U.S. SECURITIES AND EXCHANGE COMMISSION

                        Washington, D.C.  20549
                                            
                              FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT PURSUANT  TO SECTION 13 OR 15(d) OF  THE SECURITIES
     EXCHANGE ACT OF 1934

              For the fiscal year ended December 31, 1996

                                  or

[ ]   TRANSITION REPORT UNDER  SECTION 13 OR  15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934

        For the transition period from           to            

                   Commission file number:  0-21502


                         UNITED FIDELITY, INC.
   (Exact name of small business issuer as specified in its charter)


        Illinois                                         37-1267618
(State or other jurisdiction of                       (IRS Employer
 incorporation or organization)               Identification Number)

         5250 South Sixth Street, Springfield, Illinois 62703
                  (Address of principal executive offices) 

                            (217) 241-6300
                        (Issuer's telephone number)

 Securities registered under Section 12(b) of the Exchange Act:  None


   Securities registered under Section 12(g) of the Exchange Act:  

                          Title of each class
                  Class A Common Stock, no par value
           Class A Preferred Stock, $15 par value per share

   Check  whether  the issuer  (1) filed  all  reports required  to be
filed  by Section 13 or 15(d)  of the Exchange Act  during the past 12
months (or for such shorter period that the registrant was required to
file  such  reports),  and  (2)  has  been  subject  to  such   filing
requirements for the past 90 days.  Yes  X     No     

   Check if  disclosure of delinquent filers  in response to  Item 405
of Regulation  S-B is  not contained in  this form, and  no disclosure
will  be  contained,  to  the  best  of  registrant's  knowledge,   in
definitive proxy  or information statements incorporated  by reference
in Part III of this Form 10-KSB  or any amendment to the Form
10-KSB.[]

   Issuer's revenues for its most recent fiscal year:      $1,608,026 
 
   The  aggregate  market  value of  the  voting  stock  held by  non-
affiliates as of  December 31, 1996, computed by reference to the book
value at December 31, 1996:  $22,736.  

   The number  of shares  of Common  Stock,  no par  value per  share,
outstanding as of March 1, 1997:       220,211     .                   
                            
                         Index  to  Exhibits appears on pages 16-17 .

<PAGE>                             1

                                        PART I
ITEM 1.  DESCRIPTION OF BUSINESS

(a.)  BUSINESS DEVELOPMENT

           United Fidelity, Inc., is an  Illinois corporation
incorporated in 1990.  United Fidelity, Inc. is referred to herein,
together with its 71%  owned  subsidiary,  First  Fidelity  Mortgage 
Company,  as  the "Company"  and  on a  parent  only basis  as 
"Fidelity".   The  only activity of Fidelity was the sale of its stock
from  May 1991 through June  2, 1994  in an  Illinois intrastate 
offering.   First Fidelity  Mortgage Company, an Illinois corporation
("FFMC"), also incorporated in Illinois in 1990, is engaged in the
real estate mortgage brokerage and banking business with two offices
at December 31, 1996.

           The  Company  has incurred  losses  since its 
organization.   The Company incurred losses of $2,830,137 in 1994,
$535,180 in  1995, and $194,970 in  1996.  The  extent of  the losses
has  placed continuing existence of the  Company in jeopardy.   The
amount  of shareholders' equity has  decreased from  $2,692,105  as of 
December 31,  1993  to $16,357 as  of December 31,  1996.   For FFMC
to  continue to  remain viable, it  must be  able to generate  profits
and cashflow  in 1997.  The  extent  and  causes  of  the  Company's 
operational losses  are  discussed  in  this Item  6  Management 
Discussion  and Analysis  of Financial  Condition and Results of 
Operations, and in the Financial Statements, beginning at Page F-1.

*  STOCK SALES
           In  1991, Fidelity  began an  intrastate  initial public 
offering only to the residents of Illinois.  The units consisting of
one share of preferred stock  and one share  of common stock  of
Fidelity  were sold by employee agents of Fidelity.  The securities 
were registered with the Illinois Securities Department but were not
registered under the provisions of the Securities Act of 1933, as
amended, in reliance upon  an exemption  from registration under  that
Act  as provided in Section 3(a)(11) and Rule 147  promulgated
thereunder.  The  offering was initially for $21,000,000 and was
re-registered with the Illinois Securities Department in May 1992, and
May 1993, in that amount.  The amount of the offering  was reduced to
$12,000,000  in the May  1994, re-registration.   Shortly  after the 
May 1994,  re-registration, on June 2, 1994, Fidelity stopped the sale
of  the securities because of the then  recent operational losses of
FFMC.   The Board of Directors  of Fidelity voted to voluntarily
terminate the offering on August 18, 1994.    On December  7,  1994, 
the Illinois  Securities  Department officially  terminated  the 
offering.   At  the  termination  of the offering 220,211 units for
$6,606,330 had been sold.

           The  proceeds of the  offering were  used to  expand the
Company's mortgage brokerage and mortgage  banking operations, fund
losses from operations, pay offering expenses, and pay administrative
expenses.

           During  1995, as part  of the restructure of  FFMC, certain
of the common stock  of UFI  was retired,  at no cost.   Retired  were
those shares issued  to promoters, directors, salespeople  and
employees of affiliated companies.   This means that  the public
shareholders  who purchased  common  and preferred  stock  in units 
during  the public offering effectively own all of the outstanding
stock of UFI.

           The original concept  of the Company  was to  organize or 
acquire entities offering  residential real  estate mortgage  loans,
mortgage life  insurance,  title  insurance,  and  residential 
property and casualty insurance.  The proceeds of  the public offering
were to  be used  for  the organization  or acquisition  of  these
entities.   In furtherance  of  this concept,  the  Company  acquired
the  operating assets  of a residential real  estate mortgage
brokerage  firm in the Chicago, Illinois, Metropolitan Area in 1991. 
Due to the slower than expected  progress  of  the  sale of  the 
Company's  securities, the remaining portions of the Company's
strategy were never implemented.

           At  December 31, 1996,  the focus of management  of the
Company is to reduce expenses and increase revenues at FFMC so that 
the Company becomes profitable and has a positive cash flow.  
<PAGE>                          2

(b.)  BUSINESS OF ISSUER

                             REAL ESTATE MORTGAGE BANKING

           FFMC  is  the sole  operating  subsidiary of  Fidelity.  
Fidelity itself  conducts  no operations.   FFMC  is  in the 
residential real estate mortgage brokerage and banking business.

*  INDUSTRY OVERVIEW

           Mortgage  banking  generally  is the  business  of  (i) 
producing mortgage  loans, either  by  making such  loans  as a 
direct  lender (referred to as "origination") or by purchasing such
loans from other lenders, (ii) warehousing mortgage  loans pending
sale to third-party investors,  (iii) selling  mortgage loans  in the 
secondary mortgage market  or to other third-party investors, (iv)
selling or purchasing the right to service mortgage loans and (v)
servicing mortgage loans.

                             PRODUCTION OF LOANS

           In early  1993, FFMC received  approval from the  Federal
National Mortgage  Association ("Fannie Mae") as a seller and servicer
of one-to-four  family first mortgages for Fannie Mae.  This approval
allows FFMC  to participate  directly in  the secondary  mortgage
securities market.  FFMC's ability to  package and sell its own 
mortgage backed securities also allows  it to participate  in the
wholesale  mortgage market (i.e. buying loans from other mortgage
origination companies). Later  in 1993,  FFMC received  approval from 
the Federal  Home Loan  Mortgage Corporation  ("Freddie Mac") as a 
seller/servicer under its Home Mortgage Program.

           The Company originates and  purchases conventional mortgage 
loans and  loans  insured  by  the  Federal  Housing  Authority
("FHA")  or guaranteed  by the  Veterans' Administration  ("VA").  
The Company's guidelines  for underwriting  the  conventional
conforming  loans  it originates  or  purchases comply  with  the 
criteria established  by Fannie Mae.  Similarly, the Company's
guidelines for underwriting FHA insured  loans  and VA  guaranteed 
loans  comply with  the  criteria established by such agencies.   The
Company's underwriting guidelines and property standards for
conventional nonconforming  mortgage loans (e.g.,  loans for  single
family  homes with  an original  balance in excess of the maximum
amounts set by Fannie Mae, or for loans that do not  otherwise meet
the criteria established by Fannie Mae) are based on the  underwriting
standards required  by large investors  to which such loans will be
sold.

           At December 31, 1996,  the Company operated two branch 
offices in Illinois staffed by 24 personnel including a total of 12
commissioned loan  officers.    The  Company  currently  operates  two 
production offices, located in Glen  Ellyn and Peoria, Illinois.   The
Company's marketing  strategy is  to  solicit loan  business  from
real  estate brokers, builders, developers and  other real estate
professionals as sources for potential customers.  In addition,
customers  contact the Company  directly, most significantly  in
connection with refinances. To implement the Company's marketing
strategy, loan officers actively solicit the real  estate
professionals  in the area  served by their branch office in  an
effort  to develop referral  networks that  will provide  recurring  
business.     The  Company  believes   that  its commission-based
compensation  system attracts highly  motivated loan officers and
creates incentives to achieve high levels of production.

