Union Federal had real
estate owned ("REO") properties in the amount of $8,500 as of December 31, 2001.

     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,
                                   ---------------------------------------------
                                      2001              2000             1999
                                   ----------        ----------       ----------
                                            (Dollars in thousands)

Non-performing assets:
  Non-performing loans               $682               $406             $166
  Foreclosed real estate                9                  9               97
                                     ----               ----             ----
     Total non-performing assets     $691               $415             $263
                                     ====               ====             ====

Non-performing loans to total loans   .55%               .36%             .16%

Non-performing assets to total assets .49%               .33%             .22%

     Interest  income of  $39,000,  $25,000  and  $7,000 was  recognized  on the
non-performing  loans  summarized  above for the years ended  December 31, 2001,
2000 and 1999,  respectively.  Interest  income of $57,000,  $34,000 and $13,000
would have been  recognized  under the  original  terms of these  non-performing
loans for the years ended December 31, 2001, 2000 and 1999, respectively.

     At December 31, 2001,  Union  Federal held loans  delinquent  from 30 to 89
days totaling  approximately  $1.8 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, 2001, 2000 and 1999,  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, 2001                           At December 31, 2000
                        -----------------------------------------  -------------------------------------------
                             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)

One- to four-
<S>                         <C>     <C>            <C>     <C>         <C>     <C>              <C>    <C>
 family loans               13      $ 742          5       $194        12      $  632           5      $255
Commercial real
 estate loans                1         83          2        488        --          --           1        18
Multi-family loans           2      1,008         --         --         2         750           1       133
Loans secured by
 deposits                   --         --         --         --        --          --         ---        --
                            --     ------         --       ----        --       -----         ---      ----
 Total                      16     $1,833          7       $682        14      $1,382           7      $406
                            ==     ======        ===       ====        ==      ======         ===      ====
Delinquent loans to
 total loans                                               2.06%                                       1.63%
                                                           ====                                        ====
</TABLE>



                                     At December 31, 1999
                        --------------------------------------------
                              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               9         $429          4         $166
Commercial real
 estate loans               2           61         --           --
Multi-family loans          1          132         --           --
Loans secured by
 deposits                  --           --         --           --
                           --         ----         --         ----
 Total                     12         $622          4         $166
                           ==         ====        ===         ====
Delinquent loans to
 total loans                                                   .74%
                                                               ===





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

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

     At December 31, 2001, the aggregate  amount of Union  Federal's  classified
assets and its general and specific loss allowances were as follows:

                                                At December 31, 2001
                                                --------------------
                                                   (In thousands)

Substandard  assets                                     $1,643
Doubtful  assets                                            --
Loss assets                                                 --
                                                        ------
Total classified  assets                                $1,643
                                                        ======
General loss  allowances                                $  520
Specific loss allowances                                    --
                                                        ------
Total  allowances                                       $  520
                                                        ======

     Union Federal regularly reviews its loan portfolio to determine whether any
loans require classification in accordance with applicable regulations. Included
in substandard  assets at December 31, 2001,  Union Federal had two multi-family
loans, in the aggregate sum of $961,000,  that were  performing.  The loans were
classified as substandard as a result of a regulatory examination.


Allowance for Loan Losses


     The allowance for loan losses is maintained  through the provision for loan
losses,  which  is  charged  to  earnings.  The  allowance  for loan  losses  is
determined in conjunction  with Union Federal's review and evaluation of current
economic  conditions  (including  those of its  lending  area),  changes  in the
character and size of the loan portfolio,  loan delinquencies (current status as
well as past and  anticipated  trends) and adequacy of collateral  securing loan
delinquencies,  historical and estimated net  charge-offs,  and other  pertinent
information  derived  from a  review  of the  loan  portfolio.  In  management's
opinion,  Union  Federal's  allowance  for loan  losses  is  adequate  to absorb
probable  losses  inherent in the loan portfolio at December 31, 2001.  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, 2001.

