Table of Contents

Message to Shareholders....................................................    1
Selected Consolidated Financial Data.......................................    2
Management's Discussion and Analysis.......................................    3
Report of Independent Auditor..............................................   16
Consolidated Balance Sheet.................................................   17
Consolidated Statement of Income...........................................   18
Consolidated Statement of Shareholders' Equity.............................   19
Consolidated Statement of Cash Flows.......................................   20
Notes to Consolidated Financial Statements.................................   21
Directors and Officers.....................................................   39
Shareholder Information....................................................   41




Description of Business

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

     The  Association is a federal savings and loan  association  which conducts
its business from a full-service office located in Crawfordsville,  Indiana. The
Association  plans to open its  first  branch  office in  Crawfordsville  in the
Spring of 2001. The Association  offers a variety of lending,  deposit and other
financial  services to its retail and commercial  customers.  The  Association's
principal  business consists of attracting  deposits from the general public and
originating  mortgage  loans,  most of which are secured by one- to  four-family
residential  real property in Montgomery  County.  The  Association  also offers
multi-family loans, construction loans,  non-residential real estate loans, home
equity loans and consumer loans,  including  single-pay loans,  loans secured by
deposits,  installment loans and commercial loans. The Association  derives most
of its funds for lending from deposits of its customers, which consist primarily
of certificates of deposit, demand accounts and savings accounts.

<PAGE>

To Our Shareholders:
On behalf of our  employees  and Board of  Directors,  I take great  pleasure in
providing you with the 2000 Annual  Report to  Shareholders  of Union  Community
Bancorp, the holding company for Union Federal Savings and Loan Association.

The century  date  change came and went with barely a whisper  around the world.
But behind the scenes considerable effort and resources were expended to achieve
this "non-event." Several worked diligently to assure uninterrupted  service for
our  customers  and none of us were  disappointed.  On January  3, 2000,  it was
business  as usual when we opened our doors,  much to the delight of  customers
and employees  alike.  As we enter the new  millennium,  we are dedicated to the
growth and continued value of your Company.

Our return on average  assets was 1.59% and return on average  equity was 5.17%.
We are proud of our efficiency ratio of 35.9% for 2000. This means we spent 35.9
cents to earn $1.00 of income. The industry average is near 60 cents.

During the year, a 10% stock  repurchase  program was  authorized and completed.
Since our conversion in 1997, we have authorized and repurchased a total of 25%,
or 700,750 shares, at a cost of approximately $8.3 million. We have announced an
additional 5% repurchase in 2001. Each repurchase enhances shareholder value and
this was reflected in our earnings per share numbers. These repurchases evidence
our commitment to create value for our shareholders over the long term.

As we work to set our course at Union  Federal,  aware of the changes in today's
financial services markets,  we continually  endeavor to better define our place
in our industry and in our  community.  To grow, we must continue  providing new
products to meet the ever changing needs of our  customers.  This spring we will
open our first  full-service  branch at 1688  Crawfordsville  Square  Drive.  We
invite our customers to visit this  location.  We remain  committed to providing
excellent  banking  services for the people of this area and we continually look
for better ways to serve our customers.

The  Management  and the Board of Directors want to thank you for your business,
your support and your confidence in Union Federal Savings and Loan  Association.
We encourage  you to recommend  Union  Federal to your  friends,  neighbors  and
associates,  and we look  forward  to  serving  you with  the same  professional
service that has marked our  performance  for the past 88 years.  Please  review
this Annual Report and join us at the meeting on April 18, 2001.

                                             Sincerely,



                                             \s\ Joseph E. Timmons
                                             -----------------------------------
                                             Joseph E. Timmons,
                                             President & Chief Executive Officer


<PAGE>

                     SELECTED CONSOLIDATED FINANCIAL DATA OF
                     UNION COMMUNITY BANCORP AND SUBSIDIARY

The following selected  consolidated  financial data of the Company is qualified
in its entirety by, and should be read in  conjunction  with,  the  consolidated
financial statements, including notes thereto, included elsewhere in this Annual
Report.
<TABLE>
<CAPTION>


                                                                              At  December 31,
                                                        -----------------------------------------------------------
                                                        2000          1999        1998          1997         1996
                                                        -----------------------------------------------------------
                                                                           (Dollars in thousands)
Summary of Selected Consolidated
Financial Condition Data:
<S>                                                  <C>           <C>          <C>          <C>            <C>
Total assets.......................................  $125,383      $120,654     $108,162     $132,040       $82,789
Loans, net.........................................   109,505       106,174       90,900       78,436        72,697
Cash and interest-bearing deposits in other banks (1)   4,755         3,117        6,191       44,781         1,465
Investment securities available for sale...........       ---           315          ---          ---           ---
Investment securities held to maturity.............     7,597         7,522        8,026        5,820         5,747
Deposits...........................................    72,816        68,990       64,846       62,258        60,436
Stock subscriptions refundable.....................       ---           ---          ---       22,687           ---
Borrowings.........................................    15,189        12,496        1,793        3,573         7,880
Shareholders' equity...............................    36,188        38,280       40,531       42,906        13,910

                                                                           Year Ended December 31,
                                                       ------------------------------------------------------------
                                                        2000          1999        1998          1997         1996
                                                       ------------------------------------------------------------
Summary of Operating Data:
Total interest and dividend income.................    $9,222        $8,470       $8,105       $6,801         $6,11
Total interest expense.............................     4,601         3,817        3,415        3,836         3,424
                                                       ------        ------       ------       ------        ------
   Net interest income.............................     4,621         4,653        4,690        2,965         2,688
Provision for loan losses..........................        60            60          110          165            48
                                                       ------        ------       ------       ------        ------
   Net interest income after provision for loan losses  4,561         4,593        4,580        2,800         2,640
                                                       ------        ------       ------       ------        ------
Other income (losses):
   Equity in losses of limited partnership.........      (100)          (44)        (121)        (158)         (173)
   Gain on sales of available for sale securities..        46            73          ---          ---           ---
   Other...........................................       124           110           73           62            57
                                                       ------        ------       ------       ------        ------
     Total other income (losses)...................        70           139          (48)         (96)         (116)
                                                       ------        ------       ------       ------        ------
Other expenses:
   Salaries and employee benefits..................     1,102         1,069          850          480           461
   Net occupancy expenses..........................        45            47           39           39            39
   Equipment expenses..............................        23            27           28           22            20
   Deposit insurance expense.......................        15            44           46           31           495
   Legal and professional fees.....................       109           127          128           34            29
   Data processing.................................        77           122           77           66            57
   Other...........................................       314           323          296          289           201
                                                       ------        ------       ------       ------        ------
     Total other expenses..........................     1,685         1,759        1,464          961         1,302
                                                       ------        ------       ------       ------        ------
Income before income taxes.........................     2,946         2,973        3,068        1,743         1,222
Income taxes.......................................     1,011         1,003        1,094          545           336
                                                       ------        ------       ------       ------        ------
   Net income......................................    $1,935        $1,970       $1,974       $1,198       $   886
                                                       ======        ======       ======       ======       =======
</TABLE>

Table continued on following page
<PAGE>
                    SELECTED CONSOLIDATED FINANCIAL DATA OF
               UNION COMMUNITY BANCORP AND SUBSIDIARY (continued)
<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                        ------------------------------------------------------------
                                                           2000         1999        1998           1997        1996
                                                        ------------------------------------------------------------
Supplemental Data:
<S>                                                       <C>           <C>          <C>          <C>          <C>
Basic earnings per share...........................       $.87          $.81         $.70           ---         ---
Diluted earnings per share.........................        .87           .81          .70           ---         ---
Dividends per share................................        .585          .465         .355          ---         ---
Dividend payout ratio..............................      67.24%        57.41%       50.71%          ---         ---
Interest rate spread during period..................       2.12%         2.31%        2.23%        2.55%        2.54%
Net yield on interest-earning assets (2) ..........       3.87          4.14         4.42         3.50         3.53
Return on assets (3)...............................       1.59          1.72         1.82         1.38         1.13
Return on equity (4)...............................       5.17          5.02         4.65         8.10         6.54
Other expenses to average assets (5)...............       1.39          1.53         1.35         1.11         1.66
Equity to assets (6)...............................      28.86         31.73        37.47        32.49        16.80
Average equity to average assets...................      30.77         34.25        39.24        17.03        17.31
Average interest-earning assets to average
   interest-bearing liabilities....................     145.47        153.70       167.89       120.98       121.94
Non-performing assets to total assets (6)..........        .33           .22          .32          .07          .59
Allowance for loan losses to total loans
   outstanding (6).................................        .44           .40          .40          .32          .22
Allowance for loan losses to
   non-performing loans (6)........................     118.23        253.69       103.72       484.62        32.52
Net charge-offs to average
   total loans outstanding ........................        ---           ---          ---          .10          ---
Number of full service offices (6).................          1             1           1             1            1
</TABLE>
------------
(1) Includes certificates of deposit in other financial institutions.
(2) Net interest income divided by average interest-earning assets.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Other expenses divided by average total assets.
(6) At end of period.



                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

General

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

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

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

     2.  The effect of changes in interest rates; and

     3.  Changes in deposit insurance premiums.


Average Balances and Interest Rates and Yields

     The following  tables present for the years ended  December 31, 2000,  1999
and 1998,  the balances,  interest  rates and average  monthly  balances of each
category  of  the  Company's   interest-earning   assets  and   interest-bearing
liabilities,  and the  interest  earned  or paid  on  such  amounts.  Management
believes  that the use of month-end  average  balances  instead of daily average
balances has not caused any material difference in the information presented.

