HOME FEDERAL BANCORP
                               ANNUAL REPORT 2003






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 1   Letter To Shareholders

 4   Selected Consolidated Financial Data

 5   Quarterly Results Of Operations

 6   Management's Discussion & Analysis

 20  Consolidated Balance Sheets

 21  Consolidated Statements Of Income

 22  Consolidated Statements Of Shareholders' Equity

 23  Consolidated Statement Of Cash Flows

 24  Notes To Consolidated Financial Statements

 41  Independent Auditors' Report

 42  Board Of Directors & Officers Of Home Federal Bancorp
     Executive Officers Of HomeFederal Bank



<PAGE>



To our shareholders:


     For many Americans,  2003 - a year marked by ongoing international conflict
and continuing economic uncertainty at home - will be a time not soon forgotten.
It was a time  marked  by  contrasts,  in which  encouraging  results  generated
through  implementation of our strategies for growth were occasionally offset by
irregular changes in economic indicators and activities.

     For   HomeFederal,   the  low  interest  rate  environment  that  prevailed
throughout 2003 and its restricting  effects on net interest margins contributed
to a decrease in net income. Earnings were $9,643,000,  or $2.26 basic and $2.15
diluted  earnings per common share,  compared to  $10,501,000 or $2.41 basic and
$2.30 diluted earnings per common share in 2002.  Operating expenses were higher
than in the  previous  year,  largely  due to  increased  costs that  impact all
businesses,  such as the ever-increasing  costs of health insurance,  technology
expenses, regulatory compliance and retirement costs.

     In our industry,  higher levels of business also generate higher  expenses,
and our operating  expenses rose in response to increased  loan activity  during
the first  three  quarters  of the  year.  Symbolic  of this year of  contrasts,
refinancing  activity  decreased  dramatically  during the final three months of
2003,  and  operating  expenses  for the  fourth  quarter  fell  back to a level
parallel with the fourth quarter of the previous year.

     In such a low rate  environment,  fee income and savings  deposits  tend to
decrease  as  consumers  seek  lower   borrowing  rates  and  higher  yields  on
investments.  For  financial  institutions  like  HomeFederal,  whose  regulated
products  are  replicated  by an  increasing  number of  nonregulated  financial
providers, strategies for growth must necessarily be based on service advantages
rather than product advantages.

     During 2003 we  continued  to benefit  from the  unwavering  commitment  to
customer  service  that has long made  HomeFederal  a respected  and  profitable
institution.  Over the past fifteen years we have capitalized on our specialized
style  of  personalized   financial  service  to  customers  throughout  greater
Indianapolis  by  offering a wide array of  commercial  products  and  services.
Building on these efforts, we opened our first full-service branch in Greenwood,
on the city's  southern  border.  The response  from the community has been very
gratifying,  leading  us to make  plans for a second  Indianapolis  facility  on
Southport  Road.  This  full-service  branch,  to be  located  in the heart of a
rapidly-developing  suburban  sector on the city's  south side,  is scheduled to
open for business in the fall of 2004.

     Throughout the year, we expanded our initiatives in commercial services, an
important  cornerstone of our strategies for growth as a commercial bank. In the
first segment of a two-tier  program,  we introduced a comprehensive  program of
cash management strategies designed especially for small businesses.  This year,
we will  initiate  the second  tier - a new  lockbox  service  designed  to help
high-volume  commercial  customers  better manage their  receivables  through an
automated payment system.

     We have been actively  presenting these new commercial  services to current
and  potential  customers,  often  through  direct  visits,  and have  been very
encouraged  by  the  results.  We  know  that  --  in  situations  ranging  from
presentations by our officers to prospective  business clients to the most basic
transactions  at our  branches  -- there is no better way to convey our style of
business than through effective personal interaction with our customers.

     During  the past  year we  devoted  considerable  time to  identifying  the
qualities that differentiate HomeFederal from other financial institutions - the
qualities  that,  taken  together,  constitute  our  brand.  As in  our  broader
experience,  it could be observed that our brand,  too, is a study in contrasts.
While we are dedicated to offering the most contemporary  financial products and
services  to meet the  ever-changing  needs  of our  customers,  we are  equally
dedicated  to  maintaining  the  traditional  levels  of   professionalism   and
personalized service that have been a HomeFederal hallmark for generations.

     We  believe  our  success  in meeting  the needs of our  customers  through
individualized  attention  to their  particular  needs is not only our  greatest
asset,  but also our  greatest  source of  opportunity  for  future  growth  and
success.  Accordingly,  we have worked to  underscore  our unique  commitment to
personalized  service  through  broad-scale   marketing  campaigns,   individual
advertising   programs,   and  enhanced   employee   training  and   recognition
initiatives.  These programs will be maintained  and expanded in the future,  in
concert with our ongoing  development  of new products and services  designed to
meet the needs of a growing base of diverse  customers in our expanding  service
area.
<PAGE>

     Entering  our  ninety-sixth  year in  business,  we mark  with  regret  the
retirement of a distinguished colleague. Gerald Armstrong,  professional banker,
community  leader and friend to all who worked with him, served with distinction
as executive vice president and was instrumental in helping shape the modern-day
HomeFederal.  We extend our best wishes to him for a  productive  and  rewarding
retirement.

     As others step in to continue the excellent work of earlier  members of the
HomeFederal team, we rededicate  ourselves to the essential tenets of our brand:
the best products and services for contemporary needs,  blended unfailingly with
dedicated,  personalized  customer service.  No matter how  unpredictable  daily
events or  economic  conditions  may be,  we firmly  believe  that  placing  our
customers' needs first - and consistently  responding to them with  well-planned
products and courteous  professionalism -- embodies a proven business model that
will never go out of style.

Sincerely,
John K. Keach, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE>
<TABLE>


SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except per share data)
                                                    Twelve          Six
                                                    Months        Months
                                                     Ended         Ended                             Year Ended
------------------------------------------------------------------------------------------------------------------------------------
                                                   Dec 2003      Dec 2002      June 2002      June 2001     June 2000     June 1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>                <C>       <C>           <C>

Selected Balance Sheet Data:
Total assets                                      $   853,328   $   886,505   $   856,012    $   863,393   $   832,154   $   744,509
Cash and cash equivalents                              34,178        53,692        44,478         35,424        21,196        32,906
Loans available for sale                                6,272        30,560         6,302         12,383         2,376         5,102
Securities available for sale                         123,638       114,440       114,989         80,316        99,364        73,521
Securities held to maturity                             1,828         3,026         3,493          7,296         7,776         4,987
Loans receivable, net                                 630,672       628,883       631,815        674,552       652,007       586,918
Deposits                                              588,915       609,358       577,480        576,543       572,893       579,882
Borrowings                                            169,162       187,744       188,680        207,608       184,433        90,410
Shareholders' equity                                   84,022        77,794        77,086         72,044        69,486        69,635

Selected Operations Data:
Interest income                                   $    45,602   $    26,240   $    56,298    $    64,757   $    57,809   $    54,211
Interest expense                                       22,264        13,145        30,635         39,516        32,169        30,135
                                                  ------------  ------------  ------------   ------------  ------------  -----------
Net interest income                                    23,338        13,095        25,663         25,241        25,640        24,076
Provision for loan losses                               1,268         1,221         1,423          1,680         1,441         1,124
                                                  ------------  ------------  ------------   ------------  ------------  -----------
Net interest income after provision
     for loan losses                                   22,070        11,874        24,240         23,561        24,199        22,952
Gain on sale of loans                                   7,492         3,740         4,456          1,975           720         3,380
Gain (loss) on sale of securities                         (83)            4            92           (196)         (116)            2
Other income                                            7,679         3,125         7,841          7,241         7,060         6,622
Other expense                                          22,495        10,375        20,045         17,513        16,446        15,851
                                                  ------------  ------------  ------------   ------------  ------------  -----------
Income before income taxes                             14,663         8,368        16,584         15,068        15,417        17,105
Income tax provision                                    5,020         3,071         6,245          5,519         5,979         6,628
                                                  ------------  ------------  ------------   ------------  ------------  -----------
Net Income                                        $     9,643   $     5,297   $    10,339    $     9,549   $     9,438   $    10,477
                                                  ============  ============  ============   ============  ============  ===========


Basic earnings per common share                   $      2.26   $      1.23   $      2.34    $      2.13   $      1.97   $      2.06
Diluted earnings per common share                 $      2.15   $      1.17   $      2.25    $      2.07   $      1.88   $      1.95
Cash dividends per share                          $      0.70   $      0.31   $      0.58    $      0.55   $      0.54   $      0.45

Selected Financial and Statistical Data:
Return on average assets (2)                            1.10%         1.21%         1.20%          1.12%         1.20%         1.42%
Return on average shareholders' equity (2)             11.95%        13.59%        13.73%         13.76%        13.84%        15.13%
Interest rate spread during the period (2)              2.84%         3.19%         3.20%          3.13%         3.46%         3.36%
Net interest margin on average earning assets (2)       2.91%         3.26%         3.27%          3.22%         3.56%         3.53%
Average shareholders' equity to average assets          9.20%         8.93%         8.76%          8.15%         8.70%         9.41%
Efficiency ratio (1)                                   67.03%        57.01%        57.02%         50.75%        49.50%        50.00%
Nonperforming loans to total loans                      0.60%         0.71%         0.57%          1.02%         0.46%         0.60%
Nonperforming assets to total assets                    0.66%         0.70%         0.70%          0.99%         0.52%         0.75%
Loss allowance to nonperforming loans                 193.11%       151.12%       171.34%         78.70%       162.05%       121.82%
Loss allowance to total loans                           1.16%         1.08%         1.01%          0.82%         0.75%         0.73%
Dividend payout ratio                                  31.08%        25.12%        24.45%         25.53%        27.11%        21.49%
Loan servicing portfolio                          $   611,636   $   564,856   $   551,402    $   484,628   $   451,768   $   461,462
Allowance for loan losses                         $     7,506   $     7,172   $     6,451    $     5,690   $     4,949   $     4,349
Number of full service offices                             18            17            17             17            16            16
__________________
(1)  Operating  expenses as a percentage  of the sum of net interest  income and
     non-interest income, excluding real estate income and expenses,  securities
     gains and  losses,  gains and  losses  on sale of  loans,  amortization  of
     intangibles, OMSR amortization, impairment of OMSR and non-recurring items.
(2)  For comparative purposes, the December 2002 ratios have been annualized.


</TABLE>
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<TABLE>
<CAPTION>


QUARTERLY  RESULTS OF OPERATIONS
(in thousands except share data)

The following table presents certain selected unaudited data relating to results
of operations for the three month periods ending on the dates indicated.

                                                                            Three Months Ended
                                                  ---------------------------------------------------------------------------
Fiscal Year Ended December 31, 2003               March 31, 2003       June 30, 2003      Sept 30, 2003       Dec 31, 2003
-----------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                 <C>                <C>                <C>
Total interest income                             $         12,058    $         11,542   $         11,160   $         10,842
Total interest expense                                       6,016               5,674              5,429              5,145
                                                  -----------------   -----------------  -----------------  -----------------
Net interest income                                          6,042               5,868              5,731              5,697
Provision for loan losses                                      210                 450                286                322
                                                  -----------------   -----------------  -----------------  -----------------
Net interest income after
    provision for loan losses                                5,832               5,418              5,445              5,375
Gain on sale of loans                                        2,144               2,155              2,479                714
Other income                                                 1,993               1,658              2,103              1,842
Other expense                                                5,282               5,639              5,937              5,637
                                                  -----------------   -----------------  -----------------  -----------------
Income before income taxes                                   4,687               3,592              4,090              2,294
Income tax provision                                         1,733               1,318              1,462                507
                                                  -----------------   -----------------  -----------------  -----------------
Net Income                                        $          2,954    $          2,274   $          2,628   $          1,787
                                                  =================   =================  =================  =================
Basic earnings per common share                   $           0.70    $           0.53   $           0.62   $           0.42
                                                  =================   =================  =================  =================
Diluted earnings per common share                 $           0.66    $           0.50   $           0.59   $           0.40
                                                  =================   =================  =================  =================
Dividends per share                               $          0.163    $          0.163   $          0.188   $          0.188
Stock sales price range:  High (1)                $          25.12    $          27.57   $          27.00   $          29.35
                          Low                     $          22.95    $          24.26   $          25.15   $          26.45



                                                           Three Months Ended
                                                  --------------------------------------
Six Months Ended December 31, 2002                   Sept 30, 2002        Dec 31, 2002
----------------------------------------------------------------------------------------
Total interest income                             $         13,277    $         12,963
Total interest expense                                       6,703               6,442
                                                  -----------------   -----------------
Net interest income                                          6,574               6,521
Provision for loan losses                                      460                 761
                                                  -----------------   -----------------
Net interest income after
    provision for loan losses                                6,114               5,760
Gain on sale of loans                                        1,386               2,354
Other income                                                 1,457               1,672
Other expense                                                4,807               5,568
                                                  -----------------   -----------------
Income before income taxes                                   4,150               4,218
Income tax provision                                         1,559               1,512
                                                  -----------------   -----------------
Net Income                                        $          2,591    $          2,706
                                                  =================   =================
Basic earnings per common share                   $           0.60    $           0.63
                                                  =================   =================
Diluted earnings per common share                 $           0.57    $           0.60
                                                  =================   =================
Dividends per share                               $          0.150    $          0.163
Stock sales price range:  High (1)                $          24.30    $          25.14
                          Low                     $          21.60    $          21.76


<PAGE>

                                                                               Three Months Ended
                                                  ---------------------------------------------------------------------------
Fiscal Year Ended June 30, 2002                      Sept 30, 2001        Dec 31, 2001       March 31, 2002    June 30, 2002
-----------------------------------------------------------------------------------------------------------------------------
Total interest income                             $         15,168    $         14,370   $         13,290   $         13,470
Total interest expense                                       8,968               7,879              6,946              6,842
                                                  -----------------   -----------------  -----------------  -----------------
Net interest income                                          6,200               6,491              6,344              6,628
Provision for loan losses                                      306                 415                509                193
                                                  -----------------   -----------------  -----------------  -----------------
Net interest income after
    provision for loan losses                                5,894               6,076              5,835              6,435
Gain on sale of loans                                          873               1,930              1,018                635
Other income                                                 1,574               1,820              2,494              2,045
Other expense                                                4,591               5,277              5,158              5,019
                                                  -----------------   -----------------  -----------------  -----------------
Income before income taxes                                   3,750               4,549              4,189              4,096
Income tax provision                                         1,386               1,779              1,596              1,484
                                                  -----------------   -----------------  -----------------  -----------------
Net Income                                        $          2,364    $          2,770   $          2,593   $          2,612
                                                  =================   =================  =================  =================
Basic earnings per common share                   $           0.53    $           0.62   $           0.59   $           0.60
                                                  =================   =================  =================  =================
Diluted earnings per common share                 $           0.51    $           0.61   $           0.56   $           0.57
                                                  =================   =================  =================  =================
Dividends per share                               $          0.138    $          0.138   $          0.150   $          0.150
Stock sales price range:  High (1)                $          22.22    $          19.75   $          22.00   $          25.00
                          Low                     $          16.00    $          16.80   $          18.60   $          21.68

(1)  The Company's  common stock trades on the NASDAQ  National Market under the
     symbol  "HOMF." As of  December  31,  2003,  the Company had 470 holders of
     record of its shares.

</TABLE>
<PAGE>


MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

FORWARD LOOKING STATEMENTS

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

The  following  financial  information  presents  an  analysis  of the asset and
liability  structure of Home Federal  Bancorp and a discussion of the results of
operations  for each of the periods  presented in the Annual Report as well as a
discussion of Home Federal Bancorp's sources of liquidity and capital resources.


HOLDING COMPANY BUSINESS

Home Federal  Bancorp  (the  "Company")  is organized as a bank holding  company
authorized to engage in activities  permissible for a financial  holding company
and owns all of the outstanding  capital stock of HomeFederal Bank (the "Bank").
The business of the Bank and therefore,  the Company,  is providing consumer and
business  banking services to certain markets in the  south-central  portions of
the State of Indiana.  The Bank does  business  through 18 full service  banking
offices.


GENERAL

The Bank's  earnings in recent years reflect the  fundamental  changes that have
occurred  in the  regulatory,  economic  and  competitive  environment  in which
commercial banks operate.  The Bank's earnings are primarily  dependent upon its
net interest  income.  Interest income is a function of the average  balances of
loans and investments  outstanding  during a given period and the average yields
earned on such loans and  investments.  Interest  expense  is a function  of the
average amount of deposits and borrowings outstanding during the same period and
the average rates paid on such deposits and  borrowings.  Net interest income is
the difference between interest income and interest expense.

The  Bank  is  subject   to   interest   rate  risk  to  the  degree   that  its
interest-bearing liabilities,  primarily deposits and borrowings with short- and
medium-term maturities, mature or reprice more rapidly, or on a different basis,
than its  interest-earning  assets.  While  having  liabilities  that  mature or
reprice more  frequently  on average than assets will be  beneficial in times of
declining interest rates, such an asset/liability structure will result in lower
net income or net losses during periods of rising interest rates,  unless offset
by other  factors  such as  non-interest  income.  The Bank's net income is also
affected by such factors as fee income and gains or losses on sale of loans.


MD&A OVERVIEW

In reviewing  the  Company's  performance  in 2003 the driving force was the low
interest rate environment and the record setting year for loan  refinances.  The
refinancing  activity in 2003 not only affected the  residential  loan portfolio
but also the commercial  portfolio and the investment  portfolio.  Each of these
portfolios experienced  prepayments,  calls, or refinancing activity that caused
the yield on these  assets to decline  significantly  during  the year.  The low
rates also caused the deposit and borrowing costs of the Company to decline, but
not as fast as the interest earning assets did. This situation  occurred for two
primary reasons. First, the Company was asset sensitive meaning that it had more
assets  maturing or  repricing  in 2003 than  liabilities.  Second,  competition
prevents  repricing  the  deposit  base of the Bank any lower  and still  retain
customers.  Because the yields on assets  declined more rapidly than the cost of
liabilities the Company experienced a tightening of its net interest margin that
caused net interest income to decline in 2003 over 2002.

The other result of the  refinancing  activity was a record year for the Company
with respect to gain on sale of loans.  The Company  earned  approximately  $7.5
million from selling loans in 2003,  $2.0 million more that the year before.  It
is  management's  opinion  that  rates  will  not  decline  further  in 2004 and
therefore  this level of income for gain on sale of loans will be  significantly
lower in 2004. It is our opinion that loan refinancing activity in 2004 could be
half of the level of refinancing  activity experienced in 2003 thus reducing the
gain on sale of loans by about the same  percentage.  If however,  mortgage loan
rates decline below levels experienced in 2003 then the Company could experience
another  wave of  refinancings  that would cause the income from gain on sale of
loans to remain at the level experienced in 2003.

A strategy to improving  the  Company's  net interest  margin will be to replace
wholesale  funding  sources,  such  as  Federal  Home  Loan  Advances,  brokered
certificates of deposit,  and public funds with core retail  deposits.  The Bank
opened a new branch in the southern Indianapolis metropolitan market in December
of 2003. A second  branch in the same market is planned for 2004.  The expansion
into this  growing  market  plus a new  emphasis  on gaining  core  deposits  in
existing markets is anticipated to increase core deposits in 2004. Both consumer
and commercial core deposit growth will be the Company's  focus. It is important
the Company increase this source of funds in order to continue future profitable
growth in coming years.

Non-interest  expense in 2003 increased by $1.9 million  compared to 2002.  Over
$1.0 million of the increase came from  compensation  and employee benefit cost.
The increases  were due to increased  retirement and health  insurance  costs as
well as increased staffing costs for regulatory  compliance areas and technology
staffing. Some of the reductions will be offset by the costs associated with the
new branches in Indianapolis  and normal salary  increases for 2004.  Consultant
fees  increased  by $347,000 in 2003  compared  to 2002 due to  outsourcing  the
internal audit  function in 2003 and special  audits of the technology  systems.
These expenses will stay approximately the same in 2004.

Another  area  that  will  receive  close  scrutiny  in 2004 is that of  capital
management.  The Company has seen total shareholder  equity increase while total
assets  have  declined  in the past year.  The  Company  has had  several  stock
repurchase  plans in place over the past several years and will continue to look
at these  plans as one way to improve  both  return on equity and  earnings  per
share in the coming year.

In summary the Company faces several  challenges in 2004 and  subsequent  years.
The major challenge is to replace the  anticipated  reduction in gain on sale of
loans  with  other less  cyclical  sources of income.  The second is to grow the
earning  assets  of the  Company  in such a way that net  interest  margins  are
improved. The third is to increase other sources of non-interest income while at
the same time reducing the rate of increase in non-interest expense,  especially
those related to compensation and employee benefits.  It will take more than one
year to accomplish these goals but plans are in place to begin in 2004.