<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                                           2001              2000            1999
                                        ----------        ----------      ----------
                                                    (Dollars in thousands)
<S>                                        <C>               <C>             <C>
Balance at beginning of period             $480              $422            $362
Gross charge-offs - residential loans        --                (2)             --
Provision for losses on loans                40                60              60
                                           ----              ----            ----
         Balance end of period             $520              $480            $422
                                           ====              ====            ====
Allowance for loan losses as a
    percent of total loans outstanding      .43%              .44%            .40%
Ratio of net charge-offs to
    average loans outstanding                --                --              --
</TABLE>

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

<TABLE>
<CAPTION>


                                                                       At December 31,
                                        -----------------------------------------------------------------------
                                                2001                      2000                     1999
                                        -------------------       ------------------        -------------------
                                                   Percent                  Percent                    Percent
                                                   of loans                 of loans                   of loans
                                                   in each                  in each                    in each
                                                   category                 category                   category
                                                   to total                 to total                     total
                                        Amount      loans         Amount      loans          Amount      loans
                                        ------     --------       ------    --------         ------    ---------
                                                        (Dollars in thousands)

Balance at end of period applicable to:
 Real estate mortgage loans:
<S>                                     <C>         <C>            <C>      <C>               <C>        <C>
          Residential                   $117        74.37%         $102     74.48%            $  90      74.27%
          Commercial                     165         5.75           130      7.65               124       8.80
          Multi-family                   108        11.97           124     11.55               115      11.44
 Construction loans                        4         1.80             4      2.89                11       4.04
 Commercial loans                        121         5.95            77      3.28                32       1.29
 Loans secured by deposits                --          .03            --       .05                --        .11
 Personal installment loans                5          .13             3       .10                 2        .05
 Unallocated                              --          --             40        --                48         --
                                        ----       ------          ----    ------               ----    ------
  Total                                 $520       100.00%         $480    100.00%              $422    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 and an investment in Pedcor Investments - 1993 -
XVI,  L.P.  See  "--Service  Corporation  Subsidiary."  At  December  31,  2001,
approximately $5.2 million,  or 3.7%, of the Company's total assets consisted of
such investments.  The Company also had $13.2 million, or 9.3% of its assets, in
interest-earning deposits as of that date.

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

<TABLE>
<CAPTION>


                                                                   At December 31,
                                   -------------------------------------------------------------------------
                                             2001                        2000                   1999
                                   ----------------------      --------------------   ----------------------
                                   Amortized        Market     Amortized     Market   Amortized       Market
                                     Cost           Value        Cost        Value       Cost         Value
                                   ---------       -------     ---------     ------   ----------      ------
                   (In thousands)
Investment securities:
Available for sale:
<S>                                   <C>           <C>          <C>         <C>        <C>            <C>
 Marketable equity securities         $   --        $   --       $  --       $   --     $  290         $  315
Held to maturity:
  Federal agencies                       700           728        5,015       4,945      4,715          4,386
  Mortgage-backed securities           2,148         2,240        2,582       2,637      2,807          2,813
                                     -------        -------      ------      ------     ------         ------
   Total investment securities
       held to maturity.               2,848         2,968        7,597      7,582       7,522          7,199
Investment in limited partnership        857            (1)         912         (1)      1,012             (1)
FHLB stock (2)                         1,530         1,530        1,044      1,044       1,044          1,044
                                      -------                     ------                ------
Total investments                     $5,235                      $9,553                $9,868
                                      ======                      ======                ======
------------------
</TABLE>

(1)  Market values are not available

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

     The  following  table  sets  forth  the  amount  of  investment  securities
(excluding mortgage-backed securities,  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, 2001.


<TABLE>
<CAPTION>

                                                        Amount at December 31, 2001 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>           <C>          <C>
Federal agency securities         $100         6.3%       $--         --%         $300       8.2%          $300         6.8%
</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,
                             -------------------------------------------------------------------------------------------
                                         2001                           2000                            1999
                             ----------------------------  -----------------------------  ------------------------------
                             Amortized  Percent    Market  Amortized   Percent   Market   Amortized   Percent     Market
                                Cost    of Total    Value     Cost     of Total   Value      Cost     of Total    Value
                             ---------  --------   ------  ---------   --------  -------  ---------   --------   -------
                                                                        (In thousands)
Governmental National
<S>                           <C>        <C>       <C>     <C>          <C>      <C>       <C>          <C>      <C>
  Mortgage Corporation        $  477     22.2%     $  533  $  622       24.1%    $  666    $  689       24.5%    $  748
Federal Home Loan Mortgage
  Corporation                  1,619     75.4       1,657    1,897      73.5      1,911     2,043       72.8      1,995
Federal National Mortgage
  Corporation                     45      2.1          43       55       2.1         52        63        2.3         58
Other                              7       .3           7        8        .3          8        12         .4         12
                              ------     ----      ------- -------      ----     ------    ------       ----     ------
  Total mortgage-backed
        securities            $2,148    100.0%     $2,240   $2,582     100.0%   $2,637     $2,807      100.0%    $2,813
                              ======    =====      ======   ======     =====    ======     ======      =====     ======
</TABLE>

