[Front Cover]

              Company Logo 1997 ANNUAL REPORT HOME FEDERAL BANCORP






























































[Oblong shaped cutout in front cover near bottom of page omitted  showing runner
on the next page running along the beach]

[Caption under cutout]                           STRENGTH FOR THE LONG RUN




<PAGE>

[Inside front cover blank with oblong cutout near bottom of page.]
<PAGE>

          1997 ANNUAL REPORT             HOME FEDERAL BANCORP




























































[Caption above picture]
     At Home Federal,  we continually seek to solidify our position for the road
ahead.  We're setting a steady pace that's challenging but that does not exhaust
our resources. Our goal is not to break records but rather to build strength for
the long run. We want the communities, customers and shareholders we serve to be
confident that they can rely on us both now and in the future.



                        [picture omitted bottom of page]

                         Runner running along the beach.

<PAGE>



































                         [picture omitted 3/4th of page]

                         Runner running on cobblestones.








































TABLE OF CONTENTS

Letter to  Shareholders  1  Selected  Consolidated  Financial  Data 4  Quarterly
Results of  Operations  5  Management's  Discussion  &  Analysis 6  Consolidated
Balance Sheets 14 Consolidated  Statements of Income 15 Consolidated  Statements
of  Shareholders'  Equity 16  Consolidated  Statements of Cash Flows 17 Notes to
Consolidated  Financial  Statements 18 Independent  Auditors' Report 33 Board of
Directors  & Officers  of Home  Federal  Bancorp &  Executive  Officers  of Home
Federal Savings Bank 34

<PAGE>

                                                            TO OUR SHAREHOLDERS

    During the past year, we at Home Federal continued our long-standing  policy
of carefully and successfully developing our business at a steady pace - step by
step, product by product, customer by customer. As in previous years, we enjoyed
the rewards that come with careful planning and hard work: increased strength in
our core  businesses,  continued  customer  satisfaction  with our  products and
services, and gratifying financial results.
    For the 1997 fiscal year, Home Federal  reported net income of $6,846,000 or
$1.96 per share,  compared  to  $7,352,000  or $2.15 per share for the  previous
year.  Had it not been for a special  assessment  during  the first  quarter  to
recapitalize the FDIC Savings Association  Insurance Fund, net income would have
been $8,572,000 or $2.45 per share, fully 16.6 percent higher than the total for
fiscal year 1996.
    Net  interest  income  after  the  provision  for loan  losses  - a  primary
barometer of Home  Federal's  performance - increased by  $2,495,000,  despite a
loan loss provision $492,000 higher than the 1996 provision.  It should be noted
that the increased  size and  diversification  of the  portfolio  prompted us to
raise the  provision.  We feel that this increase in the provision is consistent
with the change in the portfolio mix.
    Residential  mortgage lending,  Home Federal's  primary business,  grew at a
rate of less than 10 percent in fiscal year 1997,  but that slow growth was more
than offset by significant gains in other areas. We enjoyed strong growth in our
consumer  lending  categories:  our home  equity  lending  and  second  mortgage
businesses,  for  example,  grew by just over 26 percent  during  the year.  Our
commercial real estate lending business grew by approximately 15 percent.

TOTAL LOAN PORTFOLIO IN THOUSANDS [pie graphs omitted bottom of page]
                                           
                                       1993 
 
Commercial Mortgages       14.74%                $ 61,245                
Second & Home Equity        6.54%                $ 27,157 
Commercial                  4.15%                $ 17,234  
Consumer                    9.20%                $ 38,226 
Residential Mortgages      65.37%                $271,501
                                                 $415,363

                                           
                                       1997
                         
Commercial Mortgages       17.42%                $104,612  
Second & Home Equity       10.60%                $ 63,658   
Commercial                  7.18%                $ 43,112 
Consumer                    9.11%                $ 54,705 
Residential Mortgages      55.69%                $334,311
                                                 $600,398
                                        


EARNINGS PER SHARE [Bar Graph omitted left column]

[Caption below graph]
Net income divided by outstanding common and common share equivalents. Growth in
earnings per share was 11% and 14% for fiscal years 1996 and 1997, respectively.
*The fiscal 1997 figure does not include the one time SAIF assessment.

                           FY93                  $   1.92
                           FY94                  $   2.09
                           FY95                  $   1.93
                           FY96                  $   2.15
                           FY97                  $   2.45


[Photo of John K. Keach, Jr. omitted right column]
[Quote above picture in right column]
"In fiscal year 1997,  we continued to diversify  our product  offerings to meet
the  ever-changing  needs.  At Home Federal,  we strive to set a steady pace and
move consistently forward - to grow with and for the communities we serve."-John
K. Keach, Jr.


<PAGE>



TO OUR SHAREHOLDERS


    In today's spirited economy,  financial  institutions like Home Federal have
found it difficult to compete for savings  deposits to fund loan growth when the
stock  market  in  general  - and  mutual  funds in  particular  - have  offered
investors the prospect of considerably higher returns.  Our response has been to
develop  competitive  products  like our Easy  Advantage  Money  Fund.  A strong
performer  in our  product  lineup,  this new  money  market  account  attracted
balances totaling more than $43 million during its first year.
    To better  manage our  growth,  we have been  striving to balance the upward
trends in  administrative  costs that all businesses face with the  self-imposed
discipline  in spending.  We were  particularly  successful  in  establishing  a
healthy  efficiency ratio in 1997, and we intend to maintain the discipline that
made it possible. As in other years, we will continue to investigate  investment
opportunities in new technology to build Home Federal's assets while holding the
line on non-essential spending.
    One of Home Federal's greatest assets is our proven track record in creating
shareholder  value.  During the year, Home Federal stock appreciated 64 percent.
In December we  announced a  three-for-two  stock  split,  concurrent  with a 20
percent dividend  increase.  Our intent was to make our stock more attractive to
investors,  improving its liquidity  and tangibly  demonstrating  the results of
Home Federal's recent performance.  We subsequently  announced a second dividend
increase of 25 percent,  reaffirming the recent growth and upside potential that
made the earlier  increase  and stock split  possible.  A dividend  reinvestment
program will be offered to our shareholders beginning in September of 1997.
    As we do each year, we continually  sought better ways to serve each of Home
Federal's   customers   throughout   fiscal  1997.   We  began  to  implement  a
comprehensive  new approach to blending both consumer and  commercial  financial
services,  a marketing  strategy  signaling Home Federal's ability to meet every
financial  need of its many  customers  who require  both  consumer and business
financial products and services.
    At the same time, we developed more aggressive  retail marketing  strategies
to make  present  and  potential  customers  more aware of our  diverse  product
offerings.  A recent  addition to Home  Federal's  product line is our trust and
asset management services, another investment in establishing long-term customer
relationships  and one that we expect to generate  strong returns in the future.
The appeal of such services was  demonstrated by the fine  performance of Linsco
Private  Ledger  - our  brokerage  division,  which  reported  another  year  of
outstanding  results.  With  these  complimentary  service  offerings,   we  are
positioning ourselves to be

