EXHIBIT 13

Table of Contents

Message to Shareholders .......................................................1
Selected Consolidated Financial Data...........................................2
Management's Discussion and Analysis...........................................3
Report of Independent Registered Public Accounting Firm.......................21
Consolidated Balance Sheets...................................................22
Consolidated Statements of Income.............................................23
Consolidated Statements of Shareholders' Equity...............................24
Consolidated Statements of Cash Flows.........................................25
Notes to Consolidated Financial Statements....................................26
Directors and Officers........................................................45
Shareholder Information.......................................................47

Description of Business


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

     On January 2, 2002, the Company acquired Montgomery  Financial  Corporation
("Montgomery"), the holding company of Montgomery Savings, a Federal Association
("Montgomery Savings"), a federally chartered thrift. Montgomery was merged with
and into the  Company  and  Montgomery  Savings  was merged  with and into Union
Federal.  MSA Service Corp.  ("MSA"),  an Indiana  corporation and  wholly-owned
subsidiary  of  Montgomery  Savings,  then became a subsidiary  of Union Federal
until it was dissolved in 2004.

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

     Union  Federal  offers a variety of lending,  deposit  and other  financial
services  to its retail and  commercial  customers.  Union  Federal's  principal
business consists of attracting deposits from the general public and originating
fixed-rate and  adjustable-rate  loans secured  primarily by first  mortgages on
one- to four-family  residential real estate.  Union Federal's deposits accounts
are insured up to applicable limits by the Savings Association Insurance Fund of
the Federal  Deposit  Insurance  Corporation.  Union Federal  offers a number of
other financial services, which include: (i) residential real estate loans; (ii)
multi-family loans, (iii) commercial real estate loans; (iv) construction loans;
(v) home improvement loans and consumer loans, including single-pay loans, loans
secured by deposits,  installment  loans and commercial loans; (vi) money market
demand accounts;  (vii) passbook savings  accounts;  and (viii)  certificates of
deposit.

<PAGE>


To Our Shareholders:


     On  behalf  of the  Board of  Directors,  our  management  team and all the
employees of Union Community  Bancorp and its subsidiary,  Union Federal Savings
and Loan  Association,  it is our  pleasure  to provide you with our 2004 Annual
Report.

     Throughout the year, we repurchased 172,000 shares of our common stock at a
cost of $3.1 million,  or an average of $17.95 per share,  reducing  outstanding
shares to 1,928,000.  Repurchase of  outstanding  shares is a strategy used from
time to time to enhance  shareholder value and will continue to be considered in
the future. Book value per share increased from $16.92 per share at December 31,
2003 to $17.35 per share at December 31,  2004,  an increase of $0.42 per share.
Also during 2004 dividends of $0.60 per share were paid.

     For the year ended December 31, 2004 total assets decreased $4.7 million to
$256.9 while net loans decreased $4.2 million to $217.1 million. During the same
time frame,  deposits  decreased  $1.7 million to $188.5  million.  Shareholders
equity  decreased  $2.1  million  to $33.4  million  due to  reductions  for the
repurchase  of common stock and the payment of dividends and an increase for the
net income.

     Net income was  $1,797,143  for 2004, or $0.97 basic earnings per share and
$0.95 diluted  earning per share.  Return on average assets was 0.69% and return
on average equity was 5.19%.  The acquisition of Montgomery  Financial still has
an effect on net interest  income.  During the year ended  December 31, 2003 the
amortization of purchase  accounting  adjustments  increased net interest income
$503,000 while the increase in net interest  income due to the  adjustments  was
$42,315 for 2004. The effects of these  adjustments on net interest  income will
be minimal for future years.

     The  Management  and the  Board of  Directors  want to  thank  you for your
business,  your support and your confidence in Union Community Bancorp and Union
Federal  Savings and Loan  Association.  We  encourage  you to  recommend  Union
Federal to your  friends,  neighbors  and  associates,  and we are  dedicated to
providing  innovative  products  delivered  with  quality  service  to you,  our
customers and shareholders, while continuing our commitment to community banking
that has marked our performance for the past 92 years.  Please review the Annual
Report and join us at the meeting on April 20, 2005.

                                        Sincerely,


                                        /s/ Joseph E. Timmons
                                        ----------------------------------------
                                        Joseph E. Timmons,
                                        Chairman of the Board and President


                                        /s/ Alan L. Grimble
                                        ----------------------------------------
                                        Alan L. Grimble,
                                        Chief Executive Officer

                                       1

<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 Shareholder Annual Report.
<TABLE>
<CAPTION>

                                                                                At  December 31,
------------------------------------------------------------------------------------------------------------------------
                                                  2004            2003            2002            2001            2000
------------------------------------------------------------------------------------------------------------------------
                                                                         (Dollars in thousands)
Summary of Selected Consolidated
Financial Condition Data:
<S>                                             <C>             <C>             <C>             <C>             <C>
Total assets                                    $256,899        $261,577        $269,316        $142,391        $125,383
Loans, net                                       217,056         221,230         216,703         121,749         109,505
Cash and interest bearing deposits in
        other banks (1)                           13,604          12,039          36,731          13,565           4,755
Investment securities available for sale           3,037           5,908              --              --              --
Investment securities held to maturity               152             494           1,637           2,848           7,597
Deposits                                         188,461         190,192         190,191          81,702          72,816
Borrowings                                        32,908          33,946          40,055          25,883          15,189
Shareholders' equity                              33,437          35,530          37,189          33,740          36,188

                                                                          Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------
                                                  2004            2003            2002            2001            2000
------------------------------------------------------------------------------------------------------------------------
Summary of Operating Data:
Total interest and dividend income              $ 13,977        $ 15,481         $17,986        $  9,546        $  9,222
Total interest expense                             6,320           6,927           8,162           4,760           4,601
                                                --------      -----------       ---------       --------        --------
   Net interest income                             7,657           8,554           9,824           4,786           4,621
Provision for loan losses                            103             238             372              40              60
                                                --------        --------        ----------      --------        --------
   Net interest income after provision for loan
      losses                                       7,554           8,316           9,452           4,746           4,561
                                                --------        --------        ---------       --------        --------
Other income:
   Service charges on deposit accounts               249             143             155              23              20
   Equity in losses of limited partnership           (31)            (21)            (20)            (55)           (100)
   Gain on sales of available for sale securities     --              --               9              --              46
   Other                                             515             358             205             145             104
                                                --------        --------        ----------      --------        --------
      Total other income                             733             480             349             113              70
                                                --------        --------        ----------      --------        --------
Other expenses:
   Salaries and employee benefits                  3,121           2,859           2,809           1,335           1,102
   Net occupancy expenses                            322             292             311              85              45
   Equipment expenses                                333             320             312              36              23
   Legal and professional fees                       306             270             233             124             109
   Data processing                                   410             393             812              95              77
   Other                                           1,242           1,158           1,043             406             329
                                                --------        ---------       ---------       --------        --------
      Total other expenses                         5,734           5,292           5,520           2,081           1,685
                                                --------        --------        ---------       --------        --------
Income before income taxes                         2,553           3,504           4,281           2,778           2,946
Income taxes                                         756           1,172           1,479             927           1,011
                                                --------        --------        ---------       --------        --------
      Net income                                $  1,797        $  2,332        $  2,802        $  1,851        $  1,935
                                                ========        ========        ========        ========        ========
------------------------------------------------------------------------------------------------------------------------
Table continued on following page

</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>

                                                  SELECTED CONSOLIDATED FINANCIAL DATA OF
                                             UNION COMMUNITY BANCORP AND SUBSIDIARY (continued)

                                                        Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------
                                                  2004            2003            2002            2001           2000
------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
<S>                                              <C>             <C>             <C>             <C>             <C>
Basic earnings per share                         $0.97           $1.18           $1.25           $.93            $.87
Diluted earnings per share                        0.95            1.16            1.24            .93             .87
Dividends per share                               0.600            .600            .520           .600            .585
Dividend payout ratio                            62.30%          51.78%          41.94%         64.52%          67.24%
Interest rate spread during period                2.88            2.99            3.29           2.33            2.12
Net yield on interest earning assets (2)          3.15            3.32            3.76           3.80            3.87
Return on assets (3)                              0.69            0.85            1.03           1.44            1.59
Return on equity (4)                              5.19            6.45            7.19           5.38            5.17
Other expenses to average assets (5)              2.20            1.94            2.02           1.62            1.39
Equity to assets (6)                             13.02           13.58           13.81          23.70           28.86
Average equity to average assets                 13.26           13.26           14.29          26.80           30.77
Average interest earning assets to average
         interest bearing liabilities           110.17          111.99          115.09         138.78          145.47
Nonperforming assets to total assets (6)          0.90            1.53            1.30            .49             .33
Allowance for loan losses to total loans
         outstanding (6)                          0.42            0.55            0.47            .43             .44
Allowance for loan losses to
         nonperforming loans (6)                 44.39           33.56           33.56          76.25          118.23
Net charge offs to average total
        loans outstanding                         0.19             .02             .11             --              --
Number of full service offices (6)                   6               6               6              2               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 OPERATION


General


     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  presented on
pages 22 through 44.

     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.

                                       3
<PAGE>

Executive Summary


     The  implementation  of several  changes  and  upgrades  has  enhanced  our
operational  efficiencies.  The  introduction  of new  products has expanded our
client  relationship  capabilities  and in  turn  has  diversified  our  revenue
streams.  The  introduction of new deposit  products being grouped  together has
afforded us the opportunity to provide more products that complement our deposit
offerings.

     We  continued  our  strong  level of  dividend  payout  percentage  and are
maintaining the buying back of our stock when  available.  We have realized some
turnover in management this year,  which in turn has afforded us the opportunity
to review our operations for efficiency.

     The aggressive  elimination of problem credits and real estate holdings has
had a negative effect on our income position.  This is a non-recurring situation
and we felt it  necessary to  aggressively  attack the problem and not delay the
inevitable. The elimination of these holdings and problem credits will afford us
the opportunity to focus on growth and our strategic plan.

     The  necessity  to  diversify  our loan  portfolio  mix and to improve  our
interest rate risk  position has provided for the increase in loans  categorized
for small  business  and  commercial  purposes.  The  expansion  of our business
development  in our  Lafayette  market has  increased  our market  share and has
opened  up  additional   avenues  for  growth  in  Tippecanoe   County.  We  are
aggressively  increasing  our presence in that untapped  market to continue this
growth  pattern.  The  implementation  plans for bill pay and  business  deposit
functions  available  on-line are a part of our short term  strategic  plans for
2005.


     Selling more services and products to existing  customers,  leveraging  our
employee knowledge and improving internal efficiencies will play a vital part to
our continued success. Over the next few years management focus will continue to
target improvements,  high quality customer service, development of new products
and a strong  diversified  strategic  plan  will be  focused  on  growth  of the
institution.

Critical Accounting Policies


     Note 1 to the  consolidated  financial  statements  presented  on  pages 26
through 29 contains a summary of the Company's  significant  accounting policies
for the year ended December 31, 2004. Certain of these policies are important to
the  portrayal  of  the  Company's  financial  condition,   since  they  require
management to make difficult, complex or subjective judgments, some of which may
relate to matters that are inherently  uncertain.  Management  believes that its
critical  accounting policies include determining the allowance for loan losses,
the valuation of the foreclosed assets and real estate held for development, and
the valuation of intangible assets.

Allowance for loan losses


     The allowance  for loan losses is a significant  estimate that can and does
change based on management's  assumptions  about specific  borrowers and current
general economic and business conditions,  among other factors.  Union Federal's
management  reviews the adequacy of the  allowance for loan losses at least on a
quarterly  basis.  The  evaluation  includes  a review of  payment  performance,
adequacy of collateral and financial condition of all major borrowers.  A review
of all nonperforming  loans and other identified  problem loans is performed and
the  probability  of  collecting  all amounts due is  determined.  In  addition,
changes in the composition of the loan portfolio,  the total  outstanding  loans
and past loss experience are reviewed to determine the adequacy of the allowance
for loan losses.  Current economic and market conditions and potential  negative
changes to economic  conditions are also reviewed in  determining  possible loan
losses.  Although it is the intent of management to fully  evaluate and estimate
the  potential  effects  of  economic  and market  conditions,  changes in these
conditions  are  susceptible to significant  changes beyond those  projected.  A
worsening or protracted economic decline beyond  management's  projections would
increase the likelihood of additional  losses due to the  additional  credit and
market risk and could create the need for additional loss reserves.


                                       4
<PAGE>

Foreclosed assets and real estate held for development


     Foreclosed  assets and real estate held for  development are carried at the
lower of cost or fair  value  less  estimated  selling  costs.  Union  Federal's
management estimates the fair value of the properties based on current appraisal
information. Reviews of estimated fair value are performed on at least an annual
basis.  Economic  environment,  market conditions and the real estate market are
continually  monitored  and  decreases  in the carried  value are  written  down
through current  operations when any of these factors indicate a decrease to the
market value of the assets.  Future worsening or protracted  economic conditions
and a decline in the real estate  market  would  increase  the  likelihood  of a
decline in property  values and could  create the need for future write downs of
the properties held.

