EXHIBIT 13
Table of Contents

Message to Shareholders....................................................    1
Selected Consolidated Financial Data.......................................    2
Management's Discussion and Analysis.......................................    3
Independent Accountants' Report............................................   17
Consolidated Balance Sheets................................................   18
Consolidated Statements of Income..........................................   19
Consolidated Statements of Shareholders' Equity............................   20
Consolidated Statements of Cash Flows......................................   21
Notes to Consolidated Financial Statements.................................   22
Directors and Officers.....................................................   40
Shareholder Information....................................................   42


Description of Business


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

     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 the
Association.  MSA  Service  Corporation  ("MSA"),  an  Indiana  corporation  and
wholly-owned  subsidiary of Montgomery Savings, will continue as a subsidiary of
the Association. See Consolidated Financial Statements - Note 2.

     At  December  31,  2001,  the  Association,  a  federal  savings  and  loan
association,  conducted its business from two  full-service  offices  located in
Crawfordsville,  Indiana.  The  Association  opened its first  branch  office in
Crawfordsville  on  April  2,  2001.  In  connection  with  the  acquisition  of
Montgomery in 2002, the Association also added two additional  branch offices in
Crawfordsville  and branch  offices in Covington,  Williamsport  and  Lafayette,
Indiana.

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

<PAGE>

To Our Shareholders:

On behalf of our employees and Board of Directors,  I take pleasure in providing
you with the 2001 Annual Report to Shareholders of Union Community Bancorp,  the
holding company for Union Federal Savings and Loan Association.

During the year, we  repurchased  approximately  10% or 241,000 of the Company's
outstanding  shares.  Each repurchase  enhances  shareholder  value and this was
reflected in our earnings per share numbers which  increased from $0.87 to $0.93
for the year while  dividends  remained  at $0.60 per  share.  Return on average
equity  for 2001 was 5.38%  compared  to 5.17% in 2000.  The  return on  average
assets for the year ended December 31, 2001 was 1.44%.

The year  2001 was  exciting  with a new  branch at 1688  Crawfordsville  Square
Drive,   continued   strong   earnings  and  growth.   Total  assets   increased
approximately  $17.0  million,  or 13.6% to $142.4 million at December 31, 2001,
from $125.4 million at December 31, 2000. Net loans increased by 11.2% to $121.7
million due to an increase in customer demand.

With the  acquisition  of Montgomery  Financial on January 2, 2002,  the current
year will hold many  changes.  Our branches  have been expanded from two to six.
The Montgomery acquisition was proceeded by much planning during 2001.

We will continue to search for  opportunities to increase the long-term value of
our company through internal growth and new services.

The  Management  and the Board of Directors want to thank you for your business,
your support and your confidence in Union Federal Savings & Loan Association. We
encourage  you to  recommend  Union  Federal  to  your  friends,  neighbors  and
associates,  and we look  forward  to  serving  you with  the same  professional
service that has marked our performance for the past 89 years. Please review the
Annual Report and join us at the meeting on April 17, 2002.

                                         Sincerely,


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

<PAGE>
                     SELECTED CONSOLIDATED FINANCIAL DATA OF
                     UNION COMMUNITY BANCORP AND SUBSIDIARY

<TABLE>
<CAPTION>


                                                                              At  December 31,
                                                    ----------------------------------------------------------------
                                                        2001          2000        1999          1998         1997
                                                    ----------------------------------------------------------------
                                                                           (Dollars in thousands)
Summary of Selected Consolidated
Financial Condition Data:
<S>                                                  <C>           <C>          <C>          <C>           <C>
Total assets.......................................  $142,391      $125,383     $120,654     $108,162      $132,040
Loans, net.........................................   121,749       109,505      106,174       90,900        78,436
Cash and interest-bearing deposits in other banks (1)  13,565        4,755        3,117         6,191        44,781
Investment securities available for sale...........       ---           ---          315          ---           ---
Investment securities held to maturity.............     2,848         7,597        7,522        8,026         5,820
Deposits...........................................    81,702        72,816       68,990       64,846        62,258
Stock subscriptions refundable.....................       ---           ---          ---          ---        22,687
Borrowings.........................................    25,883        15,189       12,496        1,793         3,573
Shareholders' equity...............................    33,740        36,188       38,280       40,531        42,906

                                                                           Year Ended December 31,
                                                    ----------------------------------------------------------------
                                                        2001          2000        1999          1998         1997
                                                    ----------------------------------------------------------------
Summary of Operating Data:
Total interest and dividend income.................    $9,546        $9,222       $8,470       $8,105        $6,801
Total interest expense.............................     4,760         4,601        3,817        3,415         3,836
                                                     ---------     --------     --------     --------      --------
   Net interest income.............................     4,786         4,621        4,653        4,690         2,965
Provision for loan losses..........................        40            60           60          110           165
                                                     ---------     --------     --------     --------      --------
   Net interest income after provision for loan losses  4,746         4,561        4,593         4,580        2,800
                                                     ---------     --------     --------     --------      --------
Other income (losses):
   Equity in losses of limited partnership.........       (55)         (100)         (44)        (121)         (158)
   Gain on sales of available for sale securities..       ---            46           73          ---           ---
   Other...........................................       168           124          110           73            62
                                                     ---------     --------     --------     --------      --------
     Total other income (losses)...................       113            70          139          (48)          (96)
                                                     ---------     --------     --------     --------      --------
Other expenses:
   Salaries and employee benefits..................     1,335         1,102        1,069          850           480
   Net occupancy expenses..........................        85            45           47           39            39
   Equipment expenses..............................        36            23           27           28            22
   Legal and professional fees.....................       124           109          127          128            34
   Data processing.................................        95            77          122           77            66
   Other...........................................       406           329          367          342           320
                                                     ---------     --------     --------     --------      --------
     Total other expenses..........................     2,081         1,685        1,759        1,464           961
                                                     ---------     --------     --------     --------      --------
Income before income taxes.........................     2,778         2,946        2,973        3,068         1,743
Income taxes.......................................       927         1,011        1,003        1,094           545
                                                     ---------     --------     --------     --------      --------
   Net income......................................    $1,851        $1,935       $1,970       $1,974        $1,198
                                                     =========     ========     ========     ========     =========
</TABLE>

Table continued on following page



<PAGE>
<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                                         -------------------------------------------------
                                                           2001           2000        1999          1998        1997
                                                         -------------------------------------------------
Supplemental Data:
<S>                                                       <C>           <C>          <C>          <C>         <C>
Basic earnings per share...........................       $.93          $.87         $.81         $.70          ---
Diluted earnings per share.........................        .93           .87          .81          .70          ---
Dividends per share................................        .600          .585         .465         .355         ---
Dividend payout ratio..............................      64.52%        67.24%       57.41%       50.71%         ---
Interest rate spread during period.................       2.33%         2.12%        2.31%        2.23%        2.55%
Net yield on interest-earning assets (2) ..........       3.80          3.87         4.14         4.42         3.50
Return on assets (3)...............................       1.44          1.59         1.72         1.82         1.38
Return on equity (4)...............................       5.38          5.17         5.02         4.65         8.10
Other expenses to average assets (5)...............       1.62          1.39         1.53         1.35         1.11
Equity to assets (6)...............................      23.70         28.86        31.73        37.47        32.49
Average equity to average assets...................      26.80         30.77        34.25        39.24        17.03
Average interest-earning assets to average
   interest-bearing liabilities....................     138.78        145.47       153.70       167.89       120.98
Non-performing assets to total assets (6)..........        .49           .33          .22          .32          .07
Allowance for loan losses to total loans
   outstanding (6).................................        .43           .44          .40          .40          .32
Allowance for loan losses to
   non-performing loans (6)........................      76.25        118.23       253.69       103.72       484.62
Net charge-offs to average
   total loans outstanding ........................        ---           ---         ---           ---          .10
   Number of full service offices (6)..............          2             1           1             1            1
</TABLE>
-------------------------
(1) Includes certificates of deposit in other financial institutions.
(2) Net interest income divided by average interest-earning assets.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Other expenses divided by average total assets.
(6) At end of period.

General

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

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

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

     2.   The effect of changes in interest rates; and

     3.   Changes in deposit insurance premiums.


Average Balances and Interest Rates and Yields

     The following  tables present for the years ended  December 31, 2001,  2000
and 1999,  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,
                                    ------------------------------------------------------------------------------------------------
                                               2001                              2000                          1999
                                    --------------------------------  ------------------------------- ------------------------------
                                    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.......   $3,954    $150        3.79%     $2,131     $102        4.79%    $2,981      $123       4.13%
   Mortgage-backed securities......    2,395     175        7.31       2,677      229        8.55      3,093       238       7.69
   Other investment securities.....    2,753     184        6.68       5,105      319        6.25      5,451       329       6.04
   Loans receivable (2)(5).........  115,627   8,950        7.74     108,312    8,486        7.83    100,056     7,710       7.71
   FHLB stock......................    1,178      87        7.39       1,044       86        8.24        876        70       7.99
                                     -------  ------                  -------   ------               -------    ------
     Total interest-earning assets.  125,907   9,546        7.58     119,269    9,222        7.73    112,457     8,470       7.53
                                              ------                           ------                           ------
Non-interest earning assets, net of
   allowance for loan losses.......    2,366                           2,354                           2,173
                                    --------                        --------                        --------
     Total assets.................. $128,273                        $121,623                        $114,630
                                    ========                        ========                        ========
Liabilities and shareholders' equity:
Interest-bearing liabilities:
   Savings deposits................   $2,908     104        3.58      $3,077      123        4.00     $3,389       134       3.95
   Interest-bearing demand.........   21,976     938        4.27      19,119      942        4.93     16,422       793       4.83
   Certificates of deposit.........   51,698   2,993        5.79      48,182    2,790        5.79     47,313     2,548       5.39
   FHLB advances...................   14,143     725        5.13      11,612      746        6.42      6,043       342       5.66
                                    --------  ------                --------   ------               --------    ------
     Total interest-bearing
        liabilities                   90,725   4,760        5.25      81,990    4,601        5.61     73,167     3,817       5.22
                                              ------                           ------                           ------
Other liabilities..................    3,173                           2,210                           2,199
                                    --------                        --------                        --------
     Total liabilities.............   93,898                          84,200                          75,366
Shareholders' equity...............   34,375                          37,423                          39,264
                                    --------                        --------                        --------
     Total liabilities and
         shareholders' equity...... $128,273                        $121,623                        $114,630
                                    ========                        ========                        ========
Net interest-earning assets........  $35,182                         $37,279                         $39,290
Net interest income................           $4,786                           $4,621                           $4,653
                                              ======                           ======                           ======
Interest rate spread (3)...........                         2.33%                            2.12%                           2.31%
Net yield on weighted average
   interest-earning assets (4).....                         3.80%                            3.87%                           4.14%
Average interest-earning assets to
   average interest-bearing liabilities       138.78%                 145.47%                         153.70%
</TABLE>
---------------------

(1)  Interest  income on loans  receivable  includes loan fee income of $68,000,
     $70,000 and $79,000 for each of the years ended December 31, 2001, 2000 and
     1999, respectively.
(2)  Total loans less loans in process.
(3)  Interest rate spread is calculated by subtracting weighted average interest
     rate  cost  from  weighted  average  interest  rate  yield  for the  period
     indicated.
(4)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.
(5)  The balances include nonaccrual loans.