           A table  of selected mortgage company statistics for 1996
and 1995 follows:
<PAGE>                           3

        ACTIVITY FOR YEAR ENDED        1996           1995
        Loans originated          $ 87,743,397    $88,920,620
        Pipeline from prior year  $  5,600,000   $  8,500,000 
        Loans closed              $ 79,222,010   $ 82,234,096
        Loan fallout              $  9,235,387   $  9,586,524
        Loans held for sale       $  2,720,954   $  6,064,465
        Year end pipeline         $  4,886,000   $  5,600,000
        Number of loans closed          669             817
        Number of loans unsold           31              50
        Average loan closed       $    118,419   $    100,654
        Mortgage origination fees $  1,458,530   $  1,753,606

                                 SALE OF LOANS

           The Company  sells  the  loans  that it  originates  or 
purchases primarily  to Fannie  Mae  or large  investors.  Sales of 
loans  are generally  made without  recourse  to the  Company in the 
event  of default by the borrower.  In connection  with loan sales,
the Company makes  representations  and  warranties  customary  in 
the  industry relating to,  among other  things, compliance with 
laws, regulations and program standards and accuracy of information. 
In the event of a breach of  these representations and  warranties,
the Company  may be required to repurchase such loans.

           The Company  sells its nonconforming loan production on an
ongoing basis to large  investors in privately  negotiated
transactions on  a nonrecourse basis.  The Company  currently sells
all servicing rights associated with nonconforming loans together with
the underlying loan itself.  Sales of  loans with servicing attached
results in  a higher initial  sale price for the loan,  but with no
recurring revenue from the  servicing.  These loans are sold pursuant
to purchase agreements that  involve  commitments by  investors  to 
purchase loans  meeting defined criteria.  

           The  sale of mortgage  loans may  generate a  gain or loss 
to the Company.  Gains or losses result primarily from two factors.  
First, the Company may make a loan to  a borrower at a price (i.e.,
interest rate and discount)  which is higher or  lower than the 
Company would receive  if it  immediately sold  the loan  in the 
secondary market.   These  pricing   differences  occur   principally 
as  a   result  of competitive  pricing  conditions  in  the  primary 
loan  origination market.  Second,  gains or losses may occur  from
changes in interest rates which result in changes  in the market value
of the  loans from the time the price commitment is given to the
borrower until the time that the loan is sold by the Company.

           Prior to 1995,  the Company unsuccessfully endeavored  to
minimize its interest  rate risk on  commitments it had  made to
consumers  by entering into forward sale commitments of
mortgage-backed securities. The  forward  commitments  to  sell  were
intended  to  mitigate  the Company's risk  resulting from  potential
changes in  market interest rates between the  time that the Company
commits to make a loan at an agreed price  and the  time that the 
Company closes  and sells  that loan.  FFMC incurred net hedging
losses of $0, $0 and $576,956 during 1996,  1995 and 1994,
respectively.  FFMC discontinued use of forward contracts during 1994. 
There were no  forward contracts outstanding at December 31, 1996.
<PAGE>                             4

                                LOAN SERVICING

           The Company  began servicing loans in March 1993 subsequent
to its approval  by  Fannie Mae  as a  seller/servicer.   In July 
1994, the Company sold  substantially all  its servicing  portfolio to
a  third party.   The proceeds  from the sale  of servicing was 
$839,864 less costs  of $32,107, realizing net  proceeds of $807,757.  
The Company sold the servicing portfolio to raise cash to pay
operating expenses.

           The Company's  loan servicing  included  collecting and 
remitting loan payments, accounting for  principal and interest,
holding escrow funds  for payment  of  mortgage-related expenses  such
as  taxes and insurance, making  inspections as required of  the
mortgage premises, contacting  delinquent  mortgagors,   supervising 
foreclosures   and property  dispositions  in  the  event  of 
unremedied  defaults  and generally administering the loans.

           During 1995, the Company discontinued loan servicing
entirely.  At December 31, 1996, the Company held no serviced loans.



                   FINANCING WAREHOUSE LENDING OPERATIONS

           FFMC had  a "Master Participation  Agreement" with a 
lender on an individual loan  basis.   The  lender  required one 
hundred  percent participation  in  the  loans it  funded.    There 
were no  covenant restrictions with this agreement.   The fees for
this  agreement were $100 per loan with interest  being prime plus one
half of  a percent.   As usage of this agreement increased, the fees
and interest decreased based on quoted monthly  volume.  FFMC began
utilizing  the agreement in October  1994.  The interest incurred on
these funds in 1996, 1995 and  1994 was $678, $150,732 and $0  and the
related fees totaled $0, $35,425 and $0, respectively.  FFMC
discontinued the use of this line in late 1995.

           On May 10,  1995, FFMC secured  an additional  source of 
mortgage funding  and entered into a Mortgage Loan Repurchase
Agreement with a lender on an individual loan basis.  The lender 
requires one hundred percent participation in the  loan it funds.  
There are no  covenant restrictions  with this agreement.   The fees
for  this agreement are $50 per loan with interest being prime plus
one percent.   FFMC began utilizing the agreement in June 1995.  The
interest incurred on these funds in 1996 and 1995 was $279,992 and
$143,076 and the related fees totaled $29,700 and $12,400,
respectively.

*     COMPETITION

           The  mortgage  banking  business  is  highly  competitive.  
 FFMC competes with a  large number  of other mortgage  bankers, state 
and national  banks, thrift  institutions,  credit  unions and 
insurance companies.  Mortgage  bankers compete primarily with respect
to price and  service.   Competition  may also  occur  on mortgage 
terms  and closing  costs.  FFMC competes, in part, by maintaining and
expanding its  close  relationships   with  real   estate  brokers,  
builders, developers and  permanent lenders.   Many competitors  have
financial resources that are substantially greater than those of FFMC.

           Currently, FFMC is competing primarily in  the six county
Chicago, Illinois  metropolitan  area  with an  additional  down-state 
retail origination office located in Peoria.   FFMC does not rely on
any one customer or market segment for its loan originations nor does
it rely on any one permanent investor to buy its loans.

*  REGULATORY REQUIREMENTS

           The Company's  mortgage banking business  is subject to 
the rules and  regulations  of  Fannie   Mae,  FHA  and  VA  with  
respect  to originating, processing,  selling and  servicing mortgage
loans.   In addition, there are other federal and state statutes  and
regulations affecting  such activities.   The rules and  regulations,
among other things,  impose  licensing  obligations   on  the 
Company,  prohibit discrimination  and establish  underwriting
guidelines  which include provisions for inspections and  appraisals,
require credit reports on prospective  borrowers  and  fix  maximum
loan  amounts.    Moreover, lenders such as the  Company are required
annually to  submit audited

<PAGE>                           5

financial statements to Fannie  Mae, FHA and VA , and each regulatory
entity has its own financial requirements.  The Company's affairs 
are also subject to examination by Fannie Mae, FHA and VA at
all times to assure  compliance  with  the  applicable  regulations, 
policies and procedures.   Failure to comply  with these requirements 
can lead to loss of  approved status, termination of  servicing
contracts without compensation  to the  servicer, demands  for
indemnification  or loan repurchases and administrative enforcement
actions.

           Mortgage loan origination  activities are subject to, 
among other regulatory  requirements,   fair  housing  laws,   the 
Equal  Credit Opportunity Act,  the Federal Truth-in  Lending Act, the 
Real Estate Settlement Procedures  Act, the  Fair Credit Reporting 
Act, and  the regulations    promulgated   thereunder.      These  
laws   prohibit discrimination in  residential lending and require 
the disclosure of certain information  to  borrowers concerning 
credit and  settlement costs.  Regulatory  requirements are designed 
to protect either  the interests  of consumers, or the owners or
insurers of mortgage loans. Failure to comply with  these laws and
regulations can lead  to class action lawsuits and administrative
enforcement actions.  

           FFMC  is required under  the Illinois Residential  Mortgage
Act of 1987  to obtain  and maintain  in force  a license  as  a
Residential Mortgage Licensee  from the  Commissioner of Savings  and
Residential Finance of the  State of  Illinois.  Under  the Illinois 
Residential Mortgage Act,  FFMC is required to  maintain a net worth 
of at least $100,000, maintain  a surety  bond in  the  amount of 
$20,000 and  a fidelity  bond of  $300,000, submit  annual certified 
audits to  the Commissioner,  and  submit  an annual  report  of 
activities to  the Commissioner.  As  of December 31, 1996,  FFMC is
in compliance  with these requirements.

           FFMC is  approved to  conduct direct  endorsement
underwriting  of HUD insured  mortgages.  To retain this approval FFMC
must maintain a net  worth of at least $100,000, maintain  a warehouse
line of credit of not  less than $250,000,  develop a  quality control
plan  for its operations,  employ  a manager  of its  main  office and 
each branch office with  at least one  year's experience in  the
mortgage-related activities for which FFMC  is approved to perform,
and  have at least one  senior  corporate  officer  who  possesses  at 
least  the  same knowledge and  experience as the manager.   As of
December  31, 1996, FFMC is in compliance with these requirements.

           FFMC  is also  approved as  a non-supervised  mortgagee
under  the direct endorsement  program of the National  Housing Act.  
As a non-supervised mortgagee, FFMC is able to completely process
applications for HUD mortgage insurance without prior  HUD review or
approval.  To maintain  such approval, FFMC  must be in good  standing
with HUD for the submission of loans (outlined above), have 5 years'
experience in the  origination  of  single-family  mortgages or  have 
a  principal manager who  has such experience, have  a net worth of 
not less than $250,000, and  have staff  members who  have completed
specified  HUD programs.  As of December 31,  1996, FFMC is in
compliance with these requirements.