ASSET/LIABILITY MANAGEMENT

The Bank follows a program  designed to decrease its  vulnerability  to material
and prolonged  increases in interest  rates.  This strategy  includes 1) selling
certain  longer term,  fixed rate loans from its  portfolio;  2) increasing  the
origination  of  adjustable  rate loans;  3) improving  its interest rate gap by
increasing  the interest rate  sensitivity  by shortening  the maturities of its
interest-earning  assets and  extending the  maturities of its  interest-bearing
liabilities; and 4) increasing its non-interest income.

A significant  part of the Bank's program of asset and liability  management has
been the  increased  emphasis  on the  origination  of  adjustable  rate  and/or
short-term  loans,  which  include  adjustable  rate  residential  mortgages and
construction  loans,  commercial  loans  and  consumer-related  loans.  The Bank
continues to offer fixed rate  residential  mortgage loans. The Bank retains the
servicing  function  on most of the 15-year  and  30-year  loans  sold,  thereby
increasing  non-interest  income.  The  proceeds of these loan sales are used to
reinvest in other interest-earning assets or to repay short-term debt.


LIABILITY RELATED ACTIVITIES

The Bank has  taken  several  steps to  stabilize  interest  costs and match the
maturities of liabilities to assets.  Retail deposit specials are  competitively
priced to attract  deposits in the Bank's market area. When retail deposit funds
become  unavailable due to competition,  the Bank employs Federal Home Loan Bank
of  Indianapolis  ("FHLB")  advances  and  brokered  deposits  to  maintain  the
necessary liquidity to fund lending operations.  In addition,  the Bank utilizes
FHLB advances to match maturities with select commercial loans.

The Bank has endeavored to spread its maturities of FHLB advances over a five to
seven year period so that only a limited  amount of advances come due each year.
This avoids a  concentration  of maturities in any one year and thus reduces the
risk of having to renew all advances when rates may not be favorable.

The Bank  applies  early  withdrawal  penalties to protect the maturity and cost
structure of its deposits and utilizes  longer term fixed rate  borrowings  when
the cost and availability  permit the proceeds of such borrowings to be invested
profitably.

As a result of its asset restructuring  efforts, the Bank has foregone, and will
likely forego in the future,  certain  opportunities  for improving  income on a
short-term  basis in exchange for a reduction in long-term  interest  rate risk.
For instance,  the Bank's  increased  emphasis on the  origination of adjustable
rate mortgages may cause it to sacrifice the initially  higher rates of interest
available to lenders on fixed rate loans.  Similarly,  market conditions usually
have dictated that financial  institutions  pay  substantially  higher  interest
rates on long-term deposits than on short-term deposits.
<PAGE>
INTEREST RATE SPREAD

The   following   table   sets   forth   information   concerning   the   Bank's
interest-earning  assets,  interest-bearing  liabilities,  net interest  income,
interest  rate spreads and net yield on average  interest-earning  assets during
the  periods  indicated  (including  fees which are  considered  adjustments  of
yields). Average balance calculations were based on daily balances.  (dollars in
thousands)

<TABLE>
<CAPTION>


                                             Twelve Months Ended              Six Months Ended                   Year Ended
                                      ----------------------------------------------------------------------------------------------
                                                   Dec 2003                      Dec 2002                        June 2002
                                      ----------------------------------------------------------------------------------------------
                                                                                              (3)
                                        Average              Average    Average             Average    Average             Average
                                        Balance   Interest  Yield/Rate  Balance   Interest Yield/Rate  Balance   Interest Yield/Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>        <C>      <C>        <C>         <C>    <C>       <C>          <C>
Interest-earning assets:
    Residential mortgage loan         $ 219,059    $ 13,155   6.01%    $ 244,399  $  8,371    6.85%  $ 262,194 $ 19,678     7.51%
    Commercial real estate mortgages    221,860      13,927   6.28%      208,117     7,126    6.85%    191,303   14,113     7.38%
    Home equities/
          second mortgages               76,754       5,708   7.44%       82,489     3,284    7.96%     88,061    7,218     8.20%
    Commercial loans                     93,713       5,414   5.78%       86,416     2,724    6.30%     76,947    5,271     6.85%
    Consumer loans                       36,167       3,109   8.60%       39,414     1,792    9.09%     40,978    3,950     9.64%
    Securities                          123,273       3,955   3.21%      117,938     2,772    4.70%     97,787    5,488     5.61%
    Interest-bearing deposits            30,567         334   1.09%       24,807       171    1.38%     26,991      580     2.15%
                                      -------------------------------------------------------------------------------------------
Total interest-earning assets (1)     $ 801,393    $ 45,602   5.69%    $ 803,580  $ 26,240    6.53%  $ 784,261 $ 56,298     7.18%
                                      ===========================================================================================

Interest-bearing liabilities:
     Deposits-
          Transaction account         $ 296,267    $  2,060   0.70%    $ 290,629  $  1,715    1.17%  $ 283,295 $  4,914     1.73%
          Certificate accounts          305,506      10,144   3.32%      303,610     5,799    3.79%    289,600   13,802     4.77%
     FHLB advances                      163,369       9,221   5.64%      174,387     5,205    5.92%    185,453   11,106     5.99%
     Other borrowings                    16,312         839   5.14%       11,823       426    7.15%     11,173      813     7.28%
                                      -------------------------------------------------------------------------------------------
Total interest-bearing liabilities    $ 781,454    $ 22,264   2.85%    $ 780,449  $ 13,145    3.34%  $ 769,521 $ 30,635     3.98%
                                      ===========================================================================================

Net Interest Income                                $ 23,338                       $ 13,095                     $ 25,663
                                                   ========                       ========                     ========

Net Interest Rate Spread                                      2.84%                           3.19%                         3.20%
                                                             =====                           =====                         =====

Net Earning Assets                    $  19,939                        $  23,131                     $  14,740
                                      =========                        =========                     =========

Net Interest Margin (2)                                       2.91%                           3.26%                         3.27%
                                                             =====                           =====                         =====

Average Interest-earning
    Assets to Average
     Interest-bearing Liabilities        102.55%                          102.96%                       101.92%
                                         ======                           ======                        ======

</TABLE>

[TABLE CONTINUED ON FOLLOWING PAGE]
<PAGE>
<TABLE>
<CAPTION>


[TABLE CONTINUED FROM FOLLOWING PAGE]



                                                  Year Ended
                                      --------------------------------
                                                  June 2001
                                      --------------------------------
                                          Average            Average
                                          Balance  Interest Yield/Rate
-----------------------------------------------------------------------
<S>                                     <C>         <C>      <C>

Interest-earning assets:
    Residential mortgage loan           $ 305,512  $24,631    8.06%
    Commercial real estate mortgages      171,766   14,473    8.43%
    Home equities/
          second mortgages                 91,655    8,485    9.26%
    Commercial loans                       64,431    5,696    8.84%
    Consumer loans                         43,558    4,305    9.88%
    Securities                             98,597    6,622    6.72%
    Interest-bearing deposits               9,449      545    5.77%
                                       ----------------------------
Total interest-earning assets (1)       $ 784,968  $64,757    8.25%
                                       ============================

Interest-bearing liabilities:
     Deposits-
          Transaction account           $ 249,647  $ 6,505    2.61%
          Certificate accounts            324,358   20,205    6.23%
     FHLB advances                        187,272   11,987    6.40%
     Other borrowings                      11,270      819    7.27%
                                       ----------------------------
Total interest-bearing liabilities      $ 772,547  $39,516    5.12%
                                       ============================

Net Interest Income                                $25,241
                                                   =======

Net Interest Rate Spread                                      3.13%
                                                           ========

Net Earning Assets                      $  12,421
                                        ==========

Net Interest Margin (2)                                       3.22%
                                                           ========

Average Interest-earning
    Assets to Average
     Interest-bearing Liabilities         101.61%
                                        ==========


(1)  Average balances are net of non-performing loans.
(2)  Net  interest  income  divided by the average  balance of  interest-earning
     assets.
(3)  For  comparative  purposes,   the  ratios  in  the  December  2002  average
     yield/rate column have been annualized.


</TABLE>
<PAGE>

RATE/VOLUME ANALYSIS

The  following  table sets forth the changes in the Bank's  interest  income and
interest  expense  resulting  from changes in interest  rates and changes in the
volume of interest-earning assets and interest-bearing liabilities.  Changes not
solely  attributable to volume or rate changes have been allocated in proportion
to the changes due to volume or rate. (in thousands)

<TABLE>
<CAPTION>
                                                                   Year Ended                          Six Months Ended
                                                     --------------------------------------------------------------------------
                                                            Dec 2003 vs. Dec 2002                    Dec 2002 vs. Dec 2001
                                                     --------------------------------------------------------------------------
                                                              Increase/(Decrease)                     Increase/(Decrease)
                                                        Due to       Due to       Total          Due to     Due to      Total
                                                         Rate        Volume       Change          Rate      Volume     Change
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>          <C>             <C>            <C>        <C>

Interest Income on Interest-Earning Assets:
    Residential mortgage loans                       $     (222) $   (3,901)  $     (4,123)   $  (1,070)  $  (1,424) $  (2,494)
    Commercial real estate loans                          2,857      (2,962)          (105)         529        (559)       (30)
    Home equities/second mortgages                         (513)       (442)          (955)        (189)       (366)      (555)
    Commercial loans                                       (314)        488            174          126        (139)       (13)
    Consumer loans                                         (234)       (274)          (508)        (168)       (140)      (308)
    Securities                                           (2,212)        434         (1,778)        (288)        533        245
    Interest-bearing deposits                              (189)         86           (103)        (173)         30       (143)
                                                     ----------- -----------  -------------   ----------  ---------- ----------
         Total                                             (827)     (6,571)        (7,398)      (1,233)     (2,065)    (3,298)
                                                     ----------- -----------  -------------   ----------  ---------- ----------

Interest Expense on Interest-Bearing Liabilities:
    Deposits - Transaction accounts                      (2,002)        598         (1,404)      (1,592)        141     (1,451)
                  Certificate accounts                   (1,982)         76         (1,906)      (1,969)        217     (1,752)
    FHLB advances                                          (561)       (808)        (1,369)         (33)       (482)      (515)
    Other borrowings                                        (30)         40             10           (6)         22         16
                                                     ----------- -----------  -------------   ----------  ---------- ----------
         Total                                           (4,575)        (94)        (4,669)      (3,600)       (102)    (3,702)
                                                     ----------- -----------  -------------   ----------  ---------- ----------

Net Change in Net Interest Income                    $    3,748  $   (6,477)  $     (2,729)   $   2,367   $  (1,963) $     404
                                                     =========== ===========  =============   ==========  ========== ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                    Year Ended
                                                     ---------------------------------------
                                                              June 2002 vs. June 2001
                                                     ---------------------------------------
                                                                Increase/(Decrease)
                                                           Due to      Due to       Total
                                                            Rate       Volume      Change
--------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>     <C>

Interest Income on Interest-Earning Assets:
    Residential mortgage loans                         $   (1,623)  $  (3,330)  $    (4,953)
    Commercial real estate loans                           (4,188)       3,828         (360)
    Home equities/second mortgages                           (944)        (323)      (1,267)
    Commercial loans                                       (3,104)       2,679         (425)
    Consumer loans                                           (104)        (251)        (355)
    Securities                                             (1,080)         (54)      (1,134)
    Interest-bearing deposits                                 (18)          53           35
                                                       -----------  ----------- ------------
         Total                                            (11,061)       2,602       (8,459)
                                                       -----------  ----------- ------------

Interest Expense on Interest-Bearing Liabilities:
    Deposits - Transaction accounts                        (2,665)       1,074       (1,591)
                  Certificate accounts                     (4,397)      (2,006)      (6,403)
    FHLB advances                                            (766)        (115)        (881)
    Other borrowings                                            1           (7)          (6)
                                                       -----------  ----------- ------------
         Total                                             (7,827)      (1,054)      (8,881)
                                                       -----------  ----------- ------------

Net Change in Net Interest Income                      $   (3,234)  $    3,656  $       422
                                                       ===========  =========== ============
</TABLE>
<PAGE>

RESULTS OF OPERATIONS

Comparison  of Twelve  Month  Period  Ended  December  31, 2003 and Twelve Month
Period Ended December 31, 2002:


General

On  September  24, 2002,  the Company  announced a change in its fiscal year end
from June 30 to December 31. Therefore,  the current  year-to-date numbers being
reported  will refer to the twelve month period ended  December 31, 2003,  while
the prior  year-to-date  numbers  being  reported will refer to the twelve month
period ended December 31, 2002. The Company  reported net income of $9.6 million
for the twelve month period ended December 31, 2003. This compared to net income
of  $10.5  million  for  the  twelve  month  period  ended  December  31,  2002,
representing a decrease of $858,000 or 8.2%.


Net Interest Income

Net interest income before  provision for loan losses  decreased $2.7 million or
10.5% for the twelve  month period  ended  December  31,  2003,  compared to the
twelve  month period ended  December  31,  2002.  This  decrease in net interest
income was due to  tightening  net  interest  margins  and a  decrease  in total
assets.

Year-to-date  net interest income after  provision for loan losses  decreased by
$2.1  million,  from $24.1  million one year ago to $22.1 million for the twelve
month period ended December 31, 2003. The decrease in net interest  income after
provision  for loan losses was due to the same reasons  described  above for net
interest  income  before  provision  for loan  losses.  The loan loss  provision
decreased in 2003 compared to 2002 by $655,000.  The decrease was due to the low
number of loan charge offs the Bank has  experienced in recent years.  Even with
the lower  loan loss  provision  for the year,  the  allowance  for loan  losses
increased by $334,000.  For further  information  about the  allowance  for loan
losses see the discussion under the Allowance for Loan Losses section.

For the twelve  month period ended  December 31, 2003,  the net interest  margin
declined by 35 basis  points (a basis point equals  0.01%)  compared to the same
period a year ago. The current low interest  rate  environment  continues to see
loan and  investment  rates  decrease  more rapidly  than deposit and  borrowing
rates.  The yield on the investment  portfolio has decreased  because much of it
was comprised of mortgage backed securities that have pre-paid ahead of schedule
as well as U.S.  Government agency securities that had call features  exercised.
In addition,  the investment portfolio has increased due to increased cash flows
resulting from the  refinancing of adjustable  rate loans held in portfolio into
fixed rate loans that are sold in the secondary  mortgage market.  This turnover
in the  investment  portfolio  has seen higher  yielding  assets move into lower
yielding assets that in turn tightens interest margins. On the liability side of
the balance sheet,  competition for retail deposits has caused rates to decrease
slower than they otherwise might have given the overall rate environment,  which
has also kept interest margins from widening.


Interest Income

Total  interest  income for the twelve  month  period  ended  December 31, 2003,
decreased $7.4 million,  or 14.0%,  as compared to the twelve month period ended
December 31, 2002.  The decrease in interest  income was due primarily to the 94
basis point  decrease in yield on interest  earning  assets for the twelve month
period ended December 31, 2003 as compared to the same period a year ago.


Interest Expense

Total  interest  expense for the twelve month  period  ended  December 31, 2003,
decreased $4.7 million,  or 17.3%,  as compared to the twelve month period ended
December 31,  2002.  This  decrease was due to a 58 basis point  decrease in the
cost of interest bearing  liabilities for the twelve month period ended December
31, 2003 as compared to the same period a year ago.


Other Income

Other  income  for the  current  twelve  month  period was $15.1  million.  This
represented  an increase of $2.0 million,  or 15.5%,  over the same twelve month
period ended December 31, 2002.

This increase was due to several factors  including the increase in gain on sale
of loans of $2.1 million in the current twelve month period compared to the same
period one year ago. The increase was due to increased  refinancing activity and
loan sales. Insurance,  annuity income and other fees were up $176,000 over 2002
and service fees on deposit accounts were up $316,000 over 2002.

Offsetting  these  increases  were declines in joint venture income and gains on
real estate owned of $248,000 and $165,000,  respectively.  The decline in joint
ventures  was due in part to reduced  activity in joint  ventures as the Company
continues to divest itself of these  projects.  The decline in real estate owned
("REO") income was due to reduced REO activity in 2003.
<PAGE>

Loan servicing income was basically  unchanged as early impairment  charges were
recovered  in part in the  fourth  quarter  of  2003.  The  originated  mortgage
servicing  rights asset is reviewed for impairment  each quarter.  This asset is
created  when  mortgage  loans are sold and the  lender  retains  the  servicing
rights.  The asset is then amortized as an expense to mortgage  servicing income
over the life of the  loan.  The  impairment  charge is the  recognition  of the
change in value of  mortgage  servicing  rights  that  results  with  changes in
interest rates.  Mortgage  servicing  portfolios  typically  decline in value as
interest  rates drop and  increase in value as rates  rise.  The reason for this
decline in value is that as rates drop,  prepayment  speeds increase causing the
average life of the servicing  portfolio to shorten.  This reduces the amount of
servicing  income the Bank  receives over time and thus reduces the value of the
servicing portfolio. If rates rise the opposite occurs--prepayments slow and the
average life of the  mortgage  servicing  portfolio  lengthens,  increasing  the
amount of  servicing  income  the Bank  receives  over time and the value of the
servicing  portfolio.  In 2003 the impairment charge was $83,000 compared to the
same  period  ending  December  31,  2002  where the charge  was  $469,000.  The
amortization  charge in the current period was $1.4 million compared to $905,000
for the same period a year ago. Future impairment  charges will depend on future
interest  rate  changes.  If  rates  continue  to  decrease  there  will be more
impairment charges; if they increase the impairment charges may be recovered.


Other Expenses

Other expenses  increased  $1.9 million or 9.5%,  over the prior fiscal year, to
$22.5 million from $20.6 million.  The increases were primarily in  compensation
and employee benefits. Compensation and employee benefits increased $1.0 million
due to various factors including  increased  staffing,  normal salary increases,
and  increased  funding  expenses for the Bank's  pension  plans.  Occupancy and
equipment  expense  increased due to increased  technology  expenditures and the
opening of a new branch in Indianapolis.


RESULTS OF OPERATIONS

Comparison  of Six Month  Period  Ended  December  31, 2002 and Six Month Period
Ended December 31, 2001:


General

On  September  24, 2002,  the Company  announced a change in its fiscal year end
from June 30 to December 31. The Company reported net income of $5.3 million for
the six month period ended  December  31, 2002.  This  compared to net income of
$5.1 million for the six month period ended December 31, 2001,  representing  an
increase of $163,000 or 3.2%.


Net Interest Income

Net interest income before provision for loan losses increased  $404,000 or 3.2%
for the six month  period ended  December  31,  2002,  compared to the six month
period ended  December 31, 2001.  This  increase was  primarily  the result of a
$13.4 million  increase in average  interest  earning assets  compared to a $4.5
million increase in average interest bearing liabilities.

Net interest income after provision for loan losses  decreased by $96,000,  from
$11,970,000  for the six month period ended December 31, 2001 to $11,874,000 for
the six month  period  ended  December  31,  2002.  The decrease in net interest
income after  provision  for loan losses was due to an increase in the loan loss
provision of $500,000 in the six month period ended  December 31, 2002. The loan
loss provision has increased  primarily due to the  deteriorating  economic data
regarding  bankruptcies and  unemployment  trends in the Bank's market area. The
increases in the loan loss  provision have also increased the allowance for loan
losses from  $6,451,000  at June 30, 2002 to  $7,172,000 at December 31, 2002, a
$721,000 increase.  For further  information about the allowance for loan losses
see the  discussion  under the  Allowance for Loan Losses  section.  For the six
month period ended December 31, 2002 compared to the same period in 2001 the net
interest margin improved slightly. The low interest rate environment contributed
to loan and investment  rates decreasing more rapidly than deposit and borrowing
rates.  The yield on the investment  portfolio has decreased  because much of it
was comprised of mortgage backed securities that have pre-paid ahead of schedule
as well as U.S.  Government agency securities that had call features  exercised.
In addition,  the investment  portfolio grew due to increased cash flows created
by the  refinancing  of adjustable  rate loans held in portfolio into fixed rate
loans that are sold in the  secondary  mortgage  market.  This  turnover  in the
investment  portfolio has seen higher  yielding  assets move into lower yielding
assets that in turn tightens  interest  margins.  On the  liability  side of the
balance  sheet  competition  for retail  deposits  has caused  rates to decrease
slower than they otherwise might have given the overall rate environment,  which
has also kept interest margins from widening.
<PAGE>

Interest Income

Total  interest  income  for the six  month  period  ended  December  31,  2002,
decreased  $3.3  million,  or 11.2%,  as compared to the six month  period ended
December 31, 2001.  The decrease in interest  income was due primarily to the 95
basis  point  decrease  in yield on  interest  earning  assets for the six month
period ended  December 31, 2002 as compared to the same period in 2001. A factor
offsetting the decrease in interest income was the $13.4 million increase in the
average balance of the Company's interest earning assets.