Intangible assets


     Management  annually  assesses  the  impairment  of its  goodwill  and  the
recoverability of its core deposit intangible.  Impairment is the condition that
exists when the carrying  amount of goodwill  exceeds its implied fair value. If
actual external conditions and future operating results differ from management's
judgments,  impairment and/or increased amortization charges may be necessary to
reduce the carrying value of these assets to the appropriate  value. A review of
the fair value of the Company's  goodwill was performed in the fourth quarter of
2004 and it was  management's  opinion  that  there was no  impairment  to these
intangible assets as of the date of the review.

                                       5
<PAGE>

Average Balances and Interest Rates and Yields


     The following  tables present for the years ended  December 31, 2004,  2003
and 2002,  the  balances,  interest  rates and  average  daily  balances of each
category  of  the  Company's   interest  earning  assets  and  interest  bearing
liabilities, and the interest earned or paid on such amounts.
<TABLE>
<CAPTION>

                                                    AVERAGE BALANCE SHEET/YIELD ANALYSIS

                                                                 Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                            2004                              2003                              2002
------------------------------------------------------------------------------------------------------------------------------------
                              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   $ 12,888   $    157       1.22%     $ 32,877   $    364       1.11%    $ 22,604  $   340       1.50%
  Mortgage-backed securities       283         21       7.24           776         56       7.22        1,787      150       8.39
  Other investment securities    4,893        104       2.13         4,399        142       3.23          644       48       7.45
  Loans receivable (2)(5)      221,600     13,533       6.11       216,399     14,743       6.81      232,965   17,240       7.40
  FHLB stock                     3,648        162       4.43         3,481        176       5.06        3,424      208       6.07
                              --------   --------                 --------   --------                --------  -------
    Total interest earning
        assets                 243,312     13,977       5.74       257,932     15,481       6.00      261,424   17,986       6.88
                                         --------                            --------                          -------

Noninterest earning assets,
  net of allowance for loan
  losses                        17,886                              14,805                             11,286
                              --------                            --------                           --------
    Total assets              $261,198                            $272,737                           $272,710
                              ========                            ========                           ========
Liabilities and shareholders'
  equity:
Interest bearing liabilities:
  Savings deposits            $ 27,679   $    393       1.42%     $ 33,474   $    610       1.82     $ 38,326  $ 1,094       2.85
  Interest bearing demand       59,999        886       1.48        60,521      1,112       1.84       42,066    1,118       2.66
  Certificates of deposit       99,594      3,355       3.37        97,923      3,406       3.48      106,177    4,092       3.85
  FHLB advances                 33,586      1,686       5.02        38,399      1,799       4.69       40,579    1,858       4.58
                              --------   --------                 --------   --------                --------  -------
    Total interest bearing
      liabilities              220,858      6,320       2.86       230,317      6,927       3.01      227,148    8,162       3.59
                                         --------                            --------                          -------
Other liabilities                5,713                               6,255                              6,590
                              --------                            --------                           --------
    Total liabilities          226,571                             236,572                            233,738
Shareholders' equity            34,627                              36,165                             38,972
                              --------                            --------                           --------
    Total liabilities and
      shareholders' equity    $261,198                            $272,737                           $272,710
                              ========                            ========                           ========
Net interest earning assets   $ 22,454                            $ 27,615                           $ 34,276
Net interest income                      $  7,657                            $  8,554                          $ 9,824
                                         ========                            ========                          =======
Interest rate spread (3)                                2.88%                               2.99%                            3.29%
Net yield on weighted
  average interest earning
  assets (4)                                            3.15%                               3.32%                            3.76%
Average interest earning
  assets to average interest-
  bearing liabilities           110.17%                            111.99%                             115.09%
--------------------------------------------------------------------------------
</TABLE>

(1)  Interest income on loans  receivable  includes loan fee income of $109,000,
     $532,000 and $309,000 for the years ended December 31, 2004, 2003 and 2002,
     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.

                                       6
<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 daily balances.
<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                              ----------------------------------------
                                                                2004            2003            2002
                                                              ----------------------------------------
Weighted average interest rate earned on:
<S>                                                             <C>             <C>             <C>
  Interest earning deposits                                     1.22%           1.11%           1.50%
  Mortgage-backed securities                                    7.24            7.22            8.39
  Other investment securities                                   2.13            3.23            7.45
  Loans receivable                                              6.11            6.81            7.40
  FHLB stock                                                    4.43            5.06            6.07
    Total interest earning assets                               5.74            6.00            6.88
Weighted average interest rate cost of:
  Savings deposits                                              1.42            1.82            2.85
  Interest bearing demand                                       1.48            1.84            2.66
  Certificates of deposit                                       3.37            3.48            3.85
  FHLB advances                                                 5.02            4.69            4.58
    Total interest bearing liabilities                          2.86            3.01            3.59
Interest rate spread (1)                                        2.88            2.99            3.29
Net yield on weighted average interest earning assets (2)       3.15            3.32            3.76
---------------------------------------------------------
</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.

                                       7
<PAGE>

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

                                              Increase (Decrease) in Net Interest Income
                                              ------------------------------------------
                                                                  Total
                                                  Due to         Due to          Net
                                                   Rate          Volume        Change
                                                ---------------------------------------
                                                             (In thousands)
Year ended December 31, 2004 compared
to year ended December 31, 2003
  Interest earning assets:
<S>                                             <C>              <C>           <C>
    Interest earning deposits                   $        40      $ (247)       $  (207)
    Mortgage-backed securities                           (1)        (34)           (35)
    Other investment securities                         (57)         19            (38)
    Loans receivable                                 (1,579)        369         (1,210)
    FHLB stock                                          (23)          9            (14)
                                                -----------      ------        --------
             Total                                   (1,620)        116         (1,504)
  Interest bearing liabilities:
    Savings deposits                                   (121)        (96)          (217)
    Interest bearing demand                            (216)        (10)          (226)
    Certificates of deposit                            (111)         60            (51)
    FHLB advances                                       145        (258)          (113)
                                                -----------      ------        -------
             Total                                     (303)       (304)          (607)
                                                -----------      ------        -------
  Net change in net interest income             $    (1,317)     $  420        $  (897)
                                                ===========      ======        =======

Year ended December 31, 2003 compared
to year ended December 31, 2002
  Interest earning assets:
    Interest earning deposits                   $      (105)     $  129        $    24
    Mortgage-backed securities                          (19)        (75)           (94)
    Other investment securities                         (41)        135             94
    Loans receivable                                 (1,317)     (1,180)        (2,497)
    FHLB stock                                          (35)          3            (32)
                                                -----------      ------        -------
             Total                                   (1,517)       (988)        (2,505)
  Interest bearing liabilities:
    Savings deposits                                   (358)       (126)          (484)
    Interest bearing demand                            (408)       (402)            (6)
    Certificates of deposit                            (382)       (304)          (686)
    FHLB advances                                        42        (101)           (59)
                                                -----------      ------         ------
             Total                                   (1,106)       (129)        (1,235)
                                                -----------      ------         ------
  Net change in net interest income             $      (411)     $ (859)       $(1,270)
                                                ===========      ======        =======
</TABLE>

                                       8
<PAGE>

Financial  Condition  at December 31, 2004  Compared to  Financial  Condition at
December 31, 2003


     Total assets  decreased  approximately  $4.7  million,  or 1.8%,  to $256.9
million at December 31, 2004,  from $261.6  million at December 31, 2003.  Asset
growth is a goal of the Company,  but since Union Federal is a portfolio  lender
single  family  mortgage  loans  decreased  due to the  competitive  rates being
offered by brokers selling single family mortgage loans on the secondary market.
Management was of the opinion to not originate fixed rate single family mortgage
loans based on secondary mortgage market terms and rates due to potential future
negative  effects  on  interest  rate  risk in a rising  rate  environment.  The
decrease  in total  assets was  primarily  due to the  decrease in loans by $4.5
million,  or 2.0%, to $218.0 million at December 31, 2004 from $222.5 million on
December 31, 2003.  This  decrease in loans was due to a decrease in real estate
mortgage  loans secured by  one-to-four  family  dwelling units in the amount of
$5.7 million while all other loan types had a net loan increase of $1.2 million.
Short-term interest-bearing deposits increased $1.7 million, or 15.1% from $11.1
million at  December  31,  2003 to $12.8  million at December  31,  2004.  These
deposits  were  primarily  generated  from the  decrease in loan  volume.  Total
investment  securities decreased $3.2 million during the year ended December 31,
2004 due to maturities and principal payment reductions.  Investment  securities
available for sale decreased  approximately  $2.9 million due to the maturity of
investments and investment securities held to maturity decreased $342,000 due to
principal  repayments  on  mortgage-backed  securities.  Premises and  equipment
decreased  $447,000  from $4.6  million at December  31, 2003 to $4.2 million at
December 31, 2004. The investment in limited partnerships  decreased $31,000 due
to loss booked in the operation of the  partnership.  Real estate owned and held
for investment  increased $275,000,  or 20.4%, from $1.3 million at December 31,
2003 to $1.6 million at December 31, 2004.  In  connection  with the  Montgomery
acquisition,  the  balances of goodwill and core  deposit  intangibles  are $2.4
million  and  $319,000  respectively.  Goodwill  will be reviewed  annually  for
impairment and core deposit  intangibles are currently being amortized at a rate
of  approximately  $80,000 per year. An  additional  purchase of bank owned life
insurance at a cost of $1.5  million was made during 2004.  At December 31, 2004
the cash surrender value of life insurance was $6.9 million.

     Loans and  Allowance  for Loan  Losses.  Average  loans for the year  ended
December  31, 2004 were $221.6  million  compared to average  loans for the 2003
period of $216.4  million,  an increase of $5.2  million.  The average  rates on
loans were 6.8% for 2003 and 6.1% for 2004, a decrease of 70 basis  points.  The
allowance  for losses  decreased  from $1.2  million  at  December  31,  2003 to
$910,000 at December 31, 2004, a decrease of $311,000.  The  allowance  for loan
losses as a percentage of total loans  decreased  from .55% at December 31, 2003
to .42% at December  31, 2004.  The decrease in allowance  for loan losses was a
result of charge offs totaling $418,000 partially offset by a $103,000 provision
for loan losses during the year ended December 31, 2004 and a loan loss recovery
of $4,000. The ratio of the allowance for loan losses to nonperforming loans was
44.4% at December 31, 2003 compared to 33.6% at December 31, 2003. Nonperforming
loans  decreased  from $3.6  million at  December  31,  2003 to $2.1  million at
December 31, 2004.

     Deposits.  Deposits decreased $1.7 million,  or 0.9% from $190.2 million at
December 31, 2003 compared to $188.5 million at December 31, 2004.  Certificates
of deposit increased $9.7 million,  or 10.3%, while all other deposits decreased
$11.4 million.

     Borrowed Funds. Borrowed funds decreased $1.0 million from $33.9 million at
December 31, 2003 to $32.9  million at December 31, 2004.  Borrowings  decreased
$906,000 due to the scheduled repayment of Federal Home Loan Bank advances and a
decrease  of  $132,000  as the  final  payment  of the note  payable  to  Pedcor
Investments - 1993-XVI, LP ("Pedcor"), a limited partnership organized to build,
own and operate a 48-unit apartment complex. The note to Pedcor was used to fund
an invest  ment in the  Pedcor  low income  housing  income  tax credit  limited
partnership and bore no interest.

     Shareholders' Equity.  Shareholders' equity decreased $2.1 million to $33.4
million  at


                                       9
<PAGE>

December 31, 2004.  The decrease was primarily due to stock  repurchases of $3.1
million and the payment of cash dividends of $1.1 million.  These decreases were
partially  offset by net  income for the year ended  December  31,  2004 of $1.8
million;  Employee Stock Ownership Plan shares earned of $165,000;  and unearned
compensation  amortization  of $105,000  and an increase  in  accumulated  other
comprehensive income of $48,000.