<PAGE>


Interest Rate Spread

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

     The following table sets forth the weighted average effective interest rate
that the Company  earned on its loan and  investment  portfolios,  the  weighted
average  effective cost of its deposits and advances,  the interest rate spread,
and net yield on  weighted  average  interest-earning  assets  for the  periods.
Average balances are based on average daily balances.

<TABLE>
<CAPTION>


                                                                            Year Ended December 31,
                                                            ------------------------------------------------
                                                            2001                  2000                  1999
                                                            -----                 -----                 -----
Weighted average interest rate earned on:
<S>                                                         <C>                   <C>                   <C>
   Interest-earning deposits.......................         3.79%                 4.79%                 4.13%
   Mortgage-backed securities......................         7.31                  8.55                  7.69
   Other investment securities.....................         6.68                  6.25                  6.04
   Loans receivable................................         7.74                  7.83                  7.71
   FHLB stock......................................         7.39                  8.24                  7.99
     Total interest-earning assets.................         7.58                  7.73                  7.53
Weighted average interest rate cost of:
   Savings deposits................................         3.58                  4.00                  3.95
   Interest-bearing demand.........................         4.27                  4.93                  4.83
   Certificates of deposit.........................         5.79                  5.79                  5.39
   FHLB advances...................................         5.13                  6.42                  5.66
     Total interest-bearing liabilities............         5.25                  5.61                  5.22
Interest rate spread (1)...........................         2.33                  2.12                  2.31
Net yield on weighted average
   interest-earning assets (2).....................         3.80                  3.87                  4.14
</TABLE>

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

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

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

<TABLE>
<CAPTION>

                                                               Increase (Decrease) in Net Interest Income
                                                               ------------------------------------------
                                                                                 Total
                                                                Due to           Due to            Net
                                                                 Rate            Volume           Change
(In  thousands)

Year ended December 31, 2001 compared to year ended December 31, 2000

  Interest-earning assets:
<S>                                                              <C>             <C>               <C>
   Interest-earning deposits.................................    $ (25)          $  73             $ 48
   Mortgage-backed securities................................      (31)            (23)             (54)
   Other investment securities...............................       21            (156)            (135)
   Loans receivable..........................................     (103)            567              464
   FHLB stock................................................       (9)             10                1
                                                                -------          -----            -----
      Total..................................................     (147)            471              324
                                                                -------          -----            -----
  Interest-bearing liabilities:
   Savings deposits..........................................      (12)             (7)             (19)
   Interest-bearing demand...................................     (135)            131               (4)
   Certificates of deposit...................................       (1)            204              203
   FHLB advances.............................................     (167)            146              (21)
                                                                -------          -----            -----
      Total..................................................     (315)            474              159
                                                                -------          -----            -----
Net change in net interest income............................    $ 168            $ (3)           $ 165
                                                                =======          ======           ======
Year ended December 31, 2000 compared to year ended December 31, 1999

  Interest-earning assets:
   Interest-earning deposits.................................     $ 18           $ (39)           $ (21)
   Mortgage-backed securities................................       25             (34)              (9)
   Other investment securities...............................       11             (21)             (10)
   Loans receivable..........................................      131             645              776
   FHLB stock................................................        2              14               16
                                                                -------          -----            -----
      Total..................................................      187             565              752
                                                                -------          -----            -----

  Interest-bearing liabilities:
   Savings deposits..........................................        1             (12)             (11)
   Interest-bearing demand...................................       16             133              149
   Certificates of deposit...................................      195              47              242
   FHLB advances.............................................       52             352              404
                                                                -------          -----            -----
      Total..................................................      264             520              784
                                                                -------          -----            -----
Net change in net interest income............................    $ (77)           $ 45            $ (32)
                                                                =======          ======           ======

Year ended December 31, 1999 compared to year ended December 31, 1998

  Interest-earning assets:

   Interest-earning deposits.................................   $ (107)          $(370)          $ (477)
   Mortgage-backed securities................................       (3)            (16)             (19)
   Other investment securities...............................        3              69               72
   Loans receivable..........................................     (281)          1,059              778
   FHLB stock................................................      ---              11               11
                                                                -------          -----            -----
      Total..................................................     (388)            753              365
                                                                -------          -----            -----

  Interest-bearing  liabilities:
   Savings deposits..........................................       (2)             (3)              (5)
   Interest-bearing demand...................................       89             208              297
   Certificates of deposit...................................     (199)             18             (181)
   FHLB advances.............................................       (2)            293              291
                                                                -------          -----            -----
     Total...................................................     (114)            516              402
                                                                -------          -----            -----
Net change in net interest income............................   $ (274)          $ 237            $ (37)
                                                                =======          ======           ======
</TABLE>


Financial  Condition  at December 31, 2001  Compared to  Financial  Condition at
December 31, 2000

     Total assets  increased  approximately  $17.0 million,  or 13.6%, to $142.4
million at December 31,  2001,  from $125.4  million at December  31, 2000.  The
increase  was  primarily  due to loan  growth and an  increase  in cash and cash
equivalents offset by a decrease in investment securities held to maturity.  Net
loans increased by $12.2 million, or 11.2%, to $121.7 million due to an increase
in customer  demand.  Cash and cash  equivalents  increased by $8.8 million from
December 31, 2000 to December 31, 2001.  On December 31, 2001,  the  Association
borrowed  $10.0 million from the Federal Home Loan Bank of  Indianapolis  and on
that same day paid a dividend to the Company of approximately  $9.1 million.  In
2002, the Company  disbursed  these funds to the  shareholders  of Montgomery in
connection with the merger completed on January 2, 2002.  Investment  securities
held to maturity  decreased $4.7 million during the year ended December 31, 2001
primarily due to funds received on investment  securities that were called prior
to their scheduled maturity dates.

     Loans and  Allowance  for Loan  Losses.  Average  loans for the year  ended
December  31, 2001 were $115.6  million  compared to average  loans for the 2000
period of $108.3 million, an increase of approximately 6.7%. The growth in loans
was funded  primarily by increases  in deposits and FHLB  advances.  The average
rates on loans were 7.83% for 2000 and 7.74% for 2001,  a decrease of nine basis
points.  As loans  increased,  the allowance for loan losses also increased from
$480,000 at December 31, 2000 to $520,000 at December 31,  2001.  The  allowance
for loan losses as a percentage  of total loans  remained  constant from 2000 to
2001 at .4%.  The  increase in the  allowance  for loan losses was a result of a
$40,000  provision  for loan losses for the year ended  December 31,  2001.  The
ratio of the  allowance  for loan losses to  non-performing  loans was 118.2% at
December 31, 2000  compared to 76.3% at December 31, 2001.  Nonperforming  loans
increased from $406,000 at December 31, 2000 to $682,000 at December 31, 2001.

     Deposits.  Deposits increased $8.9 million to $81.7 million during 2001, an
increase  of 12.2%.  Increased  deposits  were  utilized  to fund  loan  growth.
Interest-bearing  demand deposits  accounted for the majority of the growth with
an  increase  of $8.7  million,  or 49.8%,  during this  period.  Average  total
deposits increased $6.2 million,  or 8.8%, from $70.4 million for the year ended
December  31, 2000  compared to $76.6  million for the year ended  December  31,
2001.

     Borrowed  Funds.  Borrowed funds  increased $10.7 million from December 31,
2000 to December 31, 2001. The increase in total borrowed funds was comprised of
an increase in FHLB advances of $10.9 million and a decrease in the note payable
to Pedcor Investments - 1993-XVI, LP ("Pedcor"), a limited partnership organized
to build, own and operate a 48-unit apartment complex, of $177,000.  The note to
Pedcor was used to fund an investment in the Pedcor  low-income  housing  income
tax credit limited  partnership and bears no interest so long as there exists no
event of default.  As previously noted,  additional  borrowings were obtained in
late 2001 to fund the acquisition of Montgomery on January 2, 2002. Average FHLB
advances increased to $14.1 million for 2001 compared to $11.6 million for 2000.

     Shareholders'  Equity.  Shareholders'  equity decreased  approximately $2.4
million to $33.7 million at December 31, 2001. The decrease was primarily due to
stock  repurchases  of $3.5 million and cash  dividends of $1.2  million.  These
decreases  were  offset by net income for year ended  December  31, 2001 of $1.9
million,  Employee  Stock  Ownership Plan shares earned of $135,000 and unearned
compensation amortization of $242,000.


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

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

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

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

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

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

Comparison of Operating Results For Years Ended December 31, 2001 and 2000

     General.  Net income  decreased  $84,000,  or 4.3%, from $1,935,000 for the
year ended December 31, 2000 to $1,851,000 for the year ended December 31, 2001.
The return on average  assets was 1.44% and 1.59% for the years  ended  December
31, 2001 and 2000, respectively.

     Interest  Income.  Total interest income was $9.5 million for 2001 compared
to $9.2 million for 2000.  The increase in interest  income was primarily due to
an increase in loan volume.  Average earning assets  increased $6.6 million,  or
5.6%,  from $119.3  million for 2000  compared to $125.9  million for 2001.  The
average yield on interest-earning assets decreased from 7.73% for the year ended
December 31, 2000 to 7.58% for the comparable period in 2001.