*  SEASONALITY

           The  mortgage banking  industry  is  subject to  seasonal 
trends.  These  trends reflect the  general pattern of sales  of
homes.  These sales typically peak during the spring and summer
seasons and decline to  lower levels from mid-November  through
January.  Cyclical trends resulting from increasing or decreasing 
interest rates and the state of  the economy generally  also affect
the  mortgage banking industry and may tend to accentuate or
counteract seasonal trends.

*  PERSONNEL

           At December 31,  1996, FFMC had a  total of 24 personnel 
of which 22  were located in the Glen Ellyn,  Illinois office.  The
Glen Ellyn personnel complement is broken down as follows: executive
management, 1;  loan origination, 11;  appraisal, 2;  processing, 3; 
closing and shipping, 2 and  other, 3.   All of FFMC's  employees are
full  time. The  employees located  in the  branch origination 
offices generally consist of loan originators and loan processors.
<PAGE>                            6

ITEM 2.  DESCRIPTION OF PROPERTY

           FFMC  leases  all its  offices from  outside  third
parties.   See Footnote H in the  accompanying consolidated financial
statements for additional information concerning these leases.


ITEM 3.  LEGAL PROCEEDINGS

           Neither Fidelity  nor any  of its principals  or its 
subsidiaries are presently engaged in any  material pending litigation
which might have a material adverse effect on the Company's financial
position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           None


<PAGE>                            7


                                      PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS

a.) As of December 31, 1996, there was no established public trading
market for Fidelity's common or preferred stock.

(b.) As  of December 31, 1996, there were 220,211 shares of preferred
stock held by 2,224  shareholders and 220,211 shares of  common stock  
held by  2,224  shareholders.   See  the consolidated  statements  of  
shareholders'  equity and  Note  J in  the accompanying  consolidated
financial   statements  for   more   information  concerning   equity  
transactions.

(c.) As of December 31, 1996, no  cash dividends had been declared on
either  the  common  or  preferred   stock  of  Fidelity.    Further,  
management of Fidelity  does not  anticipate that  dividends will  be
paid for a substantial period of time.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

      Set  forth below  is management's discussion  and analysis  of
the significant  items in the balance sheets for the years ended
December 31, 1996, and 1995,  statements of operations and statements 
of cash flows for  the years  ended December  31, 1996, 1995  and
1994.   The primary purpose of management's discussion and analysis is
to enhance the reader's  understanding of Fidelity's operations  as
reflected in its  financial  statements.    This information  should 
be  read  in conjunction  with  the consolidated  financial 
statements  and notes thereto at pages  F-1 through  F-17.  Further, 
management urges  the reader  to  review Item  1. Business  within 
this Form  10-KSB while reading this discussion.

             The  Company  reported  net losses  of  $194,970, 
$535,180  and $2,830,137 in 1996, 1995 and  1994 respectively.  As a
result  of the losses,  during 1994 and 1995,  management reduced the 
size and then terminated  the  public  offering,  closed  branch 
offices,  reduced compensation  to officers, restructured  its
commissions  payments to loan  originators, and  terminated  its 
forward delivery  commitment transactions.  Most of the changes in
items included in the Company's financial  statements  result  from 
changes  in  its  mortgage  loan origination activities and its public
stock  offering, which has been voluntarily terminated.

           A  comparison of  selected  mortgage  company statistics 
for  the periods discussed by management is provided by the following
table:


              ACTIVITY FOR YEAR ENDED        1996        1995
        Loans originated                $ 87,743,397   $ 88,920,620
        Pipeline from prior year        $  5,600,000   $  8,500,000
        Loans closed                    $ 79,222,010   $ 82,234,096
        Loans sold                      $ 81,216,711   $ 84,009,533
        Mortgage origination income     $  1,458,530   $  1,753,606
        Loan originators                       12             13
        Administrative personnel               12             16

<PAGE>                             8

FINANCIAL CONDITION

       The size of  the Company's balance  sheet is  directly related 
to   production volume, the timing of loan  closings and the lag time
from   the loan  closing to the shipping and exchange of cash with the
final   investor. The  Company's receivables  for mortgage loans, 
loans held for  sale,  and line  of  credit  borrowings from warehouse
lenders decreased in 1996 as the Company closed approximately $6.2 
million of loans in December 1996 compared to $8.0 million in December 
1995.

        The financial condition of  the Company stabilized in 1995 
and began  improving in  1996.   The  year end  1994 audit  opinion
expressed  a condition  of  going  concern,  whereas,  improvements 
in  financial condition resulted  in a  year end 1995  audit opinion
with  no going concern or other qualifying expression.


(a)  ASSETS

           Receivables for mortgage loans sold  and mortgage
origination fees decreased  significantly as  the Company's  mortgage
loan  volume was substantially less  during December 1996  than
December  1995.  This item is  also effected  by  the timing  and
expediency  in which  the Company receives its funds from the final
investors.

             Loans held for sale increased at  year end 1996 as 
compared to year end 1995.   During 1996,  the timing  of loan
closings  directly affected the loans held for sale balance.

             At  December  31,  1996,  the  Company  holds  a 
$300,000  note receivable.   The note originated  as partial payment 
of proceeds to FFMC from United Trust, Inc. for preferred and common
stock issued by FFMC  in the May  1995 restructure.  The  note,
receivable from First Commonwealth Corporation  a subsidiary  of
United Trust,  Inc., bears interest at a  rate of 1% over  prime as
declared by  The Wall Street Journal.   At December 31, 1996, the 
prime rate was 8.25%.  Interest is received quarterly.  

(b)  LIABILITIES

           Accounts  payable increased  compared to  the  prior
period.   The accounts payable balance  is comparable to the prior
year-end balance and consists of items relating to the normal business
operations.

           The  line of  credit  liability  decreased by 
approximately  $3.3 million as the  Company's loan  volume was less 
than December  1995.  The line of credit  liability increases and
decreases in  relation to the fluctuations in receivables for mortgage
loans and mortgage loans held for sale.  The Company utilizes its line
of credit  to fund each loan closing.

(c)  SHAREHOLDERS' EQUITY

           The Company's  equity declined $195,000 for the year.  The
decline is the result of the net loss reported for 1996.


RESULTS OF OPERATIONS

1996 COMPARED TO 1995

           The Company reported a  net loss of $195,000 during  1996
compared to a net loss of  $535,000 during 1995.  The mortgage 
company closed $79,222,000  in 1996 compared to  $82,234,000 in 1995, 
a decrease of 3.7%, and a corresponding decrease in the number of
loans sold of 148 (18.1%).   The average  loan sold  was $118,419  in
1996  compared to $100,654  for 1995,  an increase of  17.6%.   The
decrease  in dollar volume, along with the smaller margins for larger
loans, is reflected in  mortgage origination income  for the year.  
Mortgage origination

<PAGE>                            9

income was $295,076  or 16.8% less  in 1996 than  for 1995.   Related
accounts regarding loan originations, such  as loan fees and interest
charges, also decreased in 1996.

           Total expenses decreased  significantly in 1996 compared 
to 1995.  Total expenses decreased $677,437  or 27.0%.  The primary 
causes for the  reduction in  expenses are  employee compensation  and
benefits. The decreases in these  expenses can be attributable to  two
factors.   First,  the number  of employees  decreased 17%  during
1996.   Also, guaranteed   minimum  salaries   for   loan  
originators  has  been discontinued.    Loan originators  receiving  a 
draw against  future production has also been significantly limited.

           Other  general  and  administrative  expenses  decreased 
$248,432 (38.0%) for 1996  compared to 1995.  Branch  offices
determined to be unprofitable  were closed  during 1995  existing
office  space leases were  renegotiated and  expenses  for existing 
offices were  closely reviewed.   These actions contributed
significantly  to the reduction in general expenses.

           To summarize,  the Company reduced  its net loss  in 1996
compared to 1995.   Significant influences include a decrease in the
number of employees, the  discontinuance of unprofitable  offices, and 
tighter control over general  and employee related expenses.   These
measures helped to minimize the effects of the decrease in loan
volume.


1995 COMPARED TO 1994

           The Company reported a  net loss of $513,000 during  1995
compared to a net loss of $2,830,000 during 1994.  Prior to the
restructure of the  Company's subsidiary in May 1995, the Company
reported losses of $485,000.   The  remainder of  the year,  following
the  restructure, reported losses were only $28,000.  The Company has
taken significant steps  in  late  1994 and  throughout  1995  to 
curtail the  losses. Certain of these actions are as follows:

           -      Branch offices determined to be unprofitable were
                  closed.

           -      All activities related to forward  contracts were
                  ceased.

           -      An  outside investment  banker  was engaged  on a
                  consulting basis to review  the operations of the
                  Company   and   recommend   changes   he   deemed
                  necessary.

           -      A new  management team was installed  at FFMC and
                  has been given a  substantial inducement in stock
                  and stock  options in FFMC in order  to stay with
                  the Company.

           -      United  Trust,  Inc.  invested  $615,000  of  new
                  capital in  an issue  of Preferred Stock  of FFMC
                  and  $10,000 of  new capital  in common  stock of
                  FFMC.

           -      Procedures were implemented  to reduce  operating
                  expenses of FFMC  thereby lowering the  breakeven
                  point of operations.  Management compensation was
                  reduced  through  the  negotiation of  employment
                  contracts.   Guaranteed minimum salaries for loan
                  originators was  discontinued.  Leases  on branch
                  offices  were  renegotiated.    Leases  on closed
                  branch   offices  were  negotiated  for  a  final
                  settlement  thus  eliminating  future  costs  and
                  liability.