Financial  Condition  at December 31, 2003  Compared to  Financial  Condition at
December 31, 2002

     Total assets  decreased  approximately  $7.7  million,  or 2.9%,  to $261.6
million at December 31, 2003, from $269.3 million at December 31, 2002. Although
asset growth is a primary goal of the Company,  minimal growth was projected for
the years 2002 and 2003 due to the  acquisition of Montgomery.  This  projection
was made based on both Union  Federal and  Montgomery  being located in the same
market area with a duplication of customer base.  During 2003 a commercial  loan
officer was added at our Lafayette, Indiana location to increase Union Federal's
presence in the  Tippecanoe  County market and to generate both loan and deposit
growth. The decrease was primarily due to the use of short-term interest-earning
deposits to repay borrowings.  Net loans increased by $4.5 million,  or 2.1%, to
$221.2  million at  December  31,  2003.  Short-term  interest-earning  deposits
decreased  $24.5  million,  or 68.8% from $35.6  million at December 31, 2002 to
$11.1 million at December 31, 2003.  These  deposits were primarily used to fund
loan growth, for investment purposes and the repayment of Federal Home Loan Bank
advances.  Total  investment  securities  increased $4.8 million during the year
ended  December 31, 2003.  Investment  securities  available for sale  increased
approximately $5.9 million and investment  securities held to maturity decreased
$1.1  million due to  maturities  and  principal  repayment  on  mortgage-backed
securities.  Premises and equipment  increased $1.4 million from $3.2 million at
December  31, 2002 to $4.6  million at December  31, 2003  primarily  due to the
remodeling  of  Union   Federal's   home  office.   The  investment  in  limited
partnerships  increased  $1.4 million  primarily  due to an  investment by Union
Federal with Pedcor  Investments-2003-LIX,  L.P., an Indiana limited partnership
that was  established  to  organize,  build,  own,  operate and lease a 128-unit
residential  rental  community  in  Hamilton,  Butler  County,  Ohio,  known  as
Knollwood   Crossing,   II.  Knollwood   Crossing  II  will  be  operated  as  a
multi-family,  low- and moderate-income  housing project.  Real estate owned and
held for investment decreased $259,000,  or 16.1%, from $1.6 million at December
31, 2002 to $1.3 million at December 31, 2003. In connection with the Montgomery
acquisition,  the  balances of goodwill and core  deposit  intangibles  are $2.4
million and $398,000 respectively.  Goodwill is reviewed annually for impairment
and core deposit  intangibles are currently being amortized.  A purchase of bank
owned  life  insurance  at a cost of $5.0  million  was made  during  the second
quarter of 2003. At December 31, 2003 the cash surrender value of life insurance
was $5.1 million.

     Loans and  Allowance  for Loan  Losses.  Average  loans for the year  ended
December  31, 2003 were $216.4  million  compared to average  loans for the 2002
period of $233.0  million,  a decrease of $16.6  million.  The average  rates on
loans were 7.4% for 2002 and 6.8% for 2003, a decrease of 59 basis  points.  The
allowance  for loan losses  increased  from $1.0 million at December 31, 2002 to
$1.2 million at December 31, 2003,  an increase of $191,000.  The  allowance for
loan losses as a percentage of total loans  increased  from .47% at December 31,
2002 to .55% at December 31, 2003. The increase in allowance for loan losses was
a result of a $238,000  provision for loan losses during the year ended December
31, 2003 and a loan loss recovery of $8,000  partially offset by a charge off of
$55,000.  The ratio of the allowance for loan losses to nonperforming  loans was
33.6% at  December  31,  2002 and at  December  31,  2003.  Nonperforming  loans
increased from $3.1 million at December 31, 2002 to $3.6 million at December 31,
2003.

     Deposits.  Deposits  remained  virtually  the same at December  31, 2003 as
compared  to  December  31,  2002,  increasing  $724 to  $190.2  million.  Union
Federal's deposit growth has been limited due to the duplication of the customer
base of Union  Federal  and  Montgomery.  The limit on deposit  insurance  still
effects the  movement of deposits as prior  Montgomery  certificates  of deposit
mature.  Union  Federal  is  currently  in  the  process  of and  will  continue

                                       10
<PAGE>

developing new deposit products to attract new depositors.

     Borrowed Funds. Borrowed funds decreased $6.1 million from $40.0 million at
December 31, 2002 to $33.9  million at December 31, 2003.  Borrowings  decreased
$5.9 million due to the  scheduled  repayment of Federal Home Loan Bank advances
and a decrease of $171,000 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.  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.

     Shareholders' Equity.  Shareholders' equity decreased $1.7 million to $35.5
million at December 31, 2003. The decrease was primarily due to stock repurchase
of $3.0 million,  the payment of cash  dividends of $1.2 million and  unrealized
losses on securities of $55,000.  These  decreases were partially  offset by net
income for the year ended  December  31, 2003 of $2.3  million;  Employee  Stock
Ownership Plan shares earned of $159,000; and unearned compensation amortization
of $113,000.


Comparison of Operating Results For Years Ended December 31, 2004 and 2003


     General. Net income decreased $535,000, or 22.9%, from $2.3 million for the
year ended  December  31, 2003 to $1.8  million for the year ended  December 31,
2004.  The decrease was  primarily  due to a decrease in net interest  income of
$897,000,  or 10.5%,  to $7.7 million for the year ended  December 31, 2004 from
$8.6 million for the year ended  December 31, 2003. The return on average assets
was 0.69% and 0.85% and the return on average equity was 5.19% and 6.45% for the
years ended December 31, 2004 and 2003 respectively.

     Interest Income.  Total interest income was $14.0 million for 2004 compared
to $15.5 million for 2003. Interest income decreased primarily due to a decrease
in the yield on interest  earning  assets from 6.00% for the year ended December
31, 2003 to 5.74% for the year ended December 31, 2004. Average interest earning
assets also  decreased  from $257.9  million for the 2003  comparable  period to
$243.3 million for the 2004 period.

     Interest Expense.  Interest expense decreased  $607,000 to $6.3 million for
the year ended  December 31, 2004 from $6.9 million for the year ended  December
31, 2003.  The decrease was  primarily due to a decrease in the cost of interest
bearing liabilities from 3.01% for the year ended December 31, 2003 to 2.86% for
the year ended  December  31,  2004 and a decrease in average  interest  bearing
liabilities  from $230.3  million to $220.9 million for the years ended December
31, 2003 and 2004  respectively.  Also  offsetting  the  decrease in the cost of
interest bearing liabilities was amortization of purchase accounting adjustments
which  reduced  interest  expense by $107,000 for the 2004  twelve-month  period
compared to $503,000 for the 2003 twelve-month period.

     Provision for Loan Losses. The provision for loan losses for the year ended
December  31, 2004 was  $103,000  as  compared  to  $238,000  for the year ended
December 31, 2003. The loan charge offs during the 2004 twelve-month period were
$418,000  compared  to a $55,000  charge off taken  during  the 2003  comparable
period.  The balance of the provision for loan losses was  considered  adequate,
based on delinquency, size, condition and components of the loan portfolio.

     Other Income  (Losses).  Other  income  (losses)  increased  from income of
$479,000  for the year ended  December  31, 2003 to income of  $733,000  for the
comparable  period  in 2004.  Service  charges  on  deposit  accounts  increased
$106,000 from $143,000 for the 2003 period to $249,000 for the  comparable  2004
period primarily due to the introduction of an overdraft protection product. Due
to the  operating  results of the limited  partnership,  equity in losses of the
limited partnership  increased from losses of $21,500 recorded in 2003 to losses
of $31,000 in 2004. The investment in the limited  partnership  represents a 99%
equity  investment 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 2004 and 2003 was  recorded.  Cash  value of bank  owned life
insurance  increased  from  $138,000  for the year ended  December  31,  2003 to
$251,000 for the 2004 twelve-month period.  Miscellaneous other income


                                       11
<PAGE>

increased from $220,000 to $264,000 for the year ended 2004.

     Salaries and Employee  Benefits.  Salaries and employee  benefits were $3.1
million for the year ended December 31, 2004, an increase of $262,000,  or 9.2%,
from the 2003 comparable  period. The increase in salaries and employee benefits
was primarily a result of a $63,000 increase in employee insurance expense and a
$100,000 decrease in deferred loan compensation cost. Deferred loan compensation
cost is a reduction  to salary  expense and declined in 2004 as compared to 2003
due to loan volume.  Normal  increases in employee  compensation and the cost of
other employee related benefits were the additional causes for the increase.

     Net  Occupancy  and Equipment  Expense.  Occupancy  and equipment  expenses
increased  $43,000 to $655,000 for the year ended  December 31, 2004 compared to
the 2003 period. This increase was primarily due to the increase in depreciation
expense due to the remodeling of the main office completed in late 2003.

     Legal and Professional  Fees. Legal and professional fees were $306,000 for
the year ended  December 31, 2004  compared to $270,000 for the 2003 period,  an
increase of $36,000.  This  increase was  primarily due to an expense of $29,000
related to the  establishment  of an overdraft  privilege.  Also, legal services
increased  $7,000 and audit and  accounting  services  increased  $18,000  while
consulting  and advisory  expense  decreased  $11,000 for the 2004  twelve-month
period compared to the 2003 period.

     Data Processing.  Data processing  expense  increased  $16,000 for the year
ended  December 31, 2004 compared to the same period in 2003.  This increase was
primarily due to an increase in services provided by the service bureau.

     Advertising  Expense.  Advertising  expense  increased $23,000 for the year
ended  December 31, 2004 compared to the same period in 2003.  This increase was
primarily due to campaigns targeted at deposit growth.

     Other Expenses. Other expenses, consisting primarily of expenses related to
directors' fees,  supervisory  examination fee,  supplies and postage  increased
$62,000 to $1.1 million for 2004  compared to 2003.  The increase was  primarily
due to an increase in expense  related to the operation and loss on sale of real
estate owned. The amount of expense related to real estate owned was an increase
of $50,000 to a $95,000 expense for the twelve months ended 2004.

     Income Tax Expense.  Income tax decreased  $416,000 during 2004 compared to
2003.  The  effective tax rate was 29.6% and 33.5% for the  respective  2004 and
2003 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 and the tax free income on bank owned life insurance.

Comparison of Operating Results For Years Ended December 31, 2003 and 2002

     General. Net income decreased $471,000, or 16.8%, from $2.8 million for the
year ended  December  31, 2002 to $2.3  million for the year ended  December 31,
2003.  The decrease was  primarily  due to a decrease in net interest  income of
$1.1  million,  or 12.0%,  to $8.3 million for the year ended  December 31, 2003
from $9.4 million for the year ended  December  31, 2002.  The return on average
assets was 0.85% and 1.03% and the return on average  equity was 6.45% and 7.19%
for the years ended December 31, 2003 and 2002, respectively.

     Interest Income.  Total interest income was $15.5 million for 2003 compared
to $18.0 million for 2002. Interest income decreased primarily due to a decrease
in the yield on interest  earning  assets from 6.88% for the year ended December
31, 2002 to 6.00% for the year ended December 31, 2003. Average interest earning
assets also  decreased  from $261.4  million for the 2002  comparable  period to
$257.9 million for the 2003 period.

     Interest  Expense.  Interest expense decreased $1.2 million to $6.9 million
for the year  ended  December  31,  2003 from $8.2  million  for the year  ended
December 31, 2002.  The decrease was  primarily due to a decrease in the cost of
interest-bearing  liabilities from 3.59% for the year ended December 31, 2002 to
3.01% for the year ended December 31, 2003.  This decrease was partially  offset

                                       12
<PAGE>

by an increase in average  interest-bearing  liabilities  from $227.1 million to
$230.3  million for the years ended  December  31, 2002 and 2003,  respectively.
Also  offsetting the decrease in the cost of  interest-bearing  liabilities  was
amortization of purchase  accounting  adjustments which reduced interest expense
by $503,000 for the 2003  twelve-month  period  compared to $1.1 million for the
2002 twelve-month period.

     Provision for Loan Losses. The provision for loan losses for the year ended
December  31, 2003 was  $238,000  as  compared  to  $372,000  for the year ended
December  31,  2002.  The loan charge off during 2003 was $55,000  compared to a
$240,000 charge off taken during the 2002 comparable  period. The balance of the
allowance for loan losses was considered adequate,  based on size, condition and
components of the loan portfolio.

     Other Income.  Other income increased from $349,000 for 2002 to $479,000 in
2003.  Service charges on deposit accounts  decreased  $12,000 from $155,000 for
the 2002 period to $143,000 for the  comparable  2003 period.  Union  Federal is
currently  analyzing the fees charged as service charges on deposit  accounts to
determine the fee structure as compared to local  competitors.  Management is of
the opinion fees can be increased  and still  remain  competitive  in the market
area. Due to the operating results of the limited partnership,  equity in losses
of the limited partnership  increased from losses of $20,000 recorded in 2002 to
losses of $21,500 in 2003. The investment in the limited partnership  represents
a 99% equity  investment  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 2003 and 2002 was  recorded.  There were no gains on
securities recorded during 2003 compared to $9,000 in 2002.  Miscellaneous other
income increased $153,000 to $358,000 for the year ended 2003. This increase was
primarily due to the increase in cash value of bank owned life  insurance in the
amount of $149,000.

     Salaries and Employee  Benefits.  Salaries and employee  benefits were $2.9
million for the year ended  December 31, 2003, an increase of $50,000,  or 1.8%,
from the 2002 comparable period.  Normal increases in employee  compensation and
the cost of employee  related benefits were the primary causes for the increase.
While the  workforce  at Union  Federal's  main office  should  remain  somewhat
constant,  growth of the customer  base in other branch  offices may require the
addition of staff to provide quality service.