     Interest  Expense.  Interest expense increased  $159,000,  or 3.5%, for the
year ended  December  31, 2001  compared to the year ended  December  31,  2000.
Average  interest-bearing  liabilities  increased $8.7 million,  or 10.7%,  from
$82.0  million  for the 2000  period to $90.7  million  during the 2001  period.
Average deposits increased by $6.2 million,  or 8.8%, from $70.4 million for the
2000  period  to  $76.6  million  for the 2001  period.  Average  FHLB  advances
increased  $2.5  million,  or 21.6%,  from $11.6  million for the 2000 period to
$14.1 million during the 2001 period.

     Net Interest Income. Net interest income increased  $165,000,  or 3.6%, for
the year ended  December 31, 2001 compared to the year ended  December 31, 2000.
The increase was  primarily  due to an increase in the interest rate spread from
2.12% for the year ended  December 31, 2000 to 2.33% for the year ended December
31, 2001.

     Provision for Loan Losses. The provision for loan losses for the year ended
December 31, 2001 was $40,000 as compared to $60,000 for the year ended December
31,  2000.  The  provision  for loan losses was  considered  adequate,  based on
growth, size, condition and components of the loan portfolio.

     Other Income  (Losses).  Other  income  (losses)  increased  from income of
$70,000  for the year ended  December  31,  2000 to income of  $113,000  for the
comparable  period  in  2001.  Due  to the  operating  results  of  the  limited
partnership,  equity in losses of the limited partnership  decreased from losses
of $100,000 recorded in 2000 to losses of $55,000 in 2001. The investment in the
limited  partnership  represents a 99% equity interest in Pedcor. In addition to
recording the equity in the losses of Pedcor,  a benefit of  low-income  housing
income  tax  credits  in the  amount  of  $178,000  for  both  2001 and 2000 was
recorded.  In addition,  other income  increased  $44,000 in 2001 as compared to
2000 due primarily to an increase in fee income.  The increases  resulting  from
improved  operating  results of the limited  partnership  and fee income were in
part  offset  by a  reduction  in gains on sales of  securities.  No gains  were
recorded during 2001 as compared to gains of $46,000 during 2000.

     Salaries  and  Employee  Benefits.  Salaries  and  employee  benefits  were
$1,335,000  for the year ended  December 31, 2001 compared to $1,102,000 for the
2000 period, an increase of $233,000, or 21.1%. This increase was in part due to
the  opening  of the  Association's  branch  office  on  April 2,  2001.  Normal
increases in employee compensation and related payroll taxes also contributed to
the increase.

     Net  Occupancy  and Equipment  Expenses.  Occupancy  expenses and equipment
expenses  increased  $53,000,  or 77.9%,  during  2001  compared  to 2000.  This
increase was primarily due to the branch opened in 2001.

     Legal and Professional  Fees. Legal and professional fees were $124,000 for
the year ended  December 31, 2001  compared to $109,000 for the 2000 period,  an
increase of $15,000.

     Data  Processing.  Data processing  expense  increased from $77,000 for the
year ended  December 31, 2000 to $95,000 for the  comparable  period in 2001, an
increase of $18,000.

     Other Expense. Other expenses,  consisting primarily of expenses related to
advertising,  directors'  fees,  supervisory  examination  fees,  supplies,  and
postage  increased  $77,000,  or 23.4% for 2001  compared  to 2000.  Advertising
expense  increased  $30,000,  or  58.8%  for  2001 as  compared  to 2000  due to
promotions  associated with the branch opened in 2001. Other increases  resulted
from nominal increases in a variety of expense categories.

     Income Tax Expense.  Income tax expense decreased $84,000,  or 8.3%, during
2001  compared  to 2000.  The  effective  tax rate was  33.4%  and 34.3% for the
respective  2001 and 2000  periods.  For both  periods,  the primary  difference
between the effective tax rate and the statutory tax rate relates to the benefit
received from low-income housing tax credits.


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

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

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

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

     Net Interest Income. Net interest income decreased $32,000, or .7%, for the
year ended  December 31, 2000 compared to the year ended  December 31, 1999. The
decrease was  primarily  due to a decline in the net interest  margin from 4.14%
for the year ended  December  31, 1999 to 3.87% for the year ended  December 31,
2000.  Provision  for Loan Losses.  The  provision for loan losses for the years
ended December 31, 2000 and 1999 was $60,000.  The provision for loan losses was
considered adequate, based on growth, size, condition and components of the loan
portfolio.

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

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

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

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

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

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

     Other Expense. Other expenses,  consisting primarily of expenses related to
advertising,  directors'  fees,  supervisory  examination  fees,  supplies,  and
postage  decreased  $38,000,  or 10.4% for 2000  compared to 1999.  The decrease
resulted from nominal decreases in a variety of expense categories.

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


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 an interim
final rule in March 2001 that  implemented this revised  statutory  requirement,
although savings associations remain subject to the OTS regulation that requires
them to maintain sufficient liquidity to ensure their safe and sound operation.

     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, 2001.

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                ----------------------------------------------------
                                                                  2001                 2000                  1999
                                                                ----------------------------------------------------
                                                                                   (In thousands)
<S>                                                             <C>                   <C>                  <C>
Operating activities..........................................  $ 1,971               $ 2,499              $  2,099
                                                                -------               -------              --------
Investing activities:
Investment securities
     Purchases of investment securities
       available for sale.....................................      ---                   ---                  (812)
     Proceeds from sales of investment
       securities available for sale..........................      ---                   336                   596
     Proceeds from maturities and paydowns of
     mortgage-backed securities held to maturity..............      437                   259                   731
     Purchases of other investment
       securities held to maturity............................      ---                  (300)               (1,415)
     Proceeds from maturities of
       investment securities held to maturity.................    4,315                   ---                 1,200
Purchase of loans.............................................     (173)                 (375)               (1,439)
Other net change in loans.....................................  (12,111)               (2,928)              (14,088)
Purchase of FHLB of Indianapolis stock........................     (487)                  ---                  (299)
Proceeds on sale of foreclosed real estate....................      ---                   ---                   100
Purchases of premises and equipment...........................      (63)                  (35)                  (45)
Other investing activities....................................      ---                   ---                    (3)
                                                                -------               -------              --------
     Net cash used by investing activities....................   (8,082)               (3,043)              (15,474)
                                                                -------               -------              --------
Financing activities:
Net change in
   Interest-bearing demand and savings deposits...............    8,883                  (264)                6,316
   Certificates of deposits...................................        2                 4,090                (2,171)
   Stock subscription escrow accounts.........................      ---                   ---                   ---
Proceeds from borrowings......................................   19,000                19,000                11,000
Repayment of borrowings.......................................   (8,307)              (16,307)                 (297)
Net change in advances by borrowers
   for taxes and insurance....................................       53                     9                    (5)
Cash dividends................................................   (1,254)               (1,322)               (1,118)
Repurchase of common stock....................................   (3,456)               (3,024)               (3,424)
                                                                -------               -------              --------
     Net cash provided (used) by financing activities.........   14,921                 2,182                10,301
                                                                -------               -------              --------
Net increase (decrease) in cash and cash equivalents.........   $ 8,810               $ 1,638              $ (3,074)
                                                                =======               =======              =========

</TABLE>

<PAGE>


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

     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, 2001,  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, 2001:

<TABLE>
<CAPTION>

                                                                          At December 31, 2001
                                          ---------------------------------------------------------------------------
                                            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%         $2,127                14.2%       $20,190           $18,063
Core capital (2)....................       4.0           5,673                14.2         20,190            14,517
Risk-based capital..................       8.0           6,185                26.8         20,709            14,524
</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,  2001,   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.


Current Accounting Issues

     Accounting for a Business  Combination.  Statement of Financial  Accounting
Standards  ("SFAS") No. 141 requires  that all business  combinations  should be
accounted for using the purchase method of accounting; use of the pooling method
is prohibited.

     This Statement  requires that goodwill be initially  recognized as an asset
in the financial statement and measured as the excess of the cost of an acquired
entity over the net of the amounts assigned to identifiable  assets acquired and
liabilities  assumed. In addition,  SFAS No. 141 requires all other intangibles,
such as core deposit intangibles for a financial institution, to be identified.

     The  provisions  of  Statement  No.  141 are  effective  for  any  business
combination that is initiated after June 30, 2001.

     Accounting  for Goodwill.  Under the  provisions of SFAS No. 142,  goodwill
should not be amortized  but should be tested for  impairment  at the  reporting
unit level. Impairment test of goodwill should be done on an annual basis unless
events or circumstances  indicate impairment has occurred in the interim period.
The annual  impairment test can be performed at any time during the year as long
as the measurement date is used consistently from year to year.

     Impairment testing is a two step process, as outlined within the statement.
If the fair value of the  goodwill  is less than its  carrying  value,  then the
goodwill  is  deemed  impaired  and  a  loss  recognized.  Any  impairment  loss
recognized as a result of completing the transitional  impairment test should be
treated as a change in accounting  principle and recognized in the first interim
period financial statements.

     The  provisions  of Statement  No. 142 would be effective  for fiscal years
beginning  after  December  15, 2001.  Early  adoption  would be  permitted  for
companies  with a fiscal year  beginning  after March 15, 2001 provided that the
first quarter  financial  statements  have not been  previously  issued.  In all
cases,  the  Statement  must be adopted as of the  beginning  of a fiscal  year.
Goodwill and intangible  assets  acquired in a transaction  completed after June
30, 2001 but before this  Statement is initially  applied would be accounted for
in  accordance  with the  amortization  and  nonamortization  provisions  of the
Statement.  The useful economic life of previously  recognized intangible assets
should be reassessed upon adoption of the Statement,  and remaining amortization
periods  should be adjusted  accordingly.  Intangible  assets  deemed to have an
indefinite life would no longer be amortized.

     The Company  adopted  these new  accounting  rules on January 1, 2002. As a
result,  the Company  will not  amortize  the goodwill it recorded on January 2,
2002  related  to the  acquisition  of  Montgomery,  but  will  make  an  annual
assessment  of any  impairment  in goodwill  and,  if  necessary,  recognize  an
impairment  loss at that  time.  The  Company  had no  goodwill  on its books at
December 31, 2001.