Interest Expense

Total  interest  expense  for the six month  period  ended  December  31,  2002,
decreased  $3.7  million,  or 22.0%,  as compared to the six month  period ended
December 31,  2001.  This  decrease was due to a 97 basis point  decrease in the
cost of interest bearing liabilities for the six month period ended December 31,
2002 as compared to the same period the previous year. A factor that offsets the
decrease in interest  expense was the  increase in average  balances of deposits
and borrowings of $4.5 million for the six month period ended December 31, 2002.


Other Income

Other income for the six month period  ended  December 31, 2002 was  $6,869,000.
This  represented  an increase of  $672,000,  or 10.8%,  over the same six month
period  ended  December  31,  2001.  This  increase  was due to several  factors
including  the  increase  in gain on sale of loans of  $937,000 in the six month
period ended  December 31, 2002 compared to the six month period ended  December
31, 2001. The increase was due to increased refinancing activity and loan sales.
Offsetting  this  increase  in other  income  was a  $517,000  decrease  in loan
servicing  income due  primarily to an impairment  charge  reducing the value of
originated mortgage servicing rights. In the six month period ended December 31,
2002 the  impairment  charge was  $617,000  compared to the same  period  ending
December 31, 2001 where the charge was $177,000.  The amortization charge in the
six month period ended  December 31, 2002 was $478,000  compared to $302,000 for
the same period ended December 2001.  Future  impairment  charges will depend on
future  interest rate changes.  If rates continue to decrease there will be more
impairment charges; if they increase the impairment charges may be recovered.


Other Expenses

Other  expenses  increased  $507,000 or 5.1%,  over the six month  period  ended
December 31,  2001,  to $10.4  million from $9.9  million.  The  increases  were
primarily in  compensation  and  employee  benefits.  Compensation  and employee
benefits increased $670,000 due to various factors including increased staffing,
normal salary  increases,  bonus expense and increased  funding expenses for the
Bank's pension plans. A factor that reduced the increase in other expenses was a
$156,000  reduction in service  bureau  expenses.  The Company  completed a data
processing  conversion  in the six month  period ended  December 31, 2001.  Data
processing expenses were higher than normal during the conversion process as the
Company  incurred charges from both the old and new data processors for a period
of time.


RESULTS OF OPERATIONS

Comparison of Year Ended June 30, 2002 and Year Ended June 30, 2001:

General

The  Company  reported  net income of $10.3  million for the year ended June 30,
2002.  This  compared to net income of $9.5  million for the year ended June 30,
2001, representing an increase of $790,000 or 8.3%.


Net Interest Income

Net interest income before provision for loan losses increased  $422,000 or 1.7%
for the year ended June 30, 2002,  compared to the prior year. This increase was
primarily the result of rates on interest  bearing  liabilities  declining  more
rapidly than the interest rates on interest earning assets, and was reflected in
a 7 basis point increase in the Company's net interest rate spread.

Compared to the prior year, net interest  income after provision for loan losses
increased  by  $679,000,  or 2.9% to $24.2  million  for the year ended June 30,
2002. In each period,  the provision and allowance for loan losses were based on
an analysis of individual  credits,  prior and current loss experience,  overall
growth in the  portfolio,  the change in the portfolio mix and current  economic
conditions.  The loan loss  provision in the fiscal year ended June 30, 2002 was
$1.4  million.  This  charge to the  provision  for loan  losses  increased  the
allowance  for loan losses to $6.5  million,  an  increase of $761,000  over the
prior fiscal year balance of $5.7  million.  This  increase to the allowance for
loan losses  related to two primary  factors,  the  deteriorating  economic data
regarding bankruptcies and unemployment trends in the Bank's market area and the
continuing shift of the Bank's loan portfolio in the direction of increasing the
commercial  real estate and  commercial  loan  portfolios,  while  reducing  the
residential loan portfolio. For further information about the allowance for loan
losses see the discussion under the Allowance for Loan Losses section.
<PAGE>

Interest Income

Total interest income for the year ended June 30, 2002,  decreased $8.5 million,
or 13.1%,  as compared to the year ended June 30, 2001. The decrease in interest
income was due  primarily  to the 107 basis point  decrease in yield on interest
earning  assets for the twelve  month  period ended June 30, 2002 as compared to
the same period ended June 30, 2001.


Interest Expense

Total interest expense for the year ended June 30, 2002, decreased $8.9 million,
or 22.5%,  as compared to the year ended June 30, 2001. This decrease was due to
a 114 basis point decrease in the cost of interest  bearing  liabilities for the
twelve-month  period  ended June 30, 2002 as  compared to the same period  ended
June 30, 2001.  An additional  factor that  decreased  interest  expense was the
decline in average  balances of deposits and  borrowings of $3.0 million for the
fiscal year ended June 30, 2002.


Other Income

Other  income  increased  $3.4  million from $9.0 million in fiscal year 2001 to
$12.4  million in fiscal  year  2002.  This  increase  was due  primarily  to an
increase in the gain on sale of loans of $2.5  million.  The  increased  gain on
sale of loans was  primarily  due to  increases  in  refinancing  activity  that
occurred,  as borrowers  took  advantage  of the  available  lower rates.  Other
factors  affecting the increase in other income include increases of $288,000 in
gain on sale of securities, a $241,000 increase in insurance,  annuity and other
fees, a $164,000  increase in gain of sale on real estate owned and  repossessed
assets and a $195,000  increase in loan  servicing  income.  The gain on sale of
securities  was the result of a $196,000  loss incurred in the fiscal year ended
June 30, 2001 due to restructuring  the portfolio,  compared with a $92,000 gain
realized  in the fiscal year ended June 30,  2002.  The  increase in  insurance,
annuity  and other fees came  primarily  from  commissions  earned on  brokerage
sales,  which  increased  $171,000  over the previous  fiscal year, as well as a
$90,000 increase in fees earned from trust services. The increase in net gain on
real estate  owned  resulted  from  increased  activity in real estate owned and
repossessed assets sales, with a total of 78 sales with proceeds of $4.5 million
occurring in the June 30, 2002 fiscal year compared to 53 sales with proceeds of
$1.5 million for the prior fiscal year.  The increase in loan  servicing  income
primarily resulted from a $66.8 million net increase in the servicing portfolio.


Other Expenses

Other expenses  increased  $2.5 million or 14.5%,  over the June 30, 2001 fiscal
year, to $20.0 million from $17.5  million.  The increases  came  primarily from
three  areas,  compensation  and  employee  benefits,  occupancy  and  equipment
expenses,  and  miscellaneous  expenses.   Compensation  and  employee  benefits
increased  $1.5  million  principally  due to  funding  expenses  for the Bank's
pension plans,  health  insurance  costs and overtime  associated  with the data
processing conversion.

Occupancy and equipment expenses increased $320,000 or 12.7% for the fiscal year
ended June 30,  2002,  as compared to the prior  fiscal  year.  These  increases
reflect  expenses  connected  with rising  depreciation  costs  associated  with
equipment and software  purchases for the third party data processing change, as
well as  depreciation  related to the  remodeling of the main office  located in
Columbus, Indiana.

Miscellaneous  expense  increases  of  $666,000  or 16.6%  included  $353,000 of
expenses associated with taxes, repairs,  maintenance and improvement of various
real estate owned  properties to place them in a condition for sale.  Additional
increases to miscellaneous expenses of $373,000 are associated with increases in
postage,  office  supplies and  communications  charges,  resulting from process
changes associated with the data processing  conversion.  An increase of $60,000
to  miscellaneous  expenses is related to the Bank's charter  conversion  from a
federal savings bank charter to a state commercial bank charter.


FINANCIAL CONDITION

The Company's total assets decreased $33.2 million to $853.3 million at December
31,  2003,  from  $886.5  million  at  December  31,  2002.  Loans held for sale
decreased  $24.2  million as a result of the  decrease in  refinancing  activity
experienced in the last quarter of 2003. Additionally, cash and cash equivalents
decreased $19.5 million primarily due to funding the payoff of advances from the
Federal Home Loan Bank,  which  decreased  $17.4  million  during the year ended
2003. The primary  decrease in  liabilities  occurred in deposits that decreased
$20.4  million from  December 31, 2002 to December  31, 2003.  This  decrease in
deposits reflects a decrease in public funds and jumbo  certificates of deposits
of $14.5 million and $7.8 million, respectively.
<PAGE>

Shareholders' equity increased $6.2 million to $84.0 million.  Retained earnings
increased  $9.6 million from net income and decreased $3.0 million for dividends
paid and decreased  $3.3 million from the  repurchase  of the  Company's  common
stock.  Common stock had a net increase of $3.4 million:  a decrease of $209,000
from the  repurchase of Company stock and increases of $3.1 million from options
exercised   and  $513,000   from  the  related  tax  benefit  of   disqualifying
dispositions of such options.  The Company had accumulated  other  comprehensive
loss,  net, of $30,000,  a decrease of $484,000 over the prior fiscal year. This
decrease was the net result of a $686,000 decrease from unrealized losses in the
available  for sale  portfolio  and a $202,000  increase from the change in fair
value of a cash flow hedge.


INTEREST RATE SENSITIVITY

Interest rate risk is the exposure to adverse changes in net interest income due
to changes in interest  rates.  Interest  rate  sensitivity  in the Company is a
result of repricing,  option, and basis risks.  Repricing risk represents timing
mismatches  in the  Company's  ability  to alter  contractual  rates  earned  on
financial  assets  or paid on  liabilities  in  response  to  changes  in market
interest rates. For example, when interest-bearing liabilities reprice or mature
more quickly  than  interest-earning  assets,  an increase in market rates could
adversely affect net interest income.  Conversely,  if  interest-earning  assets
reprice or mature more quickly than interest-bearing  liabilities, a decrease in
market rates could adversely affect net interest income. Option risk arises from
embedded  options present in many financial  instruments such as loan prepayment
options  and  deposit  early  withdrawal   options.   These  provide   customers
opportunities  to take  advantage of directional  changes in rates,  which could
have an adverse impact on the Company's net interest  income.  Basis risk refers
to the potential for changes in the underlying relationship between market rates
or indices,  which subsequently  result in a narrowing of the spread earned on a
loan or investment relative to its cost of funds.

Net interest  income  represents  the Company's  principal  component of income.
Consistency of the Company's net interest  income is largely  dependent upon the
effective  management of interest rate risk.  The Company has  established  risk
measures,  limits and policy  guidelines  in its Interest  Rate Risk  Management
Policy. The responsibility for management of interest rate risk resides with the
Company's  Asset/Liability  Committee,  ("ALCO"), with oversight by the Board of
Directors.  The Company uses an earnings  simulation  analysis that measures the
sensitivity  of net interest  income to various  interest  rate  movements.  The
base-case  scenario is established using current interest rates. The comparative
scenarios  assume an immediate  parallel  shock in increments of 100 basis point
rate movements. The Company did not prepare rate shocks for decreases of 200 and
300 basis points due to the  unlikeliness  of these rate scenarios  based on the
historically low current interest rate environment.  The interest rate scenarios
are used for analytical purposes and do not necessarily  represent  management's
view of future market movements. Rather, these are intended to provide a measure
of the degree of  volatility  interest rate  movements  may  introduce  into the
earnings of the Company.  Modeling the  sensitivity of earnings to interest rate
risk is highly dependent on numerous  assumptions  embedded in the model.  These
assumptions  include, but are not limited to, management's best estimates of the
effect of changing interest rates on the prepayment speeds of certain assets and
liabilities,  projections  for  activity  levels  in each of the  product  lines
offered by the Company and historical  behavior of deposit rates and balances in
relation  to  changes  in  interest  rates.  These  assumptions  are  inherently
uncertain,  and as a result,  the model  cannot  precisely  measure net interest
income or precisely  predict the impact of fluctuations in interest rates on net
interest  income.  Actual  results  will  differ from  simulated  results due to
timing,  magnitude, and frequency of interest rate changes as well as changes in
market  conditions.  The  Company's  12-month  net interest  income  sensitivity
profile as of fiscal year-end December 31, 2003 is as follows:

                --------------------------- --------------
                    Change in Rates            % Change
                --------------------------- --------------
                  + 300 basis points           (14.55)
                --------------------------- --------------
                  + 200 basis points            (9.14)
                --------------------------- --------------
                  + 100 basis points            (4.79)
                --------------------------- --------------
                  - 100 basis points              .74
                --------------------------- --------------

All of the above estimated changes in net interest income are within established
policy guidelines.
<PAGE>

ASSET QUALTIY

In accordance  with the Company's  classification  of assets policy,  management
evaluates the loan and investment  portfolio each month to identify  substandard
assets  that may  contain  the  potential  for  loss.  In  addition,  management
evaluates the adequacy of its allowance for possible loan losses.

NON-PERFORMING ASSETS

The following table sets forth information  concerning  non-performing assets of
the Bank.  Real  estate  owned  includes  property  acquired  in  settlement  of
foreclosed loans that is carried at net realizable value. (dollars in thousands)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
Period Ended As Of                                   Dec 2003    Dec 2002 June 2002   June 2001  June 2000  June 1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>        <C>         <C>        <C>        <C>

Non-accruing loans:
    Residential mortgages                           $    832   $   1,749  $     795   $  2,613   $  1,375   $   1,818
    Commercial real estate mortgages                     247         137         96      2,783         61           6
    Home equities/second mortgages                       591         606        740        504        390         633
    Commercial                                           647         566        461        226        165         718
    Consumer                                             182         206        189        225        431         334
                                                     --------    --------   --------   --------   --------    --------
    Total                                              2,499       3,264      2,281      6,351      2,422       3,509
                                                    ---------  ---------- ----------  ---------  ---------  ----------
Accruing loans:
    Residential mortgages                              1,125       1,166      1,094          -          -           -
    Commercial real estate mortgages                       -           -          -          -          -           -
    Home equities/second mortgages                         -           -          -          -          -           -
    Commercial                                             5           -          -          -          -           -
    Consumer                                               -           -         16          -          -           -
                                                     --------    --------   --------   --------   --------    --------
    Total                                              1,130       1,166      1,110          -          -           -
                                                    ---------  ---------- ----------  ---------  ---------  ----------
Troubled debt restructured                               258         316        374        879        632          61
                                                    ---------  ---------- ----------  ---------  ---------  ----------
    Total non-performing loans                         3,887       4,746      3,765      7,230      3,054       3,570
Real estate owned                                      1,739       1,472      2,239      1,298      1,235       2,050
                                                    ---------  ---------- ----------  ---------  ---------  ----------

Total Non-Performing Assets                         $  5,626   $   6,218  $   6,004   $  8,528   $  4,289   $   5,620
                                                    =========  ========== ==========  =========  =========  ==========
Non-performing assets to total assets                  0.66%       0.70%      0.70%      0.99%      0.52%       0.75%
                                                    =========  ========== ==========  =========  =========  ==========
Non-performing loans to loans                          0.60%       0.71%      0.57%      1.02%      0.46%       0.60%
                                                    =========  ========== ==========  =========  =========  ==========
Allowance for loan losses to non-performing loans    193.11%     151.12%    171.34%     78.70%    162.05%     121.82%
                                                    =========  ========== ==========  =========  =========  ==========

</TABLE>
<PAGE>

In  addition,  at  December  31,  2003,  there  were  $21.7  million  in current
performing  loans that were  classified as special  mention or  substandard  for
which potential  weaknesses  exist,  which may result in the future inclusion of
such items in the non-performing category.

Total  non-performing  assets decreased $592,000 to $5.6 million at December 31,
2003. This decrease resulted from a $859,000  decrease in  non-performing  loans
that was offset by an increase of $267,000 in real estate owned.

During  fiscal  year June 2002,  the Company  changed its method of  classifying
loans that are 90 days or more delinquent.  In prior fiscal years, any loan that
was 90 days or more delinquent was placed in a nonaccrual  status.  Beginning in
fiscal 2002,  loans that are 90 days or more  delinquent,  which have a mortgage
insurance  contract  or  a  government   agency,   such  as  Rural  Development,
guaranteeing  the  payment of  delinquent  interest,  are  further  reviewed  to
determine if the  insurance  coverage is adequate to cover both the  anticipated
principal  loss as well as the accrued  interest.  If the insurance  coverage is
determined to be adequate the loan is then classified as nonperforming but still
accruing. If management believes there is any question as to the adequacy of the
insurance  coverage,  the loan is classified as  nonaccrual.  As of December 31,
2003,  the Bank had $1.4 million of loans,  including  troubled debt  restructed
loans that were nonperforming but still accruing.


ALLOWANCE FOR LOAN LOSSES

The  provision  for loan losses for the fiscal year ended  December 31, 2003 was
$1.3 million,  which  resulted in an allowance  for loan losses  balance of $7.5
million as of December  31, 2003 as compared to $7.2  million as of December 31,
2002.  The  growth in the  allowance  for loan  losses  primarily  reflects  the
changing mix of the Bank's loans from  primarily  residential  real estate to an
increasing  commercial  real estate and commercial  loan  portfolio.  Commercial
loans  typically  involve large loan  balances to single  borrowers or groups of
related  borrowers.  In addition,  the payment  experience  on loans  secured by
income-producing  properties is typically dependent on the successful  operation
of the related project and thus may be subject to adverse conditions in the real
estate market or in the general  economy.  For the year ended December 31, 2003,
commercial real estate loans, including commercial construction loans, increased
$12.7 million or 6.5%, while commercial installment loans increased $9.0 million
or 10%. See the Critical Accounting Policies,  Allowance for Loan Losses section
on page  25 for a  description  of the  systematic  analysis  the  Bank  uses to
determine its allowance for loan losses.

The  following  table sets forth an analysis of the  allowance for possible loan
losses.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
Period Ended As Of                   Dec 2003    Dec 2002   June 2002   June 2001   June 2000   June 1999
---------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>    <C>         <C>             <C>         <C>
Balance at beginning of period      $   7,172   $   6,451  $   5,690   $   4,949   $   4,349    $  4,243
Provision for loan losses               1,268       1,221      1,423       1,680       1,441       1,124
Loan charge-offs:
    Residential mortgages                (176)        (74)      (137)        (81)       (118)       (137)
    Commercial real estate mortgages      (60)          -        (86)        (50)          -        (200)
    Home equities/second mortgages       (163)        (44)      (138)        (87)       (104)        (94)
    Commercial                           (255)       (240)       (38)       (303)       (397)        (66)
    Consumer                             (425)       (186)      (331)       (498)       (318)       (606)
                                    ----------  ---------- ----------  ----------  ----------  ----------
    Total charge-offs                  (1,079)       (544)      (730)     (1,019)       (937)     (1,103)
                                    ----------  ---------- ----------  ----------  ----------  ----------
Recoveries:
    Residential mortgages                  28          18          3           3           5           -
    Commercial real estate mortgages        -           -          -           -           -           -
    Home equities/second mortgages          -           -          1           -           -           -
    Commercial                             65           1          8           -           -           1
    Consumer                               52          25         56          77          91          84
                                    ----------  ---------- ----------  ----------  ----------  ----------
    Total recoveries                      145          44         68          80          96          85
                                    ----------  ---------- ----------  ----------  ----------  ----------
Net loan recoveries (charge-offs)        (934)       (500)      (662)       (939)       (841)     (1,018)
                                    ----------  ---------- ----------  ----------  ----------  ----------

Balance                             $   7,506   $   7,172  $   6,451   $   5,690   $   4,949   $   4,349
                                    ==========  ========== ==========  ==========  ==========  ==========
Net charge-offs to average loans        0.14%       0.08%      0.10%       0.14%       0.14%       0.17%
                                    ==========  ========== ==========  ==========  ==========  ==========
Allowance balance to total loans        1.16%       1.08%      1.01%       0.82%       0.75%       0.73%
                                    ==========  ========== ==========  ==========  ==========  ==========
</TABLE>
<PAGE>

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

The following  table  indicates the portion of the loan loss reserve  management
has allocated to each loan type at December 31, 2003: (dollars in thousands)

Loan type                                       Allowance
--------------------------------------------- -----------
Residential mortgages                          $   1,535
Commercial real estate                             1,839
Home equities/second mortgages                       712
Commercial other                                   2,491
Consumer loans                                       929
--------------------------------------------- -----------
Total allowance for loan losses                $   7,506
============================================= ===========


LIQUIDITY AND CAPITAL RESOURCES

The Bank  maintains  its  liquid  assets at a level  believed  adequate  to meet
requirements  of  normal  daily  activities,  repayment  of  maturing  debt  and
potential  deposit  outflows.  Cash flow projections are regularly  reviewed and
updated to assure that adequate liquidity is maintained. Cash for these purposes
is generated through the sale or maturity of securities and loan prepayments and
repayments,  and may be generated  through  increases in deposits or borrowings.
Loan payments are a relatively  stable source of funds,  while deposit flows are
influenced significantly by the level of interest rates and general money market
conditions.