     Net  Occupancy  and Equipment  Expense.  Occupancy  and equipment  expenses
decreased  $11,000 to $612,000 for the year ended  December 31, 2003 compared to
the 2002 period.  This decrease was primarily  due to the  consolidation  of the
main office from two  locations  to one during the 2003  period.  Union  Federal
completed  the  remodeling  of its home office  located at 221 East Main Street,
Crawfordsville,  Indiana  in the fourth  quarter  of 2003.  With the sale of the
previous home office of Montgomery  at 119 East Main Street,  Crawfordsville  in
January  2004,  the net  effect  on  depreciation  expense  for 2004  will be an
approximate increase of $42,000 as compared to 2003.  Additional savings in real
estate tax expense, insurance expense and utility expense exceeding $15,000 will
be realized from the sale of the 119 East Main Street building.

     Legal and Professional  Fees. Legal and professional fees were $270,000 for
the year ended  December 31, 2003  compared to $233,000 for the 2002 period,  an
increase of $37,000. This increase was due to an increase of $69,000 in the cost
of  contractual  services  which  includes  information  technology  support and
services.  This increase was partially offset by a decrease in legal services of
$15,000 and a decrease in audit and accounting services of $17,000.

     Data Processing.  Data processing  expense  decreased from $812,000 for the
year ended  December 31, 2002 to $393,000 for the  comparable  period in 2003, a
decrease  of  $419,000.  During the first  quarter  of 2002 a one time  $411,000
termination fee for data processing services was expensed in connection with the
Montgomery acquisition.

     Other Expenses. Other expenses, consisting primarily of expenses related to
advertising,  directors' fees, supervisory examination fee, supplies and postage
increased $115,000 to $1.2 million for 2003 compared to 2002. The major expenses
contributing  to


                                       13
<PAGE>

the  increase  in other  expenses  were an increase  in  advertising  expense of
$66,000 due to the  implementation  of an  advertising  program to promote Union
Federal's  products and services  during 2003 and an increase in directors' fees
of $41,000. Total advertising expense and directors' fees for 2003 were $138,000
and $137,000  respectively.  During 2002 advertising was basically used for name
recognition  only due to the ongoing  review and  consolidation  of products and
services  previously  offered by Union  Federal and  Montgomery.  During 2003 an
advertising  campaign  was  established  to promote a new image and the products
offered.  Directors  fees  increased  due to an increase in retainer and regular
meeting  fees and the  establishment  of a fee payment  schedule  for  committee
meetings.

     Income Tax Expense.  Income tax decreased  $307,000 during 2003 compared to
2002.  The  effective tax rate was 33.5% and 34.5% for the  respective  2003 and
2002 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. The additional reduction for 2003 in the effective tax rate
was caused by the tax free income on bank owned life insurance.


Liquidity and Capital Resources

     The Financial  Regulatory Relief and Economic Efficiency Act of 2000, which
was  signed  into law on  December  27,  2000,  repealed  the  former  statutory
requirement that all savings  associations  maintain an average daily balance of
liquid assets in a minimum  amount of not less than 4% or more than 10% of their
withdrawable  accounts  plus  short-term  borrowings.  The OTS adopted a rule in
March 2001 that implemented this revised statutory requirement, although savings
associations remain subject to the OTS regulation that requires them to maintain
sufficient liquidity to ensure their safe and sound operation.

                                       14
<PAGE>

     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, 2004.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                           ----------------------------------------------
                                                                2004             2003              2002
                                                           ----------------------------------------------
                                                                          (In thousands)
<S>                                                          <C>              <C>               <C>
Operating activities                                         $   2,925        $   2,760         $   4,276
                                                             ---------        ---------         ---------
Investing activities:
Investment securities
  Purchase of investment securities available for sale             (50)         (11,000)               --
  Proceeds from maturities and sales of investment
    securities available for sale                                3,000            5,000                76
  Proceeds from maturities and paydowns of
    mortgage-backed securities held to maturity                    343            1,146               827
  Proceeds from maturities of investment securities
    held to maturity                                                --               --               400
Investment in limited partnership                                   --           (1,400)               --
Net change in loans                                              1,464           (5,123)           20,949
Additions to real estate owned                                     (12)            (162)               --
Proceeds on sale of foreclosed real estate                       2,173              663               951
Purchases of premises and equipment                               (124)          (1,682)             (608)
Premium on life insurance                                       (1,500)          (5,000)               --
Net cash received in acquisition                                    --               --            15,830
Other investing activities                                         300             (101)                6
                                                             ---------        ---------         ---------
      Net cash provided by (used in) investing activities        5,594          (17,659)           38,431
                                                             ---------        ---------         ---------
Financing activities:
Net change in
  Interest bearing demand and savings deposits                 (11,421)          10,442            13,195
  Certificates of deposits                                       9,690          (10,119)          (21,173)
Proceeds from borrowings                                            --            1,400            20,000
Repayment of borrowings                                           (932)          (7,328)          (23,255)
Net change in advances by borrowers for taxes and
  insurance                                                        (24)              39               (44)
Cash dividends                                                  (1,144)          (1,233)           (1,112)
Stock options exercised                                             --               --               117
Repurchase of common stock                                      (3,088)          (3,000)           (7,414)
                                                             ---------        ---------         ---------
      Net cash used in financing activities                     (6,919)          (9,799)          (19,686)
                                                             ---------        ---------         ---------
Net change in cash and cash equivalents                      $   1,600        $ (24,698)        $  23,021
                                                             =========        =========         =========
</TABLE>

                                       15
<PAGE>


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, 2004, 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, 2004:
<TABLE>
<CAPTION>

                                                 At December 31, 2004
                        --------------------------------------------------------------------
                            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%     $  3,808       11.4%         $28,909          $25,101
Core capital (2)           4.0        10,155       11.4           28,909           18,754
Risk-based capital         8.0        13,565       17.3           29,367           15,802
--------------------------------------------------------------------------------------------
</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,  2004,   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.

Off-Balance Sheet Arrangements


     As of the  date of this  Annual  Report,  the  Company  does  not  have any
off-balance  sheet  arrangements  that have or are  reasonably  likely to have a
current  or  future  effect  on the  Company's  financial  condition,  change in
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital  expenditures or capital  resources that are material to investors.  The
term "off-balance sheet arrangement" generally means any transaction, agreement,
or other  contractual  arrangement  to which an entity  unconsolidated  with the
Company is a party and under which the Company  has (i) any  obligation  arising
under a guarantee contract,  derivative instrument or variable interest; or (ii)
a retained  or  contingent  interest  in assets  transferred  to such  entity or
similar arrangement that serves as credit,  liquidity or market risk support for
such assets.

Contractual Obligations


     In the  ordinary  course of  operations,  the Company  enters into  certain
contractual  obligations.   Such  obligations  include  contracts  with  service
providers as well as leases for  premises and  equipment.  The  following  table
summarizes  the  Company's   significant  fixed  and  determinable   contractual
obligations, by payment date, at December 31, 2004.

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                   Contractual Obligations Due By Period
                                                                 One             Three
                                                Within         Year to         Years to           After
(Dollars in thousands)                        One Year       Three Years      Five Years       Five Years         Total
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>              <C>              <C>             <C>
Deposits without stated maturity            $  84,747         $     --         $     --         $    --         $  84,747
Certificates of deposit                        46,487           40,778           16,441               8           103,714
Borrowings                                      3,143           10,188              214          19,363            32,908
Service contract (1)                              465            1,066            1,066           1,066             3,663
Operating lease (2)                                21               41               --              --                62
                                            -----------------------------------------------------------------------------
Total contractual obligations               $ 134,863         $ 52,073          $17,721         $20,437         $ 225,094
                                            =============================================================================
</TABLE>
-----------------------------------------

(1)  The service  contract is with Aurum  Technologies  to provide Union Federal
     with service  bureau  support for  processing of deposit and loan accounts.
     The contract fees are based on number of accounts  processed and additional
     reporting  services  provided  from time to time.  The  amount  shown is an
     estimate  of cost  based on  current  account  support  and  reporting  fee
     structures. The contract expires in February 2012.

(2)  The  operating  lease is for a branch  office  offering  lobby and drive-up
     services  located  at 1688  Crawfordsville  Square  Drive,  Crawfordsville,
     Indiana. The lease expires on December 31, 2008.


Impact of Accounting Changes


     In December,  2004, the Financial  Accounting Standards Board (FASB) issued
an amendment to SFAS 123 (SFAS 123R) which eliminates the ability to account for
share-based compensation  transactions using Accounting Principles Board Opinion
No. 25 and generally  requires that such  transactions  be accounted for using a
fair value-based  method.  SFAS 123R will be effective for the Company beginning
July 1,  2005.  SFAS 123R  applies  to all  awards  granted  after the  required
effective  date and to awards  modified,  repurchased,  or cancelled  after that
date. The cumulative  effect of initially  applying this  Statement,  if any, is
recognized as of the required effective date.

     As of the required  effective  date, the Company will apply SFAS 123R using
either the modified  version of prospective  application or the modified version
of retrospective application.  Under prospective transition method, compensation
cost is  recognized on or after the required  effective  date for the portion of
outstanding  awards for which the requisite  service has not yet been  rendered,
based on the grant-date fair value of those awards calculated under SFAS 123 for
either  recognition  or pro forma  disclosures.  For periods before the required
effective date, a company may elect to apply a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis  consistent with the pro forma  disclosures  required for those periods by
SFAS 123.

     The  Company is  currently  evaluating  the effect of the  recognition  and
measurement  provisions of SFAS 123R but believes the adoption of SFAS 123R will
not result in a  material  impact on the  Company's  results  of  operations  or
financial condition.


Impact of Inflation and Changing Prices


     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


                                       17
<PAGE>

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, 2004 and 2003.

<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)
2004:
<S>      <C>      <C>      <C>        <C>       <C>      <C>        <C>          <C>
March    $3,554   $1,598   $1,956     $110      $444     $0.23      $0.23        $0.15
June      3,513    1,548    1,965        3       408      0.22       0.21         0.15
September 3,447    1,572    1,875       60       451      0.24       0.24         0.15
December  3,463    1,602    1,861      (70)      494      0.28       0.27         0.15

2003:
March    $4,226   $1,921   $2,305     $ 30      $645     $0.31      $0.30        $0.15
June      3,952    1,785    2,167       30       551      0.28       0.28         0.15
September 3,823    1,669    2,154      118       668      0.35       0.34         0.15
December  3,480    1,552    1,928       60       468      0.24       0.24         0.15
</TABLE>

     During the quarter ended December 31, 2004, classified assets decreased due
primarily to a decrease in substandard  loans from $2.6 million at September 30,
2004 to $2.1  million.  Based upon  review of the  allowance  for loan losses at
December 31, 2004, a $70,000  adjustment  was made to adjust the  allowance  for
loan losses to a level deemed appropriate based on the calculation

Quantitative and Qualitative Disclosures about Market Risk


     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

                                       18
<PAGE>

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  74.1% of its loan portfolio at December 31,
2004.  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 Board of  Directors  has  established  targets  for minimum NPV ratios.
Currently  minimum  targets for NPV ratios are 13%, 12% and 11% for increases of
100,  200 and 300 basis  points,  respectively,  and 15% for a 100  basis  point
decline.  Monitoring of the change in NPV ratios has an effect on the maturities
of loan and savings  products  offered by Union Federal.  Current NPV ratios and
potential  changes in NPV  ratios are also  reviewed  to  determine  the type of
investments  made and  borrowings  obtained by Union  Federal.  Union Federal is
currently  reviewing  available  options for the sale of loans in the  secondary
market. This option would be another means of maintaining acceptable NPV ratios.

     Presented  below, as of December 31, 2004 and 2003, is an analysis 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  points.  It is
estimated that at December 31, 2004, NPV would decrease 16% and 26% in the event
of 200 and 300 basis point  increases  in market  interest  rates  respectively,
compared to 22% and 34% for the same increases at December 31, 2003. Information
was not available  for 200 and 300 point  decreases at the end of 2003 and 2004.
At December  31, 2004,  2% of the present  value of Union  Federal's  assets was
approximately $5.3 million. The interest rate risk of a 200 basis point increase
in market rates was $6.0 million at December 31, 2004.

                                       19
<PAGE>
<TABLE>
<CAPTION>

                                          December 31, 2004
-----------------------------------------------------------------------------------------------
                          Net Portfolio Value                         NPV as % of PV of Assets
          Change          -------------------                         ------------------------
         In Rates       $ Amount        $ Change        % Change        NPV Ratio       Change
         --------       --------        --------        --------        ---------       ------
                                         (Dollars in thousands)
<S>        <C>          <C>             <C>               <C>             <C>           <C>
         + 300 bp *     $28,629         $(9,887)          (26)%           11.51%        (302)bp
         + 200 bp        32,545          (5,970)          (16)            12.78         (175)bp
         + 100 bp        36,105          (2,411)           (6)            13.87          (66)bp
             0 bp        38,515              --            --             14.53           --
         - 100 bp        38,630             115             0             14.42          (11)bp

                           Interest Rate Risk Measures: 200 Basis Point Rate Shock

         Pre-Shock NPV Ratio: NPV as % of PV of Assets                 14.53%
         Exposure Measure: Post-Shock NPV Ratio                        12.78%
         Sensitivity Measure: Change in NPV Ratio                      175 bp

                                          December 31, 2003
-----------------------------------------------------------------------------------------------
                          Net Portfolio Value                         NPV as % of PV of Assets
          Change          -------------------                         ------------------------
         In Rates       $ Amount        $ Change        % Change        NPV Ratio       Change
         --------       --------        --------        --------        ---------       ------
                                         (Dollars in thousands)
         + 300 bp *     $26,001        $(13,627)          (34)%           10.30%        (427)bp
         + 200 bp        30,989          (8,638)          (22)            11.96         (262)bp
         + 100 bp        35,792          (3,835)          (10)            13.46         (111)bp
             0 bp        39,628              --            --             14.57           --
         - 100 bp        40,665           1,037             3             14.76           19 bp

                           Interest Rate Risk Measures: 200 Basis Point Rate Shock

         Pre-Shock NPV Ratio: NPV as % of PV of Assets                 14.57%
         Exposure Measure: Post-Shock NPV Ratio                        11.96%
         Sensitivity Measure: Change in NPV Ratio                      262 bp

-----------------------------------------
*Basis points (1 basis point equals .01%)
</TABLE>


     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.