<PAGE>

<TABLE>
<CAPTION>

                                                      Average Balance Sheet/Yield Analysis

                                                                  Year Ended December 31,
                                    ------------------------------------------------------------------------------------------------
                                                 2000                           1999                          1998
                                    --------------------------------- -----------------------------  -------------------------------
                                      Average              Average    Average             Average     Average             Average
                                      Balance  Interest(1) Yield/Cost Balance Interest(1) Yield/Cost  Balance Interest(1) Yield/Cost
                                    ------------------------------------------------------------------------------------------------
                                                                          (Dollars in thousands)
Assets:
Interest-earning assets:
<S>                                   <C>         <C>        <C>      <C>        <C>        <C>       <C>      <C>          <C>
   Interest-earning deposits.......   $2,131      $102       4.79%    $2,981     $123       4.13%     $11,441  $   600      5.24%
   Mortgage-backed securities......    2,677       229       8.55      3,093      238       7.69        3,304      257      7.78
   Other investment securities.....    5,105       319       6.25      5,451      329       6.04        4,301      257      5.98
   Loans receivable (2)(5).........  108,312     8,486       7.83    100,056    7,710       7.71       86,421    6,932      8.02
   FHLB stock......................    1,044        86       8.24        876       70       7.99          735       59      8.03
                                     -------     -----               -------    -----                 -------    -----
     Total interest-earning assets.  119,269     9,222       7.73    112,457    8,470       7.53      106,202    8,105      7.63
                                                 -----                          -----                            -----
Non-interest earning assets, net
   of allowance for loan losses....    2,354                           2,173                            2,030
                                    --------                        --------                         --------
     Total assets.................. $121,623                        $114,630                         $108,232
                                    ========                        ========                         ========
Liabilities and shareholders' equity:
Interest-bearing liabilities:
   Savings deposits................   $3,077       123       4.00     $3,389      134       3.95       $3,466      139      4.01
   Interest-bearing demand.........   19,119       942       4.93     16,422      793       4.83       11,920      496      4.16
   Certificates of deposit.........   48,182     2,790       5.79     47,313    2,548       5.39       46,999    2,729      5.81
   FHLB advances...................   11,612       746       6.42      6,043      342       5.66          873       51      5.84
                                     -------     -----               -------    -----                 -------    -----
     Total interest-bearing
        liabilities...............    81,990     4,601       5.61     73,167    3,817       5.22       63,258    3,415      5.40
                                                 -----                          -----                            -----
Other liabilities..................    2,210                           2,199                            2,504
                                     -------                         -------                          -------
     Total liabilities.............   84,200                          75,366                           65,762
Shareholders' equity...............   37,423                          39,264                           42,470
                                     -------                         -------                          -------
     Total liabilities and
         shareholders'
         equity.................    $121,623                        $114,630                         $108,232
                                    ========                        ========                         ========
Net interest-earning assets......    $37,279                         $39,290                          $42,944
Net interest income..............               $4,621                         $4,653                           $4,690
                                                ======                         ======                           ======
Interest rate spread (3).........                            2.12%                          2.31%                           2.23%
Net yield on weighted average
   interest-earning assets (4)...                            3.87%                          4.14%                           4.42%
Average interest-earning assets
   to average interest-bearing
     liabilities                      145.47%                         153.70%                          167.89%
</TABLE>
---------------------
(1)  Interest  income on loans  receivable  includes loan fee income of $70,000,
     $79,000 and $88,000 for each of the years ended December 31, 2000, 1999 and
     1998, respectively.

(2)  Total loans less loans in process.

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

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

(5)  The balances include nonaccrual loans.
<PAGE>


Interest Rate Spread

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

     The following table sets forth the weighted average effective interest rate
that the Company  earned on its loan and  investment  portfolios,  the  weighted
average  effective cost of its deposits and advances,  the interest rate spread,
and net yield on  weighted  average  interest-earning  assets  for the  periods.
Average balances are based on average month-end  balances.  Management  believes
that the use of month-end average balances instead of daily average balances has
not caused any material difference in the information presented.

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                                            ------------------------------------------------
                                                            2000                  1999                  1998
                                                            ----                  ----                  ----
Weighted average interest rate earned on:
<S>                                                         <C>                   <C>                   <C>
   Interest-earning deposits.......................         4.79%                 4.13%                 5.24%
   Mortgage-backed securities......................         8.55                  7.69                  7.78
   Other investment securities.....................         6.25                  6.04                  5.98
   Loans receivable................................         7.83                  7.71                  8.02
   FHLB stock......................................         8.24                  7.99                  8.03
     Total interest-earning assets.................         7.73                  7.53                  7.63
Weighted average interest rate cost of:
   Savings deposits................................         4.00                  3.95                  4.01
   Interest-bearing demand.........................         4.93                  4.83                  4.16
   Certificates of deposit.........................         5.79                  5.39                  5.81
   FHLB advances...................................         6.42                  5.66                  5.84
     Total interest-bearing liabilities............         5.61                  5.22                  5.40
Interest rate spread (1)...........................         2.12                  2.31                  2.23
Net yield on weighted average
   interest-earning assets (2).....................         3.87                  4.14                  4.42

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

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

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

<PAGE>

<TABLE>
<CAPTION>
                                                                         Increase (Decrease) in Net Interest Income
                                                                    --------------------------------------------------
                                                                                          Total
                                                                    Due to                Due to                  Net
                                                                     Rate                 Volume                Change
                                                                    --------------------------------------------------
                                                                                      (In thousands)
Year ended December 31, 2000 compared
to year ended December 31, 1999
   Interest-earning assets:
<S>                                                                  <C>                    <C>                <C>
     Interest-earning deposits..................................     $  18                  $ (39)             $    (21)
     Mortgage-backed securities.................................        25                    (34)                   (9)
     Other investment securities................................        11                    (21)                  (10)
     Loans receivable...........................................       131                    645                   776
     FHLB stock.................................................         2                     14                    16
                                                                     ------                  -----             ---------
       Total....................................................       187                    565                   752
                                                                     ------                  -----             ---------
   Interest-bearing liabilities:
     Savings deposits...........................................         1                    (12)                  (11)
     Interest-bearing demand....................................        16                    133                   149
     Certificates of deposit....................................       195                     47                   242
     FHLB advances..............................................        52                    352                   404
                                                                     ------                  -----             ---------
       Total....................................................       264                    520                   784
                                                                     ------                  -----             ---------
   Net change in net interest income............................    $  (77)                $   45              $    (32)
                                                                     ======                =======             =========
Year ended December 31, 1999 compared
to year ended December 31, 1998
   Interest-earning assets:
     Interest-earning deposits..................................    $ (107)              $   (370)             $   (477)
     Mortgage-backed securities.................................        (3)                   (16)                  (19)
     Other investment securities................................         3                     69                    72
     Loans receivable...........................................      (281)                 1,059                   778
     FHLB stock.................................................       ---                     11                    11
                                                                     ------                  -----             ---------
       Total....................................................      (388)                   753                   365
                                                                     ------                  -----             ---------
   Interest-bearing liabilities:
     Savings deposits...........................................        (2)                    (3)                   (5)
     Interest-bearing demand....................................        89                    208                   297
     Certificates of deposit....................................      (199)                    18                  (181)
     FHLB advances..............................................        (2)                   293                   291
                                                                     ------                  -----             ---------
       Total....................................................      (114)                   516                   402
                                                                     ------                  -----             ---------
   Net change in net interest income............................    $ (274)              $    237             $     (37)
                                                                     ======                =======             =========
Year ended December 31, 1998 compared
to year ended December 31, 1997
   Interest-earning assets:
     Interest-earning deposits..................................   $   (53)              $    407              $    354
     Mortgage-backed securities held to maturity................       (28)                    71                    43
     Other investment securities held to maturity...............        12                     48                    60
     Loans receivable...........................................      (126)                   968                   842
     FHLB stock.................................................       ---                      5                     5
                                                                     ------                  -----             ---------
       Total....................................................      (195)                 1,499                 1,304
                                                                     ------                  -----             ---------
   Interest-bearing liabilities:
     Savings deposits...........................................        (5)                   (15)                  (20)
     Interest-bearing demand....................................       (14)                    66                    52
     Certificates of deposit....................................       (12)                   (23)                  (35)
     Stock subscriptions refundable.............................       ---                   (130)                 (130)
     FHLB advances..............................................        (3)                  (285)                 (288)
                                                                     ------                  -----             ---------
       Total....................................................       (34)                  (387)                 (421)
                                                                     ------                  -----             ---------
   Net change in net interest income............................     $(161)                $1,886                $1,725
                                                                     ======                =======             =========
</TABLE>
<PAGE>

Financial  Condition  at December 31, 2000  Compared to  Financial  Condition at
December 31, 1999

     Total assets  increased  approximately  $4.7  million,  or 3.9%,  to $125.4
million at December 31,  2000,  from $120.7  million at December  31, 1999.  The
increase was primarily due to loan growth of $3.3 million.  Net loans  increased
by 3.1% to $109.5 million due to an increase in customer demand and an increased
focus by the Company in the areas of commercial and consumer lending.

     Loans and  Allowance  for Loan  Losses.  Average  loans for the year  ended
December  31, 2000 were $108.3  million  compared to average  loans for the 1999
period of $100.1 million, an increase of approximately 8.2%. The growth in loans
was funded  primarily by increases  in deposits and FHLB  advances.  The average
rates on loans were 7.71% for 1999 and 7.83% for 2000,  an  increase of 12 basis
points.  As loans  increased,  the allowance for loan losses also increased from
$422,000 at December 31, 1999 to $480,000 at December 31,  2000.  The  allowance
for loan losses as a percentage  of total loans  remained  constant from 1999 to
2000 at .4%.  The  increase in the  allowance  for loan losses was a result of a
$60,000  provision  for loan losses for the year ended  December 31,  2000.  The
ratio of the  allowance  for loan losses to  non-performing  loans was 253.7% at
December 31, 1999 compared to 118.2% at December 31, 2000.  Nonperforming  loans
increased from $166,000 at December 31, 1999 to $406,000 at December 31, 2000.

     Deposits.  Deposits increased $3.8 million to $72.8 million during 2000, an
increase  of  5.5%.  Increased  deposits  were  utilized  to fund  loan  growth.
Certificates  of  deposit  accounted  for the  majority  of the  growth  with an
increase of $4.1 million,  or 8.8%,  during this period.  Average total deposits
increased $3.3 million,  or 4.8%, from $67.1 million for the year ended December
31, 1999 compared to $70.4 million for the year ended December 31, 2000.

     Borrowed  Funds.  Borrowed  funds  increased $2.7 million from December 31,
1999 to December 31, 2000. The increase in total borrowed funds was comprised of
an increase in FHLB  advances of $2.9 million and a decrease in the note payable
to Pedcor Investments - 1993-XVI, LP ("Pedcor"), a limited partnership organized
to build, own and operate a 48-unit apartment complex, of $183,000.  The note to
Pedcor was used to fund an investment in the Pedcor  low-income  housing  income
tax credit limited  partnership and bears no interest so long as there exists no
event of default.  As with deposits,  the increased  borrowed funds were used to
fund loan growth.  Average  FHLB  advances  increased to $11.6  million for 2000
compared to $6.0 million for 1999.

     Shareholders'  Equity.  Shareholders'  equity decreased  approximately $2.1
million to $36.2 million at December 31, 2000. The decrease was primarily due to
stock  repurchases  of $3.0 million and cash  dividends of $1.3  million.  These
decreases  were  offset by net income for year ended  December  31, 2000 of $1.9
million,  Employee  Stock  Ownership Plan shares earned of $119,000 and unearned
compensation amortization of $227,000.


<PAGE>

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

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

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

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

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

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

<PAGE>

Comparison of Operating Results For Years Ended December 31, 2000 and 1999

     General.  Net income  decreased  $35,000,  or 1.8%, from $1,970,000 for the
year ended December 31, 1999 to $1,935,000 for the year ended December 31, 2000.
The return on average  assets was 1.59% and 1.72% for the years  ended  December
31, 2000 and 1999, respectively.