Borrowings  may be used to compensate  for  reductions in other sources of funds
such as deposits.  As a member of the FHLB System,  the Bank may borrow from the
FHLB of  Indianapolis.  At December  31,  2003,  the Bank had $154.3  million in
borrowings  from  the  FHLB of  Indianapolis.  As of that  date,  the  Bank  had
commitments  to fund  loan  originations  of  approximately  $23.2  million  and
commitments  to sell loans of $18.5 million.  In the opinion of management,  the
Bank has  sufficient  cash  flow and  borrowing  capacity  to meet  current  and
anticipated funding commitments.

The Bank's liquidity,  represented by cash and cash equivalents,  is a result of
its operating,  investing and financing activities. During the fiscal year ended
December  31, 2003,  there was a net decrease of $19.5  million in cash and cash
equivalents.  The major  uses of cash  during  the year  were:  originations  of
mortgages  held  for  sale  of  $350.0  million;  purchases  of  investment  and
mortgage-backed  securities  of $182.3  million;  repayment of FHLB  advances of
$32.0 million;  and decreases in deposits of $20.4 million. The major sources of
cash provided  during the year included  $381.8  million from selling fixed rate
mortgage loans primarily to Federal National Mortgage  Association  ("FNMA") and
Federal  Home  Loan  Mortgage  Corporation  ("FHLMC");  maturities  and sales of
investment  securities  of $172.5  million;  and proceeds  from FHLB advances of
$14.7 million.


SIGNIFICANT COMMITMENTS

In the normal course of business, the Bank is a party to various activities that
contain  credit  and  market  risk  that  are  not  reflected  in the  financial
statements. Such activities include commitments to extend credit, sell loans and
standby letters of credit.  For further  information on off-balance sheet credit
related financial obligations see note 15 to the financial statements.

Commitments  that are not reflected in the accompanying  consolidated  financial
statements are summarized as follows: (in thousands)

Commitments to extend credit:
   Commercial                              $63,094
   Residential real estate                  18,332
   Revolving home equity lines of credit    72,443
   Other                                     1,864
   Standby letters of credit                 1,904
Commitments to sell loans:
   Mortgage                                 11,675
   Commercial                                6,851

Commitments to extend credit,  including loan commitments and standby letters of
credit do not  necessarily  represent  future cash  requirements,  in that these
commitments often expire without being drawn upon.
<PAGE>
OFF-BALANCE SHEET ARRANGEMENTS

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


JOINT VENTURES

The  Company has  invested in joint  ventures  through  its  subsidiaries,  Home
Savings  Corporation  ("HSC") and HomeFed  Financial Corp. On December 31, 2001,
the Bank changed its charter  from a Federal  savings bank charter to an Indiana
commercial  bank charter.  Commercial  banks are not permitted to participate in
real estate  development  joint  ventures.  HSC is a partner in five real estate
development  joint ventures for which exit strategies are either  developed,  or
are currently being developed.  The Company,  as mandated by its charter change,
is in the process of divesting itself of these investments by December 31, 2004,
with two one-year  extensions  available,  subject to regulatory  approval.  The
investments are accounted for by the equity method.


DERIVIATIVE FINANCIAL INSTRUMENTS

On July 1, 2000, the Company adopted Statement of Financial Accounting Standards
No. 133,  ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts. All derivatives,  whether designated as a hedge, or not, are required
to be recorded on the balance sheet at fair value.  The Company  designates  its
fixed rate and  variable  rate  interest  rate swaps as fair value and cash flow
hedge instruments, respectively. If the derivative is designated as a fair value
hedge,  the  changes in fair  value of the  derivative  and of the  hedged  item
attributable to the hedged risk are recognized in earnings. If the derivative is
designated as a cash flow hedge, the changes in fair value of the derivative and
of the hedged item  attributable  to the hedged risk are recorded in accumulated
other  comprehensive  income (OCI),  net of income  taxes.  The Company has only
limited involvement with derivative financial  instruments and does not use them
for trading purposes.  See Note 1 for further discussion of derivative financial
instruments.


IMPACT OF INFLATION

The  consolidated  financial  statements and related data presented  herein have
been prepared in accordance with accounting principles generally accepted in the
United States of America.  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 primary assets and  liabilities of commercial  banks such as the
Bank are monetary in nature. As a result, interest rates have a more significant
impact  on the  Bank's  performance  than  the  effects  of  general  levels  of
inflation.  Interest rates do not necessarily move in the same direction or with
the same magnitude as the price of goods and services.  In the current  interest
rate environment, liquidity, maturity structure and quality of the Bank's assets
and  liabilities  are  critical to the  maintenance  of  acceptable  performance
levels.


NEW ACCOUNTING PRONOUNCEMENTS

The Financial  Accounting  Standards Board,  ("FASB") has issued  Statements No.
149,  "Amendment  of  Statement  133  on  Derivative   Instruments  and  Hedging
Activities" and No. 150,  "Accounting  for Certain  Financial  Instruments  with
Characteristics  of Both  Liabilities  and  Equity."  The FASB also  issued FASB
Interpretation No. 45, ``Guarantor's  Accounting and Disclosure Requirements for
Guarantees,  Including Indirect Guarantees of Indebtedness of Others,'' and FASB
Interpretation  No.  46,  ``Consolidation  of  Variable  Interest  Entities - an
Interpretation  of  Accounting  Research  Bulletin  (ARB) No.  51." The  Company
adopted these new  pronouncements  during the twelve month period ended December
31,  2003.  See Note 1 to the  consolidated  financial  statements  for  further
discussion of these  pronouncements.  Adoption of these  pronouncements  did not
have a material effect on the Company's consolidated financial statements.


CRITICAL ACCOUNTING POLICIES

The notes to the  consolidated  financial  statements  contain a summary  of the
Company's  significant  accounting  policies.  Certain  of  these  policies  are
critical to the  portrayal  of the  Company's  financial  condition,  since they
require management to make difficult,  complex or subjective judgments,  some of
which may relate to matters that are inherently  uncertain.  Management believes
that its critical  accounting  policies include a determination of the allowance
for loan losses and the valuation of mortgage servicing rights.
<PAGE>


Allowance for Loan Losses

A loan is considered  impaired when it is probable the Company will be unable to
collect all contractual  principal and interest  payments due in accordance with
the terms of the loan agreement. Impaired loans are measured based on the loan's
observable  market price or the  estimated  fair value of the  collateral if the
loan is  collateral  dependent.  The  amount  of  impairment,  if  any,  and any
subsequent changes are included in the allowance for loan losses.

The allowance for loan losses is established through a provision for loan losses
charged to operating expense. Loan losses are charged against the allowance when
management believes the loans are uncollectible.  Subsequent recoveries, if any,
are credited to the allowance.

The Company  maintains  an  allowance  for loan losses to absorb  probable  loan
losses inherent in the portfolio. The allowance for loan losses is maintained at
a level  management  considers  to be  adequate to absorb  probable  loan losses
inherent  in the  portfolio,  based on  evaluations  of the  collectibility  and
historical  loss  experience  of  loans.  The  allowance  is  based  on  ongoing
assessments of the probable estimated losses inherent in the loan portfolio. The
Company's  methodology for assessing the appropriate allowance level consists of
several key elements, as described below.

All delinquent loans that meet regulatory requirements are included on the Asset
Watch  List.  The Asset  Watch List is  reviewed  quarterly  by the Asset  Watch
Committee for any classification  beyond the regulatory rating based on a loan's
delinquency.

Commercial and commercial real estate loans are individually  risk rated per the
loan policy.  Homogenous  loans such as consumer and residential  mortgage loans
are not  individually  risk rated by  management.  They are risk rated  based on
computer  file data that  management  believes will provide a good basis for the
loans' quality.  For all loans not listed  individually on the Asset Watch List,
historical  loss rates based on the last four years are the basis for developing
expected charge-offs for each pool of loans.

Historical  loss rates for  commercial  and  consumer  loans may be adjusted for
significant  factors that, in management's  judgment,  reflect the impact of any
current  conditions on loss recognition.  Factors which management  considers in
the analysis include the effects of the local economy,  trends in the nature and
volume of loans  (delinquencies,  charge-offs,  nonaccrual  and problem  loans),
changes  in the  internal  lending  policies  and credit  standards,  collection
practices,  and  examination  results  from  bank  regulatory  agencies  and the
Company's internal credit review function.

A portion of the allowance is not allocated to any  particular  loan type and is
maintained in recognition of the inherent  inability to precisely  determine the
loss potential in any particular  loan or pool of loans.  Among the factors used
by  management  in  determining  the  unallocated  portion of the  allowance are
current economic conditions, trends in the Company's loan portfolio delinquency,
losses and recoveries;  level of under performing and  nonperforming  loans; and
concentrations of loans in any one industry.


Valuation of Mortgage Servicing Rights

The Company  recognizes the rights to service mortgage loans as separate assets,
which are included in other assets in the consolidated  balance sheet. The total
cost of loans when sold is allocated between loans and mortgage servicing rights
("MSR's")  based on the  relative  fair values of each.  MSR's are  subsequently
carried at the lower of the initial carrying value,  adjusted for  amortization,
or fair value.  MSR's are  evaluated for  impairment  based on the fair value of
those  rights.  The Company uses a present  value cash flow  valuation  model to
establish the fair value of the MSR's.  Factors  included in the  calculation of
fair value of the MSR's include  estimating the present value of future net cash
flows,  market  loan  prepayment  speeds  for  similar  loans,  discount  rates,
servicing costs, and other economic factors. Servicing rights are amortized over
the estimated period of net servicing revenue.  It is likely that these economic
factors  will  change  over  the  life  of the  MSR's,  resulting  in  different
valuations of the MSR's. The differing valuations will affect the carrying value
of the  MSR's on the  balance  sheet as well as the  income  recorded  from loan
servicing in the income statement.
<PAGE>
<TABLE>
<CAPTION>


CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
                                                                                       ------------------------------------
                                                                                          Dec 2003    Dec 2002   June 2002
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>             <C>          <C>

Assets:
    Cash                                                                               $   22,734   $  27,404   $   25,006
    Interest-bearing deposits                                                              11,444      26,288       19,472
                                                                                       -----------  ----------  -----------
        Total cash and cash equivalents                                                    34,178      53,692       44,478
                                                                                       -----------  ----------  -----------
    Securities available for sale at fair value (amortized cost $123,243,
        $113,000 and $113,132)(Note 2)                                                    123,638     114,440      114,989
    Securities held to maturity at amortized cost (fair value $1,883, $3,147 and
        $3,619) (Note 2)                                                                    1,828       3,026        3,493
    Loans held for sale (fair value $6,357, $31,055 and $6,383) (Note 4)                    6,272      30,560        6,302
    Loans receivable, net of allowance for loan losses of $7,506, $7,172 and
        $6,451 (Note 3)                                                                   630,672     628,883      631,815
    Investments in joint ventures (Note 5)                                                  5,501       6,710        8,153
    Federal Home Loan Bank stock (Note 9)                                                   9,965       9,965        9,965
    Accrued interest receivable, net (Note 6)                                               3,733       4,289        4,431
    Premises and equipment, net (Note 7)                                                   13,987      12,973       12,192
    Real estate owned                                                                       1,739       1,472        2,239
    Prepaid expenses and other assets                                                       9,061       8,259        6,768
    Cash surrender value of  life insurance                                                11,359      10,841        9,792
    Goodwill, net                                                                           1,395       1,395        1,395
                                                                                       -----------  ----------  -----------
Total Assets                                                                           $  853,328   $ 886,505    $ 856,012
                                                                                       ===========  ==========  ===========

Liabilities and Shareholders' Equity:
Liabilities:
    Deposits (Note 8)                                                                  $  588,915   $ 609,358    $ 577,480
    Federal Home Loan Bank advances (Note 9)                                              154,296     171,635      174,139
    Senior debt (Note 10)                                                                  14,242      14,242       11,200
    Other borrowings (Note 10)                                                                624       1,867        3,341
    Advance payments by borrowers for taxes and insurance                                      76         229          442
    Accrued expenses and other liabilities                                                 11,153      11,380       12,324
                                                                                       -----------  ----------  -----------
        Total liabilities                                                                 769,306     808,711      778,926
                                                                                       -----------  ----------  -----------

Shareholders' equity (Notes 10, 11, 12, 14):
    No par preferred stock; Authorized:  2,000,000 shares
    Issued and outstanding:  None
    No par common stock; Authorized:  15,000,000 shares
    Issued and outstanding:                                                                12,616       9,184        9,086
        4,312,805 shares at December 31, 2003
        4,228,859 shares at December 31, 2002
        4,336,515 shares at June 30, 2002
    Retained earnings, restricted                                                          71,436      68,156       67,150
    Accumulated other comprehensive income, net                                               (30)        454          850
                                                                                       -----------  ----------  -----------
        Total shareholders' equity                                                         84,022      77,794       77,086
                                                                                       -----------  ----------  -----------
Total Liabilities and Shareholders' Equity                                             $  853,328   $ 886,505    $ 856,012
                                                                                       ===========  ==========   ==========

See notes to consolidated financial statements

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


CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
                                                           Twelve          Six
                                                           Months         Months
                                                            Ended         Ended            Year Ended
                                                       ------------------------------------------------------
                                                           Dec 2003      Dec 2002      June 2002   June 2001
-------------------------------------------------------------------------------------------------------------
<S>                        <C>                         <C>           <C>           <C>           <C>

Interest Income:
    Loans receivable (Note 3)                          $    41,313   $    23,297   $    50,230   $    57,590
    Securities available for sale and held to maturity       3,932         2,772         5,488         6,622
    Other interest income                                      357           171           580           545
                                                       ------------  ------------  ------------  ------------
    Total interest income                                   45,602        26,240        56,298        64,757
                                                       ------------  ------------  ------------  ------------

Interest Expense:
    Deposits (Note 8)                                       12,204         7,514        18,716        26,710
    Advances from Federal Home Loan Bank (Note 9)            9,221         5,205        11,106        11,987
    Other borrowings (Note 10)                                 839           426           813           819
                                                       ------------  ------------  ------------  ------------
    Total interest expense                                  22,264        13,145        30,635        39,516
                                                       ------------  ------------  ------------  ------------
Net interest income                                         23,338        13,095        25,663        25,241
                                                       ------------  ------------  ------------  ------------
Provision for loan losses                                    1,268         1,221         1,423         1,680
                                                       ------------  ------------  ------------  ------------
Net interest income after provision for loan losses         22,070        11,874        24,240        23,561
                                                       ------------  ------------  ------------  ------------

Other Income:
    Gain on sale of loans                                    7,492         3,740         4,456         1,975
    Gain (loss) on sale of securities available for sale       (83)            4            92          (196)
    Income from joint ventures (Note 5)                        668           141           880           811
    Insurance, annuity income, other fees                    1,677           717         1,400         1,159
    Service fees on NOW accounts                             2,715         1,316         2,241         2,316
    Net gain on real estate owned                              197           114           271           107
    Loan servicing income, net of impairments                  575          (136)        1,031           836
    Miscellaneous                                            1,847           973         2,018         2,012
                                                       ------------  ------------  ------------  ------------
Total other income                                          15,088         6,869        12,389         9,020
                                                       ------------  ------------  ------------  ------------

Other Expenses:
    Compensation and employee benefits (Note 13)            12,520         5,745        10,813         9,270
    Occupancy and equipment                                  3,027         1,453         2,850         2,530
    Service bureau expense                                     957           428         1,029           938
    Federal insurance premium (Note 12)                         95            49           104           113
    Marketing                                                  655           223           571           549
    Goodwill amortization                                        -             -             -           101
    Miscellaneous                                            5,241         2,477         4,678         4,012
                                                       ------------  ------------  ------------  ------------
Total other expenses                                        22,495        10,375        20,045        17,513
                                                       ------------  ------------  ------------  ------------

Income before income taxes                                  14,663         8,368        16,584        15,068
Income tax provision (Note 11)                               5,020         3,071         6,245         5,519
                                                       ------------  ------------  ------------  ------------

Net Income                                             $     9,643   $     5,297   $    10,339   $     9,549
                                                       ============  ============  ============  ============


Basic Earnings per Common Share                        $      2.26   $      1.23   $      2.34   $      2.13
Diluted Earnings per Common Share                      $      2.15   $      1.17   $      2.25   $      2.07


See notes to consolidated financial statements

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


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands except share data)
                                                 ----------------------------------------------------------------------------
                                                                                                Accumulated
                                                                                                      Other           Total
                                                     Shares          Common        Retained     Comprehensive   Shareholders'
                                                Outstanding           Stock        Earnings      Income (Loss)       Equity
----------------------------------------------------------------------------------------------------------------------------
<S>             <C>                               <C>         <C>             <C>             <C>             <C>
Balance at June 2000                              4,734,585   $       8,335   $      62,251   $      (1,100)  $      69,486

Comprehensive income:
    Net income                                                                        9,549                           9,549
    Change in unrealized gain
        on securities available for sale, net of
        reclassification adjustment and tax effect                                                    1,394           1,394
    Change in fair value of cash flow hedge,
        net of tax                                                                                      (70)            (70)
----------------------------------------------------------------------------------------------------------------------------
    Total comprehensive income                                                                                       10,873
----------------------------------------------------------------------------------------------------------------------------
Stock options exercised                              17,848             117                                             117
Stock repurchased                                  (336,729)           (501)         (5,575)                         (6,076)
Tax benefit related to exercise
   of non-qualified stock options                                        82                                              82
Cash dividends ($.550 per share)                                                     (2,438)                         (2,438)
----------------------------------------------------------------------------------------------------------------------------
Balance at June 2001                              4,415,704           8,033          63,787             224          72,044

Comprehensive income:
    Net income                                                                       10,339                          10,339
    Change in unrealized gain
        on securities available for sale, net of
        reclassification adjustment and tax effect                                                      924             924
    Change in fair value of cash flow hedge,
        net of tax                                                                                     (298)           (298)
----------------------------------------------------------------------------------------------------------------------------
    Total comprehensive income                                                                                       10,965
----------------------------------------------------------------------------------------------------------------------------
Stock options exercised                             132,961           1,311                                           1,311
Stock repurchased                                  (212,150)           (316)         (4,448)                         (4,764)
Tax benefit related to exercise
     of non-qualified stock options                                      58                                              58
Cash dividends ($.576 per share)                                                     (2,528)                         (2,528)
----------------------------------------------------------------------------------------------------------------------------
Balance at June 2002                              4,336,515           9,086          67,150             850          77,086

Comprehensive income:
    Net income                                                                        5,297                           5,297
    Change in unrealized gain
        on securities available for sale, net of
        reclassification adjustment and tax effect                                                     (272)           (272)
    Change in fair value of cash flow hedge,
        net of tax                                                                                     (124)           (124)
----------------------------------------------------------------------------------------------------------------------------
    Total comprehensive income                                                                                        4,901
----------------------------------------------------------------------------------------------------------------------------
Stock options exercised                              22,344             292                                             292
Stock repurchased                                  (130,000)           (194)         (2,960)                         (3,154)
Cash dividends ($.313 per share)                                                     (1,331)                         (1,331)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 2002                          4,228,859           9,184          68,156             454          77,794

Comprehensive income:
    Net income                                                                        9,643                           9,643
    Change in unrealized gain
        on securities available for sale, net of
        reclassification adjustment and tax effect                                                     (687)           (687)
    Change in fair value of cash flow hedge,
        net of tax                                                                                      203             203
----------------------------------------------------------------------------------------------------------------------------
    Total comprehensive income                                                                                        9,159
----------------------------------------------------------------------------------------------------------------------------
Stock options exercised                             224,346           3,128                                           3,128
Stock repurchased                                  (140,400)           (209)         (3,366)                         (3,575)
Tax benefit related to exercise
     of non-qualified stock options                                     513                                             513
Cash dividends ($.700 per share)                                                     (2,997)                         (2,997)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 2003                          4,312,805   $      12,616   $      71,436   $         (30)  $      84,022
============================================================================================================================

See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)                                                               Twelve          Six
                                                                             Months         Months
                                                                             Ended          Ended              Year Ended
                                                                          -------------------------------------------------------
                                                                            Dec 2003       Dec 2002     June 2002      June 2001
                                                                          -------------------------------------------------------
<S>                                                                            <C>           <C>          <C>            <C>