[Quote in left column  above  picture]  "With the  unprecedented  pace of change
throughout  the banking  industry,  few people talk about  tradition.  Yet, it's
rewarding to realize that Home Federal still derives strength and stability from
its  customer-oriented  focus.  That  tradition  has served Home Federal and our
customers  well for almost 90 years." - John K.  Keach,  Sr. [picture of John K.
Keach, Sr. omitted left column]

EFFICIENCY RATIO [Bar Graph omitted right column]
[Caption below graph]
Operating  expenses  as a  percentage  of the  sum of net  interest  income  and
non-interest  income.  For example,  during  fiscal 1997,  every $.52 in expense
generated $1.00 in net income.

                           FY93         59.0%
                           FY94         61.2%
                           FY95         58.7%
                           FY96         56.9%
                           FY97         51.9%

<PAGE>


                                                             TO OUR SHAREHOLDERS




 able to meet the needs of the growing  number of people who have come to expect
a diversification of their personal assets.
    Continuing  our  program  of  updating  our  retail  facilities  and  taking
advantage  of our  growing  market  share  in the  Washington  County  area,  we
relocated in the community of Salem,  Indiana,  during June of 1997. And, at our
headquarters facilities, we initiated a new central loan processing system which
creates  many  corporate-wide  efficiencies  while  maintaining  decision-making
autonomy  throughout our branch  network.  We also instituted a new call center,
staffed by four customer  service  representatives,  to better  answer  customer
inquiries and provide accurate and timely product information.
    Beyond  our  doors,   the  business  of  funding  and  operating   financial
institutions  continues  to evolve  rapidly - and in many ways our  predecessors
could not imagine. Mergers,  restructuring,  dramatic regulatory changes and new
product  offerings  occur with  stunning  speed,  challenging  us to  constantly
enhance  our own  products  and  processes  while  maintaining  the  traditional
standards  of service  our  customers  have  expected  and enjoyed for almost 90
years.
    Our mission in 1998 is to effectively build Home Federal's  strength for the
long run. And our commitment is to continually leverage our unique strengths and
resources for the ongoing  benefit of all of our  stakeholders  -  shareholders,
customers and employees - one carefully-planned step at a time.

Sincerely,



/s/ John K. Keach, Sr.                           /s/ John K. Keach, Jr.
John K. Keach, Sr.                               John K. Keach, Jr.
Chairman of                                      President and Chief
the Board                                        Executive Officer



STOCK PRICE [Bar Graph omitted left column]
[Caption below graph]

Price for one share of Home Federal Bancorp stock at close on June 30.

                            FY93      $13,111
                            FY94      $13,000
                            FY95      $15,667
                            FY96      $17,333
                            FY97      $28,500


















                        [picture omitted bottom of page]

                      Runner running along a country road.
<PAGE>

<TABLE>
<CAPTION>
Summary of Selected Consolidated Financial Data
(in thousands except per share data)                             At or For the Year Ended June 30,
                                                -----------------------------------------------------------------
                                                    1997          1996         1995          1994          1993
                                                -----------------------------------------------------------------
Selected Balance Sheet Data:
<S>                                             <C>           <C>          <C>           <C>          <C>      
Total assets .................................   $ 682,796     $ 630,015    $ 588,543     $ 545,228    $ 534,390
Securities available for sale ................   $  40,119     $  44,651    $  34,221     $  38,986    $   7,489
Securities held to maturity ..................   $  13,115     $   6,990    $  17,451     $  17,225    $  76,727
Loans receivable, net ........................   $ 575,624     $ 520,097    $ 469,883     $ 445,903    $ 399,980
Deposits .....................................   $ 527,788     $ 489,573    $ 467,086     $ 445,987    $ 445,478
Total borrowings .............................   $  92,393     $  84,137    $  72,900     $  57,418    $  52,900
Shareholders' equity .........................   $  57,917     $  51,517    $  45,279     $  38,589    $  32,523

Selected Operations Data:
Total interest income ........................   $  51,531     $  47,156    $  43,013     $  38,059    $  40,174
Total interest expense .......................      28,640        27,251       24,289        21,323       23,842
                                                 ---------     ---------    ---------     ---------    ---------
Net interest income ..........................      22,891        19,905       18,724        16,736       16,332
Provision (credit) for loan losses ...........       1,129           638         (314)          491          414
Net interest income after provision              ---------     ---------    ---------     ---------    ---------
     for loan losses .........................      21,762        19,267       19,038        16,245       15,918
Gain on sale of loans ........................       1,267         1,321          667         2,072        2,152
Gain (loss) on sale of securities ............          19             1         (437)          905          387
Other income .................................       5,900         6,126        4,508         4,371        4,055
Other expense (3) ............................      17,789        14,431       13,483        12,534       12,078
Income before income taxes,                      ---------     ---------    ---------     ---------    --------- 
     extraordinary item and cumulative effect
     of change in accounting principle .......      11,159        12,284       10,293        11,059       10,434
Income tax provision .........................       4,313         4,932        3,757         4,069        3,691
Income before extraordinary item and             ---------     ---------    ---------     ---------    --------- 
     cumulative effect of change in
     accounting principle ....................       6,846         7,352        6,536         6,990        6,743
Extraordinary item (1) .......................          --            --           --            --       (1,222)
Cumulative effect of change in
     accounting principle (2) ................          --            --           --            --          849
                                                 ---------     ---------    ---------     ---------    ---------
                                                                                                                        