           The Company's  principal source  of on-going  revenue is 
mortgage origination  income,  which  is  directly related  to  the 
aggregate principal amount of mortgage loans sold.  Mortgage
origination income is comprised primarily of points that borrowers pay
at loan closings, premium paid by  or discount  paid to permanent 
investors when  they purchase  a loan,  and  service release  fees 
paid by  investors  to purchase loan servicing. 

           Mortgage origination income  increased from 1994  to 1995,
as  the aggregate  principal amount of loans sold increased, the yield
on the loans  sold remained  steady, and  marketing losses  were
eliminated.  The Company 

<PAGE>                            10

incurred interest  expense for warehouse borrowings  on a net amount 
in 1994  and 1995 (the  borrower's note  amount less  any fees,
interest,  and/or escrows), while earning  interest income from
borrowers  on the  gross amount  of the  note.   Servicing  income of  
$9,315, $100,046 and $52,441 from  FFMC's loan servicing portfolio is
included  in  other  income  in 1995,  1994  and  1993, respectively. 
During 1994, the Company  sold a significant portion of  its serviced
loans  portfolio.   The Company  discontinued servicing  loans during
1995. 

           The number  of FFMC salaried personnel decreased to 29 at
December 31, 1995  from  54 at  December  31, 1994.    As a  result, 
employee compensation  and benefits  decreased.  Health insurance 
costs  were $78,015, $209,978 and $60,759 for  1995, 1994 and 1993,
respectively.  FFMC's health insurance carrier was  changed in August
of 1994  in an attempt  to lower health insurance  costs.  The  new
carrier requires higher premiums, but no claim costs are paid by FFMC.

           The Company had  13 loan originators  at the end of  1995
compared to 27 at the end of 1994.   Closed  loan production was
approximately $82.2 million and $61.1 million in 1995 and 1994,
respectively. 

           Other general and  administrative expenses decreased 34% 
from the prior period.   The decrease is  the result of cost  savings
from the closure of  certain branch  offices,   the renegotiation  of
existing leases and stricter management control over expenses.

           To summarize,  the Company significantly  reduced the net 
loss in 1995 compared to 1994.  Significant influences include an
increase in loan volume,  the discontinuance  of hedging activities, 
and tighter control over general and employee related expenses.


LIQUIDITY AND CAPITAL RESOURCES


(a)  OPERATING ACTIVITIES

           Consolidated operating activities produced negative cash 
flows of $155,000, $490,000 and $339,000 in 1996, 1995 and 1994,
respectively.  Approximately $195,000 was needed to fund the Company's
loss in 1996.  The  actual need  for cash  was less than  $195,000 due 
primarily to depreciation charges included in net income.
Operating activities  produced approximately  $535,000 short  fall in 
1995.   The  actual need  for  cash was  less  than $535,000  due 
primarily to depreciation charges included in net income.

           Operating activities produced  negative cash flows during 
1994 of $2.8 million.  The  overall use of cash is less than the $2.8
million used to fund the loss  because the decrease in mortgage loan 
related receivables was greater  than the decrease in  payables for
warehouse borrowings  as the  Company used  less of its  own cash  to
warehouse loans.


(b)  FINANCING ACTIVITIES

           Cash was used  by financing activities in 1996 due to
repayment of the  note  payable.     (See  note  Go  of  the  notes 
to  financial statements).  No other financing activities took place
in 1996.  Cash was provided  through financing  activities of $335,000 
and $146,000 during 1995 and 1994, respectively.  Through the
restructure of FFMC, the  Company received cash from the issuance of
$615,000 of preferred stock of  FFMC and $10,000 of  common stock of
FFMC,  in exchange for $325,000 cash and a $300,000 note receivable.

           During  1994,  cash was  provided by  the  sale of  capital
stock.  However, sale of the Company's stock was stopped June 2,  1994
by the Company.   The Board of Directors of the Company voted to
voluntarily terminate the offering on August 18, 1994.  On December 
7, 1994, the Illinois  Securities Department  officially terminated 
the offering.  Cash  was used  for  incremental costs  of  the
offering  charged  to offering costs.   Cash was also  used 

<PAGE>                            11

to repay  the demand notes  and accounts payable to an affiliated
company. 


(c)  FUTURE OUTLOOK

             Management continues  to search for alternatives  to
improve the performance of  FFMC.   There can be  no assurance  that
the  actions taken  will stop  the  losses or  provide  adequate loan 
volume  for profitable operations.   For FFMC  to continue to  remain
viable,  it must be able to generate profits and cash flows in 1997.

<PAGE>                            12

ITEM 7.  FINANCIAL STATEMENTS.

INDEX OF FINANCIAL STATEMENTS

           The following  consolidated financial  statements of
Fidelity  are included as required by Item 7 of this Form 10-KSB.

                                                              Page

             Report of Independent Auditors*                   F-1

             Consolidated Balance Sheets as of 
                December 31, 1996 and 1995*                    F-2

             Consolidated Statements of Operations
                for the years ended December 31, 
                1996, 1995 and 1994*                           F-3

             Consolidated Statements of Shareholders'
               Equity for the years ended December 31, 
               1996, 1995 and 1994*                            F-4

             Consolidated Statements of Cash Flows
               for the years ended December 31, 1996,
               1995 and 1994*                                  F-5

             Notes to Consolidated Financial Statements*       F-6


           All other  schedules for which provision is made in the
applicable accounting regulations of the  Securities and Exchange
commission are not required under the related  instructions or are
inapplicable  and therefore have been omitted.  



* filed herewith



ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE. 

NONE


<PAGE>                              13


                                  PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


(a.) IDENTITY OF DIRECTORS AND EXECUTIVE OFFICERS

           The  following sets forth the names,  ages, positions, and
certain other information  regarding the directors and  executive
officers of Fidelity.   All  of the following,  except as noted,  have
held their positions with Fidelity since its formation in 1990.


ROBERT E. COOK (71)  President and Director; Chairman of the Board 
of First  Fidelity  Mortgage Company,  since  1991;  Director of 
United Trust, Inc.,  since 1984;  special advisor and  consultant to 
United Trust, Inc., 1987 to 1994; Director of United Trust Assurance
Company from 1986 to 1992;  Director of United Trust Life  Insurance
Company, 1989  to  1991;  President   of  Cook-Witter,  Inc.,  a 
governmental consulting and  lobbying firm with offices  in
Springfield, Illinois, from  1985 to  1992.    Executive  Vice 
President  of  the  Illinois Association  of  Realtors   from  1956 
to  1984,   serving  as  that Association's   chief  executive 
officer   and  chief  lobbyist  and legislative consultant.

JAMES E. MELVILLE (51)   Director; Chief Financial Officer  from 1993
and  Senior Executive Vice  President of  United Trust,  Inc., United
Income,  Inc., and United Trust  Group, Inc., 1992  to present; Chief
Financial  Officer from  1993,  Senior Executive  Vice President  and  
Director of  certain non-insurance  companies affiliated  with United
Trust Group, Inc.,  1992 to  present; President  and Chief  Operating
Officer of  certain life  insurance companies affiliated  with United
Trust Group,  Inc. since  1992; Senior Executive  Vice President  and
Chief   Operating  Officer,   Commonwealth   Industries   Corp.   and
Subsidiaries,  1984 to 1991 and  President 1989 to  1991; Senior Vice
President   and  Chief  Financial   Officer,  Massachusetts  General,
Englewood, CO, 1976  to 1984;  CPA, Coopers &  Lybrand, Chicago,  IL,
1973 to 1976.


ROBERT  TOMLINSON  (47)     Director;  President  of  Elite  Advisory
Services,  Inc.,   a  registered  investment  advisor  and  financial
consultant,  financial  advisory services  firm;  Certified Financial
Planner;  investment  company  and variable  contract  products,  and
direct participation  programs; member of the  Institute of Certified
Financial  Planners,   and  the  International  Board   of  Certified
Financial Planners; served on the Financial Advisors Service Board to
Charles Schwab of Charles Schwab and Company.

           The term of office of each director expires  at the annual
meeting of shareholders  upon  election  and  qualification  of  his 
or  her successor.  Fidelity's  executive officers serve  at the
pleasure  of the Board of Directors.


(b.)  SIGNIFICANT EMPLOYEES 

           Management  of  Fidelity's  sole operating  subsidiary, 
FFMC,  is under  the direction  of Mr.  Donald A. Lickel  who serves 
as FFMC's President.

(c.)  FAMILY RELATIONSHIPS

NONE

(d.)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

NONE

<PAGE>                            14

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934

           Based solely upon a review of Forms  3 in the custody of
Fidelity, or lack thereof, none of the persons who were officers,
directors, or holders of 10% of the outstanding common stock during
1996, including those listed on page 26 of  this Form 10-KSB, filed an
initial report of  beneficial ownership  of  the common  stock  of
Fidelity  on  the effective  date   (approximately   June  30,   1993) 
of   Fidelity's registration statement filed on Form 10-SB.

           According to  the stock  transfer records of  Fidelity,
since  the date of the required filing on  Form 3, none of the
reporting persons  engaged in any transactions that were not reported
on a timely basis.

ITEM 10.  EXECUTIVE COMPENSATION

           The following table  provides information concerning the 
cash and non-cash  compensation earned  and  received by  the
Company's Chief Executive Officer  and its most highly  compensated
executive officer for the fiscal year ended December 31, 1996.