Cash Flows From Operating Activities:
Net income                                                                 $   9,643     $   5,297     $  10,339     $   9,549
Adjustments to reconcile net income to net cash
     from operating activities:
     Accretion of discounts, amortization and depreciation                     2,212           924         1,197           768
     Provision for loan losses                                                 1,268         1,221         1,423         1,680
     Net gain from sale of loans                                              (7,492)       (3,740)       (4,456)       (1,975)
     Net (gain) loss from sale of securities available for sale                   83            (4)          (92)          196
     Income from joint ventures and net gain from real estate owned             (865)         (255)       (1,151)         (918)
     Net loan fees deferred (recognized)                                         (22)           36            61           (56)
     Proceeds from sale of loans held for sale                               381,764       210,692       256,579       131,580
     Origination of loans held for sale                                     (349,984)     (231,210)     (246,042)     (139,612)
     Decrease (increase) in accrued interest and other assets                 (2,805)       (1,893)       (7,377)          218
     Increase in other liabilities                                              (177)       (1,281)        5,270         1,786
                                                                          -----------    ----------    ----------    ----------
Net Cash From Operating Activities                                            33,625       (20,213)       15,751         3,216
                                                                          -----------    ----------    ----------    ----------
Cash Flows From Investing Activities:
Net principal received (disbursed) on loans                                    7,570         9,059        45,525       (15,034)
Proceeds from:
     Maturities/Repayments of:
          Securities held to maturity                                          1,304           472         1,822         1,498
          Securities available for sale                                      131,136        38,395        27,772         8,417
     Sales of:
          Securities available for sale                                       40,078         7,360        20,237        74,471
          Real estate owned and other asset sales                              2,328         1,305         4,545         1,505
Purchases of:
     Loans                                                                   (10,605)       (7,384)       (4,272)       (9,135)
     Securities available for sale                                          (182,214)      (45,822)      (79,349)      (61,853)
     Securities held to maturity                                                (100)            -             -        (1,010)
     Federal Home Loan Bank stock                                                  -             -           (99)         (829)
Investment in joint ventures, net                                              1,877         1,584         2,802         1,069
Investment in cash surrender value of life insurance                               -          (785)            -        (2,500)
Acquisition of property and equipment                                         (2,557)       (1,506)       (1,766)       (4,097)
                                                                          -----------    ----------    ----------    ----------
Net Cash From Investing Activities                                           (11,183)        2,678        17,217        (7,498)
                                                                          -----------    ----------    ----------    ----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits                                          (20,443)       31,878           937         3,650
Proceeds from advances from Federal Home Loan Bank                            14,700        17,600        29,700       154,400
Repayment of advances from Federal Home Loan Bank                            (32,039)      (20,104)      (47,628)     (137,819)
Proceeds from senior debt                                                          -         3,042             -         5,500
Repayment of senior debt                                                           -             -             -          (505)
Net increase (decrease) from overnight borrowings                             (1,243)       (1,474)       (1,000)        1,599
Common stock options exercised, net of fractional shares paid                  3,641           292         1,369           198
Repurchase of common stock                                                    (3,575)       (3,154)       (4,764)       (6,075)
Payment of dividends on common stock                                          (2,997)       (1,331)       (2,528)       (2,438)
                                                                          -----------    ----------    ----------    ----------
Net Cash From Financing Activities                                           (41,956)       26,749       (23,914)       18,510
                                                                          -----------    ----------    ----------    ----------
Net increase (decrease) in cash and cash equivalents                         (19,514)        9,214         9,054        14,228
Cash and cash equivalents, beginning of period                                53,692        44,478        35,424        21,196
                                                                          -----------    ----------    ----------    ----------
Cash and Cash Equivalents, End of Period                                   $  34,178     $  53,692     $  44,478     $  35,424
                                                                          ===========    ==========    ==========    ==========
Supplemental Information:

Cash paid for interest                                                     $  22,398     $  13,032     $  31,191     $  38,825
Cash paid for income taxes                                                 $   5,840     $   3,570     $   6,574     $   6,853
Assets acquired through foreclosure                                        $   3,606     $   1,104     $   4,342     $   1,427

See notes to consolidated financial statements

</TABLE>
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Twelve Months Ended  December 31, 2003 And The Six Months Ended December
31, 2002 And For Each Of The Years In The Two Year Period Ended June 30, 2002

1. SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES

The  accounting  policies of Home  Federal  Bancorp (the  "Company")  conform to
accounting  principles  generally  accepted in the United  States of America and
prevailing  practices  within  the  banking  industry.  A  summary  of the  more
significant accounting policies follows:


Basis of Presentation

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned subsidiaries, HomeFed Financial Corp. and HomeFederal Bank (the
"Bank") and its wholly-owned subsidiaries. All significant intercompany balances
and  transactions  have been  eliminated.  On September  24,  2002,  the Company
changed its fiscal year end from June 30 to December 31.


Description of Business

The Company is a bank holding company.  The Bank provides  financial services to
south-central  Indiana  through its main  office in  Columbus  and 17 other full
service banking offices.


Use of Estimates

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 amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.  Estimates  most  susceptible  to change in the near term include the
allowance  for loan losses,  the  valuation of mortgage  servicing  rights,  the
valuation of investments in joint ventures and the fair value of securities.


Cash and Cash Equivalents

All highly liquid  investments with an original maturity of three months or less
are considered to be cash equivalents.


Securities

Securities are required to be classified as held to maturity, available for sale
or trading. Debt securities that the Company has the positive intent and ability
to  hold to  maturity  are  classified  as held to  maturity.  Debt  and  equity
securities not  classified as either held to maturity or trading  securities are
classified as available for sale.  Only those  securities  classified as held to
maturity are  reported at  amortized  cost,  with those  available  for sale and
trading  reported  at fair value with  unrealized  gains and losses  included in
shareholders'  equity  or  income,  respectively.  Premiums  and  discounts  are
amortized over the contractual  lives of the related  securities using the level
yield  method.  Gain or loss on sale of  securities  is  based  on the  specific
identification method.


Loans Held for Sale

Loans  held  for sale  consist  of  fixed  rate  mortgage  loans  conforming  to
established guidelines and held for sale to the secondary market. Mortgage loans
held for sale are  carried at the lower of cost or fair value  determined  on an
aggregate  basis.  Gains  and  losses  on the sale of these  mortgage  loans are
included in other income.


Mortgage Servicing Rights

The Company  recognizes the rights to service mortgage loans as separate assets,
which are included in other assets in the consolidated  balance sheet. The total
cost of loans  when  sold is  allocated  between  loans and  mortgage  servicing
rights,  ("MSR's"),  based  on the  relative  fair  values  of each.  MSR's  are
subsequently  carried at the lower of the initial  carrying value,  adjusted for
amortization,  or fair value.  MSR's are evaluated for  impairment  based on the
fair value of those rights. The Company uses a present value cash flow valuation
model  to  establish  the fair  value  of the  MSR's.  Factors  included  in the
calculation  of fair value of the MSR's include  estimating the present value of
future net cash flows, market loan prepayment speeds for similar loans, discount
rates,  servicing  costs,  and other  economic  factors.  Servicing  rights  are
amortized over the estimated period of net servicing revenue.  It is likely that
these  economic  factors  will change over the life of the MSR's,  resulting  in
different  valuations  of the MSR's.  The differing  valuations  will affect the
carrying value of the MSR's on the balance sheet as well as the income  recorded
from loan servicing in the income statement.
<PAGE>

Loans

Interest on real estate,  commercial and  installment  loans is accrued over the
term of the loans on a level yield basis.  The recognition of interest income is
discontinued  when,  in  management's   judgment,   the  interest  will  not  be
collectible in the normal course of business.


Loan Origination Fees

Nonrefundable  origination  fees, net of certain direct  origination  costs, are
deferred and  recognized as a yield  adjustment  over the life of the underlying
loan. Any  unamortized  fees on loans sold are credited to gain on sale of loans
at the time of sale.


Uncollected Interest

An allowance for the loss of uncollected interest is generally provided on loans
which are more than 90 days past due.  The only loans which are 90 days past due
and do not have an allowance for the loss of interest,  are loans where the Bank
is guaranteed  reimbursement of interest by either a mortgage insurance contract
or by a  government  agency  such as  Rural  Development.  If  neither  of these
criteria is met an allowance is established by a charge to interest income equal
to all interest previously accrued,  and income is subsequently  recognized only
to the extent that cash payments are received until,  in management's  judgment,
the borrower's  ability to make periodic interest and principal payments returns
to normal, in which case the loan is returned to accrual status.


Allowance for Loan Losses

A loan is considered  impaired when it is probable the Company will be unable to
collect all contractual  principal and interest  payments due in accordance with
the terms of the loan agreement. Impaired loans are measured based on the loan's
observable  market price or the  estimated  fair value of the  collateral if the
loan is  collateral  dependent.  The  amount  of  impairment,  if  any,  and any
subsequent changes are included in the allowance for loan losses.

The allowance for loan losses is established through a provision for loan losses
charged to operating expense. Loan losses are charged against the allowance when
management believes the loans are uncollectible.  Subsequent recoveries, if any,
are credited to the allowance.

The Company  maintains  an  allowance  for loan losses to absorb  probable  loan
losses inherent in the portfolio. The allowance for loan losses is maintained at
a level  management  considers  to be  adequate to absorb  probable  loan losses
inherent  in the  portfolio,  based on  evaluations  of the  collectibility  and
historical  loss  experience  of  loans.  The  allowance  is  based  on  ongoing
assessments of the probable estimated losses inherent in the loan portfolio. The
Company's  methodology for assessing the appropriate allowance level consists of
several key elements, as described below.

All delinquent loans that meet regulatory requirements are included on the Asset
Watch  List.  The Asset  Watch List is  reviewed  quarterly  by the Asset  Watch
Committee  for any  classification  beyond the  regulatory  rating  based on the
loans' delinquency.

Commercial and commercial real estate loans are individually  risk rated per the
loan policy.  Homogeneous loans such as consumer and residential  mortgage loans
are not  individually  risk rated by  management.  They are risk rated  based on
computer  file data that  management  believes will provide a good basis for the
loans' quality.  For all loans not listed  individually on the Asset Watch List,
historical  loss rates based on the last four years are the basis for developing
expected charge-offs for each pool of loans.

Historical  loss rates for  commercial  and  consumer  loans may be adjusted for
significant  factors that, in management's  judgment,  reflect the impact of any
current  conditions on loss recognition.  Factors which management  considers in
the analysis include the effects of the local economy,  trends in the nature and
volume of loans  (delinquencies,  charge-offs,  nonaccrual  and problem  loans),
changes  in the  internal  lending  policies  and credit  standards,  collection
practices,  and  examination  results  from  bank  regulatory  agencies  and the
Company's internal credit review function.

A portion of the allowance is not allocated to any  particular  loan type and is
maintained in recognition of the inherent  inability to precisely  determine the
loss potential in any particular  loan or pool of loans.  Among the factors used
by  management  in  determining  the  unallocated  portion of the  allowance are
current economic conditions; trends in the Company's loan portfolio delinquency,
losses and recoveries;  level of under performing and  nonperforming  loans; and
concentrations of loans in any one industry.
<PAGE>

Real Estate Owned

Real estate owned represents real estate acquired through foreclosure or deed in
lieu of  foreclosure  and is  recorded  at the lower of fair  value or  carrying
amount. When property is acquired, it is recorded at net realizable value at the
date of acquisition, with any resulting write-down charged against the allowance
for loan  losses.  Any  subsequent  deterioration  of the  property  is  charged
directly to real estate owned  expense.  Costs relating to the  development  and
improvement  of real estate owned are  capitalized,  whereas  costs  relating to
holding and maintaining the properties are charged to expense.


Premises and Equipment

Premises  and  equipment  are  carried  at cost less  accumulated  depreciation.
Depreciation is computed on the straight-line method over estimated useful lives
that range from three to thirty-nine years.


Derivative Financial Instruments

On July 1, 2000, the Company adopted Statement of Financial Accounting Standards
No. 133,  ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts. All derivatives,  whether designated as a hedge, or not, are required
to be recorded on the balance sheet at fair value.  The Company  designates  its
fixed rate and  variable  rate  interest  rate swaps as fair value and cash flow
hedge instruments, respectively. If the derivative is designated as a fair value
hedge,  the  changes in fair  value of the  derivative  and of the  hedged  item
attributable to the hedged risk are recognized in earnings. If the derivative is
designated as a cash flow hedge, the changes in fair value of the derivative and
of the hedged item  attributable  to the hedged risk are recorded in accumulated
other comprehensive income (OCI), net of income taxes.

The adoption of this  standard  resulted in a fair value hedge asset of $271,000
being  recorded  on July 1,  2000 and an  offsetting  contra  asset for the same
amount being applied as a reduction to commercial real estate loans.

The Company has only limited involvement with derivative  financial  instruments
and does not use them  for  trading  purposes.  The  Company  has  entered  into
interest rate swap  agreements as a means of managing its interest rate exposure
on certain fixed rate commercial loans and variable rate debt obligations. As of
December 31, 2003, the notional amount of the Company's two outstanding interest
rate swaps on  commercial  loans was $5.1  million with  maturities  in 2008 and
2009,  as  discussed  in  Note 3.  The  notional  amount  of the  Company's  two
outstanding  interest  rate  swaps on debt  obligations  was $9.2  million  with
maturities in 2004 and 2006, as discussed in Note 10.

As of December 31, 2003,  the fair value of the fair value hedge  liability  was
adjusted to $620,000.  As of December 31, 2003,  the fair value of the cash flow
hedge liability was $480,000.  The total income  statement impact resulting from
the fair value and cash flow hedges was zero, as management has determined there
to be no ineffectiveness in accordance with SFAS 133.


Goodwill

On July 1, 2001, the Company early adopted, as permitted, Statement of Financial
Accounting  Standards  No.  142 ("SFAS  142"),  "Goodwill  and Other  Intangible
Assets."  In  accordance  with SFAS 142,  the  Company  ceased  annual  goodwill
amortization of  approximately  $101,000.  The new rules also require an initial
goodwill  impairment  assessment  in the year of  adoption  and at least  annual
impairment tests thereafter.  Management determined that there was no impairment
charge resulting from the adoption of SFAS 142 and its annual impairment test.


Income Taxes

The Company  and its wholly  owned  subsidiaries  file  consolidated  income tax
returns.  Deferred  income  tax  assets and  liabilities  reflect  the impact of
temporary  differences  between amounts of assets and  liabilities  recorded for
financial  reporting  purposes  and  basis of such  assets  and  liabilities  as
measured by tax laws and regulations.
<PAGE>

Earnings per Common Share

Earnings per share of common stock are based on the weighted  average  number of
basic shares and dilutive shares outstanding during the year.

The following is a reconciliation  of the weighted average common shares for the
basic and diluted earnings per share computations:

<TABLE>
<CAPTION>


                                            Twelve            Six
                                            Months           Months
                                            Ended            Ended                   Year Ended
                                        -------------------------------------------------------------------
                                           Dec 2003         Dec 2002         June 2002        June 2001
-----------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>              <C>

Basic Earnings per Share:
Weighted average common shares               4,267,257        4,300,578         4,409,829        4,485,583
                                        ===============  ===============   ===============  ===============

Diluted Earnings per Share:
Weighted average common shares               4,267,257        4,300,578         4,409,829        4,485,583
Dilutive effect of stock options               216,088          214,551           178,765          137,836
                                        ---------------  ---------------   ---------------  ---------------
Weighted average common and
     incremental shares                      4,483,345        4,515,129         4,588,594        4,623,419
                                        ===============  ===============   ===============  ===============

</TABLE>
<TABLE>
<CAPTION>


Comprehensive Income

The following is a summary of the Company's  comprehensive  income:  (dollars in
thousands)

                                                     Twelve          Six
                                                     Months         Months
                                                      Ended         Ended             Year Ended
                                                 -----------------------------------------------------
                                                    Dec 2003      Dec 2002    June 2002   June 2001
 -----------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>          <C>         <C>

Net Income                                          $  9,643      $ 5,297      $10,339     $ 9,549

 Other comprehensive income:

   Unrealized holding gains (losses)
         from securities available for sale           (1,127)        (418)       1,482       2,128

   Reclassification adjustment for
         (gains) losses realized in income                83           (4)         (92)        196

   Unrealized gains (losses) from cash
        flow hedge                                       336         (205)        (494)       (117)
                                                    --------      -------      -------     -------
Net unrealized gains (losses)                           (708)        (627)         896       2,207
Tax effect                                               224          231         (270)       (883)
                                                    --------      -------      -------     -------
Other comprehensive income,
     net of tax                                         (484)        (396)         626       1,324
                                                    --------      -------      -------     -------
Comprehensive Income                                $  9,159      $ 4,901      $10,965     $10,873
                                                    ========      =======      =======     =======
</TABLE>



Segments

In accordance  with Statement of Financial  Accounting  Standards No. 131 ("SFAS
131"),  "Disclosures  about Segments of an Enterprise and Related  Information,"
management  has  concluded  that the Company is comprised of a single  operating
segment,   community  banking   activities,   and  has  disclosed  all  required
information  relating to its one operating segment.  Management considers parent
company  activity to  represent  an overhead  function  rather than an operating
segment.  The  Company  operates  in one  geographical  area and does not have a
single  external  customer  from  which it  derives  10  percent  or more of its
revenue.
<PAGE>

Stock Based Compensation

The Company has stock-based  employee  compensation  plans,  which are described
more  fully  in Note  14.  The  company  accounts  for  those  plans  under  the
recognition  and measurement  principles of APB Opinion No. 25,  "Accounting for
Stock Issued to Employees," and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans had an exercise price equal to the market value of the  underlying  common
stock on the date of grant.  The following  table  illustrates the effect on net
income  and  earnings  per  share if the  company  had  applied  the fair  value
recognition  provisions of SFAS Statement No. 123,  "Accounting  for Stock-Based
Compensation," to stock-based employee compensation.

<TABLE>
<CAPTION>

                                                  Twelve                 Six
                                                  Months               Months
                                                  Ended                 Ended                         Year Ended
                                             ------------------------------------------------------------------------------
(dollars in thousands, except share data)        Dec 2003             Dec 2002            June 2002             June 2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                  <C>                  <C>                   <C>

Net income, as reported                          $ 9,643              $ 5,297              $10,339               $ 9,549


Deduct:  Total stock-based employee
     compensation expense determined
     under fair value based method for
     all awards, net of related tax effects         (206)                 (63)                (401)                 (296)
                                                 -------              -------              -------               -------

Pro forma net income                             $ 9,437              $ 5,234              $ 9,938               $ 9,253
                                                 =======             ========              =======               =======

Earnings per share:
     Basic---as reported                         $  2.26              $  1.23              $  2.34               $  2.13
     Basic---pro forma                           $  2.21              $  1.22              $  2.25               $  2.06

     Diluted---as reported                       $  2.15              $  1.17              $  2.25               $  2.07
     Diluted---pro forma                         $  2.10              $  1.16              $  2.17               $  2.00

</TABLE>


The pro forma  amounts are not  representative  of the  effects on reported  net
income for future years.


Changes in Presentation

Certain amounts and items appearing in the prior periods'  financial  statements
have been reclassified to conform to the current presentation.


New Accounting Pronouncements

Statement of Financial  Accounting  Standards No. 146 ("SFAS 146"),  "Accounting
for Costs Associated with Exit or Disposal Activities," was issued in June 2002.
SFAS 146 addresses financial  accounting and reporting for costs associated with
exit or disposal  activities and nullifies  Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs  to  Exit  an   Activity   (including   Certain   Costs   Incurred   in  a
Restructuring)."  The  provisions  of this  statement  are effective for exit or
disposal activities that are initiated after December 31, 2002.  Management does
not believe this statement had a material effect on its  consolidated  financial
statements.  As of  December  31,  2003,  there  were no such  exit or  disposal
activities.

Statement of Financial  Accounting  Standards No. 148 ("SFAS 148"),  "Accounting
for Stock-Based  Compensation--Transition  and Disclosure,  an amendment of FASB
Statement  No.  123," was issued in December  2002 and is  effective  for fiscal
years ending after December 15, 2002. SFAS 148 provides  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for  stock-based  employee  compensation.  In  addition,  SFAS  148  amends  the
disclosure  requirements  of Statement 123 to require  prominent  disclosures in
both annual and interim financial  statements about the method of accounting for
stock-based  employee  compensation  and the  effect of the  method on  reported
results.  Management  has  included  the  new  disclosure  requirements  in  its
consolidated financial statements.
<PAGE>

Statement of Financial Accounting Standards No. 149 ("SFAS 149"),  "Amendment of
Statement 133 on Derivative  Instruments and Hedging  Activities," was issued in
April 2003 and is effective  for contracts  entered into or modified  after June
30, 2003, except as stated below and for hedging relationships  designated after
June 30, 2003. In addition,  except as stated below,  all provisions of SFAS 149
are to be  applied  prospectively.  The  provisions  of SFAS 149 that  relate to
Statement 133 implementation issues that have been effective for fiscal quarters
that began prior to June 15,  2003,  will  continue to be applied in  accordance
with their respective  effective dates. SFAS 149 amends and clarifies  financial
accounting  and  reporting  for  derivative   instruments,   including   certain
derivative instruments embedded in other contracts  (collectively referred to as
derivatives)   and  for  hedging   activities  under  FASB  Statement  No.  133,
"Accounting for Derivative  Instruments and Hedging Activities."  Management has
determined  the  adoption  of SFAS 149 did not  have a  material  effect  on its
consolidated financial statements.