Net income (4) ...............................   $   6,846     $   7,352    $   6,536     $   6,990    $   6,370
                                                 =========     =========    =========     =========    =========
                                                                                                                          

Earnings per common and common
share equivalents (4).........................   $    1.96     $    2.15    $    1.93     $    2.09    $    1.92
Cash dividends per share .....................   $    0.41     $    0.30    $    0.25     $    0.20    $    0.17
Selected Financial and Statistical Data:
Return on average assets .....................        1.05%         1.23%        1.15%         1.31%        1.23%
Return on average shareholders' equity .......       12.62%        15.14%       15.66%        19.29%       21.03%
Interest rate spread during the period .......        3.59%         3.40%        3.43%         3.29%        3.36%
Net interest margin on average earning assets         3.76%         3.56%        3.54%         3.36%        3.39%
Average shareholders' equity to average assets        8.35%         8.12%        7.37%         6.78%        5.86%
Efficiency ratio (5) .........................       51.90%        56.90%       58.70%        61.20%       59.00%
Nonperforming assets to total assets .........        0.46%         0.48%        0.45%         0.50%        0.82%
Loss allowance to nonperforming loans ........      122.82%       103.38%      107.35%       112.91%       68.04%
Loss allowance to total loans ................        0.63%         0.58%        0.58%         0.57%        0.55%
Dividend payout ratio ........................       20.13%        13.59%       12.64%         9.27%        5.55%
Loan servicing portfolio .....................   $ 297,982     $ 266,814    $ 224,690     $ 196,522    $ 163,319
Allowance for loan losses ....................   $   3,649     $   3,061    $   2,806     $   2,580    $   2,257
Number of full service offices ...............          16            15           15            13           13
<FN>
------------------
(1)  Prepayment penalty for extinguishment of debt.
(2)  Change in accounting for income taxes.
(3)  Fiscal 1997 other expense  includes a one time SAIF assessment of $3.0 million.
(4)  Fiscal 1997 net income excluding the after tax effect of the SAIF assessment would have been $8.6 milllion or $2.45 per share.
(5)  Operating  Expsenses 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,  amortiaztion  of intangibles, and
     non-recurring items.
</FN>
</TABLE>

<PAGE>


                        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
                             --------------------------------------------------
                             September 30,   December 31,  March 31,   June 30,
Fiscal Year 1997               1996             1996         1997        1997
                             --------------------------------------------------

Total interest income .....    $12,491        $12,819      $12,933      $13,288
Total interest expense ....      7,028          7,158        7,101        7,353
                               -------        -------      -------      -------
Net interest income .......      5,463          5,661        5,832        5,935
Provision for loan losses .        167            267          379          316
                               -------        -------      -------      -------
Net interest income after
  provision for loan losses      5,296          5,394        5,453        5,619
Gain on sale of loans .....        387            351          264          265
Other income ..............      1,518          1,404        1,416        1,581
Other expense .............      6,530          3,602        3,592        4,065
                               -------        -------      -------      -------
Income before income taxes         671          3,547        3,541        3,400
Income tax provision ......        240          1,381        1,370        1,322
                               -------        -------      -------      ------- 
Net Income ................    $   431        $ 2,166      $ 2,171      $ 2,078
                               =======        =======      =======      =======
Earnings per common and common
 share equivalents.........    $  0.13        $  0.63      $  0.61      $  0.59
                               =======        =======      =======      =======

Dividends per share........    $ 0.083        $ 0.100      $ 0.100      $ 0.125
Stock sales price range: 
                    High (1)   $ 19.75        $ 25.75      $ 28.00      $ 28.75
                    Low....    $ 17.33        $ 19.50      $ 24.25      $ 25.00



                                            Three Months Ended
                             --------------------------------------------------
                             September 30,   December 31,  March 31,   June 30,
Fiscal Year 1996               1995             1995         1996        1996
                             --------------------------------------------------
 
Total interest income .....    $11,624        $11,781      $11,814      $11,937
Total interest expense ....      6,890          6,877        6,718        6,766
                               -------        -------      -------      -------

Net interest income .......      4,734          4,904        5,096        5,171
Provision for loan losses .         67            182          154          235
                               -------        -------      -------      -------
Net interest income after
  provision for loan losses      4,667          4,722        4,942        4,936
Gain on sale of loans .....        422            345          401          153
Other income ..............      1,455          1,400        1,391        1,881
Other expense .............      3,595          3,329        3,610        3,897
                               -------        -------      -------      -------
Income before income taxes       2,949          3,138        3,124        3,073
Income tax provision ......      1,156          1,234        1,244        1,298
                               -------        -------      -------      -------
Net Income ................    $ 1,793        $ 1,904      $ 1,880      $ 1,775
                               =======        =======      =======      =======
Earnings per common and common
 share equivalents.........    $  0.53        $  0.55      $  .055      $  .052
                               =======        =======      =======      =======
   
Dividends per share........    $ 0.067        $ 0.067      $ 0.083      $ 0.083
Stock sales price range: 
                    High (1)   $ 16.67        $ 18.17      $ 18.00      $ 18.17
                    Low....    $ 14.83        $ 15.67      $ 16.33      $ 16.33
----------
(1)    The  Company's  common  stock trades on the NASDAQ stock market under the
       symbol  "HOMF".  As of June 30 , 1997,  the  Company  had 582  holders of
       record of its shares.

<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


The following  financial  review 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 unitary savings and loan
holding  company  and owns all the  outstanding  capital  stock of Home  Federal
Savings 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
16 full service banking branches.