                                       20
<PAGE>


             Report of Independent Registered Public Accounting Firm


Audit Committee, Board of Directors and Shareholders
Union Community Bancorp
Crawfordsville, Indiana

     We have  audited  the  accompanying  consolidated  balance  sheets of Union
Community Bancorp as of December 31, 2004 and 2003, and the related consolidated
statements of income,  shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2004. These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). 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  referred to above
present  fairly,  in all  material  respects,  the  financial  position of Union
Community  Bancorp as of  December  31,  2004 and 2003,  and the  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2004, in conformity with accounting  principles  generally accepted
in the United States of America.



/s/ BKD, LLP

Indianapolis, Indiana
January 28, 2005

                                       21
<PAGE>
<TABLE>
<CAPTION>
                             Union Community Bancorp
                           Consolidated Balance Sheets
                           December 31, 2004 and 2003

                                                                     2004                   2003
                                                                ------------------------------------
Assets
<S>                                                             <C>                     <C>
  Cash                                                          $    706,107            $    784,673
  Interest-bearing demand deposits                                12,781,907              11,103,669
                                                                ------------            ------------
    Cash and cash equivalents                                     13,488,014              11,888,342
  Interest-bearing deposits                                          115,647                 150,239
  Investment securities
    Available-for-sale                                             3,037,390               5,908,437
    Held to maturity (fair value of $161,000 and $526,000)           151,749                 493,801
                                                                ------------            ------------
      Total investment securities                                  3,189,139               6,402,238
  Loans, net of allowance for loan losses
        of $910,000 and $1,221,000                               217,055,756             221,230,152
  Premises and equipment                                           4,180,346               4,627,766
  Federal Home Loan Bank stock                                     3,720,600               3,556,100
  Investment in limited partnership                                2,184,092               2,215,109
  Foreclosed assets and real estate held for development, net      1,622,516               1,347,824
  Goodwill                                                         2,392,808               2,392,808
  Interest receivable                                              1,085,532               1,128,342
  Cash value of life insurance                                     6,899,927               5,149,394
  Other assets                                                       965,034               1,488,457
                                                                ------------            ------------
      Total assets                                              $256,899,411            $261,576,771
                                                                ============            ============
Liabilities
  Deposits
    Noninterest-bearing                                         $  4,515,065            $  3,929,724
    Interest-bearing                                             183,945,975             186,262,428
                                                                ------------            ------------
      Total deposits                                             188,461,040             190,192,152
  Borrowings                                                      32,907,898              33,946,109
  Interest payable                                                   651,355                 572,487
  Other liabilities                                                1,442,176               1,336,501
                                                                ------------            ------------
      Total liabilities                                          223,462,469             226,047,249
                                                                ------------            ------------

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 - 1,928,000 and 2,100,000 shares       20,654,353              22,395,104
  Retained earnings                                               14,401,571              14,984,757
  Accumulated other comprehensive loss                                (7,615)                (55,295)
  Unearned employee stock ownership plan (ESOP) shares            (1,137,566)             (1,228,998)
  Unearned recognition and retention plan (RRP) shares              (473,801)               (566,046)
                                                                ------------            ------------
      Total shareholders' equity                                  33,436,942              35,529,522
                                                                ------------            ------------
      Total liabilities and shareholders' equity                $256,899,411            $261,576,771
                                                                ============            ============
See Notes to Consolidated Financial Statements
</TABLE>


                                       22
<PAGE>
<TABLE>
<CAPTION>

                             Union Community Bancorp
                        Consolidated Statements of Income
                     Years December 31, 2004, 2003 and 2002

                                                                    2004                   2003               2002
                                                                -----------------------------------------------------
Interest and Dividend Income
<S>                                                             <C>                     <C>               <C>
  Loans                                                         $13,533,368             $14,743,258       $17,239,593
  Investment securities
    Mortgage-backed securities                                       20,487                  56,283           150,267
    Other investment securities                                     104,257                 142,279            48,185
  Federal Home Loan Bank stock                                      161,701                 175,720           207,550
  Deposits with financial institutions                              157,223                 363,708           340,431
                                                                -----------             -----------       -----------
      Total interest and dividend income                         13,977,036              15,481,248        17,986,026
                                                                -----------             -----------       -----------

Interest Expense
  Deposits                                                        4,633,987               5,127,831         6,304,542
  Federal Home Loan Bank advances                                 1,686,181               1,799,367         1,857,892
                                                                -----------             -----------       -----------
      Total interest expense                                      6,320,168               6,927,198         8,162,434
                                                                -----------             -----------       -----------

Net Interest Income                                               7,656,868               8,554,050         9,823,592
  Provision for loan losses                                         102,969                 238,431           372,472
                                                                -----------             -----------       -----------
Net Interest Income After Provision for
  Loan Losses                                                     7,553,899               8,315,619         9,451,120
                                                                -----------             -----------       -----------

Other Income
  Service charges on deposit accounts                               249,128                 143,084           155,330
  Equity in losses of limited partnership                           (31,017)                (21,500)          (20,000)
  Net realized gains on sales of available-for-sale
    securities                                                           --                      --             8,534
  Increase in cash value of life insurance                          250,533                 137,743                --
  Other income                                                      263,977                 220,090           205,073
                                                                -----------             -----------       -----------
      Total other income                                            732,621                 479,417           348,937
                                                                -----------             -----------       -----------

Other Expenses
  Salaries and employee benefits                                  3,120,721               2,858,857         2,808,870
  Net occupancy expenses                                            321,742                 291,757           310,868
  Equipment expenses                                                333,285                 319,901           311,678
  Legal and professional fees                                       305,580                 270,195           233,325
  Data processing                                                   409,570                 393,377           811,773
  Advertising expense                                               161,128                 137,743            72,085
  Other expenses                                                  1,081,351               1,019,502           970,261
                                                                -----------             -----------       -----------
      Total other expenses                                        5,733,377               5,291,332         5,518,860
                                                                -----------             -----------       -----------

Income Before Income Tax                                          2,553,143               3,503,704         4,281,197
   Income tax expense                                               756,000               1,172,000         1,478,935
                                                                ------------            -----------       -----------

Net Income                                                      $ 1,797,143             $ 2,331,704       $ 2,802,262
                                                                ===========             ===========       ===========

Basic Earnings per Share                                        $      0.97             $      1.18       $      1.25
Diluted Earnings per Share                                             0.95                    1.16              1.24

See Notes to Consolidated Financial Statements
</TABLE>


                                       23
<PAGE>
<TABLE>
<CAPTION>

                             Union Community Bancorp
                 Consolidated Statements of Shareholders' Equity
                     Years December 31, 2004, 2003 and 2002


                                                                          Accumulated
                                                                             Other        Unearned
                                          Common          Retained       Comprehensive      ESOP         Unearned
                                           Stock          Earnings       Income (Loss)     Shares      Compensation      Total
                                        ------------------------------------------------------------------------------------------
<S>               <C>                   <C>              <C>                            <C>             <C>            <C>
Balances, January 1, 2002               $20,547,581      $15,556,661                    $(1,420,777)    $(943,312)     $33,740,153
  Net and comprehensive income                             2,802,262                                                     2,802,262
  Cash dividends ($.52 per share)                         (1,161,061)                                                   (1,161,061)
  Shares issued in acquisition,
    net of cost                           8,954,487                                                                      8,954,487
  Shares cancelled in acquisition          (257,111)                                                                      (257,111)
  Purchase of common stock               (5,247,896)      (2,165,648)                                                   (7,413,544)
  Stock options exercised                   116,750                                                                        116,750
  Amortization of unearned
    compensation expense                                                                                  263,831          263,831
  ESOP shares earned                         45,374                                          97,376                        142,750
                                        -----------      -----------       ---------    -----------     ---------      -----------
Balances, December 31, 2002              24,159,185       15,032,214                     (1,323,401)     (679,481)      37,188,517
  Comprehensive income
    Net income                                             2,331,704                                                     2,331,704
    Other comprehensive loss,
      net of tax  - unrealized losses
      on securities                                                        $ (55,295)                                      (55,295)
                                                                                                                       -----------
  Comprehensive income                                                                                                   2,276,409
                                                                                                                       -----------
  Cash dividends ($.60 per share)                         (1,207,295)                                                   (1,207,295)
  Purchase of common stock               (1,828,434)      (1,171,866)                                                   (3,000,300)
  Amortization of unearned
    compensation expense                                                                                  113,435          113,435
  ESOP shares earned                         64,353                                          94,403                        158,756
                                        -----------      -----------       ---------    -----------     ---------      -----------


Balances, December 31, 2003              22,395,104       14,984,757         (55,295)    (1,228,998)     (566,046)      35,529,522
  Comprehensive income
    Net income                                             1,797,143                                                     1,797,143
    Other comprehensive gain,
      net of tax  - unrealized losses
      on securities                                                           47,680                                        47,680
                                                                                                                       -----------
  Comprehensive income                                                                                                   1,844,823
                                                                                                                       -----------
  Cash dividends ($.60 per share)                         (1,118,911)                                                   (1,118,911)
  Purchase of common stock               (1,826,486)      (1,261,418)                                                   (3,087,904)
  Amortization of unearned
    compensation expense                     12,343                                                        92,245          104,588
  ESOP shares earned                         73,392                                          91,432                        164,824
                                        -----------      -----------       ---------    -----------     ---------      -----------


Balances, December 31, 2004             $20,654,353      $14,401,571       $  (7,615)   $(1,137,566)    $(473,801)     $33,436,942
                                        ===========      ===========       =========    ===========     =========      ===========


See Notes to Consolidated Financial Statements
</TABLE>



                                       24
<PAGE>
<TABLE>
<CAPTION>

                             Union Community Bancorp
                      Consolidated Statements of Cash Flows
                     Years December 31, 2004, 2003 and 2002

                                                                   2004                   2003                   2002
                                                              -----------------------------------------------------------
Operating Activities
<S>                                                           <C>                    <C>                    <C>
  Net income                                                  $   1,797,143          $   2,331,704          $   2,802,262
  Items not requiring (providing) cash
    Provision for loan losses                                       102,969                238,431                372,472
    Depreciation                                                    354,406                321,673                327,392
    Deferred income tax                                             296,573                228,558                398,958
    Amortization of unearned compensation expense                   104,588                113,435                263,831
    ESOP shares earned                                              164,824                158,756                142,750
    Amortization of purchase accounting adjustments                  37,334               (339,379)              (907,695)
  Net change in
    Interest receivable                                              42,810                148,196                301,166
    Interest payable                                                 78,868                (77,695)               (52,340)
  Other adjustments                                                 (54,638)              (363,107)               626,971
                                                              -------------          -------------          -------------
      Net cash provided by operating activities                   2,924,877              2,760,572              4,275,767
                                                              -------------          -------------          -------------

Investing Activities
  Net change in interest-bearing deposits                            34,592                 (5,132)                94,521
  Purchases of investment securities available for sale             (50,000)           (11,000,000)                    --
  Proceeds from maturities of investment securities available
    for sale                                                      3,000,000              5,000,000                     --
  Proceeds from sales of investment securities available for sale        --                     --                 75,613
  Proceeds from maturities of investment securities held
    to maturity                                                     343,276              1,146,213              1,227,200
  Net change in loans                                             1,464,174             (5,122,596)            20,948,780
  Purchases of premises and equipment                              (123,762)            (1,682,121)              (607,578)
  Additions to real estate owned                                    (11,503)              (162,012)               (88,509)
  Proceeds from real estate sales                                 2,173,272                663,030                950,881
  Contribution to limited partnership                                    --             (1,400,000)                    --
  Purchase of life insurance                                     (1,500,000)            (5,000,000)                    --
  Net cash received in acquisition                                       --                     --             15,829,942
  Other investing activities                                        264,130                (95,881)                    --
                                                              -------------          --------------         -------------
      Net cash provided by (used in) investing activities         5,594,179            (17,658,499)            38,430,850
                                                              -------------          --------------         -------------