     The  following  table sets forth the amount of  mortgage-backed  securities
which  mature  during each of the periods  indicated  and the  weighted  average
yields for each range of maturities at December 31, 2001.


<TABLE>
<CAPTION>

                                              Amount at December 31, 2001 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>           <C>
Mortgage-backed securities     $154         8.6%          $122          8.6%       $1,872        7.0%
</TABLE>

     The   following   table   sets  forth  the   changes  in  Union   Federal's
mortgage-backed securities portfolio for the years ended December 31, 2001, 2000
and 1999.

                                       For the Year Ended December 31,
                                ---------------------------------------------
                                   2001              2000             1999
                                ----------        ----------       ----------
                                                (In thousands)
Beginning balance                 $2,582            $2,807           $3,526
Purchases                             --                --               --
Repayments                          (437)             (190)            (731)
Premium and discount
   amortization, net                   3               (35)              12
                                  ------             ------          ------
Ending balance                    $2,148             $2,582          $2,807
                                  ======             ======          ======


Sources of Funds


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

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

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

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

     An analysis of the Company's deposit accounts by type,  maturity,  and rate
at December 31, 2001, is as follows:



                                Minimum    Balance at                  Weighted
                                Opening    December 31,      % of       Average
Type of Account                 Balance       2001         Deposits       Rate
---------------                 -------    ------------    --------    ---------
                                               (Dollars in thousands)
Withdrawable:
 Fixed rate, passbook accounts  $    10    $  3,284          4.02%        3.00%
 Variable rate, money market         10      24,233         29.66         3.05
 NOW accounts and other
    transaction accounts            500       3,467          4.24         1.19
                                            -------        ------        ----
          Total withdrawable                 30,984         37.92         2.84

Certificates (original terms):
 3 months or less                 1,000          21           .03         2.48
 6 months                         1,000       2,784          3.41         3.10
 12 months                        1,000       4,684          5.73         4.52
 18 months                        1,000       4,081          4.99         4.84
 24 months                        1,000       3,955          4.84         5.64
 30 months                        1,000       7,340          8.98         5.89
 36 months                        1,000       4,661          5.71         6.12
 48 months                        1,000       1,025          1.26         5.53
 60 months                        1,000       4,795          5.87         6.01
Jumbo certificates -
   $100,000 and over            100,000      17,372         21.26         5.63
                                            -------        ------         ----
Total certificates                           50,718         62.08         5.44
                                            -------        ------         ----
Total deposits                              $81,702        100.00%        4.45%
                                            =======        ======         ====

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

                                             At December 31,
                                  2001              2000            1999
                                --------          -------          -------
                                            (Dollars in thousands)
2.00 to 2.99%                   $ 2,409           $    --          $    --
3.00 to 3.99%                     3,661                --                1
4.00 to 4.99%                    12,689             3,294           11,957
5.00 to 5.99%                    11,332            16,321           22,850
6.00 to 6.99%                    17,434            27,406           11,800
7.00 to 7.99%                     3,193             3,694               17
                                -------           -------          -------
         Total                  $50,718           $50,715          $46,625
                                =======           =======          =======

     The following table  represents,  by various interest rate categories,  the
amounts of time  deposits  maturing  during  each of the three  years  following
December  31,  2001.  Matured  certificates,  which have not been  renewed as of
December 31, 2001, have been allocated based upon certain rollover assumptions.