     Interest  Income.  Total interest income was $9.2 million for 2000 compared
to $8.5 million for 1999.  The increase in interest  income was primarily due to
an increase in volume.  Average earning assets increased $6.8 million,  or 6.1%,
from $112.5  million for 1999 compared to $119.3  million for 2000.  The average
yield on  interest-earning  assets  increased  from  7.53%  for the  year  ended
December 31, 1999 to 7.73% for the comparable period in 2000.

     Interest Expense.  Interest expense increased  $784,000,  or 20.5%, for the
year ended  December  31, 2000  compared to the year ended  December  31,  1999.
Average  interest-bearing  liabilities  increased $8.8 million,  or 12.1%,  from
$73.2  million  for the 1999  period to $82.0  million  during the 2000  period.
Average deposits increased by $3.3 million,  or 4.8%, from $67.1 million for the
1999  period  to  $70.4  million  for the 2000  period.  Average  FHLB  advances
increased $5.6 million, or 92.2%, from $6.0 million for the 1999 period to $11.6
million during the 2000 period.

     Net Interest Income. Net interest income decreased $32,000, or .7%, for the
year ended  December 31, 2000 compared to the year ended  December 31, 1999. The
decrease was  primarily  due to a decline in the net interest  margin from 4.14%
for the year ended  December  31, 1999 to 3.87% for the year ended  December 31,
2000.

     Provision  for Loan  Losses.  The  provision  for loan losses for the years
ended December 31, 2000 and 1999 was $60,000.  The provision for loan losses was
considered adequate, based on growth, size, condition and components of the loan
portfolio.

     Other Income  (Losses).  Other  income  (losses)  decreased  from income of
$139,000  for the year ended  December  31,  1999 to income of  $70,000  for the
comparable  period in 2000. This decrease was in part due to $73,000 of gains on
sales of securities  available for sale during 1999 compared to gains of $46,000
during 2000.  In addition,  equity in losses of the limited  partnership  was up
$56,000 from 1999 due to the operating results of the limited  partnership.  The
investment  in the  limited  partnership  represents  a 99% equity  interest  in
Pedcor.  In addition to recording the equity in the losses of Pedcor,  a benefit
of low-income housing income tax credits in the amount of $178,000 for both 2000
and 1999 was recorded.

     Salaries  and  Employee  Benefits.  Salaries  and  employee  benefits  were
$1,102,000  for the year ended  December 31, 2000 compared to $1,069,000 for the
1999 period,  an increase of $33,000,  or 3.1%. This increase was in part due to
normal increases in employee compensation and related payroll taxes.

     Net  Occupancy  and Equipment  Expenses.  Occupancy  expenses and equipment
expenses decreased $6,000, or 7.9%, during 2000 compared to 1999.

     Deposit Insurance Expense.  Deposit insurance expense decreased $28,000, or
65.0% during 2000 compared to 1999.

     Legal and Professional  Fees. Legal and professional fees were $109,000 for
the year ended  December 31, 2000  compared to $127,000  for the 1999 period,  a
decrease of $18,000.

<PAGE>

     Data Processing.  Data processing  expense  decreased from $122,000 for the
year ended  December  31, 1999 to $77,000 for the  comparable  period in 2000, a
decrease of $45,000. This decrease was due to $45,000 of non-recurring  expenses
related to the Company's data processing  conversion during the first quarter of
1999.

     Other Expense. Other expenses,  consisting primarily of expenses related to
advertising,  directors'  fees,  supervisory  examination  fees,  supplies,  and
postage  decreased  $10,000,  or 3.0% for 2000  compared to 1999.  The  decrease
resulted from nominal decreases in a variety of expense categories.

     Income Tax Expense.  Income tax expense  increased  $8,000,  or .8%, during
2000  compared  to 1999.  The  effective  tax rate was  34.3%  and 33.7% for the
respective  2000 and 1999  periods.  For both  periods,  the primary  difference
between the effective tax rate and the statutory tax rate relates to the benefit
received from low-income housing tax credits.

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

     Income Tax Expense.  Income tax expense decreased $91,000,  or 8.3%, during
1999  compared  to 1998.  The  effective  tax rate was  33.7%  and 35.7% for the
respective  1999 and 1998  periods.  For both  periods,  the primary  difference
between the effective tax rate and the statutory tax rate relates to the benefit
received from low-income housing tax credits.

Liquidity and Capital Resources

     The following is a summary of the Company's cash flows,  which are of three
major  types.  Cash flows from  operating  activities  consist  primarily of net
income generated by cash.  Investing  activities generate cash flows through the
origination and principal  collection on loans as well as purchases and sales of
securities.  Investing  activities will generally  result in negative cash flows
when the Company experiences loan growth.  Cash flows from financing  activities
include savings deposits,  withdrawals and maturities and changes in borrowings.
The following table summarizes cash flows for each year in the three-year period
ended December 31, 2000.

<PAGE>
<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                                 --------------------------------------------------
                                                                  2000                  1999                  1998
                                                                 --------------------------------------------------
                                                                                 (In thousands)
<S>                                                              <C>                   <C>                   <C>
Operating activities..........................................   $2,499                $2,099                $2,355
                                                                 ------                ------                -------
Investing activities:
Investment securities

     Purchases of investment securities
       available for sale.....................................      ---                  (812)                  ---
     Proceeds from sales of investment
       securities available for sale..........................      336                   596                   ---
     Proceeds from maturities and paydowns of
     mortgage-backed securities held to maturity..............      259                   731                   607
     Purchases of other investment
       securities held to maturity............................     (300)               (1,415)               (9,204)
     Proceeds from maturities of
       investment securities held to maturity.................      ---                 1,200                 6,400
Purchase of loans.............................................     (375)               (1,439)                 (800)
Other net change in loans.....................................   (2,928)              (14,088)              (11,729)
Purchase of FHLB of Indianapolis stock........................      ---                  (299)                  (37)
Proceeds on sale of foreclosed real estate....................      ---                   100                     5
Purchases of premises and equipment...........................      (35)                  (45)                  (18)
Other investing activities....................................      ---                    (3)                   (2)
                                                                 ------                ------                -------

     Net cash used by investing activities....................   (3,043)              (15,474)              (14,778)
                                                                 ------               --------             ---------
Financing activities:
Net change in
   Interest-bearing demand and savings deposits...............     (264)                6,316                   (28)
   Certificates of deposits...................................    4,090                (2,171)                2,616
   Stock subscription escrow accounts.........................      ---                   ---               (22,687)
Proceeds from borrowings......................................   19,000                11,000                   ---
Repayment of borrowings.......................................  (16,307)                 (297)               (1,780)
Net change in advances by borrowers
   for taxes and insurance....................................        9                    (5)                   54
Cash dividends................................................   (1,322)               (1,118)                 (729)
Contribution of unearned compensation ........................      ---                   ---                (1,754)
Repurchase of common stock....................................   (3,024)               (3,424)               (1,859)
Proceeds from sale of common stock, net of costs..............      ---                   ---                   ---
                                                                 ------               --------             ---------
     Net cash provided (used) by financing activities.........    2,182                10,301               (26,167)
                                                                 ------               --------             ---------
Net increase (decrease) in cash and cash equivalents.........    $1,638               $(3,074)             $(38,590)
                                                                 ======               ========             =========
</TABLE>
<PAGE>


     Federal law requires  that savings  associations  maintain an average daily
balance of liquid assets in an amount not less than 4% or more than 10% of their
withdrawable  accounts plus short-term  borrowings.  Liquid assets include cash,
certain time deposits, certain bankers' acceptances,  specified U.S. government,
state  or  federal  agency  obligations,   certain  corporate  debt  securities,
commercial paper, certain mutual funds, certain mortgage-related securities, and
certain  first-lien  residential  mortgage  loans.  The  OTS  regulation,  which
implements  this  statutory  provision,  requires a savings  association to hold
liquid  assets  in an amount  that is not less  than 4% of its net  withdrawable
accounts and short-term borrowings.  Savings associations are no longer required
to maintain  short-term liquid assets  constituting at least 1% of their average
daily balance of net withdrawable  deposit accounts and current  borrowings,  as
was formerly  required  under the previous OTS liquidity  regulation.  A savings
association may calculate  compliance with the OTS liquidity  requirement  based
upon its average daily balance of liquid assets during each quarter. The OTS may
impose  monetary  penalties  on  savings  associations  that fail to meet  these
liquidity requirements. As of December 31, 2000, Union Federal had liquid assets
of $12.4 million, and a regulatory liquidity ratio of 13.5%.

     Pursuant to OTS capital  regulations,  savings  associations must currently
meet a 1.5% tangible  capital  requirement,  a leverage  ratio (or core capital)
requirement of 3% to 5% depending upon the association's  supervisory rating for
safety and soundness,  and a total risk-based  capital to  risk-weighted  assets
ratio of 8%. At December 31, 2000,  Union Federal's  capital levels exceeded all
applicable  regulatory capital  requirements  currently in effect. The following
table provides the minimum regulatory  capital  requirements and Union Federal's
capital ratios as of December 31, 2000:

<TABLE>
<CAPTION>
                                                               At December 31, 2000
                                          --------------------------------------------------------------------------
                                              OTS Requirement                    Union Federal's Capital Level
                                          ---------------------             ----------------------------------------
                                           % of                               % of                          Amount
Capital Standard                          Assets        Amount              Assets(1)      Amount          of Excess
                                          ------        ------              ---------      ------          ---------
                                                                             (Dollars in thousands)
<S>                                        <C>          <C>                   <C>         <C>               <C>
Tangible capital....................       1.5%         $1,873                27.8%       $34,716           $32,843
Core capital (2)....................       3.0           3,747                27.8         34,716            30,969
Risk-based capital..................       8.0           5,417                52.0         35,195            29,778
</TABLE>


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

(2)  The OTS core capital requirement for savings  associations is comparable to
     the OCC  requirement  for national  banks.  The OTS regulation  requires at
     least 3% of total adjusted assets for savings associations that receive the
     highest  supervisory rating for safety and soundness,  and 4% to 5% for all
     other  savings  associations.  Union  Federal  is in  compliance  with this
     regulation.

     As  of  December  31,  2000,   management  is  not  aware  of  any  current
recommendations by regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have, a material adverse effect on Union
Federal's liquidity, capital resources or results of operations.

Impact of Inflation

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

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

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

Quarterly Results of Operations

     The  following  table sets forth  certain  quarterly  results for the years
ended December 31, 2000 and 1999.