Financing Activities
  Net change in
    Interest-bearing demand and savings deposits                (11,421,029)            10,442,128             13,195,417
    Certificates of deposit                                       9,689,917            (10,119,404)           (21,173,403)
  Proceeds from borrowings                                               --              1,400,000             20,000,000
  Repayment of borrowings                                          (931,586)            (7,327,289)           (23,254,580)
  Cash dividends                                                 (1,144,711)            (1,233,996)            (1,111,544)
  Stock options exercised                                                --                     --                116,750
  Repurchase of common stock                                     (3,087,904)            (3,000,300)            (7,413,544)
  Net change in advances by borrowers for taxes and
    insurance                                                       (24,071)                38,943                (44,428)
                                                              -------------          -------------          -------------
      Net cash used in financing activities                      (6,919,384)            (9,799,918)           (19,685,332)
                                                              -------------          -------------          -------------

Net Change in Cash and Cash Equivalents                           1,599,672            (24,697,845)            23,021,285

Cash and Cash Equivalents, Beginning of Year                     11,888,342             36,586,187             13,564,902
                                                              -------------          -------------          -------------

Cash and Cash Equivalents, End of Year                        $  13,488,014          $  11,888,342          $  36,586,187
                                                              =============          =============          =============

Additional Cash Flows Information
  Interest paid                                               $   6,241,300          $   7,004,893          $   8,214,774
  Income tax paid                                                   452,583                868,653              1,124,491
  Loans transferred to foreclosed real estate                     2,542,943                280,311                663,142
See Notes to Consolidated Financial Statements
</TABLE>


                                       25
<PAGE>

                             Union Community Bancorp
                   Notes to Consolidated Financial Statements
                        December 31, 2004, 2003 and 2002
                       (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 (Union
Federal)  conform to  accounting  principles  generally  accepted  in the United
States of America 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 accounting principles
generally  accepted in the United States of America 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.  Union Federal  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 Company  generates  mortgage,  commercial  and  consumer  loans and receives
deposits from  customers  located  primarily in Montgomery  County,  Indiana and
surrounding  counties.  The Company's  loans are  generally  secured by specific
items of  collateral  including  real  property,  consumer  assets and  business
assets.

Consolidation - The consolidated  financial  statements  include the accounts of
the Company and Union Federal  after  elimination  of all material  intercompany
transactions.

Cash  Equivalents - The Company  considers all liquid  investments with original
maturities of three months or less to be cash equivalents.

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  are not  considered  impaired.  Certain  nonaccrual  and  substantially
delinquent loans may be considered to be impaired.  Generally,  loans are placed
on non-accrual status at ninety days past due and interest is considered a loss,
unless the loan is  well-secured  and in the process of collection.  The Company
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,


                                       26
<PAGE>


the borrower may be unable to meet  payments as they become due.  When  interest
accrual is discontinued, all unpaid accrued interest is reversed when considered
uncollectible.  Interest  income is  subsequently  recognized only to the extent
cash  payments  are  received.  Certain  loan  fees and  direct  costs are being
deferred  and  amortized  as an  adjustment  of  yield  on the  loans  over  the
contractual lives of the loans. When a loan is paid off or sold, any unamortized
loan origination fee balance is credited to income.

Allowance for loan losses is  maintained  to absorb 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.  Loan losses are charged  against the allowance when
management  believes  the  uncollectibility  of a  loan  balance  is  confirmed.
Subsequent  recoveries,  if any, are credited to the  allowance.  The  Company'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  and  pools  of  loans.  Changes  in  classifications  of both
performing and nonperforming  loans affect the amount of the formula  allowance.
Loss factors are based on the Company's  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.

There are certain  inherent risks in the Company's loan portfolio;  accordingly,
the  Company  includes  certain  environmental  or  qualitative  factors  in its
determination  of the adequacy of the allowance  for loan losses.  These factors
include  existing  general  economic  and  business  conditions   affecting  the
Company'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
regulatory examination results. 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  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
Company  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.

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,  2004,  the  allowance  for loan  losses  is based on  information
currently  available.  A worsening or  protracted  economic  decline in the area
within  which  the  Association   operates  would  increase  the



                                       27
<PAGE>

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 and real  estate held for  development,  net arises from loan
foreclosure  or deed in lieu of foreclosure  and  acquisition of real estate for
development  and are  carried at the lower of cost or fair value less  estimated
selling costs.  Costs relating to  development  and  improvement of property are
capitalized,  whereas costs  relating to the holding of property,  net of rental
and other income, are expensed.

Goodwill  is  annually  tested  for  impairment.  If the  implied  fair value of
goodwill is lower than its carrying amount,  a goodwill  impairment is indicated
and goodwill is written down to its implied fair value.  Subsequent increases in
goodwill value are not recognized in the financial statements.

Core deposit  intangible is being  amortized on an accelerated  basis over seven
years until such time that  straight-line  amortization  exceeds the accelerated
method.  This asset is periodically  evaluated as to the  recoverability  of its
carrying value.

Stock options - The Company has a stock-based employee  compensation plan, which
is described more fully in Note 17. The Company accounts for this plan under the
recognition  and  measurement  principles of APB Opinion No. 25,  Accounting for
Stock Issued to Employees, and related interpretations.  No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans had an exercise price equal to the market value of the  underlying  common
stock on the grant  date.  The  following  table  illustrates  the effect on net
income and  earnings  per share as if the  Company  had  applied  the fair value
provisions  of  Statement  of  Financial  Accounting  Standards  (SFAS) No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.

                                       28
<PAGE>

<TABLE>
<CAPTION>

                                                                         2004             2003             2002
                                                                      --------------------------------------------
<S>                                                                   <C>               <C>               <C>
   Net income, as reported                                            $  1,797          $ 2,332           $ 2,802
   Less:  Total stock-based employee compensation cost
          determined under the fair value based method, net of
          income taxes                                                     (18)             (37)              (48)
                                                                      --------          -------           -------

   Pro forma net income                                               $  1,779          $ 2,295           $ 2,754
                                                                      ========          =======           =======

   Earnings per share
      Basic - as reported                                             $    .97          $  1.18           $  1.25
                                                                      ========          =======           =======
      Basic - pro forma                                               $    .96          $  1.16           $  1.22
                                                                      ========          =======           =======
      Diluted - as reported                                           $    .95          $  1.16           $  1.24
                                                                      ========          =======           =======
      Diluted - pro forma                                             $    .94          $  1.15           $  1.22
                                                                      ========          =======           =======
</TABLE>

In December  2004,  the Financial  Accounting  Standards  Board (FASB) issued an
amendment  to SFAS 123 (SFAS 123R) which  eliminates  the ability to account for
share-based compensation  transactions using Accounting Principles Board Opinion
No. 25 and generally  requires that such  transactions  be accounted for using a
fair value-based  method.  SFAS 123R will be effective for the Company beginning
July 1,  2005.  SFAS 123R  applies  to all  awards  granted  after the  required
effective  date and to awards  modified,  repurchased,  or cancelled  after that
date. The cumulative  effect of initially  applying this  Statement,  if any, is
recognized as of the required effective date.

As of the required effective date, the Company will apply SFAS 123R using either
the modified  version of  prospective  application  or the  modified  version of
retrospective  application.  Under prospective  transition method,  compensation
cost is  recognized on or after the required  effective  date for the portion of
outstanding  awards for which the requisite  service has not yet been  rendered,
based on the grant-date fair value of those awards calculated under SFAS 123 for
either  recognition  or pro forma  disclosures.  For periods before the required
effective date, a company may elect to apply a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis  consistent with the pro forma  disclosures  required for those periods by
SFAS 123.

The  Company  is  currently   evaluating  the  effect  of  the  recognition  and
measurement  provisions of SFAS 123R but believes the adoption of SFAS 123R will
not result in a  material  impact on the  Company's  results  of  operations  or
financial condition.

Income tax in the consolidated statements 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 and RRP shares which
have not vested  have been  excluded  from the  computation  of  average  shares
outstanding.

                                       29
<PAGE>

Note 2:   Restriction on Cash and Due From Banks


The Company is required to maintain reserve funds in cash and/or on deposit with
the  Federal  Reserve  Bank.  The  reserve  required  at  December  31, 2004 was
$147,000.

Note 3:   Investment Securities
<TABLE>
<CAPTION>


                                                                                          2004
                                                               -------------------------------------------------------
                                                                                 Gross           Gross
                                                               Amortized      Unrealized      Unrealized         Fair
                                                                 Cost            Gains          Losses           Value
                                                              --------------------------------------------------------
Available for sale
<S>                                                             <C>             <C>               <C>           <C>
         Federal agencies                                       $3,000          $--               $28           $2,972
         Marketable equity securities                               50           15                --               65
                                                                ------          ---               ---           ------
                  Total available for sale                       3,050           15                28            3,037

Held to maturity - mortgage-backed securities                      152            9                --              161
                                                                ------          ---               ---           ------

                  Total investment securities                   $3,202          $24               $28           $3,198
                                                                ======          ===               ===           ======

                                                                                        2003
                                                               --------------------------------------------------------
                                                                                 Gross           Gross
                                                               Amortized      Unrealized      Unrealized         Fair
                                                                 Cost            Gains          Losses           Value
                                                               --------------------------------------------------------
Available for sale - federal agencies                           $6,000          $ 2               $94           $5,908
Held to maturity - mortgage-backed securities                      494           32                --              526
                                                                ------          ---               ---           ------

                  Total investment securities                   $6,494          $34               $94           $6,434
                                                                ======          ===               ===           ======
</TABLE>


At December 31, 2004, federal agencies outstanding mature in one to five years.

Proceeds from sales of  securities  available for sale during 2002 were $76,000.
Gross  gains of $9,000  were  realized  on those  sales.  There were no sales of
securities available for sale during 2004 and 2003.

Certain  investment  securities  are reported in the financial  statements at an
amount less than their historical cost. Total fair value of these investments at
December  31,  2004  and  2003,  were   $2,972,000  and  $4,906,000,   which  is
approximately   98%   and   76%  of   the   Company's   available-for-sale   and
held-to-maturity  investment  portfolio.  These declines primarily resulted from
recent increases in market interest rates.

Based on evaluation of available  evidence,  including  recent changes in market
interest  rates,  management  believes  the  declines  in fair  value  for these
securities are temporary.

Should the impairment of any of these  securities  become other than  temporary,
the  cost  basis  of the  investment  will be  reduced  and the  resulting  loss
recognized  in net income in the period the  other-than-temporary  impairment is
identified.

                                       30
<PAGE>

At December 31, 2004, a federal  agency with a fair value of  $2,972,000  and an
unrealized loss of $28,000 was in an unrealized loss position for over one year.
At December 31, 2003, two federal agencies with a total fair value of $4,906,000
and  unrealized  losses of $94,000 were in an unrealized  loss position for less
than one year.

Note 4:   Loans and Allowance
<TABLE>
<CAPTION>


                                                                      2004       2003
                                                                   --------------------
Real estate mortgage loans
<S>                                                                <C>         <C>
         One-to-four family                                        $148,621    $154,297
         Multi-family                                                11,096      11,982
         Commercial                                                  37,600      38,569
         Land                                                         6,884       3,315
Real estate construction loans                                        2,271       3,134
Commercial loans                                                      9,358       9,992
Individuals' loans for household and other personal expenditures      1,723         817
                                                                   --------    --------
                                                                    217,553     222,106
Unamortized deferred loan costs                                         413         345
Allowance for loan losses                                              (910)     (1,221)
                                                                   --------    --------
                  Total loans                                      $217,056    $221,230
                                                                   ========    ========
</TABLE>


                                                2004       2003        2002
                                             -------------------------------

Allowance for loan losses
         Balances, beginning of year         $ 1,221    $ 1,030    $   520
         Allowance acquired in acquisition      --         --          379
         Recoveries on loans                       4          8         --
         Provision for losses                    103        238        372
         Loans charged off                      (418)       (55)      (241)
                                             -------    -------    -------

         Balances, end of year               $   910    $ 1,221    $ 1,030
                                             =======    =======    =======


Information on impaired loans is summarized below.
<TABLE>
<CAPTION>
                                                                          2004      2003
                                                                        ----------------
<S>                                                                     <C>      <C>
Impaired loans, all of which have an allocated allowance                $1,773   $2,670
Allowance for impaired loans (included in the Company's allowance for
         loan losses)                                                      204      440
</TABLE>

The average balance of impaired loans was $2,546,000,  $2,182,000 and $3,060,000
during 2004, 2003 and 2002. During those years, the difference  between interest
income  recognized on impaired loans and cash-basis  interest  collected was not
material.

At  December  31,  2004  and  2003,   non-accruing  loans  were  $2,050,000  and
$3,638,000,  respectively. At December 31, 2004 and 2003, there were no accruing
loans delinquent 90 days or more.