Impact of Inflation

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

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

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



Quarterly Results of Operations

     The  following  table sets forth  certain  quarterly  results for the years
ended December 31, 2001 and 2000.
<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)

2001:
<S>           <C>          <C>           <C>             <C>          <C>            <C>            <C>         <C>
March         $2,392       $1,251        $1,141          $15          $436           $0.21          $0.21       $0.15
June           2,380        1,190         1,190           15           450            0.22           0.22        0.15
September      2,410        1,190         1,220          ---           499            0.25           0.25        0.15
December       2,364        1,129         1,235           10           466            0.25           0.25        0.15

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


Quantitative and Qualitative Disclosures about Market Risks

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

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

     Because of the lack of  customer  demand for  adjustable  rate loans in its
market area, Union Federal  primarily  originates  fixed-rate real estate loans,
which  accounted for  approximately  79.3% of its loan portfolio at December 31,
2001.  To manage the interest  rate risk of this type of loan  portfolio,  Union
Federal  limits  maturities  of  fixed-rate  loans to no more than 20 years.  In
addition,  Union Federal  continues to offer and attempts to increase its volume
of adjustable  rate loans when market  interest rates make these type loans more
attractive to customers.

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

     The  OTS  issued  a  final  rule  in 1993  which  uses a net  market  value
methodology to measure the interest rate risk exposure of savings  associations.
However,  the OTS waived the effective date of this rule, and the rule has never
gone into effect. Under this OTS regulation,  an institution's "normal" level of
interest  rate risk in the event of an  assumed  change in  interest  rates is a
decrease in the  institution's  NPV in an amount not exceeding 2% of the present
value of its assets.  Savings  associations  with over $300 million in assets or
less than a 12% risk-based  capital ratio are required to file OTS Schedule CMR.
Data from  Schedule CMR is used by the OTS to calculate  changes in NPV (and the
related  "normal" level of interest rate risk) based upon certain  interest rate
changes (discussed  below).  Associations which do not meet either of the filing
requirements  are  not  required  to  file  OTS  Schedule  CMR,  but  may  do so
voluntarily. As Union Federal does not meet either of these requirements,  it is
not required to file Schedule CMR,  although it does so  voluntarily.  Under the
regulation,  associations  which must file are required to take a deduction (the
interest  rate risk capital  component)  from their total  capital  available to
calculate  their risk based capital  requirement if their interest rate exposure
is greater  than  "normal."  The amount of that  deduction  is  one-half  of the
difference  between (a) the institution's  actual  calculated  exposure to a 200
basis point interest rate increase or decrease (whichever results in the greater
pro forma decrease in NPV) and (b) its "normal" level of exposure which is 2% of
the present value of its assets.

     It is estimated  that at December 31, 2001,  NPV would decrease 20% and 31%
in the event of 200 and 300 basis  point  increases  in market  interest  rates,
respectively,  compared to 14% and 22% for the same  increases  at December  31,
2000. At December 31, 2001,  information was not available for 200 and 300 basis
point  decreases.  A year earlier,  200 and 300 basis point  decreases in market
rates would have increased NPV 9% and 13%, respectively.

     Presented below, as of December 31, 2001 and 2000, is an analysis performed
by the OTS of Union  Federal's  interest rate risk as measured by changes in NPV
for instantaneous and sustained parallel shifts in the yield curve, in 100 basis
point increments, up 300 basis points and down 100 basis points. At December 31,
2001, 2% of the present value of Union Federal's assets was  approximately  $2.8
million.  The interest  rate risk of a 200 basis point  increase in market rates
was $5.2  million  at  December  31,  2001,  and Union  Federal  would have been
required to deduct $1.2  million from its total  capital  available to calculate
its risk  based  capital  requirement  if the OTS' NPV  methodology  had been in
effect and if the Bank had been subject to the OTS' reporting requirements under
this  methodology.  Union Federal's  exposure to interest rate risk results from
the concentration of fixed rate mortgage loans in its portfolio.

<TABLE>
<CAPTION>

                                                December 31, 2001
--------------------------------------------------------------------------------------------------------------------------
      Change                     Net Portfolio Value                                            NPV as % of PV of Assets
     In Rates              $ Amount              $ Change              % Change              NPV Ratio              Change
--------------------------------------------------------------------------------------------------------------------------
                                          (Dollars in thousands)
<S>   <C>                   <C>                   <C>                     <C>                   <C>                 <C>
    + 300 bp *              $17,570               $(7,734)                (31)%                 12.75%              (431) bp
    + 200 bp                 20,119                (5,185)                (20)                  14.25               (281) bp
    + 100 bp                 22,797                (2,507)                (10)                  15.74               (132) bp
        0 bp                 25,304                                                             17.06
    - 100 bp                 26,728                 1,424                   6                   17.72                  66 bp
    - 200 bp                     --                    --                  --                      --                  --
    - 300 bp                     --                    --                  --                      --                  --
</TABLE>

             Interest Rate Risk Measures: 200 Basis Point Rate Shock

   Pre-Shock NPV Ratio: NPV as % of PV of Assets.................        17.06%
   Exposure Measure: Post-Shock NPV Ratio........................        14.25%
   Sensitivity Measure: Change in NPV Ratio......................        281 bp

     In contrast,  presented  below,  as of December  31,  2000,  is an analysis
performed by the OTS of Union Federal's  exposure to interest rate risk measured
in 100 basis point increments, up and down 300 basis points.

<TABLE>
<CAPTION>

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

</TABLE>
             Interest Rate Risk Measures: 200 Basis Point Rate Shock

    Pre-Shock NPV Ratio: NPV as % of PV of Assets.................      28.59%
    Exposure Measure: Post-Shock NPV Ratio........................      25.88%
    Sensitivity Measure: Change in NPV Ratio......................      271 bp
---------------------
* Basis points (1 basis point equals .01%)

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


<PAGE>


                         Independent Accountants' Report


Board of Directors
Union Community Bancorp
Crawfordsville, Indiana

We have audited the accompanying  consolidated balance sheets of Union Community
Bancorp  as of  December  31,  2001  and  2000,  and  the  related  consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period  ended  December  31,  2001.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  the consolidated  financial  statements described above present
fairly, in all material respects,  the consolidated  financial position of Union
Community  Bancorp as of  December  31,  2001 and 2000,  and the  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2001, in conformity with accounting  principles  generally accepted
in the United States of America.



/s/ BKD, LLP
---------------------------------
Indianapolis, Indiana
January 18, 2002

<PAGE>
<TABLE>
<CAPTION>

                             UNION COMMUNITY BANCORP
                           Consolidated Balance Sheets
                           December 31, 2001 and 2000

                                                                                          2001              2000
                                                                                    -------------------------------
Assets
<S>                                                                                 <C>                <C>
   Cash                                                                             $     375,349      $    210,601
   Interest-bearing demand deposits                                                    13,189,553         4,544,085
                                                                                    -------------      ------------
     Cash and cash equivalents                                                         13,564,902         4,754,686
   Investment securities held to maturity (fair value of $2,967,860 and $7,582,405)     2,848,411         7,597,432
   Loans, net of allowance for loan losses of $519,554 and $479,554                   121,749,210       109,505,174
   Premises and equipment                                                                 398,857           373,986
   Federal Home Loan Bank stock                                                         1,530,300         1,043,700
   Investment in limited partnership                                                      856,609           911,609
   Interest receivable                                                                    903,040           958,450
   Other assets                                                                           540,099           238,453
                                                                                    -------------      ------------
       Total assets                                                                  $142,391,428      $125,383,490
                                                                                    ==============     ============
Liabilities
   Deposits
     Noninterest bearing                                                           $    1,397,380    $    1,769,103
     Interest bearing                                                                  80,304,133        71,047,357
                                                                                    -------------      ------------
       Total deposits                                                                  81,701,513        72,816,460
   Federal Home Loan Bank advances                                                     25,405,633        14,534,893
   Note payable                                                                           477,142           654,542
   Interest payable                                                                       186,119           196,223
   Dividends payable                                                                      292,183           326,783
   Other liabilities                                                                      588,685           666,655
                                                                                    -------------      ------------
       Total liabilities                                                             $108,651,275     $  89,195,556
                                                                                    ==============     ============

Commitments and Contingent Liabilities
Shareholders' Equity
   Preferred stock, without par value
     Authorized and unissued--2,000,000 shares
   Common stock, without par value
     Authorized--5,000,000 shares
     Issued and outstanding--2,100,000 and 2,341,000 shares                         $  20,547,581     $  22,868,943
   Retained earnings                                                                   15,556,661        16,025,304
   Unearned employee stock ownership plan (ESOP) shares                                (1,420,777)       (1,521,125)
   Unearned recognition and retention plan (RRP) shares                                  (943,312)       (1,185,188)
                                                                                    -------------      ------------
       Total shareholders' equity                                                      33,740,153        36,187,934
                                                                                    -------------      ------------
       Total liabilities and shareholders' equity                                    $142,391,428      $125,383,490
                                                                                    ==============     ============
</TABLE>

See Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
<CAPTION>

                             UNION COMMUNITY BANCORP
                        Consolidated Statements of Income
                  Years Ended December 31, 2001, 2000 and 1999

                                                                       2001               2000             1999
                                                                      ---------------------------------------------
Interest and Dividend Income
<S>                                                                   <C>              <C>               <C>
   Loans                                                              $8,949,593       $8,486,167        $7,710,042
   Investment securities
     Mortgage-backed securities                                          174,360          228,826           237,665
     Other investment securities                                         184,076          318,995           329,441
   Federal Home Loan Bank stock                                           87,468           86,120            70,089
   Deposits with financial institutions                                  149,954          102,128           123,002
                                                                      ---------------------------------------------
       Total interest and dividend  income                             9,545,451        9,222,236         8,470,239
                                                                      ---------------------------------------------