                                SUMMARY COMPENSATION TABLE

                          Annual Compensation           

                                                               Other
Name                                                          Annual
and                                                           Compen-
Principal                      Salary          Bonus          sation
Position          Year            ($)            ($)            ($)
Robert E. Cook    1996             0              0              0
President         1995             0              0              0
                  1994        58,000              0              0
                  1993        58,000              0              0
                  1992        58,000              0              0


Donald A. Lickel  1996        60,000              0              0
President of FFMC 1995        60,000         15,000              0
                  1994        60,000         45,453              0



                             Long Term Compensation


                                          Securities              All
Name                         Restricted     Under-              Other
and                            Stock         lying    LTIP      Compen-
Principal                    Award(s)     Options/  Payouts     sation
Position          Year         ($)          SARs (#)   ($)          ($)

Robert E. Cook    1996          0             0         0             0
President         1995          0             0         0             0
                  1994          0             0         0             0
                  1993          0             0         0             0
                  1992          0             0         0             0

Donald A. Lickel  1996          0             0         0             0
President of FFMC 1995          0             0         0             0
                  1994          0             0         0             0


LONG TERM COMPENSATION 

           The Company  has no  stock options,  stock appreciation 
rights or long-term incentive  awards outstanding to its  executive
officers at December 31, 1996.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT


(a.)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

NONE

<PAGE>                            15

(b.)  SECURITY OWNERSHIP OF MANAGEMENT

NONE


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           United Trust,  Inc. provides  accounting and  related
services  to the Company.   See  Notes E  and I  of the accompanying 
consolidated financial  statements for  additional information 
concerning related party transactions.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K


(a.)      INDEX OF EXHIBITS

             EXHIBIT NO.    DESCRIPTION OF EXHIBIT          PAGE NO. 

                 3          (2)  Articles of Incorporation
                              and by-laws

                 4          (2)  Instruments defining the rights
                              of holders, incl. indentures

                10 (a) (2)  Asset purchase agreement

                10 (b) (2)  Master assignment and security 
                              agreement

                10 (c) (4)  Master agreement with Fannie Mae

                10 (d) (4)  Master agreement with GE Capital
                              Mortgage Services, Inc.

                10 (e) (5)  Line of credit agreement

                10 (f) (6)  $18 million credit agreement between
                              the Company and the mortgage banker
                              named therein

                10 (g) (7)  Loan servicing purchase and sale agreement
                              with MidAmerica Federal Savings Bank

                10 (h) (8)  Master participation agreement for 
                              warehouse funding

                10 (i) (8)  Stock purchase agreement dated May 26,     
                              1995 between First Fidelity Mortgage     
                              Company and United Trust, Inc.

                10 (j) (8)  Consulting agreement with Autumnwood 
                              Financial Corporation

                10 (k) (8)  Employment agreement - Donald Lickel

<PAGE>                            16

                10 (l) (8)  Employment agreement - Alan Armour

                10 (m) (8)  Employment agreement - Joseph Cuttone, Jr.

                11          (1)  Statement re. computation of earnings
                              per share

                16          (2)  Letter on change in certifying        
                                  accountants


             EXHIBIT NO.         DESCRIPTION OF EXHIBIT       PAGE NO.

                21          (2)  Subsidiaries of the registrant

                28          Additional exhibits-
                            (2)  (i)   Prospectus dated May 23, 1991
                            (2)  (ii)  Prospectus dated May 22, 1992
                            (3)  (iii) Prospectus dated May 21, 1993



FOOTNOTES:

1)  See  Note C-11 in accompanying consolidated financial statements
        on page F-8.
(2)   Incorporated by  reference from the  Company's Registration  of
        Securities on Form 10-SB, File No. 0-21502, filed 04/06/93.
(3)   Incorporated by  reference from  the Company's Registration  of
        Securities on Amended Form 10-SB, File No. 0-21502, filed      
        06/18/93.
(4)  Incorporated by reference from the Company's quarterly report on
         Form 10-QSB, as of 6/30/93.
(5)  Incorporated by reference from the Company's quarterly report on
             Form 10-QSB, as of 9/30/93.
(6)  Incorporated by reference from the Company's annual report on 
             Form 10-KSB, as of 12/31/93.
(7)  Incorporated by reference from the Company's quarterly report on
             Form 10-QSB, as of 9/30/94.
(8)   Incorporated by reference  from the Company's  annual report on
        Form 10-KSB, as of 12/31/94.



(b)  REPORTS ON FORM 8-K

           No reports  on Form 8-K  were filed during  the fourth 
quarter of the year ended December 31, 1995.




* filed herewith

<PAGE>                            17

                                      SIGNATURES

           In accordance  with Section 13 or  15(d) of the Exchange 
Act, the registrant caused  this  report to  be signed  on its  behalf
by  the undersigned, thereunto duly authorized.

                                  UNITED FIDELITY, INC.       
                                     (Registrant)




/s/  Robert E. Cook                                  March 24, 1997
Robert E. Cook, President

           In accordance with the  Exchange Act, this report has  been
signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.



/s/  Robert E. Cook                                  March 24, 1997
Robert E. Cook, President & Director


/s/  James E. Melville                               March 24, 1997
James E. Melville, Director


/S/ Robert Tomlinson                                 March 24, 1997
Robert Tomlinson, Director


<PAGE>                            18


                   REPORT OF INDEPENDENT AUDITORS


We have  audited the accompanying consolidated balance sheet of United
Fidelity, Inc. (an Illinois corporation) and subsidiary as of December
31, 1996, and the related statements of income, retained earnings, and
cash  flows for the  year then ended.   These financial statements are
the responsibility of the company's management.  Our responsibility is
to  express  an opinion  on these  financial  statements based  on our
audit.

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

In our  opinion, the financial  statements referred  to above  present
fairly, in  all material  respects, the financial  position of  United
Fidelity,  Inc.  as  of December  31,  1996,  and the  results  of its
operations and  its cash flows for  the year then ended  in conformity
with generally accepted accounting principles.

Craig Shaffer & Associates LTD.
Certified Public Accountants
Des Plaines, Illinois  60018

March 20, 1997

                                       F-1
<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

UNITED FIDELITY, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS


<TABLE>
                                             December 31
  
                                          1996              1995
<S>                                   <C>              <C>
Assets
   Cash and cash equivalents          $   134,367      $   289,677 
   Equity securities at market              1,125            1,125 
     (cost $1,125)
   Mortgage origination fees receivable    24,316           87,036 
   Receivables for mortgage loans       1,657,724        5,335,668 
   Loans held for sale                  1,155,902          866,636 
   Notes receivable                       300,000          300,000 
   Other receivables                      169,724          105,491 
   Furniture, fixtures and equipment, 
     net of accumulated depreciation 
     of $ 431,240 and $ 384,239, 
     respectively                         64,807           116,838 
   Total assets                       $3,507,965       $ 7,102,471 

Liabilities 
   Accounts payable                   $   53,962       $    47,910 
   Line of credit                      2,676,808         6,020,000 
   Notes payable                           6,777             9,250 
   Other liabilities                     132,354           112,699 
     Total liabilities                 2,869,901         6,189,859 
   Minority interest                     621,707           701,285 

Shareholders' Equity 
  Class A 9% noncumulative, 
    convertible and callable 
    preferred stock, $ 15 par 
    value, 700,000 shares authorized,
    220,211 issued  and outstanding
    in 1996 and 1995                   3,303,165         3,303,165 
  Common stock, no par value, 
    $.20 stated value, 10,000,000 
    shares authorized,  220,211 
    issued and outstanding in 
    1996 and 1995                         44,042            44,042 
  Additional paid-in capital           2,452,970         2,452,970 
  Accumulated deficit                 (5,783,820)       (5,588,850)
     Total shareholders' equity           16,357           211,327 
     Total liabilities and 
       shareholders' equity           $3,507,965        $7,102,471 
</TABLE>


See accompanying notes to consolidated financial statements.

                                 F-3
<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>

                                           Years Ended December 31

<S>                             <C>           <C>          <C>
                                     1996           1995          1994
Revenue :
  Mortgage origination income   $ 1,458,530   $ 1,753,606   $ 417,047
  Loan fees                         190,008       247,949     257,917
  Interest earned                   237,423       283,411     549,425
  Interest charges                 (310,371)     (321,121)   (526,109)
  Gain on sale fixed assets             287             0           0
  Gain on sale equity securities          0         1,204           0
  Sale of servicing                       0             0     807,757
  Other income                       32,149        29,052     125,074
                                  1,608,026     1,994,101   1,631,111

Expenses:
  Mortgage loan commissions
      and fees                      649,615       713,216     591,072
  Employee compensation and 
      benefits                      511,400       769,497   1,855,960
  Loan costs                        215,884       280,042     306,015
  Interest expense                        0             0      32,697
  Hedging losses on forward 
      contracts                           0             0     576,956
  Depreciation and amortization      50,618        93,767     111,373
  Other general and administrative  405,722       654,154     987,175
                                  1,833,239     2,510,676   4,461,248

Income (loss) before income 
   tax provision                   (225,213)     (516,575) (2,830,137)

Income tax provision                      0             0           0
Minority interest in loss            30,243       (18,605)          0

Net income (loss)               $  (194,970)  $  (535,180)$(2,830,137)




Weighted average common 
  shares outstanding                220,211       929,811   1,984,418