                              Amounts at December 31, 2001 Maturing In
                         --------------------------------------------------
                         One Year         Two         Three    Greater Than
                         or Less         Years        Years    Three Years
                         -------        ------       ------    ------------
                                            (In thousands)
2.00 to 2.99%            $ 2,243        $  166       $   --    $   --
3.00 to 3.99%              2,363           974          324        --
4.00 to 4.99%              8,411         2,673        1,160       445
5.00 to 5.99%              4,741         4,121        2,194       276
6.00 to 6.99%             10,588         4,734        1,002     1,110
7.00 to 7.99%              1,646         1,036           99       412
                         -------        ------       ------    ------
         Total           $29,992       $13,704       $4,779    $2,243
                         =======       =======       ======    ======

     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, 2001.

                                                        At December 31, 2001
                                                        --------------------
Maturity Period                                           (In thousands)
 Three months or less                                        $ 4,354
 Greater than three months through six months                  2,783
 Greater than six months through twelve months                 5,729
 Over twelve months                                            4,506
                                                             -------
          Total                                              $17,372
                                                             =======

     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
                                  2001         Deposits      2000         2000        Deposits      1999          1999      Deposits
                                ------------   --------   ----------   ------------   --------    ---------   ------------  --------
                                                                            (Dollars in thousands)
Withdrawable:
   Fixed rate, passbook
<S>                             <C>             <C>        <C>          <C>             <C>       <C>          <C>             <C>
     accounts                   $  3,284        4.02%      $   511      $ 2,773         3.81%    $ (411)       $ 3,184         4.62%
   Variable rate, money
     market                       24,233       29.66         7,810       16,423        22.55         94         16,329        23.67
   NOW accounts and other
     transaction accounts          3,467        4.24           562        2,905         3.99         53          2,852         4.13
                                --------      ------       -------      -------       ------     ------        -------       ------
   Total withdrawable             30,984       37.92         8,883       22,101        30.35       (264)        22,365        32.42
                                --------      ------       -------      -------       ------     ------        -------       ------
Certificates (original terms):
   3 months                           21         .03             9           12          .02          2             10          .01
   6 months                        2,784        3.41           428        2,356         3.24       (384)         2,740         3.97
   12 months                       4,684        5.73           189        4,873         6.69      1,204          3,669         5.32
   18 months                       4,081        4.99        (1,708)       5,789         7.95       (210)         5,999         8.69
   24 months                       3,955        4.84           128        3,827         5.26        253          3,574         5.18
   30 months                       7,340        8.98        (2,295)       9,635        13.23       (745)        10,380        15.05
   36 months                       4,661        5.71           140        4,521         6.21      1,564          2,957         4.29
   48 months                       1,025        1.26           383          642          .88         85            557          .81
   60 months                       4,795        5.87          (328)       5,123         7.03       (916)         6,039         8.75
Jumbo certificates                17,372       21.26         3,435       13,937        19.14      3,237         10,700        15.51
                                 -------      ------        ------      -------        -----     ------        -------       ------
Total certificates                50,718       62.08             3       50,715        69.65      4,090         46,625        67.58
                                 -------      ------        ------      -------        -----     ------        -------       ------
Total deposits                   $81,702      100.00%       $8,886      $72,816       100.00%    $3,826        $68,990       100.00%
                                 =======      ======        ======      =======       ======     ======        =======       ======
</TABLE>

     Total  deposits at  December  31, 2001 were  approximately  $80.3  million,
compared to  approximately  $72.8 million at December 31, 2000.  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, 2001,  Union Federal had  borrowings in the amount of $25.4 million
from the FHLB of Indianapolis  which bear fixed and variable  interest rates and
are due at various  dates  through  2011.  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")  $477,000  under a note  payable  that is not  included  in the
following table. See "--Service Corporation Subsidiary."

     The  following  table  presents  certain  information   relating  to  Union
Federal's borrowings at or for the years ended December 31, 2001, 2000 and 1999.

                                                       At or for the Year
                                                       Ended December 31,
                                                 -------------------------------
                                                   2001        2000       1999
                                                 --------    --------   --------
                                                     (Dollars in thousands)
FHLB Advances:
 Outstanding at end of period                     $25,406    $14,535    $11,659
 Average balance outstanding for period            14,143     11,612      6,043
 Maximum amount outstanding at any month-end
          during the period                        25,406     14,535     11,659
 Weighted average interest rate during the period    5.13%      6.42%      5.66%
 Weighted average interest rate at end of period     3.35       6.31       5.76
Return on Equity and Assets