<TABLE>
<CAPTION>

                                           Net         Provision                     Basic        Diluted
Quarter       Interest     Interest     Interest       For Loan        Net         Earnings      Earnings      Dividends
Ended          Income       Expense      Income         Losses       Income        Per Share     Per Share     Per Share
----------------------------------------------------------------------------------------------------------
                                      (Dollars in thousands except for per share data)

<S>           <C>          <C>           <C>             <C>          <C>            <C>            <C>         <C>
2000:
March         $2,282       $1,069        $1,213          $15          $535           $0.23          $0.23       $0.140
June           2,277        1,107         1,170           15           494            0.22           0.22        0.145
September      2,312        1,189         1,123           15           472            0.22           0.22        0.150
December       2,351        1,236         1,115           15           434            0.21           0.21        0.150

1999:
March         $2,022         $871        $1,151          $15          $435           $0.17          $0.17       $0.105
June           2,087          912         1,175           15           470            0.19           0.19        0.110
September      2,153          983         1,170           15           540            0.22           0.22        0.120
December       2,208        1,051         1,157           15           525            0.23           0.23        0.130

</TABLE>

Quantitative and Qualitative Disclosures about Market Risks

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

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

     Because of the lack of  customer  demand for  adjustable  rate loans in its
market area, Union Federal  primarily  originates  fixed-rate real estate loans,
which  accounted for  approximately  75.8% of its loan portfolio at December 31,
2000.  To manage the interest  rate risk of this type of loan  portfolio,  Union
Federal  limits  maturities  of  fixed-rate  loans to no more than 20 years.  In
addition,  Union Federal  continues to offer and attempts to increase its volume
of adjustable  rate loans when market  interest rates make these type loans more
attractive to customers.

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

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

     It is estimated  that at December 31, 2000,  NPV would decrease 14% and 22%
in the event of 200 and 300 basis  point  increases  in market  interest  rates,
respectively,  compared to 20% and 30% for the same  increases  at December  31,
1999.  Union Federal's NPV at December 31, 2000 would increase 9% and 13% in the
event of 200 and 300 basis point decreases in market rates, respectively. A year
earlier,  200 and 300 basis point decreases in market rates would have increased
NPV 15% and 22%, respectively.

      Presented  below,  as of  December  31,  2000  and  1999,  is an  analysis
performed  by the OTS of Union  Federal's  interest  rate  risk as  measured  by
changes in NPV for  instantaneous  and  sustained  parallel  shifts in the yield
curve, in 100 basis point increments,  up and down 300 basis points. At December
31, 2000, 2% of the present value of Union  Federal's  assets was  approximately
$2.5 million.  Because the interest  rate risk of a 200 basis point  increase in
market rates (which was greater than the interest rate risk of a 200 basis point
decrease)  was $5.2 million at December 31, 2000,  Union Federal would have been
required to deduct $1.4  million from its total  capital  available to calculate
its risk based capital  requirement if it had been subject to the OTS' reporting
requirements  under this methodology.  Union Federal's exposure to interest rate
risk  results  from  the  concentration  of  fixed  rate  mortgage  loans in its
portfolio.

<TABLE>
<CAPTION>

                                                December 31, 2000
--------------------------------------------------------------------------------------------------------------------------
      Change                     Net Portfolio Value                                 NPV as % of PV of Assets
     In Rates            $ Amount           $ Change              % Change           NPV Ratio          Change
----------------------------------------------------------------------------------------------------------------------
                                          (Dollars in thousands)
<S>    <C>                <C>                <C>                   <C>                 <C>              <C>
     + 300 bp *           $28,334            $(7,835)              (22)%               24.37%           (422) bp
     + 200 bp              30,971             (5,198)              (14)                25.88            (271) bp
     + 100 bp              33,658             (2,511)               (7)                27.33            (126) bp
         0 bp              36,169                                                      28.59
     - 100 bp              38,066              1,897                 5                 29.44               85 bp
     - 200 bp              39,395              3,226                 9                 29.95              137 bp
     - 300 bp              40,949              4,780                13                 30.56              197 bp

</TABLE>

             Interest Rate Risk Measures: 200 Basis Point Rate Shock

          Pre-Shock NPV Ratio: NPV as % of PV of Assets............       28.59%
          Exposure Measure: Post-Shock NPV Ratio...................       25.88%
          Sensitivity Measure: Change in NPV Ratio.................       271 bp
<PAGE>

<TABLE>
<CAPTION>


                                                December 31, 1999
--------------------------------------------------------------------------------------------------------------------------
      Change                     Net Portfolio Value                                 NPV as % of PV of Assets
     In Rates            $ Amount           $ Change              % Change           NPV Ratio          Change
----------------------------------------------------------------------------------------------------------------------
                                          (Dollars in thousands)

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

</TABLE>


             Interest Rate Risk Measures: 200 Basis Point Rate Shock

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

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

     As with any method of measuring  interest rate risk,  certain  shortcomings
are inherent in the methods of analysis  presented above. For example,  although
certain  assets  and  liabilities  may have  similar  maturities  or  periods to
repricing,  they may react in  different  degrees to changes in market  interest
rates.  Also, the interest rates on certain types of assets and  liabilities may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other types may lag behind  changes in market  rates.  Additionally,  certain
assets,  such as adjustable-rate  loans, have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates,  expected rates of prepayments on loans
and early withdrawals from certificates could likely deviate  significantly from
those assumed in calculating the table.

<PAGE>

                          Independent Auditor's Report

Board of Directors
Union Community Bancorp
Crawfordsville, Indiana

We have audited the accompanying  consolidated  balance sheet of Union Community
Bancorp  and  subsidiary  as of  December  31,  2000 and 1999,  and the  related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended  December 31,  2000.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  the consolidated  financial  statements described above present
fairly, in all material respects,  the consolidated  financial position of Union
Community  Bancorp  and  subsidiary  as of December  31, 2000 and 1999,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  2000,  in  conformity  with  generally  accepted
accounting principles.


Olive LLP

/s/ Olive LLP

Indianapolis, Indiana
January 17, 2001

<PAGE>

<TABLE>
<CAPTION>

                     Union Community Bancorp and Subsidiary
                           Consolidated Balance Sheet

December 31                                                                               2000              1999
-------------------------------------------------------------------------------------------------------------------
Assets

<S>                                                                               <C>               <C>
   Cash                                                                           $       210,601   $       286,812
   Interest-bearing demand deposits                                                     4,544,085         2,830,213
                                                                                  ---------------------------------
     Cash and cash equivalents                                                          4,754,686         3,117,025
   Investment securities

     Available for sale                                                                                     315,463
     Held to maturity (fair value of $7,582,000 and $7,199,000)                         7,597,432         7,521,923
                                                                                  ---------------------------------
       Total investment securities                                                      7,597,432         7,837,386
   Loans, net of allowance for loan losses of $479,554 and $422,258                   109,505,174       106,173,782
   Premises and equipment                                                                 373,986           367,427
   Federal Home Loan Bank stock                                                         1,043,700         1,043,700
   Investment in limited partnership                                                      911,609         1,011,609
   Interest receivable                                                                    958,450           823,768
   Other assets                                                                           238,453           278,942
                                                                                  ---------------------------------
       Total assets                                                                  $125,383,490      $120,653,639
                                                                                  =================================
Liabilities
   Deposits

   Noninterest bearing                                                             $    1,769,103    $    1,151,075
   Interest bearing                                                                    71,047,357        67,839,367
                                                                                  ---------------------------------

       Total deposits                                                                  72,816,460        68,990,442
   Federal Home Loan Bank advances                                                     14,534,893        11,658,526
   Note payable                                                                           654,542           837,442
   Interest payable                                                                       196,223           122,565
   Dividends payable                                                                      326,783           315,591
   Other liabilities                                                                      666,655           449,158
                                                                                  ---------------------------------
       Total liabilities                                                            $  89,195,556     $  82,373,724
                                                                                  =================================
Commitments and Contingent Liabilities

Shareholders' Equity

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

     Issued and outstanding--2,341,000 and 2,600,700 shares                          $  22,868,943     $  25,389,422
   Retained earnings                                                                   16,025,304        15,912,206
   Accumulated other comprehensive income                                                                    15,385
   Unearned employee stock ownership plan (ESOP) shares                                (1,521,125)       (1,624,444)
   Unearned recognition and retention plan (RRP) shares                                (1,185,188)       (1,412,654)
                                                                                  ---------------------------------
       Total shareholders' equity                                                      36,187,934        38,279,915
                                                                                  ---------------------------------
       Total liabilities and shareholders' equity                                    $125,383,490      $120,653,639
                                                                                  =================================

</TABLE>

See notes to consolidated financial statements.
<PAGE>

<TABLE>
<CAPTION>

                     Union Community Bancorp and Subsidiary
                        Consolidated Statement of Income

Year Ended December 31                                                 2000               1999             1998
-------------------------------------------------------------------------------------------------------------------
Interest and Dividend Income
<S>                                                                   <C>              <C>               <C>
   Loans                                                              $8,486,167       $7,710,042        $6,932,194
   Investment securities
     Mortgage-backed securities                                          228,826          237,665           256,870
     Other investment securities                                         318,995          329,441           257,305
   Dividends on Federal Home Loan Bank stock                              86,120           70,089            58,866
   Deposits with financial institutions                                  102,128          123,002           599,612
                                                                      ----------       ----------        ----------
       Total interest and dividend  income                             9,222,236        8,470,239         8,104,847
                                                                      ----------       ----------        ----------
Interest Expense

   Deposits                                                            3,855,702        3,474,851         3,364,222
   Federal Home Loan Bank advances                                       745,894          342,481            50,952
                                                                      ----------       ----------        ----------
       Total interest expense                                          4,601,596        3,817,332         3,415,174
                                                                      ----------       ----------        ----------
Net Interest Income                                                    4,620,640        4,652,907         4,689,673
   Provision for loan losses                                              60,000           60,000           110,000
                                                                      ----------       ----------        ----------
Net Interest Income After Provision for Loan Losses                    4,560,640        4,592,907         4,579,673
                                                                      ----------       ----------        ----------
Other Income (Losses)
   Equity in losses of limited partnership                              (100,000)         (43,500)         (121,000)
   Net realized gains on sales of available-for-sale securities           46,128           73,150
   Other income                                                          124,279          109,485            73,126
                                                                      ----------       ----------        ----------
       Total other income (losses)                                        70,407          139,135           (47,874)
                                                                      ----------       ----------        ----------
Other Expenses
   Salaries and employee benefits                                      1,101,660        1,068,985           849,909
   Net occupancy expenses                                                 45,001           46,989            38,741
   Equipment expenses                                                     23,123           26,967            28,182
   Deposit insurance expense                                              15,245           43,556            45,847
   Legal and professional fees                                           108,741          126,733           128,193
   Data Processing                                                        77,314          121,994            76,901
   Other expenses                                                        314,062          323,871           295,413
                                                                      ----------       ----------        ----------
       Total other expenses                                            1,685,146        1,759,095         1,463,186
                                                                      ----------       ----------        ----------
Income Before Income Tax                                               2,945,901        2,972,947         3,068,613
   Income tax expense                                                  1,010,821        1,002,512         1,094,377
                                                                      ----------       ----------        ----------
Net Income                                                            $1,935,080       $1,970,435        $1,974,236
                                                                      ==========       ==========        ==========
Basic Earnings per Share                                                    $.87               $.81              $.70