General

The Bank's  earnings in recent years reflect the  fundamental  changes that have
occurred in the  regulatory,  economic,  and  competitive  environment  in which
savings  institutions  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.
     The  Bank's  net  interest  income  after  provision  for loan  losses  has
consistently  improved  from $15.9  million in fiscal  1993 to $21.8  million in
fiscal 1997. The  significant  increase in net interest  income is primarily the
result  of  an  increase  in  interest-earning   assets  over   interest-bearing
liabilities.

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 mortgage  loans;  3) improving its interest rate
gap by increasing the interest rate sensitivity and 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 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 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
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.

<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations
  

Similarly,  market conditions usually have dictated that financial  institutions
pay substantially higher interest rates on long-term deposits than on short-term
deposits.  Also,  the Bank  has  elected  to keep its  liquidity  in  excess  of
regulatory  requirements in order to maintain a short-term portfolio better able
to react to interest rate volatility.
     The  interest-sensitivity  "gap" is defined  as the amount by which  assets
repricing within the respective period exceed liabilities  repricing within such
period.  The annual prepayment  assumptions used in this table range from 20% to
25% for fixed rate mortgage loans and mortgage-backed  securities; 7% to 27% for
adjustable rate mortgage loans; and 0% to 60% for commercial and consumer loans,
depending on their maturity and yield. For deposit accounts, it has been assumed
that fixed  maturity  deposits are not  withdrawn  prior to maturity,  and other
deposits will suffer attrition at rates shown as follows:

                                   6 Months   6-12      1-3     3-5     Over 5
                                    or Less  Months    Years   Years    Years
                                   -------------------------------------------
Passbook, Money Market accounts ..  100.00%    0.00%    0.00%   0.00%    0.00%
Public fund money market accounts.   54.18%   24.82%   11.00%   5.24%    4.76%
NOW accounts .....................   20.61%   16.37%   33.87%   9.06%   20.09%
Non-interest bearing NOW accounts.   44.55%   19.47%   17.61%   9.15%    9.22%


The prepayment and attrition  rates are selected after  considering  the current
interest rate  environment,  industry asset and liability price tables developed
by the  Office  of  Thrift  Supervision  ("OTS")  and the  Company's  historical
experience.  All other interest-earning assets and interest-bearing  liabilities
are shown based on their  contractual  maturity or repricing date.
     The  following   table  sets  forth  the  repricing  dates of the Company's
interest-earning  assets  and  interest-bearing  liabilities  at June 30,  1997,
(dollars in thousands):

<TABLE>
<CAPTION>
                                           Maturity or Repricing as of June 30, 1997
                                 -------------------------------------------------------------
                                  6 Months    6-12       1-3       3-5       Over 5
                                  or Less    Months     Years     Years      Years     Total
                                 -------------------------------------------------------------
Interest-earning assets:
Loans:
<S>                             <C>       <C>       <C>       <C>       <C>        <C>      
  Adjustable rate .............. $ 122,962 $  24,899 $  53,406 $  39,115 $     528  $ 240,910
  Fixed rate ...................    12,940     9,274    26,414    18,358    26,015     93,001
  Commercial real estate .......    38,589    25,768    23,634    14,643     3,459    106,093
  Non-mortgage .................    97,048    17,963    30,950     8,556     5,877    160,394
Securities and other ...........    11,088     4,349     7,694    27,441     6,160     56,732
                                 --------- --------- --------- --------- ---------  ---------
    Total ......................   282,627    82,253   142,098   108,113    42,039    657,130
                                 --------- --------- --------- --------- ---------  ---------

Interest-bearing liabilities:
Fixed maturity deposits ........   156,288    69,338    95,017    22,786     7,688    351,117
Other deposits .................   129,112    12,331    18,515     6,092    10,621    176,671
FHLB advances ..................    21,900    12,174    29,568    12,198     4,105     79,945
Other borrowings ...............    12,448        --        --        --        --     12,448
                                 --------- --------- --------- --------- ---------  --------- 
    Total ......................   319,748    93,843   143,100    41,076    22,414    620,181
                                 --------- --------- --------- --------- ---------  ---------               

Interest-earning assets less
 interest-bearing liabilities .. $ (37,121)$ (11,590)$  (1,002)$  67,037 $  19,625
                                 ========= ========= ========= ========= =========
 Cumulative interest-rate
 sensitivity gap ............... $ (37,121)$ (48,711)$ (49,713)$ 17,324  $  36,949
                                 ========= ========= ========= ========= ========= 
Cumulative interest-rate gap
 as a percentage of total assets    (5.44%)   (7.13%)  (7.28%)    2.54%     5.41%
                                 ========= ========= ========= ========= =========
</TABLE>
<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