                                                   2001        2000       1999
                                                 --------    --------   --------
 Return on assets (net income divided
        by average total assets)                     1.44%      1.59%      1.72%
 Return on equity (net income divided
        by average equity)                           5.38       5.17       5.02
 Dividend payout ratio (dividends per share
        divided by net income per share)            64.52      67.24      57.41
 Equity to assets ratio (average equity
        divided by average total assets)            26.80      30.77      34.25


Service Corporation Subsidiary


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

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

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

     UFS  committed  to  invest  approximately  $1.8  million  in  Pedcor at the
inception of the project in November  1993.  Through  December 31, 2001, UFS had
invested  cash of  approximately  $1.3  million in Pedcor with three  additional
annual  capital  contributions  remaining  to be paid in  January  of each  year
through January 2004,  totaling $477,000.  The additional  contributions will be
used for operating and other  expenses of the  partnership.  In addition,  Union
Federal  borrowed funds from the FHLB of Indianapolis to advance to Pedcor,  and
Pedcor  currently  owes Union  Federal  $406,000  pursuant to a promissory  note
payable in  installments  through  January 1, 2004 and  bearing  interest  at an
annual rate of 9%.

     UFS transfers  the tax credits  resulting  from  Pedcor's  operation of the
Project to Union  Federal.  These tax credits will be available to Union Federal
through 2003.  Although Union Federal has reduced income tax expense by the full
amount of the tax  credit  available  each  year,  it has not been able to fully
utilize  available tax credits to reduce income taxes payable because it may not
use tax credits that would reduce its regular  corporate tax liability below its
alternative  minimum tax  liability.  Union Federal may carry forward unused tax
credits for a period of fifteen years and management believes that Union Federal
will be able to utilize  the  available  tax  credits  during the carry  forward
period. Additionally, Pedcor has incurred operating losses in the early years of
its operations primarily due to its accelerated  depreciation of assets. UFS has
accounted for its  investment  in Pedcor on the equity method and,  accordingly,
has  recorded  its share of these  losses as  reductions  to its  investment  in
Pedcor, which at December 31, 2001, was $857,000. As of December 31, 2001, 94.3%
of the units in the  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.

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


                                                     Year Ended December 31,
                                                 -------------------------------
                                                   2001        2000       1999
                                                 --------    --------   --------
                                                     (Dollars in thousands)
Investment in Pedcor:
 Net of equity in losses                         $  857      $  912     $1,012
                                                 ======      ======     ======

Equity in losses, net of income tax effect       $  (34)     $  (60)    $  (26)
Tax credit                                          178         178        178
                                                 -------     -------    ------
Increase in after-tax net income
        from Pedcor investment                   $  144      $  118     $  152
                                                 ======      ======     ======


Employees


     As of December 31, 2001,  Union Federal  employed 19 persons on a full-time
basis.  Union  Federal  does  not have any  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, a Pentegra Group (formerly known
as Financial  Institutions  Retirement  Fund)  defined  benefit  pension plan, a
noncontributory,   multiple-employer  comprehensive  pension  plan  (the"Pension
Plan"),  and  hospitalization/major  medical  insurance,  dental  and  eye  care
insurance,  long-term disability insurance, life insurance, and participation in
the Financial Institutions Thrift Plan.

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


                                   COMPETITION


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

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


                                   REGULATION


General

     As a federally chartered,  SAIF-insured savings association,  Union Federal
is subject to extensive  regulation by the OTS and the FDIC. For example,  Union
Federal must obtain OTS approval before it may engage in certain  activities and
must file reports with the OTS regarding its activities and financial condition.
The OTS  periodically  examines  Union  Federal's  books  and  records  and,  in
conjunction with the FDIC in certain situations, has examination and enforcement
powers.   This  supervision  and  regulation  are  intended  primarily  for  the
protection  of  depositors  and  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 2001, Union Federal's semi-annual assessment was $17,950.

     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 and antitrust laws.


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") on  November  12,  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.

     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,  2001,  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.

     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,  2001,  Union  Federal's  investment  in  stock of the FHLB of
Indianapolis was $1.5 million.  For the fiscal year ended December 31, 2001, the
FHLB of Indianapolis paid approximately $87,000 in 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.  During 1996,
the reserves of the SAIF were below the level required by law, primarily because
a significant portion of the assessments paid into the SAIF had been used to pay
the cost of prior thrift  failures,  while the reserves of the BIF met the level
required by law. In 1996,  however,  legislation was enacted to recapitalize the
SAIF and  eliminate  the  premium  disparity  between  the BIF and SAIF.  See "-
Assessments" below.