Statement of Financial  Accounting  Standards No. 150 ("SFAS 150"),  "Accounting
for Certain Financial  Instruments with  Characteristics of Both Liabilities and
Equity,"  was  issued in May 2003 and is  effective  for  financial  instruments
entered into or modified  after May 31, 2003,  and otherwise is effective at the
beginning of the first interim period  beginning  after June 15, 2003.  SFAS 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of SFAS 150
apply to issuers'  classification  and  measurement  of  freestanding  financial
instruments,  including  those  that  comprise  more than one  option or forward
contract.  SFAS 150 does not apply to features  that are embedded in a financial
instrument  that is not a derivative in its entirety.  Management has determined
the  adoption  of SFAS 150 did not have a  material  effect on its  consolidated
financial statements.

In  November  2002,  the FASB  issued  FASB  Interpretation  No. 45 ("FIN  45"),
"Guarantor's  Accounting and Disclosure Requirements for Guarantees,  Including
Indirect  Guarantees of  Indebtedness  of Others.'' FIN 45 requires that certain
guarantees must be recognized at fair value. FIN 45 also requires  disclosure of
detailed information about each guarantee or group of guarantees. The disclosure
requirements  are effective for financial  statements  ending after December 15,
2002. The  recognition  and  measurement  provisions of FIN 45 are applicable to
guarantees issued or modified after December 31, 2002. Management has determined
the  adoption  of FIN 45 did not  have a  material  effect  on its  consolidated
financial statements.

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
"Consolidation  of Variable Interest Entities - an Interpretation of Accounting
Research  Bulletin  (ARB) No. 51." FIN 46 requires  the primary  beneficiary  to
consolidate a variable  interest  entity  ("VIE") if it has a variable  interest
that will  absorb a majority  of the  entity's  expected  losses if they  occur,
receive a majority of the entity's  expected  residual returns if they occur, or
both. FIN 46 applies  immediately to VIEs created after January 31, 2003, and to
VIEs in which the entity  obtains an interest  after that date.  Management  has
determined  the  adoption  of FIN 46 did  not  have  a  material  effect  on its
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>

2.  SECURITIES
Securities are summarized as follows: (in thousands)

                                       December 31, 2003                                  December 31, 2002
                               ---------------------------------------------------------------------------------------
                                           Gross Unrealized                                Gross Unrealized
                                Amortized  ----------------       Fair      Amortized      ----------------     Fair
                                   Cost    Gains     Losses       Value        Cost        Gains     Losses     Value
----------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>       <C>       <C>          <C>          <C>        <C>       <C>

Held to Maturity:
Municipal bonds                $  1,250    $  20     $   -     $  1,270     $  1,985     $   55     $   -     $  2,040
Certificate of deposit              100        -         -          100          100          -         -          100
Collateralized mortgage
        obligations                   -        -         -            -           14          -         -           14
Mortgage backed securities          478       35         -          513          927         66         -          993
                               ---------------------------------------------------------------------------------------
Total Held to Maturity         $  1,828    $  55     $   -     $  1,883     $  3,026     $  121     $   -     $  3,147
                               =======================================================================================

Available for Sale:
Agency bonds                   $ 51,442    $ 300     $ (30)    $ 51,712     $ 42,386     $  313     $  (2)    $ 42,697
Asset backed securities               -        -         -            -        5,970        86          -        6,056
Municipal bonds                  14,636      142        (2)      14,776            -          -         -            -
Collateralized mortgage
        obligations              27,095      108      (131)      27,072       39,316        714         -       40,030
Mortgage backed securities       22,889      234      (171)      22,952       12,048        574         -       12,622
Corporate debt                    3,428       34       (77)       3,385        8,448         82      (209)       8,321
Equity mutual funds               3,678        -       (12)       3,666        4,757         13      (131)       4,639
Equity securities                    75        -         -           75           75          -         -           75
                               ---------------------------------------------------------------------------------------
Total Available for Sale       $l23,243    $ 818     $(423)    $123,638     $113,000     $1,782     $(342)    $114,440
                               =======================================================================================
</TABLE>

                                                June 30, 2002
                               -------------------------------------------------
                                                   Gross Unrealized
                                    Amortized      ----------------       Fair
                                       Cost        Gains     Losses       Value
--------------------------------------------------------------------------------
Held to Maturity:
Municipal bonds                     $  2,210     $   61     $   -     $  2,271
Certificate of deposit                   100          -         -          100
Collateralized mortgage
        obligations                      128          2         -          130
Mortgage backed securities             1,055         63         -        1,118
                               -------------------------------------------------
Total Held to Maturity              $  3,493     $  126     $   -     $  3,619
                               =================================================

Available for Sale:
Agency bonds                        $ 14,358     $  198     $   -     $ 14,556
Asset backed securities                5,965         89         -        6,054
Municipal bonds                            -          -         -            -
Collateralized mortgage
        obligations                   60,431      1,016        (5)      61,442
Mortgage backed securities            16,744        553         -       17,297
Corporate debt                        10,876        230      (129)      10,977
Equity mutual funds                    4,683          9      (104)       4,588
Equity securities                         75          -         -           75
                               -------------------------------------------------
Total Available for Sale            $113,132     $2,095     $(238)    $114,989
                               =================================================


Certain  securities,  with  amortized  cost and fair  value of $2.5  million  at
December 31, 2003, amortized cost and fair value of $2.0 million at December 31,
2002 and  amortized  cost of $2.9 million and fair value of $3.0 million at June
30,  2002,  were pledged as  collateral  for the Bank's  treasury,  tax and loan
account at the Federal Reserve and for certain trust, IRA and KEOGH accounts.
<PAGE>
<TABLE>
<CAPTION>


The  amortized  cost and fair value of  securities  at  December  31,  2003,  by
contractual maturity are summarized as follows: (in thousands)

                                          Held to Maturity             Available for Sale
                                          ---------------------------------------------------------
                                          Amortized  Fair     Market   Amortized  Fair     Market
                                             Cost    Value    Yield      Cost     Value    Yield
---------------------------------------------------------------------------------------------------
<S>                                       <C>                             <C>      <C>     <C>

Agency bonds:
   Due in one year or less                $       - $     -         - $   4,009 $  4,016   1.21%
   Due after 1 year through 5 years               -       -         -    47,183   47,445   2.89%
   Due after 10 years                             -       -         -       250      251   2.26%
Municipal bonds:
   Due after 1 year through 5 years             475     487     6.05%     4,880    4,906   3.46%
   Due after 5 years through 10 years           535     541     7.45%     9,756    9,870   4.89%
   Due after 10 years                           240     242     7.79%         -        -       -
Certificate of deposit:
   Due in one year or less                      100     100     1.10%         -        -       -
Collateralized mortgage obligations               -       -         -    27,095   27,072   3.57%
Mortgage backed securities                      478     513     7.47%    22,889   22,952   4.22%
Corporate debt:
   Due in one year or less                        -       -         -     1,505    1,539   6.13%
   Due after 10 years                             -       -         -     1,923    1,846   2.29%
Equity mutual funds                               -       -         -     3,678    3,666   2.15%
Equity securities                                 -       -         -        75       75       -
                                          -------------------------------------------------------
Total                                     $   1,828 $ 1,883     6.79% $ 123,243 $123,638   3.42%
                                          =======================================================
</TABLE>


Activities  related  to the sales of  securities  available  for sale and called
securities are summarized as follows: (in thousands)

                                Twelve     Six
                                Months   Months
                                 Ended    Ended        Year Ended
                               ---------------------------------------
                               Dec 2003  Dec 2002  June 2002 June 2001
---------------------------------------------------------------------
Proceeds from sales              $40,078   $7,360   $20,237   $74,471
Gross gains on sales                  37        5        92       205
Gross losses on sales                120        1         -       401

<PAGE>

The majority of unrealized  losses in the portfolio  resulted from  increases in
market interest rates and not from deterioration in the  creditworthiness of the
issuer. The total number of security positions in the investment  portfolio that
were in an unrealized loss position at December 31, 2003 is 29.

The Company  defines  securities in a continuous  unrealized  loss position as a
security that has been so classified  for a period  greater than 31  consecutive
days as of  December  31,  2003.  Investments  that  have  been in a  continuous
unrealized loss position are summarized as follows: (in thousands)

<TABLE>
<CAPTION>

                                                      Less than                 Twelve Months
                                                    Twelve Months                 Or Longer                    Total
                                           -------------------------------------------------------------------------------------
                                                 Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
Description of Securities                        Value       Losses          Value       Losses          Value        Losses
--------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>         <C>                         <C>              <C>

Agency bonds                                   $  5,830         (30)        $     -          -          $ 5,830          (30)
Collateralized mortgage obligations              12,454        (131)              -          -           12,454         (131)
Mortgage backed securities                       13,015        (171)              -          -           13,015         (171)
Corporate debt                                        -           -           1,846        (77)           1,846          (77)
Equity mutual funds                               3,572         (12)              -          -            3,572          (12)
                                           -------------------------------------------------------------------------------------
Total Temporarily Impaired Securities          $ 34,871        (344)        $ 1,846        (77)         $36,717         (421)
                                           =====================================================================================
</TABLE>
<PAGE>

3.  LOANS RECEIVEBLE

Loans receivable are summarized as follows:  (in thousands)


                                             -----------------------------------
 Period Ended As Of                          Dec 2003    Dec 2002    June 2002
 -------------------------------------------------------------------------------
 First mortgage loans:
      Residential single family              $178,159    $195,255    $214,565
      Commercial and multi-family             171,397     183,369     172,495
      Property under construction              94,431      63,017      54,639
      Unimproved land                           3,201       2,795       4,712
 Home equity                                   35,515      40,998      45,541
 Second mortgage                               44,529      39,276      40,278
 Commerical                                    99,085      90,063      86,435
 Mobile home                                    4,365       5,834       6,625
 Automobile                                    23,244      25,149      25,355
 Consumer                                       4,221       4,681       4,535
 Savings account                                2,736       3,018       3,092
                                             ----------  ---------   ---------
      Gross loans receivable                  660,883     653,455     658,272
 Allowance for loan losses                     (7,506)     (7,172)     (6,451)
 Deferred loan fees                              (555)       (544)       (508)
 Undisbursed loan proceeds                    (22,150)    (16,856)    (19,498)
                                             ----------  ---------   ---------
 Loans Receivable, Net                       $630,672    $628,883    $631,815
                                             ==========  =========   =========

The Bank originates  both  adjustable and fixed rate loans.  The adjustable rate
loans have  interest  rate  adjustment  limitations  and are  indexed to various
indices.  Adjustable residential mortgages are generally indexed to the one year
Treasury constant maturity rate; adjustable consumer loans are generally indexed
to the prime rate;  adjustable  commercial loans are generally indexed to either
the prime rate or the one, three or five year Treasury  constant  maturity rate.
Future market factors may affect the  correlation of the interest rates the Bank
pays on the short-term  deposits that have been primarily utilized to fund these
loans.

The principal balance of loans on nonaccrual status totaled  approximately  $2.5
million at December 31, 2003, $3.3 million at December 31, 2002 and $2.3 million
at June 30, 2002. The Bank would have recorded  interest  income of $461,000 for
the year ended  December  31,  2003,  $168,000  for the six month  period  ended
December  31, 2002 and $503,000 and $432,000 for the fiscal years ended June 30,
2002 and 2001, respectively,  if loans on non-accrual status had been current in
accordance  with their original terms.  Actual  interest  received was $253,000,
$83,000,  $431,000 and $220,000 for the fiscal year ended December 31, 2003, for
the six months ended December 31, 2002, and the fiscal years ended June 30, 2002
and 2001, respectively.  The Bank agreed to modify the terms of certain loans to
customers who were experiencing financial  difficulties.  Modifications included
forgiveness of interest,  reduced  interest rates and/or  extensions of the loan
term. The principal balance at December 31, 2003, December 31, 2002 and June 30,
2002,  on  these  restructured  loans  were  $298,000,  $266,000  and  $324,000,
respectively.

The Bank's primary lending area is south-central  Indiana.  Virtually all of the
Bank's loans originated and purchased are to borrowers  located within the state
of Indiana.  The Bank  originates  and purchases  commercial  real estate loans,
which totaled $171.4 million,  $183.4 million and $172.5 million at December 31,
2003 and 2002,  and June 30, 2002,  respectively.  These loans are considered by
management  to be of  somewhat  greater  risk  of  uncollectibility  due  to the
dependency on income production or future development of the real estate. Of the
commercial  real estate  loans,  $22.0,  $22.8  million and $29.6  million  were
collateralized  by  multi-family  residential  property at December 31, 2003 and
2002, and June 30, 2002, respectively.

Effective  July 1, 1998 and  January  2,  1999,  the  company  entered  into two
interest rate swap agreements with KeyBank on two commercial loans. In the first
agreement the company will receive  variable rate payments at thirty-day  London
inter bank offering rate ("LIBOR")  index and make fixed rate payments at 6.28%.
The notional  amount on the swap was $3.2  million as of December 31, 2003.  The
thirty-day  LIBOR was 1.12% at December 31, 2003.  The  termination  date of the
first swap  agreement is July 1, 2008. In the second  agreement the company will
receive  variable rate payments at thirty day LIBOR and make fixed rate payments
at 6.24%.  The  notional  amount of the swap was $1.9 million as of December 31,
2003. The termination  date of the second swap agreement is January 2, 2009. The
two  interest  rate swaps are settled on a net basis.  The company is exposed to
losses,  in the event of  nonperformance  by KeyBank,  for the net interest rate
differential  when floating  rates exceed the fixed maximum rate.  However,  the
company does not anticipate nonperformance by the counter party.
<PAGE>

Under the capital  standards  provisions  of FIRREA,  the  loans-to-one-borrower
limitation is generally 15% of unimpaired  capital and surplus,  which,  for the
Bank,  was  approximately  $14.5  million,  $14.1  million and $13.6  million at
December 31, 2003 and 2002, and June 30, 2002, respectively.  As of December 31,
2003 and  2002,  and June  30,  2002,  the  Bank  was in  compliance  with  this
limitation.

Aggregate  loans to officers and directors  included  above were $11.6  million,
$13.2 million and $13.0  million as of December 31, 2003 and 2002,  and June 30,
2002,  respectively.  Such loans are made in the ordinary course of business and
are made on  substantially  the same terms as those  prevailing  at the time for
comparable transactions with other borrowers. For the fiscal year ended December
31, 2003,  loans of $2.7 million were  disbursed to officers and  directors  and
repayments of $4.3 million were received from officers and directors.

An analysis of the allowance for loan losses is as follows: (in thousands)

                                     Twelve       Six
                                     Months      Months
                                     Ended       Ended         Year Ended
                                    --------------------------------------------
                                    Dec 2003    Dec 2002  June 2002    June 2001
--------------------------------------------------------------------------------
Beginning balance                   $ 7,172     $  6,451    $ 5,690    $ 4,949
Provision for loan losses             1,268        1,221      1,423      1,680
Charge-offs                          (1,079)        (544)      (730)    (1,019)
Recoveries                              145           44         68         80
                                    --------   ----------   --------   --------
Ending Balance                      $ 7,506     $  7,172    $ 6,451    $ 5,690
                                    ========   ==========   ========   ========


The  following is a summary of  information  pertaining to impaired  loans:  (in
thousands)

--------------------------------------------------------------------------------
Period Ended As Of                           Dec 2003    Dec 2002    June 2002
--------------------------------------------------------------------------------
Impaired loans with a valuation reserve       $   57      $  234      $    -
Impaired loans with no valuation reserve       8,982       6,063         580
                                              ------      ------      ------
Total Impaired Loans                          $9,039      $6,297      $  580
                                              ======      ======      ======
Valuation reserve on average impaired loans   $   27      $  111      $    -
Average impaired loans                        $6,866      $5,534      $2,602




4.  MORTGAGE BANKING ACTIVITIES

At December 31, 2003 and 2002, and June 30, 2002,  the Bank was servicing  loans
for others  amounting  to $611.6  million,  $564.9  million and $551.4  million,
respectively.  Net gain on sales of loans,  exclusive  of gain  attributable  to
retained  MSR's was $5.1  million for the fiscal year ended  December  31, 2003,
$2.6  million,  $2.8  million and $1.4  million for the six month  period  ended
December  31,  2002,  and the  fiscal  years  ended  June  30,  2002  and  2001,
respectively.  Servicing  loans for  others  generally  consists  of  collecting
mortgage payments, maintaining escrow accounts, disbursing payments to investors
and foreclosure  processing.  Loan servicing income includes servicing fees from
investors and certain  charges  collected from  borrowers,  such as late payment
fees.
<PAGE>

The Bank is  obligated  to  repurchase  certain  loans sold to and  serviced for
others that become delinquent as defined by the various agreements.  At December
31,  2003 and  2002,  and June 30,  2002,  these  obligations  were  limited  to
approximately $0, $53,000 and $90,000, respectively.

The  following  analysis  reflects  the  changes in  mortgage  servicing  rights
retained: (in thousands)


---------------------------------------------------------------------------
Period Ended As Of                    Dec 2003     Dec 2002      June 2002
---------------------------------------------------------------------------
Beginning carrying value               $ 2,508       $ 2,511      $ 1,617
   Additions                             2,356         1,092        1,651
   Amortization                         (1,398)         (478)        (729)
   Net change in valuation allowance       (83)         (617)         (28)
                                       -------       -------      -------
Ending Carrying Value                  $ 3,383       $ 2,508      $ 2,511
                                       =======       =======      =======



The carrying  value  approximates  fair value at December 31, 2003 and 2002, and
June 30, 2002. Fair value is estimated by discounting  the net servicing  income
to be received over the estimated  servicing  term using a current  market rate.
The significant  risk  characteristics  of the underlying loans used to stratify
MSRs for  impairment  measurement  were  term and  rate of note.  The  valuation
allowance  as of December 31, 2003 and 2002,  and June 30, 2002 was  $1,069,000,
$986,000 and $368,000,  respectively.  The estimated annual amortization expense
for the next five years is $865,000, $800,000, $646,000, $456,000, and $272,000.
<PAGE>

5.  INVESTMENTS IN JOINT VENTURES

The  Company has  invested in joint  ventures  through  its  subsidiaries,  Home
Savings  Corporation  ("HSC") and HomeFed  Financial Corp. On December 31, 2001,
the Bank changed its charter  from a Federal  savings bank charter to an Indiana
commercial  bank charter.  Commercial  banks are not permitted to participate in
real estate development joint ventures at December 31, 2003. HSC is a partner in
five real estate development joint ventures for which exit strategies are either
developed,  or are currently being  developed.  The Company,  as mandated by the
regulators,  is in the  process  of  divesting  itself of these  investments  by
December 31, 2004, with two one-year extensions available, subject to regulatory
approval.  The Company is not  required to divest  itself of its  investment  in
Family  Financial  Life. The investments are accounted for by the equity method.
The Company's interest in these investments is as follows: (in thousands)


-----------------------------------------------------------------------
                             Equity
Period Ended As Of          Interest     Dec 2003   Dec 2002  June 2002
------------------------------------------------------------------------
Family Financial Life         14%         $  774     $  774     $  774
Heritage Woods                33%             46         53         53
Home-Breeden                  50%          1,600      1,809      2,126
Coventry Associates           65%              -          -         20
Crystal Lake                  50%              -        300        307
Broadmoor North/Heathfield    35%          1,227      1,394      1,415
Sycamore Springs              33%          1,581      1,880      2,925
Bloomington Technology        50%            273        500        533
                                         -------     -------    ------
Total Investment                         $ 5,501     $6,710     $8,153
                                         =======     ======     ======

<TABLE>
<CAPTION>

Summarized condensed unaudited financial statements for these joint ventures are
as follows: (in thousands)

--------------------------------------------------------------------------------------
Period Ended As Of                              Dec 2003      Dec 2002     June 2002
--------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>

Balance Sheets:
Cash                                             $ 2,932       $ 2,634       $ 2,883
Investments                                        2,372         4,020         3,727
Property and equipment, net                          619           673           671
Inventory of developed lots                        6,359         7,828         8,866
Other assets                                         556           489           547
                                                 -------       -------       -------
Total Assets                                     $12,838       $15,644       $16,694
                                                 =======       =======       =======

Notes payable                                    $ 4,783       $ 5,656       $ 6,999
Insurance liabilities                                791         1,296         1,407
Other liabilities                                    277           321           286
                                                 -------       -------       -------
Total liabilities                                  5,851         7,273         8,692
                                                 -------       -------       -------
Shareholders' equity                               6,987         8,371         8,002
                                                 -------       -------       -------
Total Liabilities and Shareholders' Equity       $12,838       $15,644       $16,694
                                                 =======       =======       =======
</TABLE>
<PAGE>



                              Twelve        Six
                              Months      Months
                              Ended        Ended              Year Ended
                           -----------------------------------------------------
                             Dec 2003     Dec 2002      June 2002    June 2001
  ------------------------------------------------------------------------------
  Income Statements
  Income:
       Insurance premiums
           and commissions    $1,353        $2,062        $2,153       $2,479
       Investment income         201           283           445          416
       Net lot sales           2,189           671         1,809          767
       Other income              136             1           165          109
                              -------       -------       -------      -------
       Total income            3,879         3,017         4,572        3,771
                              -------       -------       -------      -------

  Expenses:
       Commissions               883           987         1,239        1,100
       Insurance benefits        394           479           367          326
       Interest expense          148            77           497          208
       Other expense             920         1,110         1,337        1,315
                              -------       -------       -------      -------
       Total expense           2,345         2,653         3,440        2,949
                              -------       -------       -------      -------
  Net Income                  $1,534        $  364        $1,132       $  822
                              =======       =======       =======      =======

The notes payable  included  $4.2 million,  $5.2 million and $6.6 million due to
HSC and $335,000, $149,000 and $135,000 due to the Bank at December 31, 2003 and
2002, and June 30, 2002,  respectively.  At December 31, 2003 and 2002, and June
30, 2002, open  commitments to these joint ventures  included  letters of credit
totaling $191,000, $609,000 and $609,000, respectively.