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 and monthly balances.
(Dollars in thousands.)
<TABLE>
<CAPTION>
                                                                               Years Ended June 30,
                                          -----------------------------------------------------------------------------------------
                                                        1997                         1996                          1995 
                                          -----------------------------------------------------------------------------------------
                                                                Average                        Average                      Average
                                            Average              Yield   Average                Yield   Average              Yield
                                            Balance   Interest   /Rate   Balance    Interest    /Rate   Balance   Interest   /Rate
                                          -----------------------------------------------------------------------------------------
Interest-earning assets:                                                
<S>                                      <C>        <C>         <C>     <C>        <C>          <C>   <C>        <C>        <C>  
 Mortgage loans ........................  $ 455,225  $  38,633    8.49%  $ 404,268  $  34,521    8.54% $ 390,986  $ 31,682   8.10%
 Commercial loans ......................     39,892      3,638    9.12%     32,044      2,999    9.36%    24,489     2,382   9.73%
 Consumer loans ........................     56,040      5,651   10.08%     60,224      5,779    9.60%    53,293     5,167   9.70%
 Securities ............................     50,752      3,307    6.52%     51,332      3,272    6.37%    53,502     3,443   6.44%
 Interest-bearing deposits .............      7,044        302    4.29%     11,786        585    4.96%     7,365       339   4.60%
                                          ---------  ---------   -----   ---------  ---------   -----  ---------  --------  ----- 
Total interest-earning
  assets (1) ...........................  $ 608,953  $  51,531    8.46%  $ 559,654  $  47,156    8.43% $ 529,635  $ 43,013   8.12%
                                          =========  =========   =====   =========  =========   =====  =========  ========  ===== 
Interest-bearing liabilities:
 Deposits - Transaction accounts .......  $ 169,890  $   4,420    2.60%  $ 148,065  $   3,393    2.29% $ 145,420  $  3,345   2.30%
            Certificate accounts .......    333,057     18,866    5.66%    322,386     19,103    5.93%   310,212    16,722   5.39%
 FHLB advances .........................     74,267      4,652    6.26%     60,188      3,855    6.40%    51,263     3,211   6.26%
 Other borrowings ......................     10,368        702    6.77%     11,625        900    7.74%    11,223     1,011   9.01%
                                          ---------  ---------   -----   ---------  ---------   -----  ---------  --------  -----
Total interest-bearing  liabilities ....  $ 587,582  $  28,640    4.87%  $ 542,264  $  27,251    5.03% $ 518,118  $ 24,289   4.69%
                                          =========  =========   =====   =========  =========   =====  =========  ========  =====
Net interest income ....................             $  22,891                      $  19,905                     $ 18,724
                                          =========================================================================================
Net interest rate spread ...............                          3.59%                          3.40%                       3.43%
                                          =========================================================================================
Net earning assets .....................  $  21,371                      $  17,390                     $  11,517
                                          =========================================================================================
Net interest margin (2) ................                          3.76%                          3.56%                       3.54%
                                          =========================================================================================
Average interest-earning assets to
 average interest-bearing liabilities ..     103.64%                        103.21%                       102.22%
                                           ========================================================================================
<FN>
----------
(1)  Average balances are net of non-performing loans, and interest income includes loan fee amortization of $320,000, $217,000 and
     $100,000 for the years ended June 30, 1997, 1996 and 1995, respectively.
(2)  Net  interest  income  divided by the  average  balance of  interest-earning assets.
</FN>
</TABLE>

Rate/Volume Analysis

The  following  table sets forth the changes in the Bank's  interest  income and
interest  expense (in  thousands)  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.
<TABLE>
<CAPTION>
                                                                         Years Ended June 30,
                                                   ---------------------------------------------------------------
                                                            1997 vs. 1996                    1996 vs. 1995
                                                   --------------------------------   ----------------------------
                                                            Increase/Decrease               Increase/Decrease
                                                     Due to     Due to      Total       Due to    Due to   Total
                                                      Rate      Volume      Change       Rate     Volume  Change
                                                   --------------------------------   ----------------------------
Interest income on interest-earning assets:
<S>                                               <C>        <C>         <C>         <C>       <C>       <C>    
 Mortgage loans..................................  $  (212)   $  4,324    $  4,112    $ 1,740   $ 1,099   $ 2,839
 Commercial loans................................      (75)        715         640        (86)      703       617
 Consumer loans..................................      350        (478)       (128)       (52)      664       612
Securities.......................................       71         (37)         34        (33)     (138)     (171)
 Interest-bearing deposits.......................      (72)       (211)       (283)        29       217       246
                                                   --------------------------------   ----------------------------
         Total...................................       62       4,313       4,375      1,598     2,545     4,143
                                                   --------------------------------   ----------------------------
Interest expense on interest-bearing liabilities:
 Deposits - Transaction accounts.................      491         536       1,027        (13)       61        48
            Certificate accounts.................     (955)        718        (237)     1,706       675     2,381
 FHLB advances...................................      (83)        879         796         73       571       644
 Other borrowings................................     (106)        (91)       (197)      (149)       38      (111)
                                                   --------------------------------     --------------------------
         Total...................................     (653)      2,042       1,389      1,617     1,345     2,962
                                                   --------------------------------     --------------------------
Net change in net interest income................  $   715    $  2,271    $  2,986    $   (19)  $ 1,200  $  1,181
                                                   ================================   ============================
</TABLE>


<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


RESULTS OF OPERATIONS

Comparison of Year Ended June 30, 1997 and Year Ended June 30, 1996:

General

The  Company  reported  net income of $6.8  million  for the year ended June 30,
1997,  compared to $7.4  million for the year ended June 30, 1996, a decrease of
$506,000,  or  6.9%.  The  decrease  was  due to a  legislated  special  pre-tax
assessment  of $3.0 million to help  recapitalize  the FDIC Savings  Association
Insurance Fund (SAIF).  Without the SAIF  assessment,  net income for the period
ended June 30, 1997,  would have been $8.6 million,  an increase of $1.2 million
or 16.6%.

Net  Interest  Income 

Net interest income before provision for loan losses increased $3.0 million,  or
15.0%  for the year  ended  June 30,  1997,  compared  to the prior  year.  This
increase was the result of assets growing $52.8 million, or 8.4%, in addition to
increased net interest margins, as well as a gain in  interest-sensitive  assets
to liabilities.
     Net  interest  income  after  provision  for loan losses  increased by $2.5
million,  or 12.9% over that of the prior year, to $21.8 million even though the
loan loss  provision  in fiscal 1997 was $492,000  higher than the  provision in
fiscal 1996.  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 and current economic conditions.  The balance of
the allowance for loan losses was $3.6 million at June 30, 1997.

Interest  Income

The Company's total interest income for the year ended June 30, 1997,  increased
$4.4  million,  or 9.3%,  as compared to the year ended June 30, 1996.  Interest
income  increased  primarily  due to  growth  in the loan  portfolio  as well as
increased  yields  on the  loan  portfolio.  This  growth  was  attributed  to a
relatively  strong  local  economy  and  increased  emphasis  on the part of the
Company to expand its market share of non-mortgage loan products.

Interest  Expense  

Total interest expense for the year ended June 30, 1997, increased $1.4 million,
or 5.1%,  as compared  to the year ended June 30,  1996.  Increased  deposit and
borrowing balances accounted for the increase in total interest expense.