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

     In 1996,  legislation  was enacted  that  included  provisions  designed to
recapitalize the SAIF and eliminate the significant  premium  disparity  between
the BIF and the SAIF.  Under the new law,  Union  Federal was charged a one-time
special  assessment equal to $.657 per $100 in assessable  deposits at March 31,
1995, and beginning  January 1, 1997, Union Federal's  annual deposit  insurance
premium  was  reduced  from  .23% to  .0644% of total  assessable  deposits.  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.  During
1998, FICO payments for SAIF members  approximated 6.10 basis points,  while BIF
members paid 1.22 basis points.  By law,  payments on FICO obligations have been
shared  equally  between  BIF members and SAIF  members  since  January 1, 2000.
Legislation is pending before Congress that would increase the deposit insurance
assessments paid by all financial institutions, including Union Federal.

     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, 2001,  Union
Federal was in compliance with all capital requirements imposed by law.

     The OTS has  promulgated  a rule  which  sets  forth  the  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS has delayed the  implementation of
this rule, however.  The rule requires savings  associations with "above normal"
interest rate risk  (institutions  whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain  additional capital for interest rate risk under the
risk-based capital framework.  Even though the OTS has delayed implementing this
rule, Union Federal  nevertheless  measures its interest rate risk in conformity
with the OTS regulation  and, as of December 31, 2001,  would have been required
to deduct  $1.2  million  from its total  capital  available  to  calculate  its
risk-based  capital  requirement.  The OTS recently proposed an amendment to its
interest  rate  risk rule  that  would  delete  the  requirement  that a savings
association  with  excess  exposure  to  interest  rate risk  make this  capital
deduction.  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.


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,
2001,  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, 2001,  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.

     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, which
was  signed  into law on  December  27,  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


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


Real Estate Lending Standards


     OTS  regulations  require  savings  associations  to establish and maintain
written  internal  real estate  lending  policies.  Each  association's  lending
policies  must be  consistent  with  safe and  sound  banking  practices  and 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.




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.   Union  Federal  has
established  an  "in-house"  lending  limit of $2 million to a single or related
group of borrowers,  which is  significantly  lower than the regulatory  lending
limit described above. Any loan that exceeds this "in-house" lending limit up to
the regulatory  lending limit must first be approved by Union Federal's board of
directors.  At December 31, 2001, Union Federal had no loan  relationships  that
exceeded its "in-house"  lending limit. Also on that date, 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, 2001,  Union Federal was in compliance
with its QTL  requirement,  with  approximately  92.3% of its assets invested in
QTIs.

     A savings  association which fails to meet the QTL test must either convert
to a bank (but its deposit  insurance  assessments and payments will be those of
and paid to the SAIF) or be subject to the following  penalties:  (i) it may not
enter into any new activity except for those permissible for a national bank and
for a savings  association;  (ii) its branching  activities  shall be limited to
those of a national bank;  (iii) it shall 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.

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

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

     Finally, The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal  Act") permits bank holding companies to acquire banks in
other states and, with state consent and subject to certain limitations,  allows
banks  to  acquire  out-of-state  branches  either  through  merger  or de  novo
expansion.  The State of Indiana  enacted  legislation  establishing  interstate
branching  provisions for Indiana  state-chartered  banks  consistent with those
established by the Riegle-Neal Act (the "Indiana  Branching  Law").  The Indiana
Branching  Law,  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  restrict  financial  transactions  between  banks and their
directors,  executive  officers and  affiliated  companies.  The statute  limits
credit  transactions  between a bank or savings  association  and its  executive
officers and its affiliates,  prescribes terms and conditions for bank affiliate
transactions deemed to be consistent with safe and sound banking practices,  and
restricts the types of collateral security permitted in connection with a bank's
extension of credit to an affiliate.


Federal Securities Law


     The shares of Common Stock of the Holding Company have been registered with
the SEC under the 1934 Act 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.


Community Reinvestment Act Matters


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


                                    TAXATION


Federal Taxation

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

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

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


State Taxation


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

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

Item 2. Properties.