Net loss per common share       $     (0.89)   $    (0.58)$     (1.43)
</TABLE>


See accompanying notes to consolidated financial statements.
                                   F-4
<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, and 1994

<TABLE>

                      9% Preferred       Common Stock          Capital 
                          Stock           Outstanding           Stock  
                   Shares      Amount   Share      Amount     Subscribed 
<S>               <C>      <C>         <C>       <C>           <C>
Balances at December 
   31, 1993       176,852  $ 2,652,780 1,954,852 $390,970      $285,258

 Subscriptions of 
 capital stock 
 units in public 
 offering          43,359      650,385    43,359    8,672      (285,258)
 Costs of public
   offering             0            0         0        0             0
 Repurchase of common 
   stock                0            0     4,000     (800)            0
 Unrealized loss        0            0         0        0             0
 Net loss               0            0         0        0             0

Balances at December 
  31, 1994        220,211    3,303,165 1,994,211  398,842             0

 Subscriptions of 
  capital stock 
  units in public 
  offering              0            0(1,774,000)(354,800)            0
 Costs of public 
  offering              0            0         0        0             0
 Repurchase of 
  common stock          0            0         0        0             0
 Net loss               0            0         0        0             0

Balances at December 
  31, 1995        220,211    3,303,165   220,211   44,042             0

 Net loss               0            0         0        0             0

Balances at December 
  31, 1996        220,211  $ 3,303,165   220,211 $ 44,042    $        0


</TABLE>

See accompanying notes to consolidated financial statements

                                     F-5
<PAGE>



UNITED FIDELITY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, and 1994

<TABLE>

                     Additional       Un-
                      Paid-in      realized    Accumulated
                      Capital        Loss        Deficit        Total
<S>               <C>           <C>          <C>            <C>
Balances at December 
  31, 1993        $  1,587,797  $  (1,167)   $ (2,223,533)  $ 2,692,105

 Subscriptions of 
  capital stock 
  units in public 
  offering             639,673          0               0     1,013,472
 Costs of public 
  offering             (42,735)         0               0       (42,735)
 Repurchase of 
  common stock               0          0               0          (800)
 Unrealized loss             0     (1,230)              0        (1,230)
 Net loss                    0          0      (2,830,137)   (2,830,137)

Balances at December 
  31, 1994           2,184,735     (2,397)     (5,053,670)       830,675

 Subscriptions of 
  capital stock 
  units in public 
  offering             354,800          0               0              0
 Costs of public 
  offering             (86,565)         0               0        (86,565)
 Repurchase of common 
  stock                      0      2,397               0          2,397
 Net loss                    0          0        (535,180)      (535,180)

Balances at December 
  31, 1995           2,452,970          0      (5,588,850)       211,327

 Net loss                    0          0        (194,970)      (194,970)

Balances at December 
  31, 1996         $ 2,452,970  $       0 $    (5,783,820)  $     16,357

</TABLE>

                                      F-5a
<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>

                                         Years Ended December 31
                                     1996          1995        1994
<S>                            <C>           <C>           <C>
Cash Flows From Operating Activities
  Net loss                     $   (194,970)  $  (535,180) $ (2,830,137)
  Adjustments to reconcile net 
    loss to net cash used by 
    operating activities:
      Depreciation and 
        amortization                 50,618        93,767       111,373
      Minority interest in 
        loss                        (30,243)       18,605             0
      (Gain) loss on sale 
        of equipment                   (287)          232         2,481
      Gain on sale equity  
        securities                        0        (1,204)            0
      Changes in assets and liabilities: 
         (Increase) decrease in 
           origination fees 
           receivable                62,720       (66,270)      146,822
         (Increase) decrease in 
           receivable for mortgage 
           loans sold             3,677,944    (3,713,328)   18,750,590
         (Increase) decrease in 
           loans held for sale     (289,266)    1,763,238     1,693,748
         (Increase) decrease in
           other receivables        (64,233)      (67,370)       54,516
         Increase (decrease) in 
           accounts payable           6,052      (103,711)       72,278
         Increase (decrease) in 
           line of credit        (3,343,192)    2,094,272   (18,028,280)
         Increase (decrease) in 
           other liabilities        (29,680)       26,846      (312,357)
Net cash (used) provided by 
  operating activities             (154,537)     (490,103)     (338,966)

Cash Flows From Investing 
  Activities
  Proceeds from sale of 
    equity securities                     0         9,929         1,766
  Purchase of equity securities           0        (1,125)            0
  Proceeds from sale of 
    furniture and equipment           1,700           510        11,772
  Purchase of furniture 
    and equipment                         0       (13,472)      (26,906)
Net cash provided (used) by 
  investing activities                1,700        (4,158)      (13,368)

Cash Flows From Financing Activities
  Proceeds from sale of 
    capital stock                         0           500     1,013,472
  Proceeds from notes payable             0         9,250          (800)
  Proceeds from notes payable        (2,473)            0             0
  Capitalization by United 
    Trust, Inc.                           0       325,000       (42,735)
  Decrease in notes payable - 
    affiliate                             0             0      (475,000)
  Increase in accounts payable - 
    affiliate                             0             0      (349,014)
Net cash provided by financing 
  activities                         (2,473)      334,750       145,923

Net (decrease) increase in cash    (155,310)     (159,511)     (206,411)

Cash and cash equivalents at 
  beginning of period               289,677       449,188       655,599

Cash and cash equivalents at 
  end of period                $    134,367   $   289,677  $    449,188

</TABLE>

<TABLE>
Supplemental disclosure of cash flow information:
<S>                                <C>           <C>        <C>
      Taxes paid during the
         period                    $          0  $        0  $       0
      Interest paid during the 
         period                    $    274,266  $  168,492  $ 497,572
</TABLE>
See accompanying notes to consolidated financial statements.

                                   F-6
<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996 AND 1995


NOTE A--ORGANIZATION

United Fidelity, Inc. (the "Company") was  formed on October 24, 1990,
primarily for the  purpose of providing integrated financial services
to purchasers of residential real estate  in Illinois.  Present
services include residential real estate mortgage banking.

The Company was engaged in  a $21,000,000 intrastate securities
offering, which  was reduced to a $12,000,000  offering on May 23,
1994.   The Board of Directors  of the Company  voted  to voluntarily 
terminate the  offering on  August  18, 1994.   Upon termination of
the offering, this securities offering had raised $6,604,310.

During 1995, the Company  and UTI worked together to eliminate at no
cost all of the Common shares of United  Fidelity, Inc. issued to
promoters,  directors, salespeople and employees of affiliated
companies.   This means that the public shareholders who purchased
Common and Preferred Stock in units effectively own all of the
outstanding stock of UFI.  See Note C.

First Fidelity  Mortgage Company ("FFMC"), a 71% owned subsidiary of
the Company, is engaged in the residential mortgage brokerage and
banking business and operates two production offices.   The offices 
are located in  Glen Ellyn and  Peoria, Illinois.  FFMC  originates 
residential  mortgage  loans,  arranges to  sell  the  loans  to a
permanent investor  and provides  temporary funding  from the  date
the  loan closes until such time as the permanent investor funds the
loan (usually  within 30 days of the loan closing).


NOTE B--ACCOUNTING POLICIES

1.  NATURE OF OPERATIONS

United  Fidelity, Inc.  is  a mortgage  banking  holding company 
that,  through its subsidiary, is engaged in the residential mortgage
brokerage and banking business.

2.  PRINCIPLES OF CONSOLIDATION

The consolidated financial statements  include the accounts  of the
Company and  its 71%  owned subsidiary.    All  intercompany  accounts 
and  transactions  have  been eliminated in consolidation.

3.  USE OF ESTIMATES

In preparing financial  statements in conformity with generally 
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities,  the 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 result 
could differ from those estimates.

4.  CASH AND CASH EQUIVALENTS

Cash and  cash equivalents include  cash on  hand and in  banks and
certificates  of deposit with original maturities of three months or
less.

<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

5.  RECEIVABLES FOR MORTGAGE LOANS SOLD

When mortgage  loans  are delivered  to  the  final investor,  the 
Company  records receivables for mortgage  loans sold and recognizes
gains and  losses on such sales.  The receivable for mortgage loans 
sold is satisfied upon settlement with  the final investor, usually
within 30 days of the sale.


6.  MORTGAGE LOANS HELD FOR SALE

Mortgage loans held for  sale are reported at the lower of  aggregate
cost or market value.  Cost is the face value of the mortgage reduced
by the net deferred fees  and costs which are  recognized upon sale. 
The  related servicing rights may  either be sold or retained.  Gains
or losses on such sales are recognized at the time of  sale and are
determined by the difference between net sales proceeds and cost.

7.  FURNITURE AND EQUIPMENT

Furniture  and  equipment are  recorded  at cost.   Depreciation  is 
provided using straight-line and accelerated methods over periods
ranging from five to seven years.


8.  INTANGIBLE ASSETS

Tangible and identifiable intangible assets were recorded based  on
values stated in the asset  purchase agreement and estimates  of fair
market value  of the respective assets  at the date of acquisition.  
Goodwill, representing the acquisition cost of First Mortgage
Corporation assets in excess of the value of net assets acquired, was
eliminated through the restructuring of the Company's investment in
FFMC.

Organizational costs  consist principally of  legal and registration 
fees resulting from  the  establishment  of  the  Company.  
Amortization  expense pertaining  to organizational costs was $0, $0
and $5,532 for each of the  years ended December 31, 1996, 1995 and
1994.