Other Income

Total other  income  decreased  $262,000,  or 3.5%,  for the year ended June 30,
1997, as compared to the year ended June 30, 1996. This decrease was due in part
to a decrease in gains on loan sales over the prior fiscal year  attributable to
diminished  spreads  available  in the  secondary  market  in the  current  year
compared to the prior year.  Miscellaneous  other income  decreased  $313,000 or
19.2%  because of a one time  interest  payment of  $387,000  from the  Internal
Revenue Service for amended tax returns for prior periods,  which was accrued in
fiscal 1996.  These  decreases were offset by increases of $85,000,  or 9.0%, in
loan  servicing  income  resulting  from  the  increase  in the  loan  servicing
portfolio  as well as the  increase  in  insurance,  late  charges and other fee
income of $68,000,  or 4.8%, and the increase of $38,000,  or 2.3%, from service
fees on NOW accounts.
     The Company  adopted  Statement of Financial  Accounting  Standards No. 122
("SFAS 122") on July 1, 1996. SFAS 122 specifies conditions under which mortgage
servicing rights should be accounted for separately from the underlying mortgage
loans. In fiscal 1997,  $420,000 of the total $1.3 million gain on sale of loans
was attributable to mortgage servicing rights.

Other Expenses

Total other expenses increased $ 3.4 million,  or 23.3%, for the year ended June
30,  1997,  as  compared  to the year ended  June 30,  1996.  Federal  insurance
premiums   increased  $2.6  million  due  to  the   previously   discussed  SAIF
legislation. Compensation and employee benefits increased $491,000, or 6.4%, due
to normal  salary  increases  as well as  increases  in  accrued  vacation  pay,
retirement plan expenses,  and health  insurance costs. An increase in occupancy
and equipment  expense of $175,000,  or 9.1%, was due to increased  depreciation
charges, as well as increased equipment expense related primarily to the upgrade
and maintenance of data processing equipment.

<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


Comparison of Year Ended June 30, 1996 and Year Ended June 30, 1995:

General

The  Company  reported  net income of $7.4  million  for the year ended June 30,
1996,  compared to $6.5 million for the year ended June 30, 1995, an increase of
$816,000,  or  12.5%.  The  increase  was  due to a  $2.7  million  increase  in
non-interest  income and a $229,000  increase in net interest  income after loan
loss provision which was partially offset by a $948,000 increase in non-interest
expense and a $1.2 million increase in income taxes.

Net  Interest  Income

Net interest income before provision for loan losses increased $1.2 million,  or
6.3%,  for the year  ended  June 30,  1996,  compared  to the prior  year.  This
increase was the result of assets growing $41.5 million, or 7.0%, while interest
margins  remained  comparable to a year ago.  This growth,  as well as a gain in
interest-sensitive assets to liabilities, caused net interest income to increase
over the prior year.
     Net interest income after provision for loan losses  increased by $229,000,
or 1.2%, over that of the prior year, to $19.3 million even though the loan loss
provision in fiscal 1996 was $952,000  higher than the provision in fiscal 1995.
The increase in the loan loss  provision in 1996  compared to 1995 was primarily
attributed to a $721,000 loan loss recovery credited to the 1995 provision.  The
Company received  insurance  payments of $821,000 from insurance  policies which
had been  assigned  to the Company  for loans  written off in prior  periods and
accordingly  were treated as loan loss  recoveries.  After  consideration of the
insurance  proceeds,  the Company  credited  the  provision  for loan losses for
$721,000.  The  insurance  recovery  was a one time event that will not recur in
future periods.  In each period, the provision and allowance for loan losses are
based on an analysis of individual  credits,  prior and current loss experience,
overall growth in the portfolio and current economic conditions.  The balance of
the allowance for loan losses was $3.1 million at June 30, 1996.

Interest  Income 

The Company's total interest income for the year ended June 30, 1996,  increased
$4.1  million,  or 9.6%,  as compared to the year ended June 30, 1995.  Interest
income increased primarily due to growth in commercial real estate loans, second
mortgages, home equity loans and commercial loans. This growth was attributed to
a relatively  strong  local  economy and  increased  emphasis on the part of the
Company to expand its market share of non-mortgage loan products.

Interest  Expense

Total interest expense for the year ended June 30, 1996, increased $3.0 million,
or 12.2%,  as compared to the year ended June 30,  1995.  Increased  deposit and
borrowing  balances as well as higher  interest rates accounted for the increase
in total interest expense.

Other Income 

Total other income increased $2.7 million, or 57.2%, for the year ended June 30,
1996, as compared to the year ended June 30, 1995. This increase was due in part
to  increases in gains on loan sales over the prior fiscal year due to increased
loan  activity  earlier in the  current  year  compared  to the prior  year.  In
addition,  the  increases in gains on security  sales were due to  restructuring
losses  taken in fiscal year 1995 and no gains or losses  taken in fiscal  1996.
Joint venture  income,  fee income,  and  miscellaneous  other income all showed
improvement  in fiscal 1996.  Included in the  miscellaneous  other income was a
$387,000  interest payment due the Company from the Internal Revenue Service for
amended tax returns for prior periods.  The after-tax  impact of the amended tax
returns to net income was $0.06 per share. Fee income increased due to increased
activity  in the  Linsco  Private  Ledger  brokerage  area as well as  growth in
checking account income.

Other Expenses 

Total other expenses  increased  $948,000,  or 7.0%, for the year ended June 30,
1996,  as compared to the year ended June 30,  1995.  Compensation  and employee
benefits  increased $1.1 million,  or 16.4%,  due to normal salary  increases as
well as higher commission  payments due to the improved activity in the loan and
brokerage  areas.  Health  insurance  costs  increased by $190,000 due to higher
experience  costs.  Increases in  occupancy  and  equipment  expense and service
bureau expense were due to the opening of a new branch in Columbus, Indiana. The
data  communication  system of the Company and its check processing  system were
replaced  with upgraded  systems in the third  quarter of fiscal year 1995.  The
higher  costs  resulted in an increase in  occupancy  and  equipment in the year
ended June 30, 1996.