Interest Expense
   Deposits                                                            4,035,014        3,855,702         3,474,851
   Federal Home Loan Bank advances                                       724,787          745,894           342,481
                                                                      ---------------------------------------------
       Total interest expense                                          4,759,801        4,601,596         3,817,332
                                                                      ---------------------------------------------
Net Interest Income                                                    4,785,650        4,620,640         4,652,907
   Provision for loan losses                                              40,000           60,000            60,000
                                                                      ---------------------------------------------
Net Interest Income After Provision for Loan Losses                    4,745,650        4,560,640         4,592,907
                                                                      ---------------------------------------------
Other Income (Losses)
   Equity in losses of limited partnership                               (55,000)        (100,000)          (43,500)
   Net realized gains on sales of available-for-sale securities              ---           46,128            73,150
                                                                      ---------------------------------------------
   Other income                                                          168,287          124,279           109,485
       Total other income                                                113,287           70,407           139,135
                                                                      ---------------------------------------------
Other Expenses
   Salaries and employee benefits                                      1,335,003        1,101,660         1,068,985
   Net occupancy expenses                                                 85,212           45,001            46,989
   Equipment expenses                                                     35,631           23,123            26,967
   Legal and professional fees                                           123,875          108,741           126,733
   Data processing                                                        94,502           77,314           121,994
   Other expenses                                                        406,572          329,307           367,427
                                                                      ---------------------------------------------
       Total other expenses                                            2,080,795        1,685,146         1,759,095
                                                                      ---------------------------------------------
Income Before Income Tax                                               2,778,142        2,945,901         2,972,947
   Income tax expense                                                    927,062        1,010,821         1,002,512
                                                                      ---------------------------------------------
Net Income                                                            $1,851,080       $1,935,080        $1,970,435
                                                                      =============================================
Basic Earnings per Share                                              $      .93       $      .87        $      .81

Diluted Earnings per Share                                                   .93               87               .81

Weighted-Average Shares Outstanding                                    1,995,020        2,217,229         2,444,080
</TABLE>

See Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
<CAPTION>

                             UNION COMMUNITY BANCORP
                 Consolidated Statements of Shareholders' Equity
                  Years Ended December 31, 2001, 2000 and 1999



                                               Common Stock                                         Accumulated
                                         -----------------------                                       Other
                                            Shares                   Comprehensive   Retained      Comprehensive      Unearned
                                          Outstanding   Amount          Income       Earnings         Income         ESOP Shares
                                         -----------------------------------------------------------------------------------------
<S>               <C>                    <C>         <C>                          <C>                              <C>
Balances, January 1, 1999                2,889,663   $28,193,644                  $15,708,073                      $(1,730,736)
Comprehensive income
   Net income                                                         $1,970,435    1,970,435
   Other comprehensive income, net of tax
     Unrealized gains on securities,
       net of reclassification adjustment                                 15,385                    $15,385
                                                                      ----------
Comprehensive income                                                  $1,985,820
                                                                      ==========
Cash dividends ($.465 per share)                                                   (1,162,604)
Purchase of common stock                  (288,963)   (2,820,059)                    (603,698)
Amortization of unearned compensation
   expense
ESOP shares earned                                        15,837                                                       106,292
                                         ------------------------     ------------------------------------------------------------

Balances, December 31, 1999              2,600,700    25,389,422                   15,912,206        15,385         (1,624,444)
Comprehensive income
   Net income                                                         $1,935,080    1,935,080
   Other comprehensive loss, net of tax
     Unrealized losses on securities,
       net of reclassification adjustment                                (15,385)                   (15,385)
                                                                      ----------
Comprehensive income                                                  $1,919,695
                                                                      ==========
Cash dividends ($.585 per share)                                                   (1,333,440)
Purchase of common stock                  (259,700)   (2,535,911)                    (488,542)
Amortization of unearned compensation
   expense
ESOP shares earned                                        15,432                                                       103,319
                                         ------------------------     ------------------------------------------------------------
Balances, December 31, 2000              2,341,000    22,868,943                   16,025,304             0         (1,521,125)
Net income                                                            $1,851,080    1,851,080
                                                                      ==========
Cash dividends ($.60 per share)                                                    (1,219,732)
Purchase of common stock                  (241,000)   (2,356,034)                  (1,099,991)
Amortization of unearned compensation
   expense
ESOP shares earned                                        34,672                                                       100,348
                                         ------------------------     ------------------------------------------------------------
Balances, December 31, 2001              2,100,000   $20,547,581                  $15,556,661                      $(1,420,777)
                                         ========================     ============================================================
</TABLE>


<TABLE>
<CAPTION>

                                                            Unearned
                                                          Compensation      Total
                                                        ----------------------------
<S>               <C>                                   <C>              <C>
Balances, January 1, 1999                               $(1,640,120)     $40,530,861
Comprehensive income
   Net income                                                              1,970,435
   Other comprehensive income, net of tax
     Unrealized gains on securities,
       net of reclassification adjustment                                     15,385
Comprehensive income
Cash dividends ($.465 per share)                                          (1,162,604)
Purchase of common stock                                                  (3,423,757)
Amortization of unearned compensation
   expense                                                  227,466          227,466
ESOP shares earned                                                           122,129
                                                        -----------------------------
Balances, December 31, 1999                             (1,412,654)      38,279,915
Comprehensive income
   Net income                                                             1,935,080
   Other comprehensive loss, net of tax
     Unrealized losses on securities,
       net of reclassification adjustment                                   (15,385)
Comprehensive income
Cash dividends ($.585 per share)                                         (1,333,440)
Purchase of common stock                                                 (3,024,453)
Amortization of unearned compensation
   expense                                                 227,466          227,466
ESOP shares earned                                                          118,751
                                                        -----------------------------
Balances, December 31, 2000                             (1,185,188)      36,187,934
Net income                                                                1,851,080
Cash dividends ($.60 per share)                                          (1,219,732)
Purchase of common stock                                                 (3,456,025)
Amortization of unearned compensation
   expense                                                 241,876          241,876
ESOP shares earned                                                          135,020
                                                        -----------------------------
Balances, December 31, 2001                              $(943,312)     $33,740,153
                                                        =============================
</TABLE>

See Notes to Consolidated Financial Statements

<PAGE>

<TABLE>
<CAPTION>

                             UNION COMMUNITY BANCORP
                      Consolidated Statements of Cash Flows
                  Years Ended December 31, 2001, 2000 and 1999

                                                                         2001              2000             1999
                                                                    -----------------------------------------------
Operating Activities
<S>                                                                 <C>                <C>               <C>
   Net income                                                       $  1,851,080       $1,935,080        $1,970,435
   Items not requiring cash
     Provision for loan losses                                            40,000           60,000            60,000
     Depreciation                                                         38,106           28,260            32,589
     Deferred income tax                                                 (20,814)         (41,757)           20,928
     Investment securities accretion, net                                 (3,314)         (34,546)          (12,061)
     Gains on sale of investment securities available for sale               ---          (46,128)          (73,150)
     Gains on sale of foreclosed real estate                                 ---              ---              (284)
     Equity in losses of limited partnership                              55,000          100,000            43,500
     Amortization of unearned compensation expense                       241,876          227,466           227,466
     ESOP shares earned                                                  135,020          118,751           122,129
   Net change in
     Interest receivable                                                  55,410         (134,682)         (109,077)
     Interest payable                                                    (10,104)          73,658            13,228
     Other assets                                                       (280,832)           4,313           (38,750)
     Other liabilities                                                  (130,538)         208,146          (157,776)
                                                                    -----------------------------------------------
       Net cash provided by operating activities                       1,970,890        2,498,561         2,099,177
                                                                    -----------------------------------------------
Investing Activities
   Investment securities
     Purchases of investment securities available for sale                   ---              ---          (812,492)
     Purchases of investment securities held to maturity                     ---         (300,000)       (1,415,000)
     Proceeds from sales of investment securities available for sale         ---          336,115           595,655
     Proceeds from maturities and paydowns of mortgage-backed
       securities held to maturity                                       437,335          259,037           731,300
     Proceeds from maturities of investment securities held
        to maturity                                                    4,315,000              ---         1,200,000
   Net change in loans                                               (12,284,036)      (3,303,368)      (15,527,383)
   Purchases of premises and equipment                                   (62,977)         (34,819)          (44,822)
   Proceeds from sale of foreclosed real estate                              ---              ---           100,356
   Purchase of Federal Home Loan Bank of Indianapolis stock             (486,600)             ---          (299,200)
   Other investing activity                                                  ---              ---            (2,726)
                                                                    -----------------------------------------------
       Net cash used by investing activities                          (8,081,278)      (3,043,035)      (15,474,312)
                                                                    -----------------------------------------------

Financing Activities
   Net change in
     Interest-bearing demand and savings deposits                      8,882,589         (264,246)        6,316,311
     Certificates of deposit                                               2,464        4,090,264        (2,171,501)
   Proceeds from borrowings                                           19,000,000       19,000,000        11,000,000
   Repayment of borrowings                                            (8,306,660)     (16,306,533)         (296,900)
   Cash dividends                                                     (1,254,332)      (1,322,248)       (1,117,580)
   Repurchase of common stock                                         (3,456,025)      (3,024,453)       (3,423,757)
   Net change in advances by borrowers for taxes and insurance            52,568            9,351            (5,493)
                                                                    -----------------------------------------------
       Net cash provided by financing activities                      14,920,604        2,182,135        10,301,080
                                                                    -----------------------------------------------

Net Increase (Decrease) in Cash and Cash Equivalents                   8,810,216        1,637,661        (3,074,055)

Cash and Cash Equivalents, Beginning of Year                           4,754,686        3,117,025         6,191,080
                                                                    -----------------------------------------------
Cash and Cash Equivalents, End of Year                               $13,564,902       $4,754,686        $3,117,025
                                                                    ===============================================
Additional Cash Flows Information
   Interest paid                                                    $  4,769,905       $4,527,938        $3,804,104
   Income tax paid                                                     1,077,327          938,419         1,087,326
   Loans transferred to (from) foreclosed real estate                        ---          (88,024)          193,870
</TABLE>

See Notes to Consolidated Financial Statements


<PAGE>
                            Union Community Bancorp
                   Notes to Consolidated Financial Statements
                        December 31, 2001, 2000 and 1999
                      (Table Dollar Amounts in Thousands)

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

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

     The  preparation  of financial  statements  in conformity  with  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. The Association operates under
     a  federal  thrift  charter  and  provides  full  banking  services.  As  a
     federally-chartered thrift, the Association is subject to regulation by the
     Office of Thrift Supervision and the Federal Deposit Insurance Corporation.