At December 31, 1996 and 1995, no intangible assets remain on the
balance sheet.

9.  DEFERRED LOAN FEES AND COSTS

In  accordance  with   Financial  Accounting  Standards  Board  
Statement  No.  91, "Accounting  for  Nonrefundable  Fees  and  Costs 
Associated  with  Originating  or Acquiring Loans  and Initial Direct 
Costs of Leases", lending  transaction fees and costs are deferred 
and recognized as income  or expense in the  periods the related loans
are sold.  

10.  MORTGAGE ORIGINATION INCOME

Mortgage origination income includes  all mortgage related revenues
other  than loan fees, servicing fees and interest.

11.  LOAN FEES

Loan  fees  include  payments  received  from borrowers,  usually  at 
the  time  of application, to  cover  loan costs  (the  costs  of
appraisals  and credit  reports provided by third parties and paid for
by FFMC).

<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  MORTGAGE SERVICING FEES AND LATE CHARGES

The  Company  recognizes mortgage  servicing fees  and late  charges
as  income when collected.   Servicing fees are  calculated on  the
basis  of outstanding  principal balances of  loans serviced.  Income 
from mortgage servicing is  included in "other income" in the
Consolidated Statements of Operations.

13.  LOSS PER SHARE

Net loss per share is calculated by dividing net loss by the weighted
average number of shares outstanding for  the years ended December 31, 
1996, 1995, and 1994.   The convertible preferred  stock is not
considered  as a common stock equivalent in the calculation as its
effect would be antidilutive.

NOTE C-- SUBSIDIARY RESTRUCTURE

Prior to implementation of the plan of restructure in May 1995, the
Company incurred losses from operations,  reduction in  production
volume and  substantial cash  flow problems.   An outside investment
banker was engaged to review the operations of the Company and
recommend  changes he deemed necessary.   On May 26, 1995, based on
the recommendation of the outside investment banker, the Company, FFMC
and United Trust, Inc. ("UTI"), have cooperated together to
accomplish:

    A.  Elimination at  no  cost  of almost  all  of  the Common       
        shares  of  United Fidelity, Inc. issued to  promoter,         
        directors, salespeople and employees of  affiliated companies. 
        This  means that the  public shareholders who purchased Common 
        and Preferred Stock in units effectively own all of the         
        outstanding stock of UFI.

    B.  A new  management  team has  been installed  at FFMC  and  has 
        been  given a substantial  inducement in stock  and stock       
        options in  FFMC in order to stay with the Company.

    C. UTI invested $615,000  of new capital in an issue  of Preferred 
       Stock of FFMC and $10,000 of new capital in common stock of     
       FFMC and further agreed to guarantee up to  $2,000,000 of       
       mortgage credit  lines for  FFMC.   This capitalization, which  
       provided an additional $325,000  in cash, allowed unpaid  bills  
       to be brought  current and permitted loan originations to         
       continue uninterrupted.

    D.  In exchange for  the 100 shares of  FFMC common stock          
        previously owned, UFI received 1,000,000 shares  of the  newly 
        authorized common  stock.   UFI also  contributed $259,035  in  
        assets  to FFMC.   These  assets included $34,435 in  cash,      
        $6,369  in equity  securities,  $44,700 mortgage  loan
        receivable and $173,531 in receivables resulting from prior    
        advances.

    E.  The series A Preferred Stock issued to UTI is  redeemable at   
        any time at the option  of management.  If the shares          
        currently outstanding are redeemed prior to May 26, 1998,      
        accrued dividends will be waived.  Also, if FFMC redeems       
        300,000 of UTI's shares of Series A Preferred Stock prior to   
        May 26, 1996,  FFMC may then redeem  50,000 shares of common   
        stock owned by UTI for an aggregate purchase price of $2,500.    
        If  the remaining shares  of Series  A Preferred  Stock are       
        redeemed prior to  May 26,  1997, the Company  may then           
        redeem an  additional 50,000  shares of  common stock
        owned by UTI  for an aggregate purchase  price of $2,500.      
        The May  26, 1996 redemption date was not exercised by the     
        Company.


<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

    F.  On  April  26,  1995,  FFMC  sold  105,000  shares  of  common 
        stock  (4.2% outstanding) to  Autumnwood Financial Corporation 
        for $250  and 105,000 shares of common stock to FFMC's          
        president for $250.  In addition, stock options were offered    
        to two key loan officers where in each can purchase 127,500     
        shares for $250.  The options expired on May 8, 1996.

As a result of these transactions, UFI owns 1,000,000 of the 1,410,000
shares of the common stock issued and outstanding, or 71% of FFMC. 
UTI owns all 615,000 shares of the preferred stock issued and
outstanding and 200,000 shares of common stock.

In addition  to the  above, during  1995, management has  implemented
procedures  to reduce  expenses of  FFMC extensively  and thereby 
lowered the  breakeven  point of operations.  These procedures
included closing unprofitable branch offices,  ceasing forward
contract  activities, and reducing  operating expenses.   Operating
expenses were reduced by reducing employment contracts, eliminating
minimum salaries for loan officers and renegotiating lease agreements
for branch offices.



NOTE D--NOTE RECEIVABLE

The Company  has a note receivable from First Commonwealth
Corporation, a subsidiary of UTI, in the amount of $300,000 at
December 31, 1996.  The note bears interest  at a variable per annum
rate equal to 1%  over the variable per annum rate of  interest most
recently announced by the  Wall Street Journal as the prime rate.   As
of March 1, 1997, the prime rate was 8.25%.


NOTE E--FURNITURE AND EQUIPMENT

Furniture and equipment as of December 31 consist of the following:

      Cost                                     1996               1995 


      Furniture and fixtures               $ 231,438         $ 236,468
      Computer hardware                      182,113           182,113
      Computer software                       72,034            72,034
      Equipment under capital lease           10,462            10,462
                                             496,047           501,077
      Less accumulated depreciation          431,240           384,239

                                           $  64,807         $ 116,838


Depreciation expense amounted to $ 50,618,  $ 73,394 and $96,474 in
1996, 1995,  and 1994, respectively.

<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)


NOTE F--BORROWING ARRANGEMENTS

FFMC had  a "Master Participation  Agreement" with  a lender on  an
individual  loan basis.   The lender  required  one hundred  percent
participation  in the loans  it funded.  There were no covenant
restrictions with this agreement.  The fees for this agreement were
$100 per loan with interest  being prime plus one half of a  percent.
As  usage of  this agreement  increased, the  fees and  interest 
decreased  based on quoted  monthly volume.  FFMC  began utilizing the 
agreement in October  1994.  The interest  incurred on these funds in 
1996, 1995 and 1994 was  $678, $150,732 and $0 and the  related fees
totaled $0,  $35,425 and $0, respectively.   FFMC discontinued use of
this line late in 1995.

On May 10, 1995, FFMC  secured an additional source of mortgage
funding  and entered into a Mortgage Loan Repurchase Agreement with a
lender on an individual loan basis.  The lender  requires one hundred
percent participation in the  loan it funds.  There are  no covenant
restrictions with this agreement.   The fees for this agreement are
$50 per  loan with interest being prime plus one  percent.  FFMC began
utilizing the agreement in June 1995.  The interest incurred  on these
funds in 1996 and 1995  was $279,992   and  $143,076  and  the  
related  fees  totaled   $29,700  and  $12,400, respectively.


NOTE G--NOTES PAYABLE

At December 31,  1996, the Company has  a note payable of  $6,777. 
The note,  dated October 30, 1995, bears interest at 6% per annum and
requires equal monthly payments for a term of  forty eight months. 
The  note was originated in connection  with the purchase of an
automobile by FFMC.  Expected principal reductions for the  next five
years are as follows:


                        1997                  2,262
                        1998                  2,401
                        1999                  2,114
                        2000                      0
                        2001                      0


NOTE H--INCOME TAXES

Until  the  FFMC  restructure  in  May  1995  (See  Note C),  the 
Company  filed  a consolidated  federal  income  tax  return  which 
included  the  results  of  FFMC.  Following the  restructure, the
Company  and FFMC are no  longer eligible to  file a consolidated
federal income tax return pursuant to the Internal Revenue Service
Code relating to percentage of ownership.

No provisions for income taxes for the years ended December 31, 1996,
1995, and 1994 have  been reflected  in the statements  of operations 
due to  net operating losses since inception.

At  December 31,  1996, the  Company has  tax net  operating loss 
carryforwards for federal income tax purposes available to offset
future taxable income as follows:

<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
  

               Expiration                                   
                  Year                                      
                 Ending                UFI             FFMC 

                  2005           $   14,000       $        0
                  2006              281,000          309,000
                  2007              280,000          198,000
                  2008              231,000          616,000
                  2009              174,000        2,768,000
                  2010               23,000          486,000
                  2011                1,000          224,000

                 Total           $1,004,000       $4,601,000


The Company has  established a deferred  tax asset of  $1,962,000 for
its  operating loss carryforward and has established an allowance of
$1,962,000.