     The following  table  provides  certain  information  with respect to Union
Federal's office as of December 31, 2001:

<TABLE>
<CAPTION>

                                                                              Net Book
                                                                              Value of
                                                                              Property,     Approximate
                                        Owned or        Year     Total       Furniture &      Square
Description and Address                  Leased       Opened    Deposits      Fixtures        Footage
----------------------------         -----------      ------    --------     -----------    -----------
                                                             (Dollars in thousands)
<S>                                     <C>             <C>     <C>             <C>           <C>
221 East Main Street                    Owned           1913    $80,284         $335          19,065
Crawfordsville, Indiana  47933
1688 Crawfordsville Square Drive        Leased          2001    $ 1,418         $ 64           1,059
Crawfordsville, Indiana  47933
</TABLE>

     Union  Federal  has also  contracted  for  data  processing  and  reporting
services from Intrieve, Incorporated in Cincinnati, Ohio. The cost of these data
processing services is approximately $7,300 per month.

     Union Federal has also executed a Correspondent Services Agreement with the
FHLB of Indianapolis  under which it receives item processing and other services
for a fee of approximately $1,700 per month.

     Union Federal also receives  income from leasing office space on the second
floor of its building and parking  spaces  located  behind its  building.  Union
Federal's  gross  income from  renting the office space was $21,000 for the year
ended  December 31, 2001,  and its gross income from renting the parking  spaces
was approximately $7,000 for the year ended December 31, 2001.


Item 3. Legal Proceedings.


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


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


     Vote on the merger of Montgomery  Financial  Corporation  with and into the
Holding Company and the merger of Montgomery Savings with and into Union Federal
in accordance with that certain Agreement and Plan of Reorganization  dated July
23, 2001, by and among Union Community, Montgomery, Union Federal and Montgomery
Savings.

     There were  outstanding  and  entitled to vote  1,207,698  shares of Common
Stock of the Holding  Company.  There were 844,958 shares of Common Stock of the
Holding Company present at the meeting, which constituted a quorum and more than
a majority of the outstanding shares entitled to vote. A tabulation of the votes
cast for  approval of the  Agreement  and Plan of  Reorganization  is  presented
below:

                                                Number
                                               of Votes
                                               --------
         For                                    840,053
         Against                                  1,641
         Abstain                                  3,264
         Broker non-votes                            --


Item 4.5. Executive Officers of the Registrant.


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


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

     Joseph E.  Timmons  (age 67) has served as  President  and Chief  Executive
Officer of the Holding  Company  since 1997,  of Union Federal since 1974 and of
UFS Service Corp.  since its inception in 1994. He has been an employee of Union
Federal since 1954.

     Denise E. Swearingen (age 43) has served as the Holding Company's Secretary
and   Treasurer   since   1997   and   as   Union   Federal's    Secretary   and
Controller/Treasurer since 1995. She has worked for Union Federal since 1983.

     Ronald  L.  Keeling  (age 50) has  served  as the  Holding  Company's  Vice
President since 1997, as Union Federal's Vice President and Assistant  Secretary
since  1984 and as Senior  Loan  Officer  since  1979.  He has  worked for Union
Federal since 1971.

     Alan L. Grimble (age 45) has served as the Holding Company's Vice President
since 2000, as Union  Federal's  Executive  Vice  President  since 2000 and as a
Commercial Loan Officer since 1998. He has worked for Union Federal since 1998.


                                     PART II



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


     The  information  required by this item is incorporated by reference to the
material under the heading  "Shareholder  Information" on page 42 of the Holding
Company's 2001 Shareholder Annual Report (the "Shareholder Annual Report").


Item 6. Selected Financial Data.


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


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


     The information required by this item is incorporated by reference to pages
3 through 14 of the Shareholder Annual Report.


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


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


Item 8. Financial Statements and Supplementary Data.


     The Holding Company's  Consolidated  Financial Statements and Notes thereto
contained  on  pages  17  through  39  of  the  Shareholder  Annual  Report  are
incorporated herein by reference.  The Holding Company's supplementary financial
information required by this item is incorporated by reference to page 14 of the
Shareholder annual report.


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

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


                                    PART III



Item 10. Directors and Executive Officers of the Registrant.