6.  ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following: (in thousands)

--------------------------------------------------------------------------------
Period Ended As Of                              Dec 2003   Dec 2002  June 2002
--------------------------------------------------------------------------------
Loans, less allowance of $183, $185 and $165     $2,838     $3,488    $3,575
Securities                                          881        770       846
Interest-bearing deposits                            14         31        10
                                                 ------     ------    ------
Total Accrued Interest Receivable                $3,733     $4,289    $4,431
                                                 ======     ======    ======




7.  PREMISES AND EQUIPMENT

Premises and equipment consists of the following: (in thousands)


--------------------------------------------------------------------------------
Period Ended As Of                       Dec 2003       Dec 2002      June 2002
--------------------------------------------------------------------------------
Land                                      $ 2,230        $ 2,230       $ 1,561
Buildings and improvements                 15,342         13,893        13,805
Furniture and equipment                     7,895          7,875         7,240
                                          --------     ----------    ----------
    Total                                  25,467         23,998        22,606
Accumulated depreciation                  (11,480)       (11,025)      (10,414)
                                          --------     ----------    ----------
Total Premises and Equipment              $13,987        $12,973       $12,192
                                          ========     ==========    ==========

Depreciation  expense  included in operations for the fiscal year ended December
31, 2003,  six months ended December 31, 2002, and the years ended June 30, 2002
and June 30, 2001 totaled $1.5 million, $725,000, $1.5 million and $1.3 million,
respectively.
<PAGE>
<TABLE>
<CAPTION>

8. DEPOSITS

Deposits are summarized as follows: (in thousands)


                                      Dec 2003               Dec 2002                June 2002
                                 -------------------------------------------------------------------
                                           Weighted                Weighted                Weighted
                                            Average                 Average                 Average
                                  Amount     Rate        Amount      Rate         Amount      Rate
----------------------------------------------------------------------------------------------------
<S>                              <C>                    <C>                      <C>

Non-interest bearing             $ 55,535               $ 51,720                 $ 49,884
NOW accounts                       67,533    0.37%        73,690     0.77%         67,362    0.93%
Statement savings                  50,269    0.30%        47,809     0.75%         48,382    1.05%
Money market savings              112,797    0.74%       120,944     1.53%        121,978    1.57%
                                 --------    -----      --------     -----       --------    -----
     Total transaction accounts   286,134    0.43%       294,163     0.94%        287,606    1.06%
                                 --------    -----      --------     -----       --------    -----
Certificates of deposit:
     Less than one year            51,516    1.42%        45,039     1.93%         27,175    2.25%
     12-23 months                  38,270    1.62%        48,920     2.46%         58,959    3.01%
     24-35 months                  96,665    2.85%       108,069     3.69%        107,408    5.05%
     36-59 months                  30,655    4.49%        43,765     4.85%         27,559    4.86%
     60-120 months                 85,675    4.96%        69,402     5.15%         68,773    5.32%
                                 --------    -----      --------     -----       --------    -----
     Total certificate accounts   302,781    3.21%       315,195     3.73%        289,874    4.42%
                                 --------    -----      --------     -----       --------    -----
Total Deposits                   $588,915    1.86%      $609,358     2.39%       $577,480    2.74%
                                 ========    =====      ========     =====       ========    =====
</TABLE>



At December  31, 2003 and 2002,  and June 30, 2002,  certificates  of deposit in
amounts of $100,000 or more totaled  $102.4  million,  $106.4  million and $76.9
million, respectively.


<TABLE>
<CAPTION>

A summary of certificate  accounts by scheduled  maturities at December 31, 2003
is as follows: (in thousands)

                              2004      2005     2006      2007      2008    Thereafter    Total
-------------------------------------------------------------------------------------------------
<C>                         <C>        <C>      <C>       <C>       <C>       <C>       <C>

1.99% or less               $ 74,060   $14,502  $ 1,119   $     -  $     -    $      -  $ 89,681
2.00% - 2.99%                 24,596    21,096    1,607       313      300           -    47,912
3.00% - 3.99%                 49,152     1,509    1,620     1,372    4,485       1,715    59,853
4.00% - 4.99%                  9,710     9,511    9,913    11,236    3,798      10,979    55,147
5.00% - 5.99%                  4,326     4,081    7,501    22,537    2,193       1,612    42,250
Over 6.00%                     2,033     4,023      471       782      217         412     7,938
                            ---------------------------------------------------------------------
Total Certificate Amounts   $163,877   $54,722  $22,231   $36,240  $10,993    $ 14,718  $302,781
                            =====================================================================
</TABLE>



A summary of interest expense on deposits is as follows: (in thousands)

                                Twelve       Six
                                Months      Months
                                 Ended      Ended          Year Ended
                              ----------  ----------  ----------------------
                               Dec 2003    Dec 2002   June 2002    June 2001
                              ----------  ----------  ---------    ---------

NOW accounts                    $   176     $  120     $   379     $   533
Statement savings                   243        222         589         848
Money market savings              1,277      1,138       3,282       5,907
Certificates of deposit          10,508      6,034      14,466      19,422
                                -------     ------     -------     -------
Total Interest Expense          $12,204     $7,514     $18,716     $26,710
                                =======     ======     =======     =======

<PAGE>

9.  FEDERAL HOME LOAN BANK ADVANCES

The Bank was eligible to receive  advances  from the FHLB up to $162.4  million,
$207.6  million and $198.6  million at December 31, 2003 and 2002,  and June 30,
2002. The Bank has pledged qualifying  mortgage loans and Federal Home Loan Bank
stock as collateral  on the following  advances from the Federal Home Loan Bank:
(in thousands)

--------------------------------------------------
                                        Weighted
Year Ending Maturity                     Average
December                       Amount     Rate
--------------------------------------------------

     2004                     $ 37,200    5.35%
     2005                       39,650    5.50%
     2006                       32,603    5.49%
     2007                        9,250    5.04%
     2008                       11,850    4.26%
     Thereafter                 23,743    5.23%
                              --------    -----
Total FHLB Advances           $154,296    5.30%
                              ========    =====


10.  OTHER BORROWINGS

Senior Debt

The Company has a revolving note with LaSalle Bank N.A.  whereby the Company may
borrow $17.5 million.  The note accrues interest at a variable rate based on the
ninety-day  LIBOR index,  on the date of the draw,  plus 150 basis  points.  The
ninety-day LIBOR index was 1.15% at December 31, 2003. Interest payments are due
ninety  days  after the date of any  principal  draws made on the loan and every
ninety days  thereafter.  Maturities  of senior debt based on minimum  scheduled
payments  as of  December  31,  2003 are:  2004 - $4.6  million  and 2006 - $7.6
million.  The Company used the funds to buy back shares of the Company's  common
stock.  The assets of the  Company  collateralize  the note.  Under terms of the
agreement,  the Company is bound by certain  restrictive debt covenants relating
to earnings,  net worth and various  financial  ratios. As of December 31, 2003,
the Company was in compliance with the debt covenants.

As of December 31, 2003, the company has two swap  agreements  with LaSalle Bank
N.A. In the first  agreement  the Company will make fixed rate  payments at 5.6%
and receive variable rate payments at the three-month LIBOR on a notional amount
of $4.6 million.  The maturity date of the first swap  agreement is May 1, 2004.
In the second  agreement  the Company will make fixed rate payments at 5.77% and
receive variable rate payments at the three-month  LIBOR on a notional amount of
$4.6  million.  The  maturity  date of the second swap  agreement is February 1,
2006.  The two  interest  rate swaps are settled on a net basis.  The Company is
exposed to credit loss, in the event of nonperformance by LaSalle Bank N.A., for
the net interest rate  differential when floating rates exceed the fixed maximum
rate.  However,  the Company does not anticipate  nonperformance  by the counter
party.


Other Borrowings

In addition to the other  borrowings  scheduled  below, the Bank also has a $5.0
million  overdraft line of credit with the Federal Home Loan Bank, none of which
was used, as of December 31, 2003 or 2002, or June 30, 2002. (in thousands)

--------------------------------------------------------------------------------
Period Ended                            Dec 2003        Dec 2002      June 2002
--------------------------------------------------------------------------------
Official check overnight remittance      $   624        $ 1,867        $ 3,341
                                         --------       --------       --------
Total Other Borrowings                   $   624        $ 1,867        $ 3,341
                                         ========       ========       ========


11.  INCOME TAXES

An analysis of the income tax provision is as follows: (in thousands)

                                  Twelve       Six
                                  Months     Months
                                  Ended       Ended       Year Ended
                                ---------------------------------------------
                                 Dec 2003   Dec 2002   June 2002   June 2001
-----------------------------------------------------------------------------
Current:
     Federal                     $ 3,020    $ 3,621    $  5,869    $ 4,929
     State                           549        702       1,200      1,022
     Deferred                      1,451     (1,252)       (824)      (432)
                                 -------    -------    --------    -------
Income Tax Provision             $ 5,020    $ 3,071    $  6,245    $ 5,519
                                 =======    =======    ========    =======



The difference between the financial statement provision and amounts computed by
using the statutory rate of 34% is reconciled as follows: (in thousands)


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------
Period Ended As Of                                Dec 2003  Dec 2002   June 2002   June 2001
--------------------------------------------------------------------------------------------
<S>                                                <C>       <C>        <C>         <C>

Income tax provision at federal statutory rate     $ 4,986   $ 2,845    $ 5,639     $ 5,123
State tax, net of federal tax benefit                  568       286        722         640
Tax exempt interest                                   (180)      (57)      (112)       (125)

Increase in cash surrender value
     of life insurance                                (176)      (90)      (176)       (125)
Other                                                 (178)       87        172           6
                                                   -------   -------    -------     -------
Income Tax Provision                               $ 5,020   $ 3,071    $ 6,245     $ 5,519
                                                   =======   =======    =======     =======

</TABLE>


The  Company  is  allowed to deduct an  addition  to a reserve  for bad debts in
determining  taxable income.  This addition  differs from the provision for loan
losses for financial reporting purposes. No deferred taxes have been provided on
the income tax bad debt reserves  which total $6.0  million,  for years prior to
1988.  This tax reserve  for bad debts is  included  in taxable  income of later
years only if the bad debt  reserves are  subsequently  used for purposes  other
than to absorb bad debt  losses.  Because the Company does not intend to use the
reserves for purposes other than to absorb losses, deferred income taxes of $2.4
million  were not  provided at December  31, 2003 and 2002,  and June 30,  2002,
respectively.  Pursuant to Statement of Financial  Accounting  Standards No. 109
("SFAS 109"),  "Accounting  for Income  Taxes," the Company has  recognized  the
deferred tax  consequences  of differences  between the financial  statement and
income tax treatment of allowances for loan losses arising after June 30, 1987.

In August 1996, the "Small  Business Job Protection Act of 1996" was passed into
law. One  provision of this act repeals the special bad debt reserve  method for
thrift  institutions  provided for in Section 593 of the Internal  Revenue Code.
The provision requires thrifts to recapture any reserves  accumulated after 1987
but  forgives  taxes owed on reserves  accumulated  prior to 1988.  The six year
recovery period for the excess reserves began in taxable year 1999. The adoption
of the act did not have a material adverse effect on the Company's  consolidated
financial  position or results of operations.  The Company's deferred income tax
assets and liabilities are as follows: (in thousands)





<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------
Period Ended As Of                                    Dec 2003       Dec 2002       June 2002
-----------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>

Deferred tax assets:
     Bad debt reserves, net                            $2,265         $ 2,478        $ 2,394
     Difference in basis of fixed assets                    -             131              -
     Other                                                190             323            195
     Deferred compensation                              1,377           1,153          1,032
                                                       -------        -------         ------
     Total deferred tax assets                          3,832           4,085          3,621
                                                       -------        -------         ------

Deferred tax liabilities:
     Difference in basis of fixed assets                  101               -            205
     FHLB dividend                                        177             185            194
     Unrealized gain on securities available for sale     136             494            639
     Deferred fees                                        308             365            361
     Originated mortgage servicing rights               1,087              23            537
     Other                                                  -               -            146
                                                      -------         -------         ------
     Total deferred tax liabilities                     1,809           1,067          2,082
                                                      -------         -------        -------
Net Deferred Tax Asset                                $ 2,023         $ 3,018        $ 1,539
                                                      =======         =======        =======

</TABLE>
<PAGE>

12.  REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital  requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate  certain   mandatory  -  and  possible   additional
discretionary - actions by regulators  that, if undertaken,  could have a direct
material  effect on the Bank's  financial  statements.  Under  capital  adequacy
guidelines and the regulatory  framework for prompt corrective  action, the Bank
must meet specific capital guidelines that involve quantitative  measures of the
Bank's assets,  liabilities  and certain  off-balance  sheet items as calculated
under regulatory  accounting  practices.  The capital amounts and classification
are also subject to qualitative  judgments by the regulators  about  components,
risk weightings, and other factors.

Quantitative measures that have been established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the following  table),  of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average  assets (as defined).  As of December 31, 2003,  the Company
and the Bank met all capital adequacy requirements to which they were subject.

As of  December  31,  2003  and  2002,  and  June  30,  2002,  the  most  recent
notifications  from the Federal Reserve  categorized the Company and the Bank as
"well capitalized" under the regulatory  framework for prompt corrective action.
To be categorized as "well  capitalized" the Company must maintain minimum total
risk-based,  Tier 1 risk-based,  and Tier 1 leverage  ratios as set forth in the
table. There are no conditions or events since that notification that management
believes have changed either entity's category.
<PAGE>
<TABLE>
<CAPTION>

Summary of capital amounts and ratios as of December 31, 2003 and 2002, and June
30, 2002: (dollars in thousands)

                                                                                                        To Be Categorized As
                                                                                                        "Well Capitalized"
                                                                                                           Under Prompt
                                                                                 For Capital             Corrective Action
                                                        Actual                 Adequacy Purposes            Provisions
                                             -----------------------------------------------------------------------------------
                                                 Amount        Ratio         Amount        Ratio         Amount        Ratio
--------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>      <C>                  <C>    <C>                 <C>

As of December 31, 2003
Total risk-based capital
    (to risk-weighted assets)
    HomeFederal Bank                          $     96,739       14.35%   $     53,927         8.0%   $     67,409        10.0%
    Home Federal Bancorp Consolidated         $     90,164       13.36%   $     54,003         8.0%   $     67,504        10.0%
Tier 1 risk-based capital
    (to risk-weighted assets)
    HomeFederal Bank                          $     89,233       13.24%   $     26,964         4.0%   $     40,446         6.0%
    Home Federal Bancorp Consolidated         $     82,658       12.24%   $     27,002         4.0%   $     40,503         6.0%
Tier 1 leverage capital
    (to average assets)
    HomeFederal Bank                          $     89,233       10.36%   $     34,437         4.0%   $     43,046         5.0%
    Home Federal Bancorp Consolidated         $     82,658        9.61%   $     34,418         4.0%   $     43,022         5.0%



                                                                                                        To Be Categorized As
                                                                                                         "Well Capitalized"
                                                                                                            Under Prompt
                                                                                 For Capital             Corrective Action
                                                        Actual                 Adequacy Purposes             Provisions
                                             -----------------------------------------------------------------------------------
                                                 Amount        Ratio         Amount        Ratio         Amount        Ratio
--------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2002
Total risk-based capital
    (to risk-weighted assets)
    HomeFederal Bank                          $     93,862       13.96%   $     53,795         8.0%   $     67,243        10.0%
    Home Federal Bancorp Consolidated         $     83,118       12.34%   $     53,883         8.0%   $     67,354        10.0%
Tier 1 risk-based capital
    (to risk-weighted assets)
    HomeFederal Bank                          $     86,690       12.89%   $     26,897         4.0%   $     40,346         6.0%
    Home Federal Bancorp Consolidated         $     75,946       11.28%   $     26,941         4.0%   $     40,412         6.0%
Tier 1 leverage capital
    (to average assets)
    HomeFederal Bank                          $     86,690        9.80%   $     35,370         4.0%   $     44,213         5.0%
    Home Federal Bancorp Consolidated         $     75,946        8.56%   $     35,505         4.0%   $     44,382         5.0%



                                                                                                        To Be Categorized As
                                                                                                         "Well Capitalized"
                                                                                                            Under Prompt
                                                                                 For Capital              Corrective Action
                                                         Actual               Adequacy Purposes               Provisions
                                                ------------------------------------------------------------------------------
                                                   Amount       Ratio         Amount      Ratio         Amount       Ratio
------------------------------------------------------------------------------------------------------------------------------
 As of June 30, 2002
 Total risk-based capital
     (to risk-weighted assets)
     HomeFederal Bank                           $     90,347      13.62%  $     53,062       8.00%  $      66,327      10.00%
     Home Federal Bancorp Consolidated          $     81,293      12.23%  $     53,196       8.00%  $      66,494      10.00%
 Tier 1 risk-based capital
     (to risk-weighted assets)
     HomeFederal Bank                           $     83,896      12.65%  $     26,531       4.00%  $      39,796       6.00%
     Home Federal Bancorp Consolidated          $     74,842      11.26%  $     26,598       4.00%  $      39,897       6.00%
 Tier 1 leverage capital
     (to average assets)
     HomeFederal Bank                           $     83,896       9.91%  $     33,877       4.00%  $      42,346       5.00%
     Home Federal Bancorp Consolidated          $     74,842       8.81%  $     33,992       4.00%  $      42,490       5.00%

</TABLE>
<PAGE>

Dividend Restrictions

The principal  source of income and funds for the Company are dividends from the
Bank.  The Bank is subject to certain  restrictions  on the amount of  dividends
that it may declare  without prior  regulatory  approval.  At December 31, 2003,
approximately  $21.9 million of retained  earnings  were  available for dividend
declaration without prior regulatory approval.


13.  EMPLOYEE BENEFIT PLANS

Multi-employer Pension Plan

The Bank participates in a noncontributory  multi-employer pension plan covering
all  qualified  employees.  The  plan is  administered  by the  trustees  of the
Financial  Institutions  Retirement Fund. There is no separate  valuation of the
plan benefits nor segregation of plan assets  specifically for the Bank, because
the plan is a multi-employer plan and separate actuarial valuations are not made
with  respect  to each  employer.  However,  as of June  30,  2003,  the  latest
actuarial valuation,  the total plan assets exceeded the actuarially  determined
value of accrued  benefits.  The Bank had contribution  expenses of $815,000 for
the twelve months ended  December  2003,  $237,000 for six months ended December
2002,  and $404,000 and $206,000,  for the fiscal years ended June 2002 and June
2001,  respectively.  Cash contributions to the multi-employer  pension plan for
these same periods were $471,000, $163,000, $435,000 and $209,000, respectively.