Diluted Earnings per Share                                                   .87                .81               .70

</TABLE>

See notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>

                     Union Community Bancorp and Subsidiary
                 Consolidated Statement of Shareholders' Equity

                                   Common Stock                                    Accumulated
                                   ------------                                       Other
                                  Shares                Comprehensive   Retained  Comprehensive  Unearned     Unearned
                               Outstanding    Amount       Income       Earnings     Income     ESOP Shares  Compensation  Total
                               -----------    ------    -------------   --------  ------------- -----------  ------------  -----

<S>                            <C>         <C>            <C>         <C>             <C>     <C>           <C>       <C>
Balances, January 1, 1998      $3,041,750  $29,637,592                $15,108,285             $(1,840,000)              $42,905,877
Comprehensive income
   Net income                                             $1,974,236    1,974,236                                         1,974,236
                                                          ==========
Cash dividends
   ($.355 per share)                                                     (999,293)                                         (999,293)
Purchase of common stock         (152,087)  (1,483,829)                  (375,155)                                       (1,858,984)
Contribution for unearned
   RRP shares                                                                                              $(1,753,853)  (1,753,853)
Amortization of unearned
   compensation expense                                                                                        113,733      113,733
ESOP shares earned                              39,881                                             109,264                  149,145
                                ----------------------                --------------------------------------------------------------
Balances, December 31, 1998     2,889,663   28,193,644                 15,708,073               (1,730,736) (1,640,120)  40,530,861
Comprehensive income
   Net income                                             $1,970,435    1,970,435                                         1,970,435
   Other comprehensive
       income, net of tax
     Unrealized gains on
       securities, net of
       reclassification adjustment                            15,385                  $15,385                                15,385
                                                          ----------
Comprehensive income                                      $1,985,820
                                                          ==========
Cash dividends ($.465 per share)                                       (1,162,604)                                       (1,162,604)
Purchase of common stock         (288,963)  (2,820,059)                  (603,698)                                       (3,423,757)
Amortization of unearned
   compensation expense                                                                                        227,466      227,466
ESOP shares earned                              15,837                                             106,292                  122,129
                                ----------------------                --------------------------------------------------------------
Balances, December 31, 1999     2,600,700   25,389,422                 15,912,206      15,385   (1,624,444) (1,412,654)  38,279,915
Comprehensive income
   Net income                                             $1,935,080    1,935,080                                         1,935,080
   Other comprehensive loss,
    net of tax
     Unrealized losses on
       securities, net of
       reclassification
       adjustment                                            (15,385)                 (15,385)                              (15,385)
                                                          -----------
Comprehensive income                                      $1,919,695
                                                          ==========
Cash dividends ($.585 per share)                                       (1,333,440)                                       (1,333,440)
Purchase of common stock         (259,700)  (2,535,911)                  (488,542)                                       (3,024,453)
Amortization of unearned
   compensation expense                                                                                        227,466      227,466
ESOP shares earned                              15,432                                             103,319                  118,751
                                ----------------------                --------------------------------------------------------------
Balances, December 31, 2000    $2,341,000  $22,868,943                $16,025,304  $        0  $(1,521,125)$(1,185,188) $36,187,934
                               =======================                ==============================================================

</TABLE>


See notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>


                     Union Community Bancorp and Subsidiary
                      Consolidated Statement of Cash Flows

Year Ended December 31                                                   2000              1999             1998
                                                                      ---------------------------------------------
Operating Activities
<S>                                                                   <C>              <C>               <C>
   Net income                                                         $1,935,080       $1,970,435        $1,974,236
   Adjustments to reconcile net income to net cash provided by
     operating activities
   Provision for loan losses                                              60,000           60,000           110,000
   Depreciation                                                           28,260           32,589            30,344
   Deferred income tax                                                   (41,757)          20,928           (40,926)
   Investment securities accretion, net                                  (34,546)         (12,061)           (9,223)
   Gains on sale of investment securities available for sale             (46,128)         (73,150)
   Gains on sale of foreclosed real estate                                                   (284)           (2,500)
   Equity in losses of limited partnership                               100,000           43,500           121,000
   Amortization of unearned compensation expense                         227,466          227,466           113,733
   ESOP shares earned                                                    118,751          122,129           149,145
   Net change in
     Interest receivable                                                (134,682)        (109,077)         (133,165)
     Interest payable                                                     73,658           13,228            (9,530)
     Other assets                                                          4,313          (38,750)           (8,396)
     Other liabilities                                                   208,146         (157,776)           60,780
                                                                      ---------------------------------------------
       Net cash provided by operating activities                       2,498,561        2,099,177         2,355,498
                                                                      ---------------------------------------------

Investing Activities
   Investment securities
     Purchases of investment securities available for sale                               (812,492)
     Purchases of investment securities held to maturity                (300,000)      (1,415,000)       (9,203,586)
     Proceeds from sales of investment securities available for sale     336,115          595,655
     Proceeds from maturities and paydowns of mortgage-backed
       securities held to maturity                                       259,037          731,300           606,716
     Proceeds from maturities of investment securities held to maturity                 1,200,000         6,400,000
   Net change in loans                                                (3,303,368)     (15,527,383)      (12,529,034)
   Purchases of premises and equipment                                   (34,819)         (44,822)          (18,178)
   Proceeds from sale of foreclosed real estate                                           100,356             4,500
   Purchase of Federal Home Loan Bank of Indianapolis stock                              (299,200)          (36,800)
   Other investing activity                                                                (2,726)           (1,934)
                                                                      ---------------------------------------------
       Net cash used by investing activities                          (3,043,035)     (15,474,312)      (14,778,316)
                                                                      ---------------------------------------------

Financing Activities
   Net change in
     Interest-bearing demand and savings deposits                       (264,246)       6,316,311           (28,493)
     Certificates of deposit                                           4,090,264       (2,171,501)        2,616,080
     Stock subscription escrow accounts                                                                 (22,687,104)
   Proceeds from borrowings                                           19,000,000       11,000,000
   Repayment of borrowings                                           (16,306,533)        (296,900)       (1,780,225)
   Cash dividends                                                     (1,322,248)      (1,117,580)         (728,726)
   Contribution of unearned compensation                                                                 (1,753,853)
   Repurchase of common stock                                         (3,024,453)      (3,423,757)       (1,858,984)
   Net change in advances by borrowers for taxes and insurance             9,351           (5,493)           54,376
                                                                      ---------------------------------------------
       Net cash provided (used) by financing activities                2,182,135       10,301,080       (26,166,929)
                                                                      ---------------------------------------------

Net Increase (Decrease) in Cash and Cash Equivalents                   1,637,661       (3,074,055)      (38,589,747)

Cash and Cash Equivalents, Beginning of Year                           3,117,025        6,191,080        44,780,827
                                                                      ---------------------------------------------
Cash and Cash Equivalents, End of Year                                $4,754,686       $3,117,025        $6,191,080
                                                                      =============================================
Additional Cash Flows Information

   Interest paid                                                      $4,527,938       $3,804,104        $3,424,704
   Income tax paid                                                       938,419        1,087,326           984,063
   Loans transferred to (from) foreclosed real estate                    (88,024)         193,870            13,619


</TABLE>

See notes to consolidated financial statements.

<PAGE>


Union Community Bancorp and Subsidiary
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)

Note 1 --  Nature of Operations and Summary of Significant Accounting Policies

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

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

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

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

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

Investment  Securities--Debt  securities are classified as held to maturity when
the  Company  has the  positive  intent and  ability to hold the  securities  to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities not classified as held to maturity and marketable  equity  securities
are classified as available for sale.  Securities available for sale are carried
at  fair  value  with  unrealized  gains  and  losses  reported   separately  in
accumulated other comprehensive income, net of tax.

Amortization  of premiums and  accretion  of discounts  are recorded as interest
income from  securities.  Realized gains and losses are recorded as net security
gains  (losses).  Gains and losses on sales of securities  are determined on the
specific-identification method.

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

<PAGE>

Allowance for loan losses is  maintained  to absorb losses  inherent in the loan
portfolio.  The  allowance  is based on ongoing,  quarterly  assessments  of the
probable  estimated  losses  inherent in the loan  portfolio.  The  allowance is
increased by the provision for credit losses,  which is charged  against current
period  operating  results and  decreased  by the amount of  chargeoffs,  net of
recoveries.  The Bank's  methodology  for assessing the  appropriateness  of the
allowance consists of several key elements, which include the formula allowance,
specific allowances for identified problem loans, and the unallocated allowance.

The  formula  allowance  is  calculated  by  applying  loss  factors  to certain
classified  loans,  pools of loans and certain  unused  commitments.  Changes in
classifications of both performing and nonperforming  loans affect the amount of
the formula allowance.  Loss factors are based on our historical loss experience
and may be adjusted for  significant  factors that, in  management's  judgement,
affect the collectibility of the portfolio as of the evaluation date.

Specific  allowances are  established  in cases where  management has identified
significant  conditions  or  circumstances  related to a credit that  management
believes indicate the probability that a loss has been incurred in excess of the
amount determined by the application of the formula allowance.

The  unallocated  allowance  is based upon  management's  evaluation  of various
conditions,  the effects of which are not directly measured in the determination
of the formula and specific allowances. The evaluation of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they are not  identified  with specific  credits.  The  conditions  evaluated in
connection with the unallocated  allowance may include existing general economic
and business  conditions  affecting the Association's key lending areas,  credit
quality trends, collateral values, loan volumes and concentrations, seasoning of
the loan portfolio,  specific  industry  conditions  within portfolio  segments,
recent loss experience in particular segments of the portfolio,  duration of the
current business cycle, and bank regulatory examination results.

The  allowance  for loan  losses  also  incorporates  the  results of  measuring
impaired  loans  as  provided  in SFAS  No.  114 and  SFAS  No.  118.  A loan is
considered impaired when management determines that it is probable that the Bank
will be unable to collect all amounts due according to the original  contractual
terms of the loan  agreement.  Impairment is measured by the difference  between
the recorded  investment  in the loan and the  estimated  present value of total
expected future cash flows, discounted at the loan's effective rate, or the fair
value of the  collateral  of the loan, if  collateral  dependent.  Impairment is
recognized by adjusting an allocation of the existing allowance for loan losses.