     The  information  required  by this  item  with  respect  to  Directors  is
incorporated  by  reference  to  pages 2 to 5 and  pages  7 to 8 of the  Holding
Company's  Proxy Statement for its Annual  Shareholder  meeting to be held April
17, 2002 (the "2002 Proxy  Statement").  The information  concerning the Holding
Company's executive officers is included in Item 4.5 in Part I of this report.


Item 11. Executive Compensation.


     The  information  required  by this  item  with  respect  to  Directors  is
incorporated  by reference to pages 5 to 7 of the Holding  Company's  2002 Proxy
Statement.


Item 12. Security Ownership of Certain Beneficial Owners and Management.


     The  information  required  by this  item  with  respect  to  Directors  is
incorporated  by  reference  to  page  3 of the  Holding  Company's  2002  Proxy
Statement.


Item 13. Certain Relationships and Related Transactions.


     The  information  required  by this  item  with  respect  to  Directors  is
incorporated  by  reference  to  page  8 of the  Holding  Company's  2002  Proxy
Statement.


                                     PART IV


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

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

                                                                   Annual Report
                                                                      Page No.

Financial Statements:

Independent Accountants' Report..........................................17

Consolidated Balance Sheets at December 31, 2001 and 2000................18

Consolidated Statements of Income for the
        Years Ended December 31, 2001, 2000 and 1999.....................19

Consolidated Statements of Shareholders' Equity for the Years Ended
        December 31, 2001, 2000 and 1999.................................20

Consolidated Statements of Cash Flows for the Years
        Ended December 31, 2001, 2000 and 1999...........................21

Notes to Consolidated Financial Statements...............................22

     (b)  Reports on Form 8-K.

          The  Holding  Company  filed no reports on Form 8-K during the quarter
          ended December 31, 2001.

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

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

<PAGE>
                                   SIGNATURES

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



Date:  March 28, 2002                By: /s/ Joseph E. Timmons
                                        --------------------------------------
                                        Joseph E. Timmons, President and
                                        Chief Executive Officer

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 28 day of March, 2002.


Signatures                           Title                   Date
--------------------------------     -------------------     ------------

(1)  Principal Executive Officer:                           )
                                                            )
     /s/ Joseph E. Timmons                                  )
     ---------------------------                            )
     Joseph E. Timmons               President and          )
                                     Chief Executive Officer)
                                                            )
                                                            )
(2)  Principal Financial and                                )
     Accounting Officer:                                    )
                                                            )
                                                            )   March 28, 2002
     /s/ Denise E. Swearigen         Treasurer              )
     ---------------------------                            )
     Denise E. Swearingen                                   )
                                                            )
                                                            )
                                                            )
(3)  The Board of Directors:                                )
                                                            )
                                                            )
     /s/ Philip L. Boots             Director               )
     ---------------------------                            )
     Philip L. Boots                                        )
                                                            )
                                                            )
     /s/ Marvin L. Burkett           Director               )
     ---------------------------                            )
     Marvin L. Burkett                                      )
                                                            )
                                                            )
     /s/ Phillip E. Grush            Director               )
     ---------------------------                            )
     Phillip E. Grush                                       )
                                                            )
     /s/ Samuel H. Hildebrant                               )
     ---------------------------                            )
     Samuel H. Hildebrand            Director               )
                                                            )
                                                            )
     /s/ John M. Horner              Director               )
     ---------------------------                            )
     John M. Horner                                         )
                                                            )
                                                            )   March 28, 2002
     /s/ Harry A. Siamas             Director               )
     ---------------------------                            )
     Harry A. Siamas                                        )
                                                            )
                                                            )
     /s/ Joseph E. Timmons           Director               )
     ---------------------------                            )
     Joseph E. Timmons                                      )



<PAGE>

                                  EXHIBIT INDEX


 Exhibit No.   Description
 -----------   -----------------------------------------------------------------
      3 (1)    Registrant's   Articles  of  Incorporation  are  incorporated  by
               reference  to to Exhibit  3(1) to the  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 is  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  Employee Stock Ownership Plan and Trust
               Agreement and Union Community  Bancorp  incorporated by reference
               to Exhibit 10(6) to the Registration Statement

     13        2001 Annual Report

     21        Subsidiaries of the Registrant

     23        Consent of Independent Accountants