                                       31
<PAGE>


Note 5:   Premises and Equipment


                              2004       2003
                           ------------------
Land                       $   562    $   569
Buildings                    3,641      3,885
Equipment                    1,435      1,318
                           -------    -------
         Total cost          5,638      5,772
Accumulated depreciation    (1,458)    (1,144)
                           -------    -------
         Net               $ 4,180    $ 4,628
                           =======    =======


Note 6:   Investment in Limited Partnership


The investment in limited  partnerships of $2,184,000 and $2,215,000 at December
31, 2004 and 2003  represents  a 49.5  percent  equity in Pedcor  Investments  -
2003-LIX,  LP for 2004 and 2003, and a 99 percent equity in Pedcor Investments -
1993-XVI, LP for 2002, limited partnerships  organized to build, own and operate
apartment  complexes.  In addition to recording  its equity in the losses of the
partnerships,  the Company has  recorded  the benefit of low income  housing tax
credits of $116,000,  $178,000  and  $178,000  for the years ended  December 31,
2004,  2003  and  2002.   Condensed  unaudited  financial   statements  for  the
partnerships as of December 31 are as follows:


                                                                2004     2003
                                                             -----------------
Condensed statements of financial condition
   Assets
       Cash                                                  $   283   $   229
       Land and property                                       1,900     1,950
       Bond fund                                                  74     5,362
       Development cost                                        9,261     2,412
       Other assets                                              907       224
                                                             -------   -------
            Total assets                                     $12,425   $10,177
                                                             =======   =======
Liabilities
       Notes payable - Association                           $    --   $   121
       Notes payable - other                                   8,764     7,647
       Other liabilities                                         193       305
                                                             -------   -------
            Total liabilities                                  8,957     8,073
Partners' equity                                               3,468     2,104
                                                             -------   -------

            Total liabilities and partners' equity           $12,425   $10,177
                                                             =======   =======



                                      2004     2003     2002
                                     ------------------------

Condensed statements of operations
         Total revenue               $ 260    $ 236    $ 258
         Total expenses               (349)    (318)    (292)
                                     -----    -----    -----
                  Net loss           $ (89)   $ (82)   $ (34)
                                     =====    =====    =====

                                       32
<PAGE>


Note 7:   Core Deposit Intangible


The carrying basis of the recognized core deposit  intangible  included in other
assets  was  $590,000  at  December  31,  2004  and  2003  and  the  accumulated
amortization of such intangible was $272,000 and $192,000 at those dates.

Amortization expense for 2004, 2003 and 2002 was $80,000,  $87,000 and $105,000.
Estimated amortization expense for each of the following four remaining years is
approximately $80,000.


Note 8:   Deposits


                                                               2004       2003
                                                            -------   --------
Noninterest-bearing demand                                 $  4,518   $  3,930
Interest-bearing demand                                      55,028     62,482
Savings deposits                                             25,201     29,756
Certificates and other time deposits of $100,000 or more     41,482     36,803
Other certificates and time deposits                         62,232     57,221
                                                           --------   --------
         Total deposits                                    $188,461   $190,192
                                                           ========   ========
The scheduled maturities of time deposits are:

          2005                                             $ 46,487
          2006                                               18,436
          2007                                               22,342
          2008                                               10,923
          2009                                                5,518
          Thereafter                                              8
                                                           --------
                                                           $103,714
                                                           ========

Note 9:   Borrowings


Borrowings included the following:

                                                              2004      2003
                                                            -----------------
FHLB advances                                               $32,908   $33,814
Note payable                                                     --       132
                                                            -------   -------
                                                            $32,908   $33,946
                                                            =======   =======

Aggregate annual maturities of borrowings at December 31, 2004, are:


         2005                                               $ 3,143
         2006                                                    91
         2007                                                10,097
         2008                                                   104
         2009                                                   110
         Thereafter                                          19,363
                                                            -------
                                                            $32,908
                                                            =======

                                       33
<PAGE>

FHLB  advances  are  secured  by  first-mortgage  loans  totaling  $140,142,000.
Advances, at interest rates from 4.2 to 6.6 percent, are subject to restrictions
or penalties in the event of prepayment.

The Company has an available  line of credit with the FHLB totaling  $2,000,000.
The line of credit  expires March 8, 2005 and bears  interest at a rate equal to
the current variable advance rate. There were no draws on this line of credit at
December 31, 2004.

The note  payable at  December  31, 2003 was  interest  free since there were no
events of default. If default had occurred,  interest would have been calculated
at a rate  equal to the  lesser of 14 percent  per annum or the  highest  amount
permitted by applicable law.

Note 10:   Income Tax
<TABLE>
<CAPTION>

                                                              2004        2003        2002
                                                            --------------------------------
Income tax expense
         Currently payable
<S>                                                         <C>         <C>         <C>
                  Federal                                   $   302     $   701     $   843
                  State                                         158         243         237
         Deferred
                  Federal                                       256         180         273
                  State                                          40          48         126
                                                            -------     -------     -------
                      Total income tax expense              $   756     $ 1,172     $ 1,479
                                                            =======     =======     =======

Reconciliation of federal statutory to actual tax expense
         Federal statutory income tax at 34%                $   868     $ 1,191     $ 1,456
         Effect of state income taxes                           130         192         240
         Tax credits                                           (116)       (178)       (178)
         Other                                                 (126)        (33)        (39)
                                                            -------     -------     -------
                  Actual tax expense                        $   756     $ 1,172     $ 1,479
                                                            =======     =======     =======

Effective tax rate                                             29.6%       33.5%       34.5%
</TABLE>

                                       34
<PAGE>

The components of the cumulative net deferred tax asset (liability)  included in
the consolidated balance sheets are as follows:

                                                   2004    2003
                                              ---------------------
Assets
         Allowance for loan losses              $  386   $  516
         Pensions and employee benefits             77      124
         Purchase accounting adjustments           141      198
         Available-for-sale securities               5       36
         State income tax                           19       --
                                                ------   ------
                  Total assets                     628      874
                                                ------   ------

Liabilities
         Depreciation                             (224)    (308)
         State income tax                           --       (4)
         FHLB stock dividend                      (179)    (109)
         Loan fees                                (278)    (291)
         Prepaids                                  (80)      --
         Equity in partnership losses             (172)    (140)
                                                ------   ------
                  Total liabilities               (933)    (852)
                                                ------   ------
                                                $ (305)  $   22
                                                ======   ======

There was no valuation allowance necessary at December 31, 2004 and 2003.

Retained earnings include approximately  $4,132,000 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 $1,637,000.


Note 11:   Commitments and Contingent Liabilities


In  the  normal  course  of  business  there  are  outstanding  commitments  and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included in the accompanying financial statements.  The
Company'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  Company  uses  the  same  credit  policies  in  making  such
commitments  as it does for  instruments  that are included in the  consolidated
balance sheets.

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

                                                  2004            2003
                                                -----------------------

Commitments to extend credit                    $18,769         $18,145
Standby letters of credit                         4,106           4,142


                                       35
<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 Company evaluates each customer's credit
worthiness on a case-by-case  basis. The amount of collateral obtained if deemed
necessary  by the  Company  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 Company to
guarantee the performance of a customer to a third party.

Union Federal has entered into  employment  agreements with three officers which
provide  for the  continuation  of salary and certain  benefits  for a specified
period of time under certain conditions for approximately three years. Under the
terms of the agreements,  these payments could occur in the event of a change in
control of Union  Federal,  as defined,  along with other  specific  conditions.
Union  Federal is not required to pay any amounts under these  agreements  which
cannot be deducted for federal income tax purposes.

The Company  and Union  Federal 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.

Note 12:   Dividend and Capital Restrictions


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

At December 31, 2004, the shareholder's equity of Union Federal was $31,603,000.
Although well capitalized, under current regulations in effect, Union Federal is
required to apply to the Office of Thrift  Supervision  to pay  dividends to the
Company.

Note 13:   Regulatory Capital


Union Federal 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 ratios that are calculated
according  to the  regulations.  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,
2004 and 2003,  Union Federal is categorized as well  capitalized  and meets all
subject capital adequacy  requirements.  There are


                                       36
<PAGE>

no conditions or events since  December 31, 2004 that  management  believes have
changed Union Federal's classification.

Union Federal's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>

                                                                                      2004
                                                          ------------------------------------------------------------
                                                                                   Required for           To Be Well
                                                                Actual           Adequate Capital         Capitalized
                                                          Amount       Ratio      Amount    Ratio       Amount   Ratio
                                                          ------------------------------------------------------------
<S>                                                       <C>          <C>       <C>         <C>        <C>      <C>
Total risk-based capital (to risk-weighted assets)        $29,367      17.3%     $13,565     8.0%       $16,956  10.0%
Tier 1 capital (to risk-weighted assets)                   28,909      17.1%       6,782     4.0%        10,174   6.0%
Core capital (to adjusted total assets)                    28,909      11.4%      10,156     4.0%        12,694   5.0%
Core capital (to adjusted tangible assets)                 28,909      11.4%       5,078     2.0%                 N/A
Tangible capital (to adjusted total assets)                28,909      11.4%       3,808     1.5%                 N/A


                                                                                      2003
                                                          ------------------------------------------------------------
                                                                                   Required for           To Be Well
                                                                Actual           Adequate Capital         Capitalized
                                                          Amount       Ratio      Amount    Ratio       Amount   Ratio
                                                          ------------------------------------------------------------
Total risk-based capital (to risk-weighted assets)       $30,560       18.1%     $13,538     8.0%       $16,923  10.0%
Tier 1 capital (to risk-weighted assets)                  30,270       17.9%       6,769     4.0%        10,154   6.0%
Core capital (to adjusted total assets)                   30,270       11.7%      10,331     4.0%        12,914   5.0%
Core capital (to adjusted tangible assets)                30,270       11.7%       5,165     2.0%                 N/A
Tangible capital (to adjusted total assets)               30,270       11.7%       3,874     1.5%                 N/A
</TABLE>


Note 14:   Employee Benefit Plans


The Company provides pension benefits for substantially all of its employees who
were Union Federal employees prior to January 2, 2002, and is a participant in a
multi-employer  pension fund.  Separate  actuarial  valuations are not made with
respect to each participating employer. Pension expense was $78,000, $93,000 and
$2,000 for 2004, 2003 and 2002.

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  percent  for the  first 5  percent  of base  salary  contributed  by
participants.  The  Company's  expense  for the plan was  $43,000,  $43,000  and
$45,000 for 2004, 2003 and 2002.

The Company has an ESOP covering  substantially all employees of the Company and
Union Federal.  The ESOP acquired  184,000 shares of the Company common stock at
$10 per share with funds  provided  by a loan from the  Company.  Unearned  ESOP
shares totaled  113,757 and 122,900 at December 31, 2004 and 2003 and had a fair
value of $2,087,000  and  $2,146,000  at December 31, 2004 and 2003.  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 Union
Federal,  are made to the ESOP.  ESOP  expense for the years ended  December 31,
2004, 2003 and 2002 was


                                       37
<PAGE>

$165,000,  $159,000 and  $143,000.  At December  31,  2004,  the ESOP had 70,243
allocated  shares,  113,757  suspense  shares  and no  committed-to-be  released
shares.  At December 31, 2003,  the ESOP had 61,100  allocated  shares,  122,900
suspense shares and no committed-to-be released shares.


Union Federal has a Recognition  and Retention  Plan and Trust (RRP) to which it
contributed  $1,753,853  for the  purchase of 121,670  shares of Company  common
stock,  and  grants  for  88,900 of these  shares  have been  awarded to various
directors,  officers and employees of Union Federal.  These awards generally are
to vest and be earned by the recipient at a rate of 20 percent per year. Expense
under  the  plan  for the  years  ended  December  31,  2004,  2003 and 2002 was
$105,000, $113,000 and $264,000.

Note 15:   Stock Option Plan


Under the Company's  stock option plan (Plan),  which is accounted for under the
recognition and measurement  principles of 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. The Company has
authorized the grant of options for up to 304,175 shares of the Company's common
stock and has granted 226,000 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 (see Note 1). The
fair  value of each  option  grant  was  estimated  on the grant  date  using an
option-pricing model with the following assumptions for the 2003 grants:

                                                                       2003
                                                                   -------------
Risk-free interest rate                                                 3.3%
Dividend yield                                                          3.6
Volatility factors of expected market price of common stock            15.4
Weighted-average expected life of the options                        10 years



                                       38
<PAGE>

A summary of the status of the Plan at December  31,  2004,  2003 and 2002,  and
changes during the years then ended is presented below:
<TABLE>
<CAPTION>

                                       2004                      2003                       2002
                                ------------------------------------------------------------------------------
                                             Weighted-                Weighted-                    Weighted-
                                              Average                  Average                      Average
                                Shares    Exercise Price   Shares   Exercise Price    Shares    Exercise Price
                                ------------------------------------------------------------------------------

Outstanding, beginning
<S>                             <C>           <C>          <C>         <C>            <C>           <C>
         of year                203,000       $ 14.77      165,000     $14.49         186,000       $ 14.49
Granted                              --                     40,000      15.90              --
Exercised                            --                         --                     (8,000)        14.49
Forfeited                        (5,000)        15.90       (2,000)     14.49         (13,000)        14.49
                                -------                    -------                    -------

Outstanding, end of year        198,000         14.74      203,000      14.77         165,000         14.49
                                =======                    =======                    =======

Options exercisable,
         end of year            136,112                    122,260                     99,408
                                =======                    =======                    =======
</TABLE>

As of December  31, 2004,  options  totaling  163,000 have an exercise  price of
$14.49  and a  weighted-average  remaining  contractual  life of 3.5  years  and
options totaling 35,000 have an exercise price of $15.90 and a  weighted-average
remaining contractual life of 8.1 years.