<PAGE>

The  determination  of the adequacy of the allowance for loan losses is based on
estimates  that are  particularly  susceptible  to  significant  changes  in the
economic  environment  and market  conditions.  Management  believes  that as of
December  31,  2000,  the  allowance  for  loan  losses  is  adequate  based  on
information  currently available.  A worsening or protracted economic decline in
the area within which the Association  operates would increase the likelihood of
additional  losses due to credit and market  risks and could create the need for
additional loss reserves.

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

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

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

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

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

<PAGE>

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

Earnings per share have been  computed  based upon the  weighted-average  common
shares  outstanding  during each year.  Unearned  ESOP shares have been excluded
from the computation of average shares outstanding.

Note 2 -- Investment Securities

<TABLE>
<CAPTION>

                                                                                      2000
                                                          ------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
December 31                                                 Cost              Gains           Losses             Value
----------------------------------------------------------------------------------------------------------------------

Held to maturity

<S>                                                        <C>                  <C>              <C>            <C>
   Federal agencies                                        $5,015               $16              $86            $4,945
   Mortgage-backed securities                               2,582                64                9             2,637
                                                          ------------------------------------------------------------
       Total held to maturity                              $7,597               $80              $95            $7,582
                                                          ============================================================
</TABLE>


<TABLE>
<CAPTION>

                                                                                      1999
                                                          ------------------------------------------------------------

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

</TABLE>
<PAGE>

The amortized cost and fair value of securities held to maturity at December 31,
2000, by contractual maturity,  are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                                         Held to Maturity
                                                    -------------------------
                                                    Amortized           Fair
December 31                                           Cost              Value
-----------------------------------------------------------------------------
One to five years                                    $2,415            $2,406
Five to ten years                                       300               316
After ten years                                       2,300             2,223
                                                    -------------------------
                                                      5,015             4,945
Mortgage-backed securities                            2,582             2,637
                                                    -------------------------
       Totals                                        $7,597            $7,582
                                                    =========================

Securities  with a carrying value of $2,606,000  and $2,807,000  were pledged at
December 31, 2000 and 1999 to secure FHLB advances.

Proceeds from sales of  securities  available for sale during 2000 and 1999 were
$336,000 and $596,000. Gross gains of $46,000 and $73,000 were realized on those
sales.

Mortgage-backed  securities  included in investment  securities held to maturity
above consist of the following:


<TABLE>
<CAPTION>

                                                                                      2000
                                                          ------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
December 31                                                 Cost              Gains           Losses             Value
----------------------------------------------------------------------------------------------------------------------

Held to maturity
<S>                                                        <C>                  <C>               <C>           <C>
   Government National Mortgage Corporation                $  622               $47               $3            $  666
   Federal Home Loan Mortgage Corporation                   1,897                17                3             1,911
   Federal National Mortgage Corporation                       55                                  3                52
   Other                                                        8                                                    8
                                                          ------------------------------------------------------------
       Total mortgage-backed securities                    $2,582               $64               $9            $2,637
                                                          ============================================================

</TABLE>



<TABLE>
<CAPTION>


                                                                                      1999
                                                          ------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
December 31                                                 Cost              Gains           Losses             Value
----------------------------------------------------------------------------------------------------------------------
Held to maturity
<S>                                                        <C>                  <C>                             <C>
   Government National Mortgage Corporation                $  689               $59                             $  748
   Federal Home Loan Mortgage Corporation                   2,043                26              $74             1,995
   Federal National Mortgage Corporation                       63                                  5                58
   Other                                                       12                                                   12
                                                          ------------------------------------------------------------
       Total mortgage-backed securities                    $2,807               $85              $79            $2,813
                                                          ============================================================

</TABLE>
<PAGE>

Note 3 -- Loans and Allowance

December 31                                      2000              1999
-------------------------------------------------------------------------
Real estate mortgage loans
   One-to-four family                         $  83,012         $  80,552
   Multi-family                                   8,522             9,549
   Commercial                                    12,878            12,410
Real estate construction loans                    2,037             2,848
Commercial loans                                  3,661             1,394
Individuals' loans for household
   and other personal expenditures                  165               177
                                              ----------------------------
                                                110,275           106,930
Unamortized deferred loan fees                     (290)             (334)
Allowance for loan losses                          (480)             (422)
                                              ----------------------------
       Total loans                             $109,505          $106,174
                                             =============================


Year Ended December 31                  2000             1999              1998
--------------------------------------------------------------------------------
Allowance for loan losses
   Balances, beginning of year          $422             $362              $252
   Provision for losses                   60               60               110
   Loans charged off                      (2)
                                       -----------------------------------------
   Balances, end of year                $480             $422              $362
                                       =========================================

Information on impaired loans is summarized below.


December 31                                           2000              1999
--------------------------------------------------------------------------------
Impaired loans for which the discounted
   cash flows or collateral value
   exceeds the carrying value of the loan             $133              $197


Year Ended December 31                  2000             1999              1998
--------------------------------------------------------------------------------
Average balance of impaired loans       $131             $214              $110
Interest income recognized on
   impaired loans                         10               21                10
Cash basis interest included above        10               18                10

<PAGE>

Note 4 -- Premises and Equipment

December 31                                              2000              1999
--------------------------------------------------------------------------------
Land                                                     $146              $146
Buildings                                                 579               579
Equipment                                                 206               171
                                                         -----------------------
       Total cost                                         931               896
Accumulated depreciation                                 (557)             (529)
                                                         -----------------------
       Net                                               $374              $367
                                                         =======================
Note 5 -- Investment in Limited Partnership

The investment in limited partnership of $912,000 and $1,012,000 at December 31,
2000 and 1999  represents a 99 percent equity in Pedcor  Investments - 1993-XVI,
LP (Pedcor), a limited partnership organized to build, own and operate a 48-unit
apartment complex.  In addition to recording its equity in the losses of Pedcor,
the  Company  has  recorded  the  benefit of low income  housing  tax credits of
$178,000 for each of the years ended December 31, 2000, 1999 and 1998. Condensed
financial statements for Pedcor are as follows:

December 31                                             2000              1999
--------------------------------------------------------------------------------
Condensed statement of financial condition
   Assets
     Cash                                            $     83           $    21
     Land and property                                  2,120             2,178
     Other assets                                         170               175
                                                     ---------------------------
       Total assets                                    $2,373            $2,374
                                                     ===========================
Liabilities

   Notes payable--Association                         $   535           $   659
   Notes payable--other                                 1,329             1,338
   Other liabilities                                      170               161
                                                     ---------------------------
       Total liabilities                                2,034             2,158
Partners' equity                                          339               216
                                                     ---------------------------
       Total liabilities and partners' equity          $2,373            $2,374
                                                     ===========================


Year Ended December 31                2000             1999              1998
--------------------------------------------------------------------------------

Condensed statement of operations
   Total revenue                     $ 258            $ 253             $ 232
   Total expenses                      318              318               354
                                     -------------------------------------------
       Net loss                      $ (60)           $ (65)            $(122)
                                     ===========================================

<PAGE>

Note 6 -- Deposits

December 31                                    2000              1999
--------------------------------------------------------------------------------
Noninterest-bearing demand                  $  1,769          $  1,151
Interest-bearing demand                       17,559            18,030
Savings deposits                               2,773             3,184
Certificates and other time
   deposits of $100,000 or more               13,937            10,700
Other certificates and time deposits          36,778            35,925
                                            --------------------------
       Total deposits                        $72,816           $68,990
                                            ==========================

Certificates and other time deposits maturing in years ending December 31:

        2001                                 $28,993
        2002                                  11,500
        2003                                   6,794
        2004                                   2,166
        2005                                   1,262
                                             -------
                                             $50,715
                                             =======

Year Ended December 31                2000             1999              1998
--------------------------------------------------------------------------------
Interest expense on deposits
   Interest-bearing demand          $   942          $   793           $   496
   Savings deposits                     123              134               139
   Certificates                       2,791            2,548             2,729
                                    ------------------------------------------
                                    $ 3,856          $ 3,475           $ 3,364
                                    ============================================


Note 7 -- Federal Home Loan Bank Advances
                                                       2000
                                             -------------------------
                                                              Weighted
                                                               Average
December 31                                  Amount             Rate
----------------------------------------------------------------------
Advances from FHLB
   Maturities in years ending
     2001                                  $  8,129             6.66%
     2002                                       138             5.80
     2003                                       147             5.90
     2004                                       121             6.03
     Thereafter                               6,000             5.79
                                           --------------------------
                                           $ 14,535             6.31%
                                           ==========================
<PAGE>

The  Association  has an  available  line  of  credit  with  the  FHLB  totaling
$1,000,000.  The line of credit  expires  March 1, 2001 and bears  interest at a
rate equal to the current  variable advance rate. There were no drawings on this
line of credit at December 31, 2000.

FHLB  advances are secured by  first-mortgage  loans and  investment  securities
totaling  $87,087,000.  Advances are subject to restrictions or penalties in the
event of prepayment.

Note 8 -- Note Payable

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

December 31                                                        2000
--------------------------------------------------------------------------------
Note payable to Pedcor
   Maturities in years ending
     2001                                                          $178
     2002                                                           174
     2003                                                           171
     2004                                                           132
                                                                   ----
                                                                   $655
                                                                   ====
<TABLE>
<CAPTION>
Note 9 -- Income Tax

Year Ended December 31                     2000             1999              1998
----------------------------------------------------------------------------------
Income tax expense
   Currently payable
<S>                                     <C>               <C>               <C>
     Federal                            $   821           $  726            $  848
     State                                  231              256               287
   Deferred
     Federal                                (35)              16               (27)
     State                                   (6)               5               (14)
                                        -------------------------------------------
       Total income tax expense         $ 1,011           $1,003            $1,094
                                        ===========================================

Reconciliation of federal statutory
 to actual tax expense
   Federal statutory income tax at 34%  $ 1,002           $1,011            $1,043
   Effect of state income taxes             148              172               180
   Tax credits                             (178)            (178)             (178)
   Other                                     39               (2)               49
                                        -------------------------------------------
       Actual tax expense               $ 1,011           $1,003            $1,094
                                        ===========================================

Effective tax rate                         34.3%            33.7 %            35.7 %
</TABLE>


<PAGE>

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

December 31                                              2000              1999
--------------------------------------------------------------------------------
Assets
   Allowance for loan losses                             $198              $173
   Pensions and employee benefits                          48                48
   Other                                                   36                19
                                                         -----------------------
       Total assets                                       282               240
                                                         -----------------------

Liabilities

   Depreciation                                           (28)              (23)
   State income tax                                        (7)               (5)
   FHLB stock dividend                                    (23)              (23)
   Loan fees                                              (12)              (16)
   Equity in partnership losses                          (110)             (107)
   Unrealized gain on securities available-for-sale                         (10)
                                                         -----------------------
       Total liabilities                                 (180)             (184)
                                                         -----------------------
Valuation Allowance                                        (2)               (7)
                                                         -----------------------
                                                         $100               $49
                                                         =======================

The  valuation  allowance at December 31, 2000 is $2,000,  and was  decreased by
$5,000 during the current year.