<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


FINANCIAL CONDITION

The Company's total assets increased $52.8 million to $682.8 million at June 30,
1997, from $630.0 million at June 30, 1996. Cash,  interest-bearing deposits and
securities decreased $4.3 million.  Loans held for sale and net loans receivable
increased   $55.5  million.   Mortgage  loans   increased  $53.6  million  while
non-mortgage loans increased $4.3 million.
     The  Company's  total  liabilities  increased  $46.4 million  with deposits
increasing $38.2  million,  Federal  Home Loan Bank  advances  increasing  $9.2 
million and senior debt decreasing $1.3 million.
     Shareholders'  equity increased $6.4 million,  primarily due to an increase
in retained earnings of $5.5 million.  Retained earnings  increased $6.8 million
from net income and  decreased  $1.4  million as a result of  dividends  paid to
shareholders. Common stock had a net increase of $730,000; $670,000 from options
exercised, $65,000 from the related tax benefit of non-qualified dispositions of
such  options  and a $5,000  decrease  from the  purchase of  fractional  shares
resulting  from a  three-for-two  stock split which  occurred in December  1996.
Finally,  a decrease in unrealized losses on securities  classified as available
for sale pursuant to SFAS 115 increased shareholders' equity by $202,000.

INTEREST RATE SENSITIVITY

The OTS requires each thrift  institution  to calculate the estimated  change in
the  institution's  net  portfolio  value  ("NPV")  assuming  an  instantaneous,
parallel  shift in the Treasury yield curve of 100 to 400 basis points either up
or down in 100 basis point  increments.  NPV  represents  the sum of future cash
flows of assets discounted to present value less the sum of future cash flows of
liabilities discounted to present value. The OTS permits institutions to utilize
the  OTS'  model,  which is  based  upon  data  submitted  in the  institution's
quarterly thrift financial reports.
     In estimating the NPV of mortgage loans and mortgage-backed securities, the
OTS model utilizes various price  indications and prepayment  rates. At June 30,
1997,  these  price  indications  varied  from  69.02 to 119.82  for fixed  rate
mortgages  and  mortgage-backed  securities  and varied from 88.73 to 108.46 for
adjustable rate mortgages and mortgage-backed  securities.  Prepayment rates for
June 30, 1997, ranged from a CPR or 4% to a constant  prepayment rate ("CPR") of
37%.
     The value of deposit  accounts appears on both the asset and liability side
of the NPV  calculation in the OTS model. In estimating the value of certificate
of deposit accounts,  ("CDs"), retail price estimates represent the value of the
liability implied by the CD and reflect the difference between the CD coupon and
secondary-market  CD rates. As of June 30, 1997, the retail CD price assumptions
varied from 73.44 to 121.08. The retail CD intangible prices represent the value
of the  "customer  relationship"  due to the  rollover of CD deposits and are an
intangible  asset for the Bank.  As of June 30, 1997,  the retail CD  intangible
price assumptions varied from .04 to .93.
     Other deposit accounts such as transaction  accounts,  money market deposit
accounts, passbook accounts and non-interest-bearing accounts are valued at 100%
of their respective  outstanding balances in all nine interest rate scenarios on
the liability side of the OTS model. On the asset side of the model,  intangible
prices  are used to  reflect  the value of the  "customer  relationship"  of the
various types of deposit  accounts.  As of June 30, 1997, the intangible  prices
for transaction accounts,  money market deposit accounts,  passbook accounts and
non-interest-bearing  accounts varied from -2.06 to 20.94, -. 57 to 11.69, -. 84
to 17.55 and 4.31 to 18.04 respectively.
     The following table sets forth the Bank's interest rate  sensitivity of NPV
as of June 30, 1997, (dollars in thousands).


                    Net Portfolio Value           NPV as % of PV of Assets
                    -------------------           ------------------------
   Change                          
   In Rates   $ Amount   $ Change   % Change         NPV Ratio   Change
   --------   --------   --------   --------         ---------   ------

   +400 bp     64,517    (18,900)       (23)           9.73 %   (214) bp
   +300 bp     70,516    (12,901)       (15)          10.46 %   (141) bp
   +200 bp     75,939    ( 7,479)       ( 9)          11.10 %   ( 78) bp
   +100 bp     80,440    ( 2,978)        (4)          11.59 %   ( 29) bp
      0 bp     83,417          -          -           11.87 %      -
   -100 bp     84,467      1,049          1           11.91 %      4  bp
   -200 bp     83,866        449          1           11.74 %   ( 13) bp
   -300 bp     83,698        281          -           11.63 %   ( 25) bp
   -400 bp     85,153      1,736          2           11.71 %   ( 17) bp   
     

ASSET QUALITY

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.


<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


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 are  carried at the lower of cost or
estimated fair value less estimated cost to sell, (dollars in thousands.)

                                                  At June 30,
                                ---------------------------------------------
                                  1997      1996     1995     1994     1993
                                ---------------------------------------------
Non-accruing loans:
  Mortgage ..................   $ 2,182  $ 2,153  $ 1,904  $ 1,837  $ 1,491
  Commercial ................       258      307      197      205      326
  Consumer ..................       490      411      330      188      170
                                -------  -------  -------  -------  -------
       Total ................     2,930    2,871    2,431    2,230    1,987
                                -------  -------  -------  -------  -------
  Mortgage ..................         2       88       69       77    1,292
  Commercial ................        36       --       --       --       --
  Consumer ..................         2        1       12       38       --
                                -------  -------  -------  -------  -------
       Total ................        40       89       81      115    1,292
                                -------  -------  -------  -------  -------
Troubled debt restructured..          1        1      102      283      597
                                -------  -------  -------  -------  -------
Total non-performing loans        2,971    2,961    2,614    2,628    3,876
Real estate owned ...........       139       48       41       98      491
                                -------  -------  -------  -------  -------
Total non-performing assets..   $ 3,110  $ 3,009  $ 2,655  $ 2,726  $ 4,367
                                =======  =======  =======  =======  =======
Non-performing assets to
  total assets ..............      0.46%    0.48%    0.45%    0.50%    0.82%
                                =======  =======  =======  =======  =======
Non-performing loans to
  total loans ...............      0.51%    0.56%    0.55%    0.59%    0.96%
                                =======  =======  =======  =======  ======= 
Allowance for loan losses 
  to non-performing loans ...    122.82%  103.38%  107.35%  98.17%    58.23%
                                =======  =======  =======  =======  =======

In addition,  at June 30, 1997, there were $279,000 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.