NOTE I--COMMITMENTS, CONTINGENCIES, AND OFF BALANCE SHEET RISK

1.  LEASES

The Company leases office  facilities under various operating leases 
having initial or remaining noncancelable  lease terms in excess of 
one year.  Rent  expense under these leases  aggregates $85,920,
$161,929  and $273,196  for 1996, 1995,  and 1994, respectively.  
Minimum  rental commitments  under the  aforementioned leases  as of
December 31, 1996, are as follows:

                        YEAR                    AMOUNT

                        1997                  $ 89,202
                        1998                    83,265
                        1999                         0
                       TOTAL                  $172,467


2.  UNINSURED CASH BALANCES

The Company maintains its cash balances at several financial
institutions located in Illinois.  Accounts at each institution are
insured by the Federal Deposit Insurance Corporation up to $100,000.  
At December 31, 1996 and 1995, the Company's uninsured balances
aggregate to approximately $79,728 and $32,552, respectively.    In 
connection  with  mortgage  servicing  activities,  no  related
fiduciary funds held in trust were uninsured at December 31, 1996 and
1995.

<PAGE>

UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)



3.  RECEIVABLES FOR MORTGAGE LOANS SOLD

At  December  31,  1996  and  1995,  the  Company  had  $1,657,724 
and  $5,335,668, respectively, in  outstanding accounts  receivable
from various  mortgage investors.  This amount  represents loans 
which the  Company closed, funded  and sold,  but for which the
Company has not yet received reimbursement  from a permanent investor. 
In general, the time span between the date of funding by the Company
and the receipt of funds  from the  investor does  not exceed  30
days.   Collection  of  the Company's receivables is dependent on the
purchasing ability of its permanent investors.  None of the investors
has ever defaulted on a payment commitment.

4.  PIPELINE OF MORTGAGE LOAN APPLICATIONS IN PROCESS

As of December 31, 1996, and 1995, commitments to fund mortgage loan
applications in process with pre-established  interest rates and fees
aggregated over  $4.9 and $5.6 million, respectively.   The Company
has  adequate lines of  credit at December  31, 1996, and 1995, to
fund its projected loan closings from its mortgage loan pipeline.

5.  FORWARD CONTRACTS

The  Company sold  mortgage-backed securities  through forward 
delivery commitments with major dealers in such securities.   Forwards
are used as hedges of  anticipated mortgage  loan sales.  Forward
contracts  involve selling mortgage-backed securities at a specified
price  for delivery on a specified future date.  Risks arise from the
possible  inability of counterparties to meet the  terms of their
contracts and from movements  in mortgage  values and  interest 
rates.   Gains and  losses related  to forwards  are recognized in the
same period in which gains and losses on the related hedged mortgage 
loans are  recognized.   The Company  discontinued  use of  forward
contracts during  1994.  There were no forward contracts outstanding
at December 31, 1996 and 1995.

6.  REPURCHASE REQUIREMENTS

Mortgage loans and  their related  servicing rights are  sold under
agreements  that define certain criteria for the mortgage loan.  If
the criteria are not met, FFMC is required to repurchase the mortgage
loan.

Conforming  conventional loans  serviced by  FFMC are sold  to the 
Federal National Mortgage Association ("FNMA")  on a non-recourse 
basis, whereby foreclosure  losses are generally the responsibility of
FNMA rather than FFMC. 

7.  CONCENTRATION OF BUSINESS

The Company's primary  business activity  is the origination, 
closing, selling  and servicing of real estate  mortgage loans on one-
to four-family residential property located in Northern  and Central
Illinois.  The volume  of business is, accordingly, directly 
dependent on economic  conditions in those  areas and  the financial
well-being and credit worthiness of borrowers.
<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)



NOTE J--TRANSACTIONS WITH RELATED PARTIES

United  Trust, Inc. provides the Company with  accounting and related
services.  The Company incurred expenses of $0, $0  and $82,069 for
services performed during 1996, 1995  and 1994, respectively.   The
Company  rented office space  from United Trust, Inc. through May
1996, and incurred rent expense of $0, $0 and $6,000 in 1996, 1995,
and  1994, respectively.   The above amounts are  included in
"employee compensation and  benefits" and "other general and
administrative" expenses, respectively, in the accompanying
Consolidated Statements of Operations.


NOTE K--SHAREHOLDERS' EQUITY

1.  INITIAL SALE OF COMMON STOCK

In October 1990, the Company issued 2,043,000 shares of no par value
common stock at $.20 stated value per share.  The proceeds  from the
stock sale were $408,600.  As a part  of the  restructure  of FFMC  in
May  1995, the  shares outstanding  issued to officers,  promoters,
salespeople, and affiliated companies, were retired at no cost to the
Company.

2.  PUBLIC OFFERING OF STOCK

During the  first five months  of 1994, the  Company continued to 
market its public stock offering.  The Company's original  offering
was 700,000 units ("units"), which was reduced  to 400,000 units  with
the  prospectus dated May  23, 1994.   Each unit consists of one share 
of no par  value common stock  and one share  of Class A,  9%
noncumulative convertible preferred stock, $15  par value per share. 
Each  share of Class A preferred stock may be converted, at the
holder's option, into two shares of common stock until three years
after the completion of the offering, unless extended by the Company. 
The Company may, at its option, at any time, call for redemption of
all or any portion of the shares of  Class A preferred stock, and pay
the holder $20 per share,  plus any declared but  unpaid dividends.  
The units are offered  to the public at $30  per unit.   Upon any
liquidation, dissolution,  or winding up  of the Company,  the holders
of the  Class A preferred  stock will be  entitled to receive, from
the assets of the  Company remaining after paying or providing  for
the payment of  all creditors, and  before any payments to  the
holders of  the common stock, an amount  equal to $15 per  share,
together with  an amount equal to  any declared and unpaid dividends.

Due to the recent losses of FFMC, the Company stopped the sale of its
stock units to the  public  on June  2, 1994.    The Board  of
Directors  of  the Company  voted to voluntarily terminate the
offering on August 18, 1994.

This public  stock offering  is exempt  from  the registration 
requirements of  the Securities Act  of 1933,  as amended,  as
provided  by Section  3(a)11 and  Rule 147 promulgated thereunder. 
Accordingly,  this public stock offering is  not registered with the
Securities and Exchange Commission.

3.  REPURCHASE OF COMMON STOCK

In  1995, the  Company  retired 1,774,000  shares of  common  stock as 
part  of the reorganization of  FFMC.  The shares,  which had been
issued  to officers, promoter, salespeople, and affiliated companies,
were 
<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)


retired at no cost.

During the year  ended December 31,  1994, the Company  repurchased
4,000 shares  of common stock from certain of the  original organizers
at the original issue  cost of $800.

4.  OFFERING COSTS

Costs directly attributable to the distribution of the stock are
charged against the gross proceeds  of the  public offering  rather
than to  operations.   The following costs have been specifically
identified as costs of the offering:

                              1996         1995        1994   

     Commissions                 -            -     109,920 
     Legal fees                  -            -      21,095 
     Printing                    -            -       8,161 
     Other                       -            -     (96,441)
      Total             $        -   $        -   $  42,735 


5.  PROCEEDS OF PUBLIC OFFERING

The Company deposited all proceeds from  the public stock offering
into a segregated bank account.     Generally,  amounts equal  to  17%
or  less  of the  subscriptions deposited were then transferred to 
the Company's operating account,  leaving 83%  or more of the 
subscription proceeds in the segregated account.   However, during
1994 and  1993,  in  addition  to  transferring  17%  for  offering 
costs,  the  Company transferred $927,720 and $169,131, respectively,
for general corporate expenses.  In 1995,  the segregated  account was 
closed  and all  remaining funds  were used  for general corporate
expenses.

Activity in the segregated account was as follows:

                                           1996          1995  

      Beginning balance                      -       $ 221,319 
      Subscription deposits                  -               - 
      Interest credited                      -           4,579 
      Interest used for operations           -          (4,579)
      Funds used for offering costs          -               - 
      Line of credit to FFMC                 -               - 
      Repayment of line of credit            -               - 
      Funds used for general 
         corporate expenses                  -        (221,316)


      Balance remaining           $          -  $            -
<PAGE>
UNITED FIDELITY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)




NOTE L--OTHER CASH FLOW DISCLOSURE

On a  cash basis,  the  Company paid  $274,266, $168,492  and 
$497,572 in  interest expense for  the years 1996,  1995 and 1994,
respectively.   The Company  paid $0 in federal income tax for the
years 1996, 1995 and 1994.

As  part  of the  subsidiary's  restructure  on  May  26,  1995 (see 
NOTE  C),  UTI transferred  a $300,000 note receivable as partial
consideration for preferred stock issued by FFMC.


NOTE M--FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair  values of the  Company's financial  instruments at
December  31, 1996 follow:

                                                              
Estimated
                                              Carrying         Fair
                                               Amount          Value
   FINANCIAL ASSETS:
       Cash and cash equivalents             $ 134,367      $ 134,367
       Loans held for sale                 $ 1,155,902     $1,155,902
       Notes Receivable                      $ 300,000      $ 300,000

   FINANCIAL LIABILITIES:
       Lines of credit                     $ 2,676,000     $2,676,000
       Notes and accounts payable             $ 60,739       $ 60,739
       Other liabilities                     $ 132,354      $ 132,354



The following methods and assumptions  were used to estimate the fair
value  of each class of financial instruments for which it is
practicable to estimate that value:

CASH  AND CASH  EQUIVALENTS -  Due to  the short  term nature  of
these  assets, the carrying amount is a reasonable estimate of fair
value.

LOANS HELD FOR SALE - Fair value is estimated using quoted market
prices.

LINES  OF CREDIT, NOTES  AND ACCOUNTS PAYABLE  AND OTHER LIABILITIES 
- The carrying amount is a reasonable estimate of fair value.
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