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

<PAGE>

Note 10 -- Other Comprehensive Income
<TABLE>
<CAPTION>

                                                                 2000
                                             ---------------------------------------------
                                                                  Tax
                                             Before-Tax        (Expense)        Net-of-Tax
Year Ended December 31                         Amount           Benefit           Amount
------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
<S>                                              <C>              <C>               <C>
   Unrealized holding gains
        arising during the year                  $ 21             $ (7)             $ 14
   Less: reclassification adjustment
        for gains realized in net income           46              (17)               29
                                                -----------------------------------------
   Other comprehensive loss                      $(25)             $10              $(15)
                                                ==========================================
</TABLE>



<TABLE>
<CAPTION>

                                                                     1999
                                                 ---------------------------------------------
                                                                      Tax
                                                 Before-Tax        (Expense)        Net-of-Tax
Year Ended December 31                             Amount           Benefit           Amount
----------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
   Unrealized holding gains
<S>                                                   <C>             <C>                <C>
        arising during the year                       $98             $(39)              $59
   Less: reclassification adjustment
        for gains realized in net income               73              (29)               44
                                                 ---------------------------------------------
   Other comprehensive income                         $25             $(10)              $15
                                                 =============================================

</TABLE>

Note 11 -- Commitments and Contingent Liabilities

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

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

December 31                                         2000              1999
--------------------------------------------------------------------------------
Commitments to extend credit                       $4,341            $3,762
Standby letters of credit                           4,208             3,215

<PAGE>

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash  requirements.  The Association  evaluates each customer's
credit worthiness on a case-by-case  basis. The amount of collateral obtained if
deemed  necessary  by the  Association  upon  extension  of  credit  is based on
management's credit evaluation.  Collateral held varies but may include accounts
receivable,  inventory,  property and equipment, and income-producing commercial
properties.

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

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

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

<PAGE>

Note 12 -- Dividend and Capital Restrictions

Without  prior  approval,  current  regulations  allow  the  Association  to pay
dividends to the Company not exceeding  retained net income for the current year
plus  those for the  previous  two years.  The  Association  normally  restricts
dividends to a lesser amount because of the need to maintain an adequate capital
structure.

At the time of conversion,  a liquidation  account was  established in an amount
equal to the  Association's  net worth as reflected  in the latest  statement of
condition  used in its  final  conversion  offering  circular.  The  liquidation
account is maintained for the benefit of eligible  deposit  account  holders who
maintain their deposit account in the Association after conversion. In the event
of a complete liquidation, and only in such event, each eligible deposit account
holder  will  be  entitled  to  receive  a  liquidation  distribution  from  the
liquidation  account  in the  amount  of the then  current  adjusted  subaccount
balance for deposit accounts then held, before any liquidation  distribution may
be made to  shareholders.  Except  for the  repurchase  of stock and  payment of
dividends, the existence of the liquidation account will not restrict the use or
application of net worth.  The initial  balance of the  liquidation  account was
$14,473,000.

At  December  31,  2000,  the  shareholder's   equity  of  the  Association  was
$34,716,000,  of which approximately $3,930,000 was available for the payment of
dividends.

Note 13 -- Regulatory Capital

The  Association  is  subject  to  various   regulatory   capital   requirements
administered  by the  federal  banking  agencies  and is  assigned  to a capital
category.  The assigned capital  category is largely  determined by three ratios
that are calculated  according to the regulations:  total risk adjusted capital,
Tier 1 capital,  and Tier 1 leverage ratios.  The ratios are intended to measure
capital  relative to assets and credit  risk  associated  with those  assets and
off-balance  sheet exposures of the entity.  The capital category assigned to an
entity can also be affected by qualitative judgments made by regulatory agencies
about the risk  inherent  in the  entity's  activities  that are not part of the
calculated ratios.

There are five capital categories defined in the regulations,  ranging from well
capitalized to critically undercapitalized.  Classification of an association in
any of the undercapitalized  categories can result in actions by regulators that
could have a material  effect on an  association's  operations.  At December 31,
2000 and 1999, the Association is categorized as well  capitalized and meets all
subject capital adequacy  requirements.  There are no conditions or events since
December  31, 2000 that  management  believes  have  changed  the  Association's
classification.

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                            2000
                                                      -----------------------------------------------------------------
                                                                                Required for             To Be Well
                                                       Actual                Adequate Capital 1         Capitalized 1
December 31                                            Amount     Ratio      Amount       Ratio       Amount     Ratio
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>         <C>           <C>        <C>         <C>
Total risk-based capital 1 (to risk-weighted assets)  $35,195    52.0%       $5,417        8.0%       $6,771      10.0%
Tier 1 capital 1 (to risk-weighted assets)             34,716    51.3%        2,708        4.0%        4,062       6.0%
Core capital 1 (to adjusted total assets)              34,716    27.8%        3,747        3.0%        6,245       5.0%
Core capital 1 (to adjusted tangible assets)           34,716    27.8%        2,498        2.0%                     N/A
Tangible capital 1 (to adjusted total assets)          34,716    27.8%        1,873        1.5%                     N/A
1 As defined by regulatory agencies
</TABLE>


<TABLE>
<CAPTION>

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


Note 14 -- Employee Benefit Plans

The Company provides pension  benefits for  substantially  all of its employees,
and is a participant in a pension fund known as the Pentegra Group. This plan is
a multi-employer  plan; separate actuarial  valuations are not made with respect
to each participating  employer.  Pension expense was $2,000, $2,000, and $2,000
for 2000, 1999, and 1998.

<PAGE>

The Company has a  retirement  savings  401(k) plan in which  substantially  all
employees may participate.  The Company matches employees'  contributions at the
rate of 50% for the first 5% of base salary  contributed  by  participants.  The
Company's  expense for the plan was $15,000,  $8,000 and $10,000 for 2000, 1999,
and 1998.

The Company has an ESOP covering  substantially all employees of the Company and
Association. The ESOP acquired 184,000 shares of the Company common stock at $10
per share with  funds  provided  by a loan from the  Company.  Accordingly,  the
$1,840,000  of common  stock  acquired  by the ESOP is shown as a  reduction  of
shareholders'  equity.  Unearned  ESOP  shares  totaled  152,112  and 162,444 at
December 31, 2000 and 1999 and had a fair value of $1,901,400  and $1,787,000 at
December 31, 2000 and 1999. Shares are released to participants  proportionately
as the loan is repaid.  Dividends on allocated  shares are recorded as dividends
and charged to retained earnings.  Dividends on unallocated shares, which may be
distributed  to  participants  or  used  to  repay  the  loan,  are  treated  as
compensation expense.  Compensation expense is recorded equal to the fair market
value of the stock when  contributions,  which are  determined  annually  by the
Board of Directors of the  Association,  are made to the ESOP.  ESOP expense for
the years ended  December 31,  2000,  1999 and 1998 was  $119,000,  $122,000 and
$149,000.  At December 31, 2000, the ESOP had 31,888 allocated  shares,  152,112
suspense shares and no  committed-to-be  released shares.  At December 31, 1999,
the  ESOP  had  21,556  allocated   shares,   162,444  suspense  shares  and  no
committed-to-be released shares.

The Association  has a Recognition and Retention Plan and Trust (RRP).  The Bank
contributed  $1,753,853 to the RRP for the purchase of 121,670 shares of Company
common stock, and effective June 30, 1998,  awards of grants for 78,900 of these
shares  were  issued  to  various  directors,  officers  and  employees  of  the
Association.  These awards  generally are to vest and be earned by the recipient
at a rate of 20 percent per year, commencing June 30, 1999. The unearned portion
of these stock  awards is  presented  as a reduction  of  shareholders'  equity.
Expense under the plan for the years ended December 31, 2000,  1999 and 1998 was
$227,000, $227,000 and $114,000.

Note 15 -- Stock Option Plan

Under  the  Company's  stock  option  plan  (Plan),  which is  accounted  for in
accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for
Stock  Issued to  Employees,  and related  interpretations,  the Company  grants
selected  executives and other key employees stock option awards which vest at a
rate of 20 percent per year.  During 1998,  the Company  authorized the grant of
options for up to 304,175 shares of the Company's  common stock.  Effective June
30, 1998, the Company granted 186,000 of the options. The exercise price of each
option,  which  has a  ten-year  life,  was  equal  to the  market  price of the
Company's stock on the date of grant;  therefore,  no  compensation  expense was
recognized.

Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro
forma  disclosures  of net income and  earnings  per share as if the Company had
accounted for its employee stock options under that  Statement.  No options were
granted in 2000 or 1999.  The fair value of each option  grant was  estimated on
the grant date using an option-pricing model with the following assumptions:


<PAGE>

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

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

<TABLE>
<CAPTION>

                                                          2000             1999              1998
--------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>              <C>
Net income                      As reported              $1,935            $1,970           $1,974
                                Pro forma                 1,837             1,872            1,876
Basic earnings per share        As reported                 .87               .81              .70
                                Pro forma                   .83               .77              .67
Diluted earnings per share      As reported                 .87               .81              .70
                                Pro forma                   .83               .77              .67
</TABLE>

The following is a summary of the status of the Company's  stock option plan and
changes in that plan as of and for the years ended  December 31, 2000,  1999 and
1998.
<TABLE>
<CAPTION>

Year Ended December 31                             2000                       1999                      1998
-----------------------------------------------------------------------------------------------------------------------
                                                        Weighted-                 Weighted-                 Weighted-
                                                         Average                   Average                   Average
Options                                   Shares     Exercise Price  Shares    Exercise Price   Shares   Exercise Price
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>
Outstanding, beginning of year              186,000      $14.59       186,000      $14.59
Granted                                                                                          186,000     $14.59
                                            -------                   -------                    -------
Outstanding, end of year                    186,000      $14.59       186,000      $14.59        186,000     $14.59
                                            =======                   =======                    =======
Options exercisable at year end              74,400                    37,200
Weighted-average fair value of
   options granted during the year                                                                $2.94

</TABLE>

As of December 31, 2000, the 186,000 options  outstanding have an exercise price
of $14.59 and a weighted-average remaining contractual life of 7.5 years.

<PAGE>

Note 16 -- Related Party Transactions

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

Balances, January 1, 2000                           $2,986
   New loans, including renewals                       429
   Payments, etc. including renewals                  (344)
                                                    -------
Balances, December 31, 2000                         $3,071
                                                    =======

Deposits from related  parties held by the Association at December 31, 2000, and
1999 totaled $2,038,000 and $1,930,000.