Supplemental Retirement Program

The Bank  has  entered  into  supplemental  retirement  agreements  for  certain
officers. These agreements are unfunded. However, the Bank has entered into life
insurance contracts to fund these agreements.  Benefits under these arrangements
are generally  paid over a 15 year period.  The  following  table sets forth the
Plan's funded status and amount recognized in the Bank's consolidated statements
of income for the twelve  months  ended  December  31,  2003,  six months  ended
December 31, 2002 and for the fiscal years ended June 30, 2002 and 2001:

<TABLE>
<CAPTION>

                                                         -------------------------------------------------------------------
                                                             Dec 2003          Dec 2002        June 2002        June 2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>              <C>              <C>

Economic assumptions:
   Discount rate                                                   6.5%              6.5%             8.5%             9.7%
   Salary rate                                                     4.0%              4.0%             4.0%             4.0%

Components of net periodic pension expense:
   Interest cost on projected benefit obligation         $      176,676    $      137,121   $      200,196    $     124,181
   Service cost                                                  64,914            11,292           34,995           64,516
   Prior service cost                                           129,705            96,489          234,860           39,475
                                                         ---------------   ---------------  ---------------   --------------
Net periodic pension expense                             $      371,295    $      244,902   $      470,051    $     228,172
                                                         ===============   ===============  ===============   ==============
</TABLE>

<TABLE>
<CAPTION>

A summary of the Plan's  funded  status at December 31, 2003 and 2002,  and June
30, 2002, 2001 is as follows:

                                                                --------------------------------------------------
                                                                    Dec 2003          Dec 2002        June 2002
------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>              <C>

Projected benefit obligation at beginning of year               $    2,770,882    $    2,552,969   $    2,410,778
Interest cost                                                          176,676           137,121          200,196
Service cost                                                            64,914            11,292           34,995
Amendment to plan                                                            -                 -                -
Actuarial loss                                                         110,988           116,000                -
Benefits paid during year                                             (121,060)          (46,500)         (93,000)
                                                                ---------------   ---------------  ---------------
Projected benefit obligation at end of year (unfunded status)        3,002,400         2,770,882        2,552,969

Unrecognized net loss                                                 (932,859)         (951,576)        (932,065)
                                                                ---------------   ---------------  ---------------
Accrued pension liability                                       $    2,069,541    $    1,819,306   $    1,620,904
                                                                ===============   ===============  ===============
</TABLE>


Prior service cost is amortized  over the estimated  remaining  service lives of
the employees of approximately seven years.
<PAGE>


401(k) Plan

The Bank has an employee thrift plan established for substantially all full-time
employees.  The Bank has elected to make matching  contributions equal to 50% of
the  employee  contributions  up to a maximum of 1.5% of an  individual's  total
eligible salary.  The Bank contributed  $120,000  $54,000,  $109,000 and $99,000
during the year ended  December 31, 2003, six months ended December 31, 2002 and
fiscal years ended June 30, 2002 and 2001, respectively.


14.  STOCK OPTIONS

The  Company  has stock  option  plans for the  benefit of  officers,  other key
employees and directors.  As of December 31, 2003, the plans were  authorized to
grant  additional  options to purchase  310,631  shares of the Company's  common
stock.  The  option  price is not to be less than the fair  market  value of the
common  stock on the date the  option  is  granted,  and the stock  options  are
exercisable at any time within the maximum term of 10 years and one day from the
grant date. The options are  nontransferable  and are forfeited upon termination
of employment.

The  following  is the stock  option  activity for the twelve month period ended
December 31, 2003 and the six month period ended December 31, 2002, and for each
of the years in the two year period ended June 30, 2002,  and the stock  options
outstanding at the end of the respective periods:

                                                   -----------------------------
                                                                     Weighted
                                                                      Average
                                                                     Exercise
Options                                           Shares              Price
--------------------------------------------------------------------------------
Outstanding June 30, 2000                         908,596            $17.52
Granted                                           105,655             15.87
Forfeited                                          (3,001)            23.06
Exercised                                         (17,848)             6.56
                                                ---------
Outstanding June 30, 2001                         993,402             17.52
Granted                                           164,655             18.73
Forfeited                                         (14,687)            20.30
Exercised                                        (132,961)             9.86
                                                ---------
Outstanding June 30, 2002                       1,010,409             18.68
Granted                                            22,224             22.65
Forfeited                                          (3,987)            24.46
Exercised                                         (22,344)            13.05
                                                ---------
Outstanding December 31, 2002                   1,006,302             18.87
                                                ---------
Granted                                             8,724             27.23
Forfeited                                         (19,412)            23.03
Exercised                                        (224,346)            13.94
                                                ---------
Outstanding December 31, 2003                     771,268             20.30
                                                =========


The following table is an analysis of the remaining  weighted average life as of
December 31, 2003 of the  outstanding  options  within  various  exercise  price
ranges:

------------------------------------------------------------------------
  Exercise Price            Number of Options        Average Life
------------------------------------------------------------------------
$10.620 - $16.250                244,137                 3.9
$17.575 - $23.000                240,959                 6.9
$23.063 - $27.400                286,172                 5.5
                                 -------
     Total                       771,268                 5.4
                                 =======

The weighted average fair value of options granted was $5.91 for the fiscal year
ended December 31, 2003, $5.18 for the six month period ended December 31, 2002,
and $4.58 and $3.59 for the fiscal  years ended June 30, 2002 and June 30, 2001,
respectively.  The fair value of the option  grants is  estimated on the date of
grant using an option  pricing  model with the following  assumptions:  dividend
yield ranging from 1.32% to 3.58%,  risk-free  interest rates ranging from 2.66%
to 8.04%, expected volatility ranging from 24.13% to 34.86% and expected life of
5.04 to 5.80 years.
<PAGE>


Shareholder Rights Plan

The  Company  has  adopted a  Shareholder  Rights  Plan and  declared a dividend
distribution  at the rate of one Right for each  share of common  stock  held of
record as of the close of business on November 22,  1994,  and for each share of
common stock issued thereafter up to the Distribution Date (defined below).

Each Right entitles  holders of common stock to buy one share of common stock of
the Company at an exercise  price of $80. The Rights would be  exercisable,  and
would detach from the common stock (the "Distribution Date") only if a person or
group (i) were to acquire 15 percent or more of the outstanding shares of common
stock of the Company;  (ii) were to announce a tender or exchange offer that, if
consummated, would result in a person or group beneficially owning 30 percent or
more of the  outstanding  shares of common stock of the  Company;  or (iii) were
declared  by the Board to be an Adverse  Person (as defined in the Plan) if such
person or group  beneficially owns 10 percent or more of the outstanding  shares
of common stock in the Company.  In the event of any  occurrence  triggering the
Distribution Date, each Right may be exercised by the holder (other than such an
acquiring  person or group) to  purchase  shares of common  stock of the Company
(or, in certain  circumstances,  common stock of the acquiring  person) at a 50%
discount to market  price.  The Company is entitled to redeem the Rights at $.01
per Right at any time.  The  Rights  will  expire  at the close of  business  on
November 22, 2004.


15. COMMITMENTS

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business,  the Bank makes various  commitments to extend
credit  that  are  not  reflected  in the  accompanying  consolidated  financial
statements.  At December 31, 2003 and 2002, and June 30, 2002, the Bank had loan
commitments approximating $23.2, $35.5 million and $29.9 million,  respectively,
excluding undisbursed portions of loans in process. Loan commitments at December
31, 2003, included commitments to originate fixed rate loans with interest rates
ranging  from  4.5% to 7.5%  totaling  $7.3  million  and  adjustable  rate loan
commitments  with  interest  rates  ranging  from  3.3% to 9.5%  totaling  $15.9
million. Commitments, which are disbursed subject to certain limitations, extend
over various periods of time.  Generally,  unused commitments are cancelled upon
expiration of the commitment term as outlined in each individual contract.

Outstanding  letters of credit were $1.9 million,  $2.5 million and $2.4 million
at December 31, 2003 and 2002,  and June 30, 2002,  respectively.  Additionally,
the Bank had  approximately  $11.7  million  in  commitments  to sell fixed rate
residential  loans and $6.8  million  in  commitments  to sell  adjustable  rate
commercial loans at December 31, 2003.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
parties  to the  financial  instruments  for  commitments  to  extend  credit is
represented by the contract amount of those instruments.  The Bank uses the same
credit policies and collateral requirements in making commitments as it does for
on-balance sheet instruments.


Employment Agreements

The  Company has entered  into  employment  agreements  with  certain  executive
officers.  Under certain circumstances  provided in the agreements,  the Company
may be obligated to continue  the  officer's  salary for a period of up to three
years.
<PAGE>
<TABLE>
<CAPTION>


16.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The  disclosure  of the  estimated  fair value of  financial  instruments  is as
follows: (in thousands)

                                             December 2003               December 2002              June 2002
                                   --------------------------------------------------------------------------------------
                                        Carrying         Fair       Carrying         Fair      Carrying          Fair
                                         Value           Value       Value           Value       Value          Value
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>

Assets:
   Cash                                $  22,734     $  22,734     $  27,404     $  27,404     $  25,006     $  25,006
   Interest-bearing deposits              11,444        11,444        26,288        26,288        19,472        19,472
   Securities available for sale         123,638       123,638       114,440       114,440       114,989       114,989
   Securities held to maturity             1,828         1,883         3,026         3,147         3,493         3,619
   Loans held for sale                     6,272         6,357        30,560        31,055         6,302         6,383
   Loans, net                            630,672       648,987       628,883       653,007       631,815       649,880
   Accrued interest receivable             3,733         3,733         4,289         4,289         4,431         4,431
   Federal Home Loan Bank stock            9,965         9,965         9,965         9,965         9,965         9,965
   Cash surrender value of life
     insurance                            11,359        11,359        10,841        10,841         9,792         9,792

Liabilities:
    Deposits                             588,915       597,911       609,358       621,187       577,480       583,881
    Federal Home Loan Bank advances      154,296       161,387       171,635       180,429       174,139       182,626
    Senior debt                           14,242        14,792        14,242        15,161        11,200        11,200
    Other borrowings                         624           624         1,867         1,867         3,341         3,341
    Advance payments by borrowers
       for taxes and insurance                76            76           229           229           442           442
    Accrued interest payable                 900           900         1,035         1,035           924           924
    Commitments                                -             -             -             -             -             -

Financial Instruments:
    Interest rate swaps                   (1,099)       (1,099)       (1,592)       (1,592)       (1,038)       (1,038)

</TABLE>



The Company,  using  available  market  information  and  appropriate  valuation
methodologies,   has   determined   the  estimated   fair  values  of  financial
instruments.  Considerable  judgment is required in interpreting  market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily  indicative of the amounts that the Company could realize in
a current  market  exchange.  The use of  different  market  assumptions  and/or
estimation  methodologies may have a material effect on the estimated fair value
amounts.


Cash,  Interest-bearing  Deposits,  Accrued Interest Receivable,  Cash Surrender
Value of Life Insurance,  Advance Payments by Borrowers for Taxes and Insurance,
Accrued Interest Payable and Other Borrowings

The  carrying  amount  as  reported  in the  Consolidated  Balance  Sheets  is a
reasonable estimate of fair value.



Securities Held to Maturity and Available for Sale

Fair values are based on quoted market prices and dealer quotes.


Loans Held for Sale and Loans, net

The fair value is  estimated  by  discounting  the future  cash flows  using the
current rates for loans of similar credit risk and maturities.



Federal Home Loan Bank Stock

The fair value is estimated to be the carrying value, which is par.



Deposits

The fair value of demand  deposits,  savings  accounts and money market  deposit
accounts is the amount  payable on demand at the reporting  date. The fair value
of  fixed-maturity  certificates  of deposit is estimated  using rates currently
offered for deposits of similar remaining maturities.



Federal Home Loan Bank Advances

The fair  value is  estimated  by  discounting  future  cash flows  using  rates
currently available to the Company for advances of similar maturities.



Senior Debt

Rates  currently  available  to the  Company  for debt  with  similar  terms and
remaining maturities are used to estimate fair value of existing debt.



Interest Rate Swaps

The fair value is derived from  proprietary  models  based upon  well-recognized
financial   principles   which   management   believes   provide  a   reasonable
approximation of the fair value of the interest rate swap transactions.



Commitments

The  commitments  to originate and purchase loans have terms that are consistent
with current market conditions. Accordingly, the Company estimated that the face
amounts of these commitments approximate carrying values.

The fair value estimates presented herein are based on information  available to
management at December 31, 2003 and 2002, and June 30, 2002. Although management
is not aware of any factors that would  significantly  affect the estimated fair
value amounts, such amounts have not been comprehensively  revalued for purposes
of these financial statements since that date, and, therefore, current estimates
of fair value may differ significantly from the amounts presented herein.


<TABLE>
<CAPTION>

17.  PARENT COMPANY  FINANCIAL STATEMENTS

The condensed financial  statements of Home Federal Bancorp are as follows:  (in
thousands)

                                                                        --------------------------------------
                                                                         Dec 2003      Dec 2002    June 2002
--------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>                <C>

Condensed Balance Sheets (Parent Company only)
Assets:
Cash                                                                    $    6,857   $     2,930   $    1,421
Investment in subsidiary                                                    91,667        89,835       87,280
Other                                                                          285           447          361
                                                                        -----------  ------------  -----------
Total Assets                                                            $   98,809   $    93,212   $   89,062
                                                                        ===========  ============  ===========

Liabilities:
Senior debt                                                             $   14,242   $    14,242   $   11,200
Other                                                                          545         1,176          776
                                                                        -----------  ------------  -----------
  Total liabilities                                                         14,787        15,418       11,976
                                                                        -----------  ------------  -----------
Shareholders' equity                                                        84,022        77,794       77,086
                                                                        -----------  ------------  -----------
Total Liabilities and Shareholders' Equity                              $   98,809   $    93,212   $   89,062
                                                                        ===========  ============  ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                        ---------------------------------------------------
Period Ended As Of                                                       Dec 2003      Dec 2002    June 2002    June 2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>                <C>     <C>

Condensed Statements of Income (Parent Company only)
Dividends from subsidiary                                               $    7,750   $     2,914   $    6,379   $    5,574
Other                                                                          560           271          629          556
                                                                        -----------  ------------  -----------  -----------
  Total income                                                               8,310         3,185        7,008        6,130
                                                                        -----------  ------------  -----------  -----------
Interest on senior debt                                                        838           425          812          807
Other expenses                                                                 751           574          895          925
                                                                        -----------  ------------  -----------  -----------
  Total expenses                                                             1,589           999        1,707        1,732
                                                                        -----------  ------------  -----------  -----------
Income before taxes and change in undistributed earnings of subisidiary      6,721         2,186        5,301        4,398
Applicable income tax credit                                                  (403)         (284)        (419)        (433)
                                                                        -----------  ------------  -----------  -----------
Income before change in undistributed earnings of subsidiary                 7,124         2,470        5,720        4,831
Increase in undistributed earnings of subsidiary                             2,519         2,827        4,619        4,718
                                                                        -----------  ------------  -----------  -----------
Net Income                                                              $    9,643   $     5,297   $   10,339   $    9,549
                                                                        ===========  ============  ===========  ===========




                                                                        ---------------------------------------------------
Period Ended As Of                                                       Dec 2003      Dec 2002    June 2002    June 2001
---------------------------------------------------------------------------------------------------------------------------
Condensed Statements of Cash Flows (Parent Company only)
Operating Activities:
Net income                                                              $    9,643   $     5,297   $   10,339   $    9,549
Adjustments to reconcile net income to net cash provided by
operating activities:
  Decrease (increase) in other assets                                          162           (86)         (29)         (87)
  Increase (decrease) in accrued expenses and other liabilities               (428)          276           44          245
  Increase in undistributed earnings of subsidiary                          (2,519)       (2,827)      (4,619)      (4,718)
                                                                        -----------  ------------  -----------  -----------
Net cash provided by operating activities                                    6,858         2,660        5,735        4,989
                                                                        -----------  ------------  -----------  -----------

Investing Activities:
Net cash used in investment in HomeFed Financial Corp.                           -             -         (768)           -
                                                                        -----------  ------------  -----------  -----------

Financing Activities:
Repayment of senior debt                                                         -             -            -         (505)
Funds provided by senior debt                                                    -         3,042            -        5,500
Payment of dividends                                                        (2,997)       (1,331)      (2,528)      (2,438)
Repurchase shares of common stock                                           (3,575)       (3,154)      (4,764)      (6,076)
Exercise of stock options, net of fractional shares paid                     3,641           292        1,369          199
                                                                        -----------  ------------  -----------  -----------
Net cash used in financing activities                                       (2,931)       (1,151)      (5,923)      (3,320)
                                                                        -----------  ------------  -----------  -----------

Net (decrease)/increase in cash                                              3,927         1,509         (956)       1,669
Cash at beginning of period                                                  2,930         1,421        2,377          708
                                                                        -----------  ------------  -----------  -----------
Cash at End of Period                                                   $    6,857   $     2,930   $    1,421   $    2,377
                                                                        ===========  ============  ===========  ===========

</TABLE>
<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Home Federal Bancorp
Columbus, Indiana

We have audited the  accompanying  consolidated  balance  sheets of Home Federal
Bancorp and its  subsidiaries  (the  "Company") as of December 31, 2003 December
31, 2002, and June 30, 2002, and the related consolidated  statements of income,
shareholders'  equity and cash flows for the year ended  December 31, 2003,  the
six month  period  ended  December 31, 2002 and for each of the two years in the
period ended June 30, 2002. These financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with 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,  such financial  consolidated  statements present fairly, in all
material  respects,  the financial  position of the Company at December 31, 2003
and 2002,  and June 30,  2002,  and the results of its  operations  and its cash
flows for the year ended  December 31, 2003, the six month period ended December
31,  2002 and for each of the two years in the  period  ended  June 30,  2002 in
conformity with accounting principles generally accepted in the United States of
America.



/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 23, 2004
<PAGE>


Board of Directors
& Officers of
 Home Federal Bancorp


Board of Directors                        Officers
John K. Keach, Jr.                        John K. Keach, Jr.
Chairman of the Board, President and      Chairman of the Board, President and
Chief Executive Officer,                  Chief Executive Officer
Home Federal Bancorp
                                          Charles R. Farber
John T. Beatty                            Executive Vice President
President,
Beatty Insurance, Inc.                    Lawrence E. Welker
                                          Executive Vice President,
Harold Force                              Chief Financial Officer,
President,                                Treasurer and Secretary
Force Construction Company, Inc.
                                          S. Elaine Pollert
David W. Laitinen, MD                     Executive Vice President
Orthopedic Surgeon

John M. Miller
President,
Best Beers, Inc.                          Executive Officers
                                          of HomeFederal Bank
Harvard W. Nolting, Jr.                   John K. Keach, Jr.
Retired from Nolting                      Chairman of the Board,
Foods, Inc.                               President and Chief
                                          Executive Officer
Gregory J. Pence
President,                                Charles R. Faber
Kiel Bros. Oil Company, Inc. and          Executive Vice President
KP Oil Company, Inc.
                                          Lawrence E. Welker
John K. Keach, Sr.                        Executive Vice President,
Chairman Emeritus                         Chief Financial Officer,
Retired                                   Treasurer and Secretary

The Directors of Home                     S. Elaine Pollert
Federal Bancorp also                      Executive Vice President
serve as Directors of
HomeFederal Bank.                         Melissa A. McGill
                                          Senior Vice President
                                          Controller
<PAGE>


Shareholder Information

Stock Listing

The common stock of Home Federal  Bancorp is traded on the National  Association
of Securities Dealers Automated Quotation System,  National Market System, under
the symbol HOMF.  Home Federal  Bancorp stock appears in The Wall Street Journal
under  the  abbreviation  HomFedBcpIN,  and  in  other  publications  under  the
abbreviation HFdBcp.


Transfer Agent & Registrar

To change name, address or ownership of stock, to report lost  certificates,  or
to consolidate accounts, contact:

LaSalle Bank N.A.
c/o Corporate Trust Operations
135 South LaSalle Street, Room 1960
Chicago, Illinois 60603
(800) 246-5761


General Counsel

Barnes & Thornburg
11 South Meridian Street
Indianapolis, IN 46204


Shareholder & General Inquiries

Home Federal  Bancorp is required to file an Annual  Report on Form 10-K for its
fiscal  year  ended  December  31,  2003,   with  the  Securities  and  Exchange
Commission.


For copies of the Annual Report and Home Federal  Bancorp's  Quarterly  Reports,
contact:

Cora Laymon
Home Federal Bancorp
222 West Second Street
P.O. Box 648
Seymour, IN 47274
(812) 522-1592
(877) 626-7000


For financial information and security analyst inquiries, please contact:

Lawrence E. Welker
Home Federal Bancorp
222 West Second Street
P.O. Box 648
Seymour, IN 47274
(812) 522-1592
(877) 626-7000


For an online annual report or shareholder inquiries on the Web, visit us at:

www.homf.com
<PAGE>


                                                    Office Locations

                                                    Seymour
                                                    22 W. Second Street
                                                    1117 E. Tipton Street

 Picture omitted                                    Columbus
                                                    501 Washington Street
 A map of the state of Indiana, showing             1020 Washington Street
 HomeFederal's office locations is on               3805 25th Street
 the left side of the page.                         2751 Brentwood Drive
                                                    4330 W. Jonathan Moore Pike

                                                    Hope
                                                    8475 N. State Road 9

                                                    Austin
                                                    67 W. Main Street

                                                    North Vernon
                                                    111 N. State Street
                                                    1540 N. State Street

                                                    Osgood
                                                    820 S. Buckeye Street

                                                    Batesville
                                                    114 State Road 46 East

                                                    Madison
                                                    201 Clifty Drive

                                                    Brownstown
                                                    101 N. Main Steet

                                                    Salem
                                                    1208 S. Jackson Street

                                                    Greensburg
                                                    115 E. North Street

                                                    Greenwood
                                                    8740 W. Emerson Avenue

                                                    Southport Road
                                                    Coming Fall 2004

                                                    Visit our Web site at
                                                    www.homf.com or call us
                                                    toll-free at (877) 626-7000.