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

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

     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  outstanding  are not considered
     impaired.  Certain  nonaccrual and  substantially  delinquent  loans may be
     considered to be impaired.  The  Association  considers  its  investment in
     one-to-four  family  residential loans and consumer loans to be homogeneous
     and  therefore  excluded  from separate  identification  for  evaluation of
     impairment.  Interest income is accrued on the principal balances of loans.
     The accrual of interest on impaired and  nonaccrual  loans is  discontinued
     when, in management's  opinion, the borrower may be unable to meet payments
     as they become  due.  When  interest  accrual is  discontinued,  all unpaid
     accrued interest is reversed when considered uncollectible. Interest income
     is  subsequently  recognized only to the extent cash payments are received.
     Certain loan fees and direct costs are being  deferred and  amortized as an
     adjustment of yield on the loans over the  contractual  lives of the loans.
     When a loan is paid off or  sold,  any  unamortized  loan  origination  fee
     balance is credited to income.

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

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

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

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

     The  allowance for loan losses also  incorporates  the results of measuring
     impaired  loans as  provided  in SFAS No.  114 and SFAS No.  118. A loan is
     considered impaired when management determines that it is probable that the
     Association  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, 2001, 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  likelihood of
     additional  losses due to credit and market risks and could create the need
     for additional loss reserves.

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

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

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

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

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

     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 have been
     excluded from the  computation  of average shares  outstanding.  Options to
     purchase  shares of common  stock were  excluded  from the  computation  of
     diluted earnings per share because the options'  exercise price was greater
     than or equal to the average market price of common shares.


Note 2: Business Combination

     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  into the  Company  and  Montgomery  Savings was merged into the
     Association.  MSA Service  Corporation  (MSA),  an Indiana  corporation and
     wholly-owned   subsidiary  of  Montgomery  Savings,   will  continue  as  a
     subsidiary  of the  Association.  Montgomery's  results of  operations  and
     financial position will be included in the Company's consolidated financial
     statements beginning January 3, 2002.

     On January 2, 2002,  the Company  issued 678,967 shares of its common stock
     at a cost of approximately  $9,068,000,  excluding  registration costs, and
     paid cash of approximately $9,058,000 to Montgomery's shareholders.

     The following  table  summarizes  the  estimated  fair values of the assets
     acquired and liabilities assumed at the date of acquisition. The Company is
     in the process of finalizing  valuations of certain assets and liabilities;
     thus, the allocation of the purchase price is subject to refinement.


     At January 2, 2002:


       Cash and cash equivalents                               $    25,490
       Loans, net of allowance for loan losses                     117,029
       Premises and equipment                                        2,530
       Goodwill                                                      2,260
       Core deposit intangible                                         590
       Other assets                                                  6,543
                                                               -----------
         Total assets acquired                                     154,442
                                                               -----------

       Deposits                                                    117,390
       Federal Home Loan Bank advances                              17,607
       Other liabilities                                             1,145
                                                               -----------
         Total liabilities acquired                                136,142
                                                               -----------
         Net assets acquired                                   $    18,300
                                                               ============

     Core deposit  intangibles will be amortized over seven years using the 125%
     declining balance method. Goodwill will not be deductible for tax purposes.

     The Financial  Accounting Standards Board (FASB) recently adopted Statement
     of Financial Accounting Standards (SFAS) 142, Goodwill and Other Intangible
     Assets. This Statement  establishes new financial  accounting and reporting
     standards for acquired goodwill and other intangible  assets. The Statement
     addresses how intangible  assets that are acquired  individually  or with a
     group of other  assets (but not those  acquired in a business  combination)
     should be accounted for in financial statements upon their acquisition.  It
     also addresses how goodwill and other  intangible  assets  (including those
     acquired in a business combination) should be accounted for after they have
     been  initially  recognized  in  the  financial  statements.  SFAS  142  is
     effective for fiscal years  beginning  after December 15, 2001. The Company
     expects to first apply SFAS 142 in the first  quarter of 2002.  In adopting
     SFAS 142, the goodwill  recorded on January 2, 2002 from the acquisition of
     Montgomery  will  not be  amortized  but will be  subject  to  testing  for
     impairment.


Note 3: Investment Securities

<TABLE>
<CAPTION>

                                                                                      2001
                                                          -------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
                                                            Cost              Gains           Losses             Value
                                                          -------------------------------------------------------------
     Held to maturity
<S>                                                       <C>                 <C>               <C>            <C>
       Federal agencies                                   $   700             $  28             $---           $   728
       Mortgage-backed securities                           2,148                94                2             2,240
                                                          -------------------------------------------------------------
         Total held to maturity                            $2,848              $122             $  2            $2,968
                                                          ============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                      2000
                                                          -------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
                                                            Cost              Gains           Losses             Value
                                                          -------------------------------------------------------------
    Held to maturity
<S>                                                        <C>                  <C>              <C>            <C>
       Federal agencies                                    $5,015               $16              $86            $4,945
       Mortgage-backed securities                           2,582                64                9             2,637
                                                          -------------------------------------------------------------
         Total held to maturity                            $7,597               $80              $95            $7,582
                                                          ============================================================
</TABLE>

     The  amortized  cost  and fair  value of  securities  held to  maturity  at
     December 31,  2001,  by  contractual  maturity,  are shown below.  Expected
     maturities will differ from contractual maturities because issuers may have
     the right to call or prepay  obligations with or without call or prepayment
     penalties.



                                                      Held to Maturity

                                                   Amortized           Fair
                                                     Cost              Value
                                                   -------------------------
     Less than one year                             $  100            $  104
     Five to ten years                                 300               322
     After ten years                                   300               302
                                                   -------------------------
                                                       700               728
     Mortgage-backed securities                      2,148             2,240
                                                   -------------------------
       Totals                                       $2,848            $2,968
                                                   =========================

     At December 31, 2000,  securities  with a carrying value of $2,606,000 were
     pledged to secure FHLB advances. No securities were pledged at December 31,
     2001.

     Proceeds from sales of  securities  available for sale during 2000 and 1999
     were  $336,000  and  $596,000.  Gross  gains of $46,000  and  $73,000  were
     realized on those sales.  There were no sales of  securities  available for
     sale during 2001.

     Mortgage-backed  securities  included  in  investment  securities  held  to
     maturity above consist of the following:
<TABLE>
<CAPTION>
                                                                                      2001
                                                          ------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
                                                            Cost              Gains           Losses             Value
                                                          ------------------------------------------------------------
     Held to maturity
<S>                                                        <C>                  <C>             <C>             <C>
       Government National Mortgage Corporation            $  477               $56             $---            $  533
       Federal Home Loan Mortgage Corporation               1,619                38              ---             1,657
       Federal National Mortgage Corporation                   45               ---                2                43
       Other                                                    7               ---              ---                 7
                                                          ------------------------------------------------------------
         Total mortgage-backed securities                  $2,148               $94             $  2            $2,240
                                                          ============================================================
</TABLE>

<TABLE>
<CAPTION>


                                                                                      2001
                                                          ------------------------------------------------------------
                                                                              Gross            Gross
                                                          Amortized        Unrealized       Unrealized           Fair
                                                            Cost              Gains           Losses             Value
                                                          ------------------------------------------------------------
     Held to maturity
<S>                                                        <C>                  <C>               <C>           <C>
       Government National Mortgage Corporation            $  622               $47               $3            $  666
       Federal Home Loan Mortgage Corporation               1,897                17                3             1,911
       Federal National Mortgage Corporation                   55               ---                3                52
       Other                                                    8               ---              ---                 8
                                                          ------------------------------------------------------------
         Total mortgage-backed securities                  $2,582               $64               $9            $2,637
                                                          ============================================================

</TABLE>

Note 4: Loans and Allowance
                                                    2001              2000
                                                ---------------------------
     Real estate mortgage loans
       One-to-four family                        $ 91,796          $ 83,012
       Multi-family                                 7,095             8,522
       Commercial                                  14,777            12,878
     Real estate construction loans                 1,394             2,037
     Commercial loans                               7,342             3,661
     Individuals' loans for household
        and other personal expenditures               198               165
                                                 ---------------------------
                                                  122,602           110,275
     Unamortized deferred loan fees                  (333)             (290)
     Allowance for loan losses                       (520)             (480)
                                                 ---------------------------
        Total loans                              $121,749          $109,505
                                                ============================




                                                      2001      2000      1999
                                                      ------------------------
     Allowance for loan losses
       Balances, beginning of year                    $480      $422      $362
       Provision for losses                             40        60        60
       Loans charged off                               ---        (2)      ---
                                                      ------------------------
       Balances, end of year                          $520      $480      $422
                                                      ========================


     Information on impaired loans is summarized below.

<TABLE>
<CAPTION>


                                                                        2001              2000
                                                                       ------------------------
<S>                                                                     <C>               <C>
     Impaired loans with an allowance                                   $464              $---
     Impaired loans for which the discounted cash flows or
       collateral value exceeds the carrying value of the loan           ---               133
     Allowance for impaired loans (included in the Company's
       allowance for loan losses)                                         23               ---
</TABLE>



<TABLE>
<CAPTION>

                                                       2001             2000              1999
                                                       ---------------------------------------
<S>                                                    <C>              <C>               <C>
     Average balance of impaired loans                 $116             $131              $214
     Interest income recognized on impaired loans       ---               10                21
     Cash basis interest included above                 ---               10                18
</TABLE>

Note 5: Premises and Equipment

                                               2001              2000
                                               ----------------------
     Land                                      $146              $146
     Buildings                                  584               579
     Equipment                                  264               206
                                               ----------------------
       Total cost                               994               931
     Accumulated depreciation                  (595)             (557)
                                               ----------------------
       Net                                     $399              $374
                                               ======================

Note 6: Investment in Limited Partnership

     The investment in limited  partnership of $857,000 and $912,000 at December
     31, 2001 and 2000  represents a 99 percent  equity in Pedcor  Investments -
     1993-XVI,  LP (Pedcor),  a limited partnership  organized to build, own and
     operate a 48-unit apartment complex. In addition to recording its equity in
     the losses of Pedcor,  the Company has  recorded  the benefit of low income
     housing tax credits of $178,000  for each of the years ended  December  31,
     2001,  2000 and 1999.  Condensed  financial  statements  for  Pedcor are as
     follows:

                                                       2001              2000
                                                      -------------------------
     Condensed statements of financial condition
       Assets
         Cash                                         $  104           $    83
         Land and property                             2,062             2,120
         Other assets                                    196               170
                                                      -------------------------
             Total assets                             $2,362            $2,373
                                                      =========================
       Liabilities
         Notes payable - Association                  $  406            $  535
         Notes payable - other                         1,319             1,329
         Other liabilities                               163               170
                                                      -------------------------
            Total liabilities                          1,888             2,034
       Partners' equity                                  474               339
                                                      -------------------------
            Total liabilities and partners' equity    $2,362            $2,373
                                                      =========================



                                            2001         2000         1999
                                           --------------------------------
     Condensed statements of operations
       Total revenue                         $263         $258         $253
       Total expenses                        (305)        (318)        (318)
                                           --------------------------------
         Net loss                           $ (42)       $ (60)       $ (65)
                                           =================================

Note 7: Deposits
<TABLE>
<CAPTION>


                                                                   2001              2000
                                                                 -------------------------
<S>                                                              <C>               <C>
     Noninterest-bearing demand                                  $ 1,397           $ 1,769
     Interest-bearing demand                                      26,303            17,559
     Savings deposits                                              3,284             2,773
     Certificates and other time deposits of $100,000 or more     17,372            13,937
     Other certificates and time deposits                         33,346            36,778
                                                                 -------------------------
       Total deposits                                            $81,702           $72,816
                                                                 =========================
</TABLE>

     Certificates and other time deposits maturing:
       2002                                                      $29,992
       2003                                                       13,704
       2004                                                        4,779
       2005                                                        1,823
       2006                                                          420
                                                                 --------
                                                                 $50,718
                                                                 ========




                                          2001           2000            1999
                                         -------------------------------------
     Interest expense on deposits
       Interest-bearing demand           $  938         $  942          $  793
       Savings deposits                     104            123             134
       Certificates                       2,993          2,791           2,548
                                         -------------------------------------
                                         $4,035         $3,856          $3,475
                                         =====================================

Note 8: Federal Home Loan Bank Advances


                                                     2001
                                         -----------------------------
                                                            Weighted-
                                                             Average
                                           Amount             Rate
     Advances from FHLB
       Maturities in years ending
         2002                             $12,138             1.99%
         2003                               3,147             2.79
         2004                                 121             6.03
         2010 and 2011                     10,000             5.16
                                          -------
                                          $25,406             3.35%
                                          =======

     The  Association  has an  available  line of credit with the FHLB  totaling
     $1,000,000.  The line of credit expires March 1, 2002 and bears interest at
     a rate equal to the current  variable  advance rate. There were no drawings
     on this line of credit at December 31, 2001.

     FHLB advances are secured by first-mortgage loans and investment securities
     totaling $91,550,000.  Advances are subject to restrictions or penalties in
     the event of prepayment.


Note 9: Note Payable

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

                                                 2001
                                                 ----
     Note payable to Pedcor
       Maturities in years ending
         2002                                    $174
         2003                                     171
         2004                                     132
                                                 ----
                                                 $477
                                                 ====

Note 10: Income Tax

                                                 2001        2000       1999
                                                 ----------------------------
     Income tax expense
       Currently payable
         Federal                                  $719      $  821     $  726
         State                                     229         231        256
       Deferred
         Federal                                   (17)        (35)        16
         State                                      (4)         (6)         5
                                                 ----------------------------
             Total income tax expense             $927      $1,011     $1,003
                                                 =============================
     Reconciliation of federal statutory to
     actual tax expense
       Federal statutory income tax at 34%        $945      $1,002     $1,011
       Effect of state income taxes                149         148        172
       Tax credits                                (178)       (178)      (178)
       Other                                        11          39         (2)
                                                 ----------------------------
         Actual tax expense                       $927      $1,011     $1,003
                                                 =============================
     Effective tax rate                          33.4%       34.3%      33.7%

<PAGE>

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

                                               2001              2000
                                               -----------------------
     Assets
       Allowance for loan losses                $219              $198
       Pensions and employee benefits             48                48
       Other                                      51                36
                                               -----------------------
         Total assets                            318               282
                                               -----------------------
     Liabilities
       Depreciation                              (32)              (28)
       State income tax                           (9)               (7)
       FHLB stock dividend                       (23)              (23)
       Loan fees                                 (11)              (12)
       Equity in partnership losses             (122)             (110)
                                               -----------------------
         Total liabilities                      (197)             (180)
                                               -----------------------
     Valuation Allowance                         ---                (2)
                                               -----------------------
                                                $121              $100
                                               ========================

     There was no  valuation  allowance  necessary  at December  31,  2001.  The
     valuation  allowance at December 31, 2000 was $2,000,  a decrease of $5,000
     from December 31, 1999.

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


Note 11: Other Comprehensive Income
<TABLE>
<CAPTION>

                                                                                               2000
                                                                           ---------------------------------------------
                                                                                                Tax
                                                                           Before-Tax        (Expense)        Net-of-Tax
                                                                             Amount           Benefit           Amount
                                                                           ---------------------------------------------

     Unrealized gains (losses) on securities:
<S>                                                                            <C>              <C>               <C>
       Unrealized holding gains arising during the year                        $ 21             $ (7)             $ 14

       Less: reclassification adjustment for gains realized
         in net income                                                           46              (17)               29
                                                                           ---------------------------------------------
       Other comprehensive loss                                                $(25)             $10              $(15)
                                                                           =============================================

</TABLE>



<TABLE>
<CAPTION>
                                                                                               1999
                                                                           ---------------------------------------------
                                                                                                Tax
                                                                           Before-Tax        (Expense)        Net-of-Tax
                                                                             Amount           Benefit           Amount
                                                                           ---------------------------------------------
     Unrealized gains (losses) on securities:
<S>                                                                             <C>             <C>                <C>
       Unrealized holding gains arising during the year                         $98             $(39)              $59

       Less: reclassification adjustment for gains realized
         in net income                                                           73              (29)               44
                                                                           ---------------------------------------------
       Other comprehensive income                                               $25             $(10)              $15
                                                                           =============================================

</TABLE>

Note 12: Commitments and Contingent Liabilities

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

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

                                               2001              2000
                                              ------------------------
     Commitments to extend credit             $9,087            $4,341
     Standby letters of credit                 4,199             4,208

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

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

     The Association  has entered into  employment  agreements with two officers
     which  provide for the  continuation  of salary and certain  benefits for a
     specified period of time under certain  conditions.  Under the terms of the
     agreement,  these  payments could occur in the event of a change in control
     of the Association,  as defined, along with other specific conditions.  The
     contingent  liability  under  the  agreement  in the  event of a change  in
     control is approximately  $570,000.  The Association is not required to pay
     any amounts  under this  agreement  which  cannot be  deducted  for federal
     income tax purposes.

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


Note 13: Dividend and Capital Restrictions

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

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

     At December 31,  2001,  the  shareholder's  equity of the  Association  was
     $20,190,000.  Although  well  capitalized,  under  current  regulations  in
     effect,  the  Association  is  required  to apply to the  Office  of Thrift
     Supervision to pay dividends to the Company.


Note 14: Regulatory Capital

     The  Association  is  subject to various  regulatory  capital  requirements
     administered by the federal  banking  agencies and is assigned to a capital
     category.  The assigned  capital  category is largely  determined by 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, 2001 and 2000, the  Association is categorized
     as well  capitalized and meets all subject capital  adequacy  requirements.
     There are no conditions or events since  December 31, 2001 that  management
     believes have changed the Association's classification.


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

<TABLE>
<CAPTION>

                                                                                        2001
                                                       -----------------------------------------------------------------
                                                                                Required for             To Be Well
                                                           Actual            Adequate Capital 1         Capitalized 1
                                                       Amount     Ratio      Amount       Ratio       Amount     Ratio
                                                       -----------------------------------------------------------------
<S>                       <C>                         <C>         <C>        <C>           <C>        <C>        <C>
  Total risk-based capital1 (to risk-weighted assets) $20,709     26.8%      $6,185        8.0%       $7,731     10.0%
  Tier 1 capital1 (to risk-weighted assets)            20,190     26.1%       3,092        4.0%        4,639      6.0%
  Core capital1 (to adjusted total assets)             20,190     14.2%       5,673        4.0%        7,091      5.0%
  Core capital1 (to adjusted tangible assets)          20,190     14.2%       2,836        2.0%                   N/A
  Tangible capital1 (to adjusted total assets)         20,190     14.2%       2,127        1.5%                   N/A
  1 As defined by regulatory agencies
</TABLE>

<TABLE>
<CAPTION>
                                                                                            2000
                                                       -----------------------------------------------------------------
                                                                                Required for             To Be Well
                                                           Actual            Adequate Capital 1         Capitalized 1
                                                       Amount     Ratio      Amount       Ratio       Amount     Ratio
                                                       -----------------------------------------------------------------
<S>                       <C>                         <C>         <C>        <C>           <C>        <C>        <C>
  Total risk-based capital1 (to risk-weighted assets) $35,195     52.0%      $5,417        8.0%       $6,771     10.0%
  Tier 1 capital1 (to risk-weighted assets)            34,716     51.3%       2,708        4.0%        4,062      6.0%
  Core capital1 (to adjusted total assets)             34,716     27.8%       3,747        3.0%        6,245      5.0%
  Core capital1 (to adjusted tangible assets)          34,716     27.8%       2,498        2.0%                   N/A
  Tangible capital1 (to adjusted total assets)         34,716     27.8%       1,873        1.5%                   N/A
  1 As defined by regulatory agencies
</TABLE>



Note 15: Employee Benefit Plans

     The  Company  provides  pension  benefits  for  substantially  all  of  its
     employees,  and is a  participant  in a pension  fund known as the Pentegra
     Group. This plan is a multi-employer  plan;  separate actuarial  valuations
     are not made with respect to each participating  employer.  Pension expense
     was $1,000, $2,000, and $2,000 for 2001, 2000 and 1999.

     The Company has a retirement savings 401(k) plan in which substantially all
     employees may participate.  The Company matches employees' contributions at
     the  rate  of  50%  for  the  first  5%  of  base  salary   contributed  by
     participants.  The Company's expense for the plan was $18,000,  $15,000 and
     $8,000 for 2001, 2000 and 1999.