Note 17 -- Earnings Per Share

Earnings per share (EPS) were computed as follows:
<TABLE>
<CAPTION>

                                                                              Year Ended December 31, 2000
                                                                       --------------------------------------------
                                                                                      Weighted            Per-Share
                                                                       Income      Average Shares          Amount
-------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share

<S>                                                                    <C>            <C>                 <C>
   Income available to common shareholders                             $1,935         2,217,229           $.87
Effect of Dilutive Securities
   Stock options
                                                                       ------------------------
Diluted Earnings Per Share
   Income available to common shareholders and
     assumed conversions                                               $1,935         2,217,229           $.87
                                                                       ============================================
</TABLE>

Options  to  purchase  186,000  shares of common  stock at $14.59 per share were
outstanding  at December 31, 2000,  but were not included in the  computation of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares.

<PAGE>
<TABLE>
<CAPTION>

                                                                            Year Ended December 31, 1999
                                                                       --------------------------------------------
                                                                                      Weighted            Per-Share
                                                                       Income      Average Shares          Amount
-------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share
<S>                                                                    <C>            <C>                 <C>
   Income available to common shareholders                             $1,970         2,444,080           $.81
Effect of Dilutive Securities
   Stock options
                                                                       ------------------------
Diluted Earnings Per Share
   Income available to common shareholders and
     assumed conversions                                               $1,970         2,444,080           $.81
                                                                       ============================================

</TABLE>

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

                                                                            Year Ended December 31, 1998
                                                                       --------------------------------------------
                                                                                      Weighted            Per-Share
                                                                       Income      Average Shares          Amount
-------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share
<S>                                                                    <C>            <C>                 <C>
   Income available to common shareholders                             $1,974         2,804,584           $.70
Effect of Dilutive Securities
   Stock options                                                                              9
                                                                       ------------------------
Diluted Earnings Per Share
   Income available to common shareholders and
     assumed conversions                                               $1,974         2,804,593           $.70
                                                                       ============================================
</TABLE>

Note 18 -- Fair Values of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instrument:

Cash  and  Cash  Equivalents--The  fair  value  of  cash  and  cash  equivalents
approximates carrying value.

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

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

<PAGE>

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

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

Deposits--Fair  values  for  certificates  of  deposit  are  estimated  using  a
discounted  cash flow  calculation  that applies  interest rates currently being
offered on certificates to a schedule of aggregated  expected monthly maturities
on such time deposits.

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

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

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

Off-Balance  Sheet  Commitments--Commitments  include  commitments  to originate
mortgage and consumer loans, and are generally of a short-term  nature. The fair
value of such  commitments  are based on fees  currently  charged  to enter into
similar  agreements,  taking into account the remaining  terms of the agreements
and  the  counterparties'   credit  standing.  The  carrying  amounts  of  these
commitments, which are immaterial, are reasonable estimates of the fair value of
these financial instruments.

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

                                                                     2000                               1999
                                                          -------------------------------------------------------------
                                                          Carrying            Fair           Carrying            Fair
December 31                                                Amount             Value           Amount             Value
-----------------------------------------------------------------------------------------------------------------------
Assets
<S>                                                      <C>                 <C>            <C>               <C>
   Cash and cash equivalents                             $  4,755            $4,755         $  3,117          $  3,117
   Investment securities available for sale                                                      315               315
   Investment securities held to maturity                   7,597             7,582            7,522             7,199
   Loans, net                                             109,505           109,856          106,174           103,846
   Stock in FHLB                                            1,044             1,044            1,044             1,044
   Interest receivable                                        958               958              824               824

Liabilities
   Deposits                                                72,816            73,160           68,990            68,735
   Borrowings
     FHLB advances                                         14,535            14,366           11,659            11,646
     Notes payable--limited partnership                       655               572              837               712
   Interest payable                                           196               196              123               123
   Advances by borrowers for taxes and insurance              279               279              270               270

</TABLE>
<PAGE>

Note 19-- Condensed Financial Information (Parent Company Only)

Presented  below is condensed  financial  information as to financial  position,
results of operations and cash flows of the Company:

<TABLE>
<CAPTION>

                             Condensed Balance Sheet

December 31                                                      2000              1999
---------------------------------------------------------------------------------------
Assets
<S>                                                           <C>               <C>
   Cash                                                       $  1,581          $  5,555
   Investment securities available-for-sale                                          315
   Investment in subsidiary                                     34,716            32,532
   Other assets                                                    254               216
                                                              --------------------------
       Total assets                                           $ 36,551          $ 38,618
                                                              ==========================
Liability--other                                              $    363          $    338
Shareholders' Equity                                            36,188            38,280
                                                              --------------------------
       Total liabilities and shareholders' equity              $36,551           $38,618
                                                              ==========================
</TABLE>

<TABLE>
<CAPTION>


                          Condensed Statement of Income

Year Ended December 31                                                        2000             1999              1998
----------------------------------------------------------------------------------------------------------------------
Income
<S>                                                                       <C>               <C>               <C>
   Interest income                                                        $       8         $     11          $      4
   Other income                                                                 144              175                81
                                                                          --------------------------------------------
                                                                                152              186                85
                                                                          --------------------------------------------
Expenses
   Salaries and employee benefits                                                95               80                65
   Legal and professional fees                                                   68               83                97
   Other expenses                                                                15               17                14
                                                                          --------------------------------------------
     Total expenses                                                             178              180               176
                                                                          --------------------------------------------
Income (loss) before income tax and equity in
   undistributed income of subsidiaries                                         (26)               6               (91)
Income tax benefit (expense)                                                      4                9               (20)
                                                                          --------------------------------------------
Loss before equity in undistributed income of subsidiaries                      (22)              (3)              (71)
Equity in undistributed income of subsidiaries                                1,957            1,973             2,045
                                                                          --------------------------------------------
Net Income                                                                   $1,935           $1,970            $1,974
                                                                          ============================================

</TABLE>

<TABLE>
<CAPTION>



                      Consolidated Statement of Cash Flows

Year Ended December 31                                                        2000             1999              1998
----------------------------------------------------------------------------------------------------------------------
Operating Activities
<S>                                                                          <C>              <C>             <C>
   Net income                                                                $1,935           $1,970          $  1,974
   Adjustments to reconcile net income to net cash provided by
     operating activities                                                    (1,899)          (1,900)           (2,165)
                                                                          --------------------------------------------
       Net cash provided (used) by operating activities                          36               70              (191)
                                                                          --------------------------------------------
Investing Activities

   Purchases of investments available for sale                                                  (812)
   Proceeds from sales of investments available for sale                        336              596
                                                                          --------------------------------------------
       Net cash used by investing activities                                    336             (216)
                                                                          --------------------------------------------
Financing Activities

   Cash dividend                                                             (1,322)          (1,118)             (729)
   Repurchase of common stock                                                (3,024)          (3,424)           (1,859)
                                                                          --------------------------------------------
       Net cash used by financing activities                                 (4,346)          (4,542)           (2,588)
                                                                          --------------------------------------------

Net Change in Cash                                                           (3,974)          (4,688)           (2,779)
Cash at Beginning of Year                                                     5,555           10,243            13,022
                                                                          --------------------------------------------
Cash at End of Year                                                          $1,581           $5,555           $10,243
                                                                          =============================================

</TABLE>


<PAGE>

Directors and Officers

                               Board of Directors

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

         Philip L. Boots                              Samuel H. Hildebrand
         President, Boots Brothers                    President, Village
         Oil Company, Inc.                            Traditions, Inc.
         Marvin L. Burkett                            John M. Horner
         Farmer (Retired)                             President, Horner
                                                      Pontiac Buick, Inc.
         Phillip E. Grush                             Harry A. Siamas
         Optometrist                                  Attorney

                       Officers of Union Community Bancorp

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

             Officers of Union Federal Savings and Loan Association

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

                  Denise E. Swearingen             Alan L. Grimble
                  Secretary, Controller/           Commercial Loan Officer
                  Treasurer                        Executive Vice President

                                     Judith E. Wilson-Tulley
                                     Loan Officer
                                     Assistant Secretary

<PAGE>

Directors and Officers

     Philip L.  Boots  (age 54) has  served  since  1985 as  President  of Boots
Brothers Oil Company, Inc., a petroleum marketer that operates gasoline outlets,
convenience grocery stores and car washes in the Crawfordsville area.

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

     Phillip  E.  Grush  (age  69)  worked  as a  self-employed  optometrist  in
Crawfordsville  from 1960 until  September,  1996 when he sold his practice.  He
currently  works for Dr.  Michael  Scheidler  in  Crawfordsville  as a part-time
employee/consultant.

     Samuel H.  Hildebrand,  II (age 61) a resident of  Montgomery  County since
1964, has served in management  positions at R R Donnelley & Sons Co.,  Crawford
Industries,  Inc.,  and Atapco  Custom  Products.  Since 1995,  he has served as
President of  Hildebrand's  Village  Traditions,  Inc. The company is engaged in
property management as well as custom fabrication of rain gutter systems through
its Custom Flo Division.

     John M.  Horner  (age 64) has  served as the  president  of Horner  Pontiac
Buick, Inc. in Crawfordsville since 1974.

     Harry A. Siamas (age 50) has practiced law in Crawfordsville since 1976 and
has served as Union Federal's attorney for 18 years.

     Joseph E.  Timmons  (age 66) has served as  President  and Chief  Executive
Officer of Union Federal since 1974 and of UFS Service Corp. since its inception
in 1994. He has been an employee of Union Federal since 1954.

<PAGE>

Shareholder Information

Market Information

     The   Association   converted  from  a  federal  mutual  savings  and  loan
association to a federal stock savings and loan association  effective  December
29, 1997,  and  simultaneously  formed a savings and loan holding  company,  the
Holding  Company.  The Holding  Company's  Common Stock, is traded on the NASDAQ
National  Market System under the symbol  "UCBC." As of January 31, 2001,  there
were approximately 1,344 record holders of the Holding Company's Common Stock.

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

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

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

                            Stock Price      Dividends

Quarter Ended            High        Low     Per Share
March 31, 1999         $12 1/2    $11 1/8     $.105
June 30, 1999           12         10 1/4      .110
September 30, 1999      12 1/2     10 13/16    .120
December 31, 1999       12 3/8      8 7/8      .130
March 31, 2000          11 3/8      9 15/16    .140
June 30, 2000           11 1/8     10 1/8      .145
September 30, 2000      12 3/4     11          .150
December 31, 2000       13 7/64    11 1/4      .150


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


General Counsel
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana  46204

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


Shareholders and General Inquiries

The  Company  filed an  Annual  Report on Form 10-K for its  fiscal  year  ended
December 31, 2000 with the  Securities and Exchange  Commission.  Copies of this
annual report may be obtained without charge upon written request to:

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