Note 16:   Earnings Per Share


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

                                                        Year Ended December 31, 2004
                                                    -----------------------------------
                                                               Weighted-
                                                               Average        Per Share
                                                     Income     Shares         Amount
                                                    -----------------------------------
Basic earnings per share
<S>                                                  <C>      <C>               <C>
         Income available to common shareholders     $1,797   1,854,070         $0.97
                                                                                =====

Effect of dilutive stock options                                 31,074
                                                     ------   ---------

Diluted earnings per share
         Income available to common shareholders
                and assumed conversions              $1,797   1,885,144         $0.95
                                                     ======   =========         =====
</TABLE>

                                       39
<PAGE>

<TABLE>
<CAPTION>

                                                     Year Ended December 31, 2003
                                                   --------------------------------
                                                                Weighted-
                                                                 Average   Per Share
                                                     Income      Shares     Amount
                                                   ---------------------------------
Basic earnings per share
<S>                                                <C>         <C>          <C>
         Income available to common shareholders   $   2,332   1,982,872    $ 1.18
                                                                            ======

Effect of dilutive stock options                                  20,819
                                                   ---------

Diluted earnings per share
         Income available to common shareholders
                  and assumed conversions          $   2,332   2,003,691    $ 1.16
                                                   =========   =========    ======


                                                     Year Ended December 31, 2002
                                                   --------------------------------
                                                                Weighted-
                                                                 Average   Per Share
                                                     Income      Shares     Amount
                                                   ---------------------------------
Basic earnings per share
         Income available to common shareholders   $   2,802   2,249,239    $ 1.25
                                                                            ======

Effect of dilutive stock options                                   1,841
                                                   ---------

Diluted earnings per share
         Income available to common shareholders
                  and assumed conversions          $   2,802   2,251,080    $ 1.24
                                                   =========   =========    ======

</TABLE>

Note 17:   Related Party Transactions


Union Federal 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, 2004                            $4,397
                  New loans, including renewals                  298
                  Change in composition                          183
                  Payments, etc. including renewals             (505)
                                                              ------

         Balances, December 31, 2004                          $4,373
                                                              ======

Deposits  from related  parties  held by Union  Federal at December 31, 2004 and
2003, totaled $1,022,000 and $1,368,000.

                                       40
<PAGE>

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.

Interest-bearing   Deposits  -  The  fair  value  of  interest-bearing  deposits
approximates carrying values.

Securities - Fair values are based on quoted market prices.

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

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

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

Cash Value of Life  Insurance  - The fair value of cash value of life  insurance
approximates the carrying value.

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.

                                       41
<PAGE>

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                                   2004                  2003
                                                          -----------------------------------------

                                                           Carrying    Fair      Carrying    Fair
                                                            Amount     Value      Amount     Value
                                                          -----------------------------------------
Assets
<S>                                                       <C>        <C>        <C>        <C>
         Cash and cash equivalents                        $ 13,488   $ 13,488   $ 11,888   $ 11,888
         Interest-bearing deposits                             116        116        150        150
         Securities available for sale                       3,037      3,037      5,908      5,908
         Securities held to maturity                           152        161        494        526
         Loans, net                                        217,056    222,587    221,230    228,971
         Stock in FHLB                                       3,721      3,721      3,556      3,556
         Interest receivable                                 1,086      1,086      1,128      1,128
         Cash value of life insurance                        6,900      6,900      5,149      5,149

Liabilities
         Deposits                                          188,461    188,902    190,192    192,064
         Borrowings
                  FHLB advances                             32,908     34,298     33,814     36,668
                  Notes payable - limited partnership           --         --        132        132
         Interest payable                                      651        651        572        572
         Advances by borrowers for taxes and insurance         558        558        582        582
</TABLE>


Note 19:   Condensed Financial Information (Parent Company Only)


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




                            Condensed Balance Sheets

                                                        2004     2003
Assets
         Cash                                          $ 1,536   $ 1,988
         Interest-bearing deposits                          16        50
         Investments available for sale                     65        --
         Investment in Union Federal                    31,603    33,531
         Other assets                                      507       457
                                                       -------   -------
          Total assets                                 $33,727   $36,026
                                                       =======   =======

Liability - other                                      $   290   $   496

Shareholders' Equity                                    33,437    35,530

          Total liabilities and shareholders' equity   $33,727   $36,026
                                                       =======   =======


                                       42
<PAGE>

<TABLE>
<CAPTION>


                         Condensed Statements of Income

                                                          2004            2003            2002
                                                         ---------------------------------------

Income
<S>                                                      <C>            <C>             <C>
         Dividends from Union Federal                    $ 4,000        $ 5,000         $ 3,721
         Other income                                         58             64              90
                                                         -------        -------         -------
                  Total income                             4,058          5,064           3,811
                                                         -------        -------         -------

Expenses
         Salaries and employee benefits                      102             79              74
         Legal and professional fees                          81             73              85
         Other expenses                                       55             57              57
                                                         -------        -------         -------
                  Total expenses                             238            209             216
                                                         -------        -------         -------

Income before income tax and equity in undistributed
         income of Union Federal                           3,820          4,855           3,595

Income tax benefit                                            48             37              36
                                                         -------        -------         -------

Income before equity in undistributed income of
         Union Federal                                     3,868          4,892           3,631

Distribution in excess of income of Union Federal         (2,071)        (2,560)           (829)
                                                         -------        -------         -------

Net Income                                               $ 1,797        $ 2,332         $ 2,802
                                                         =======        =======         =======
</TABLE>

                                       43
<PAGE>

<TABLE>
<CAPTION>



                       Condensed Statements of Cash Flows

                                                                       2004        2003              2002
                                                                     ---------------------------------------

Operating Activities
<S>                                                                  <C>         <C>                <C>
         Net income                                                  $  1,797    $  2,332           $  2,802
         Items not requiring (providing) cash
                  Distributions in excess of income of subsidiary       2,071       2,560                829
                  Other                                                   (71)         77              2,042
                                                                     --------    --------           --------
                       Net cash provided by operating activities        3,797       4,969              5,673
                                                                     --------    --------           --------

Investing Activities
         Net change in interest-bearing deposits                           34          (5)                (5)
         Proceeds from sales of investments available for sale             --          --                 76
         Purchase of investment securities available for sale             (50)         --                 --
         Net cash paid in acquisition                                      --          --             (9,413)
                                                                     --------    --------           --------
                       Net cash used in investing activities              (16)         (5)            (9,342)
                                                                     --------    --------           --------

Financing Activities
         Cash dividends                                                (1,145)     (1,234)            (1,112)
         Stock options exercised                                         --          --                  117
         Repurchase of common stock                                    (3,088)     (3,000)            (7,414)
                                                                     --------    --------           --------
                       Net cash used in financing activities           (4,233)     (4,234)            (8,409)
                                                                     --------    --------           --------

Net Change in Cash                                                       (452)        730            (12,078)

Cash at Beginning of Year                                               1,988       1,258             13,336
                                                                     --------    --------           --------

Cash at End of Year                                                  $  1,536    $  1,988           $  1,258
                                                                     ========    ========           ========
</TABLE>


                                       44
<PAGE>
<TABLE>
<CAPTION>

================================================================================================

                                      DIRECTORS AND OFFICERS

================================================================================================

                                        BOARD OF DIRECTORS

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

<S>     <C>    <C>    <C>    <C>    <C>    <C>
     Philip L. Boots                       Mark E. Foster                   John M. Horner
        President,                        General Manager,                 Dealer Principal,
Boots Brothers Oil Company, Inc.       Birkey's Farm Store, Inc.       Horner Pontiac Buick GMC

    Marvin L. Burkett                     C. Rex Henthorn                   Harry A. Siamas
     Farmer (Retired)                         Attorney                         Attorney

    Phillip E. Grush                   Samuel H. Hildebrand                Joseph M. Malott
      Secretary                             President,                  Financial Institutions
 Union Community Bancorp             Village Traditions, Inc.                 Consultant
  Optometrist (Retired)
================================================================================================

                                 OFFICERS OF UNION COMMUNITY BANCORP

                         Alan L. Grimble                    Joseph E. Timmons
                     Chief Executive Officer                   President

                         Phillip E. Grush                    J. Lee Walden
                            Secretary                    Chief Financial Officer

================================================================================================

                          OFFICERS OF UNION FEDERAL SAVINGS AND LOAN ASSOCIATION

                       Alan L. Grimble                      Joseph E. Timmons
                   Chief Executive Officer                     President

                        J. Lee Walden                        Steve V. Brier
                   Executive Vice President and             Vice President and
                     Chief Financil Officer               Chief Lending Officer


</TABLE>

                                       45
<PAGE>

                             Directors and Officers


     Philip L.  Boots  (age 58) 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 77) has  retired  from  his work as a farmer  and
equipment dealer in Montgomery County since 1956.

     Mark E. Foster  (age 52) is the Owner and General  Manager of a retail farm
equipment  and  automobile  dealership  located  in Warren  County,  Indiana,  a
position he has held since 1983.

     Alan L. Grimble (age 48) is currently  the Chief  Executive  Officer of the
Holding Company and Union Federal having held these positions since 2002. He has
worked for Union Federal since 1998.

     Phillip  E.  Grush  (age  73)  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.

     C. Rex  Henthorn  (age 67) is a partner  with  Henthorn,  Harris,  Taylor &
Weliever, P.C., a professional legal corporation engaged in the practice of law.

     Samuel H.  Hildebrand,  II (age 65) has served since 1995 as President  and
Chief  Executive  Officer  of Village  Traditions,  Inc.,  a company  engaged in
property  management and custom  fabrication of rain gutter systems  through its
Custom Flo  Division,  Seamless  Gutter  Systems  Division,  in  Crawfordsville,
Indiana.

     John M. Horner (age 68) has served as Dealer  Principal  of Horner  Pontiac
Buick GMC in Crawfordsville since 1974.

     Joseph  M.  Malott  (age  67) has been  self-employed  as a  consultant  to
financial institutions for the past five years.

     Harry A. Siamas (age 54) has practiced law in Crawfordsville since 1976 and
has served as Union Federal's attorney for 18 years.

     Joseph E.  Timmons  (age 70) is  currently  the  President  of the  Holding
Company  and Union  Federal,  having  served as  President  and Chief  Executive
Officer  of the  Holding  Company  from  1997 to 2002 and  President  and  Chief
Executive Officer of Union Federal from 1974 to 2002. He has been an employee of
Union Federal since 1954.

     J. Lee Walden (age 57) is currently Chief Financial  Officer of the Holding
Company and Union Federal having held these positions since the 2002 acquisition
of Montgomery  Financial Corp. and Montgomery Savings. In addition,  he has been
the Executive  Vice  President of Union  Federal  since 2003. He had  previously
worked for Montgomery Savings since 1984.


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<PAGE>
                             SHAREHOLDER INFORMATION

Market Information


     Union Federal  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 March 7, 2005,  there were  approximately
390 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
Union Federal 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 Union Federal. 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 Union Federal's earnings which
has been  appropriated for bad debt reserves and deducted for federal income tax
purposes  cannot be used by Union  Federal to pay cash  dividends to the Holding
Company without the payment of federal income taxes by Union Federal 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 Union Federal that would result in a
recapture of Union  Federal's bad debt reserve or otherwise  create  federal tax
liabilities.

                            Stock Price        Dividends
Quarter Ended                 High              Low           Per Share
---------------------      ----------       -----------       ---------
March 31, 2003               $16.94            $15.40           $.15
June 30, 2003                 18.06             16.25            .15
September 30, 2003            17.65             16.15            .15
December 31, 2003             17.95             16.53            .15

March 31, 2004                19.60             17.58            .15
June 30, 2004                 18.50             17.15            .15
September 30, 2004            18.40             17.45            .15
December 31, 2004             19.14             17.95            .15

Transfer Agent and Registrar

Computershare Investor Services LLC
P.O. Box 3504
Chicago, Illinois 60690

Corporate Counsel

Barnes & Thornburg LLP
11 South Meridian Street
Indianapolis, Indiana  46204

Independent Auditor

BKD LLP
201 N. Illinois Street, Suite 700S
Indianapolis, Indiana  46244

Shareholders and General Inquiries


The  Company  filed an  Annual  Report on Form 10-K for its  fiscal  year  ended
December 31, 2004 with the  Securities and Exchange  Commission.  Copies of this
annual report may be obtained without charge upon written request to:

         J. Lee Walden
         Chief Financial Officer
         Union Community Bancorp
         221 East Main Street - PO Box 151
         Crawfordsville, Indiana 47933


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