     The Company has an ESOP covering substantially all employees of the Company
     and  Association.  The ESOP acquired  184,000  shares of the Company common
     stock at $10 per share  with  funds  provided  by a loan from the  Company.
     Accordingly,  the  $1,840,000 of common stock acquired by the ESOP is shown
     as a reduction  of  shareholders'  equity.  Unearned  ESOP  shares  totaled
     142,078 and  152,112 at December  31, 2001 and 2000 and had a fair value of
     $1,984,600  and  $1,901,400  at  December  31,  2001 and 2000.  Shares  are
     released to participants  proportionately as the loan is repaid.  Dividends
     on  allocated  shares are  recorded  as  dividends  and charged to retained
     earnings.  Dividends on  unallocated  shares,  which may be  distributed to
     participants  or used to  repay  the  loan,  are  treated  as  compensation
     expense. Compensation expense is recorded equal to the fair market value of
     the stock when contributions, which are determined annually by the Board of
     Directors of the  Association,  are made to the ESOP.  ESOP expense for the
     years ended  December 31, 2001,  2000 and 1999 was  $135,000,  $119,000 and
     $122,000.  At December  31,  2001,  the ESOP had 41,922  allocated  shares,
     142,078 suspense shares and no committed-to-be released shares. At December
     31, 2000, the ESOP had 31,888 allocated shares, 152,112 suspense shares and
     no committed-to-be released shares.

     The Association  has a Recognition and Retention Plan and Trust (RRP).  The
     Association  contributed  $1,753,853 to the RRP for the purchase of 121,670
     shares of Company  common stock,  and effective  June 30, 1998 and June 29,
     2001, awards of grants for 78,900 and 10,000 of these shares were issued to
     various directors, officers and employees of the Association.  These awards
     generally  are to vest and be earned by the  recipient at a rate of 20% per
     year.  The  unearned  portion  of these  stock  awards  is  presented  as a
     reduction of  shareholders'  equity.  Expense  under the plan for the years
     ended December 31, 2001, 2000 and 1999 was $242,000, $227,000 and $227,000.


Note 16: Stock Option Plan

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

     Although  the  Company  has  elected  to follow  APB No.  25,  SFAS No. 123
     requires pro forma  disclosures  of net income and earnings per share as if
     the  Company  had  accounted  for its  employee  stock  options  under that
     Statement.  No options have been granted since 1998. The fair value of each
     option grant was estimated on the grant date using an option-pricing  model
     with the following assumptions:

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

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

<TABLE>
<CAPTION>

                                                                    2001             2000              1999
                                                                   -----------------------------------------
<S>                                                                <C>               <C>              <C>
     Net income                           As reported              $1,851            $1,935           $1,970
                                          Pro forma                 1,753             1,837            1,872
     Basic earnings per share             As reported                 .93               .87              .81
                                          Pro forma                   .88               .83              .77
     Diluted earnings per share           As reported                 .93               .87              .81
                                          Pro forma                   .88               .83              .77

</TABLE>

     During the  three-year  period ended  December  31,  2001,  the Company had
     186,000 options outstanding at a weighted-average exercise price of $14.59.
     There were 116,800,  74,400 and 37,200 options  exercisable at December 31,
     2001, 2000 and 1999.

     As of December 31, 2001, the options  outstanding  have a  weighted-average
     remaining contractual life of 6.5 years.


Note 17: Related Party Transactions

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

     Balances, January 1, 2001                       $  3,071
       New loans, including renewals                    1,578
       Payments, etc.  including renewals              (1,163)
                                                     ---------
     Balances, December 31, 2001                     $  3,486
                                                     =========

     Deposits from related  parties held by the Association at December 31, 2001
     and 2000, totaled $2,762,000 and $2,038,000.


Note 18: Fair Values of Financial Instruments

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

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

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

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

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

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

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

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

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

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

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

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

                                                                     2001                               2000
                                                        --------------------------------------------------------------
                                                          Carrying            Fair           Carrying            Fair
                                                           Amount             Value           Amount             Value
                                                        --------------------------------------------------------------
     Assets
<S>                                                     <C>               <C>             <C>               <C>
       Cash and cash equivalents                        $  13,565         $  13,565       $    4,755        $    4,755
       Investment securities held to maturity               2,848             2,968            7,597             7,582
       Loans, net                                         121,749           123,963          109,505           109,856
       Stock in FHLB                                        1,530             1,530            1,044             1,044
       Interest receivable                                    903               903              958               958

     Liabilities
       Deposits                                            81,702            82,645           72,816            73,160
       Borrowings
         FHLB advances                                     25,406            24,966           14,535            14,366
         Notes payable - limited partnership                  477               456              655               572
       Interest payable                                       186               186              196               196
       Advances by borrowers for taxes
         and insurance                                        332               332              279               279
</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
                                                      2001              2000
                                                   --------------------------
     Assets
       Cash                                        $ 13,336          $  1,581
       Investment in subsidiary                      20,190            34,716
       Other assets                                     529               254
                                                   --------------------------
         Total assets                              $ 34,055          $ 36,551
                                                   ==========================
     Liability - other                             $    315          $    363

     Shareholders' Equity                            33,740            36,188
                                                   --------------------------
       Total liabilities and shareholders' equity  $ 34,055          $ 36,551
                                                   ==========================


<TABLE>
<CAPTION>

                         Condensed Statements of Income

                                                               2001             2000              1999
                                                            -------------------------------------------
     Income
<S>                                                         <C>               <C>               <C>
       Dividends from subsidiary                            $ 16,709          $   ---           $   ---
       Interest income                                           ---                8                11
       Other income                                               77              144               175
                                                            -------------------------------------------
         Total income                                         16,786              152               186
                                                            -------------------------------------------
     Expenses
       Salaries and employee benefits                             91               95                80
       Legal and professional fees                                78               68                83
       Other expenses                                             32               15                17
                                                            -------------------------------------------
         Total expenses                                          201              178               180
                                                            -------------------------------------------

     Income (loss) before income tax and equity in
       undistributed income of subsidiary                     16,585              (26)                6

     Income tax benefit                                           35                4                 9
                                                            -------------------------------------------
     Income (loss) before equity in undistributed
       income of subsidiary                                   16,620              (22)               (3)

     Equity in undistributed (distribution in excess
       of) income of subsidiary                              (14,769)           1,957             1,973
                                                            -------------------------------------------

     Net Income                                             $  1,851          $ 1,935           $ 1,970
                                                            ===========================================
</TABLE>




<TABLE>
<CAPTION>


                       Condensed Statements of Cash Flows

                                                                              2001             2000              1999
                                                                           --------------------------------------------
     Operating Activities
<S>                                                                        <C>                <C>               <C>
       Net income                                                          $  1,851           $1,935            $1,970
       Items not providing cash
         Distributions in excess of (equity in undistributed)
              income of subsidiary                                           14,769           (1,957)           (1,973)
         Other                                                                 (155)              58                73
                                                                           --------------------------------------------
         Net cash provided by operating activities                           16,465               36                70
                                                                           --------------------------------------------

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

     Financing Activities
       Cash dividends                                                        (1,254)          (1,322)           (1,118)
       Repurchase of common stock                                            (3,456)          (3,024)           (3,424)
                                                                           --------------------------------------------
         Net cash used in financing activities                               (4,710)          (4,346)           (4,542)
                                                                           --------------------------------------------
     Net Change in Cash                                                      11,755           (3,974)           (4,688)

     Cash at Beginning of Year                                                1,581            5,555            10,243
                                                                           --------------------------------------------
     Cash at End of Year                                                    $13,336           $1,581            $5,555
                                                                           ============================================
</TABLE>


<PAGE>



                               BOARD OF DIRECTORS

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

         Philip L. Boots                      Samuel H. Hildebrand
         President, Boots Brothers            President, Village
         Oil Company, Inc.                    Traditions, Inc.

         Marvin L. Burkett                    John M. Horner
         Farmer (Retired)                     Dealer Principal
                                              Horner Pontiac Buick GMC

         Phillip E. Grush                     Harry A. Siamas
         Optometrist                          Attorney

                       OFFICERS OF UNION COMMUNITY BANCORP

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



             OFFICERS OF UNION FEDERAL SAVINGS AND LOAN ASSOCIATION

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

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

                             Judith E. Wilson-Tulley
                                  Loan Officer
                               Assistant Secretary



<PAGE>



     Philip L.  Boots  (age 55) 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  73) has  worked  as a  self-employed  farmer  in
Montgomery County since 1956. He currently is semi-retired from farming.

     Phillip  E.  Grush  (age  70)  worked  as a  self-employed  optometrist  in
Crawfordsville  from 1960 until  September,  1996 when he sold his practice.  He
currently  works for Dr.  Michael  Scheidler  in  Crawfordsville  as a part-time
employee/consultant.

     Samuel H.  Hildebrand,  II (age 62) a resident of  Montgomery  County since
1964, has served in management  positions at R R Donnelley & Sons Co.,  Crawford
Industries,  Inc.,  and Atapco  Custom  Products.  Since 1995,  he has served as
President of  Hildebrand's  Village  Traditions,  Inc. The company is engaged in
property management as well as custom fabrication of rain gutter systems through
its Custom Flo Division.

     John M.  Horner  (age 65) has  served as the  president  of Horner  Pontiac
Buick, Inc. in Crawfordsville since 1974.

     Harry A. Siamas (age 51) has practiced law in Crawfordsville since 1976 and
has served as Union Federal's attorney for 18 years.

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





<PAGE>

Market Information

     The   Association   converted  from  a  federal  mutual  savings  and  loan
association to a federal stock savings and loan associaiton  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 February 19, 2002,  there
were approximately 424 record holders of the Holding Company's Common Stock.

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

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

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

                            Stock Price       Dividends
Quarter Ended             High        Low     Per Share
March 31, 2000          $11.3500   $ 9.9375     $.140
June 30, 2000            11.1250    10.1250      .145
September 30, 2000       12.7500    11.0000      .150
December 31, 2000        13.1094    11.2500      .150

March 31, 2001           14.0000    11.6250      .15
June 30, 2001            13.9000    12.4000      .15
September 30, 2001       14.9500    12.6500      .15
December 31, 2001        14.0000    13.0000      .15

Transfer Agent and Registrar

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


General Counsel

Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana  46204


Independent Auditor

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, 2001 with the  Securities and Exchange  Commission.  Copies of this
annual report may be obtained without charge upon written request to:

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