Allowance  for Loan Losses

The  following  table sets forth an analysis of the  allowance for possible loan
losses. See Note 1 to the Consolidated  Financial Statements for a discussion of
the Company's policy for establishing the allowance for loan losses. (Dollars in
thousands.)

                                              Years Ended June 30,
                                ------------------------------------------------
                                  1997      1996      1995      1994      1993
                                ------------------------------------------------
Balance at beginning of year ...$ 3,061   $ 2,806   $ 2,580   $ 2,257   $ 2,123
Provision for loan losses ......  1,125       638      (314)      491       414
Loan charge-offs:
  Mortgage .....................     (9)      (10)       (6)      (47)      (82)
  Commercial ...................     --        (9)       --        --       (51)
  Consumer .....................   (606)     (434)     (369)     (262)     (302)
                                -------   -------   -------   -------   -------
    Total charge-offs ..........   (615)     (453)     (375)     (309)     (435)
                                -------   -------   -------   -------   -------
Recoveries:
  Mortgage .....................      9        16         2        15        49
  Commercial ...................     --        --       822        34        --
  Consumer .....................     69        54        91        92       106
                                -------   -------   -------   -------   -------
     Total recoveries ..........     78        70       915       141       155
                                -------   -------   -------   -------   -------
Net loan charge-offs ...........   (537)     (383)      540      (168)     (280)
                                -------   -------   -------   -------   -------

Balance ........................$ 3,649   $ 3,061   $ 2,806   $ 2,580   $ 2,257
                                =======   =======   =======   =======   =======

Net charge-offs to average loans   0.10%     0.08%    (0.12%)    0.04%     0.07%
                                =======   =======   =======   =======   =======
Allowance balance to total loans   0.63%     0.58%     0.58%     0.57%     0.55%
                                =======   =======   =======   =======   =======
<PAGE>
                     Management's Discussion and Analysis of
                 Financial Condition and Results of Operations


Liquidity and Capital Resources

The standard  measure of liquidity for the thrift  industry is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings and
borrowings due within one year.  The minimum  required level is currently set by
OTS regulation at 5%. At June 30, 1997, the Bank's liquidity ratio was 9.98%.
     Historically,  the Bank has  maintained its liquid assets which qualify for
purposes of the OTS liquidity regulations above the minimum requirements imposed
by such  regulations  and 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 June 30,  1997,  the Bank had  $79.9  million  in
borrowings  from  the  FHLB of  Indianapolis.  As of that  date,  the  Bank  had
commitments  to fund loan  originations  and  purchases of  approximately  $40.0
million  and  commitments  to sell  loans of $15.3  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 year ended June
30, 1997, there was a net decrease of $5.9 million in cash and cash equivalents.
The major uses of cash during the year were loan  originations net of repayments
of $136.2  million;  purchases of investment and  mortgage-backed  securities of
$22.5  million;  repayment of FHLB advances of $41.6  million;  and repayment of
senior debt of $1.3 million.  Partially offsetting these uses of cash, the major
sources of cash  provided  during the year  included  $79.6 million from selling
fixed rate mortgage loans to FNMA and FHLMC;  maturities and sales of investment
securities of $21.2 million; and proceeds from FHLB advances of $50.8 million.

Impact of Inflation

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

Recent Accounting Pronouncements

The Financial  Accounting Standards Board has issued Statement Nos. 128, 130 and
131 that the Company will be required to adopt in future periods.  See Note 1 to
the  consolidated   financial   statements  for  further   discussion  of  these
pronouncements.

<PAGE>




                          CONSOLIDATED BALANCE SHEETS
                        (in thousands except share data)




                                                                 June 30,
                                                         ----------------------
                                                            1997         1996
                                                         ---------    ---------
ASSETS:
Cash .................................................   $  16,274    $  19,327
Interest-bearing deposits ............................       3,498        6,301
                                                         ---------    ---------
  Total cash and cash equivalents ....................      19,772       25,628
                                                         ---------    ---------
Securities available for sale at fair value
 (amortized cost $40,208 and $45,075) (Note 2) .......      40,119       44,651
Securities held to maturity (fair value $13,012
 and $6,753 ) (Note 2) ...............................      13,115        6,990
Loans held for sale (fair value $4,688 and
 $4,666) (Note 4) ....................................       4,629        4,623
Loans receivable, net of allowance for loan
losses of $3,649 and $3,061 (Notes 3, 9) .............     575,624      520,097
Investments in joint ventures (Note 5) ...............       3,084        2,855
Federal Home Loan Bank stock (Note 9) ................       4,260        3,798
Accrued interest receivable, net (Note 6) ............       4,272        3,893
Premises and equipment, net (Note 7) .................       8,171        8,090
Real estate owned ....................................         139           48
Prepaid expenses and other assets ....................       2,284        2,440
Cash surrender value of  life insurance ..............       5,529        5,004
Goodwill, net ........................................       1,798        1,898
                                                         ---------    ---------
   TOTAL ASSETS ......................................   $ 682,796    $ 630,015
                                                         =========    =========
                                                      
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits (Note 8) ....................................   $ 527,788    $ 489,573
Advances from Federal Home Loan Bank (Note 9) ........      79,945       70,700
Senior debt (Note 10) ................................       7,800        9,100
Other borrowings (Note 10) ...........................       4,648        4,337
Advance payments by borrowers for taxes
 and insurance .......................................         296          621
Accrued expenses and other liabilities ...............       4,402        4,167
                                                         ---------    ---------
   Total liabilities .................................     624,879      578,498
                                                         ---------    ---------
Shareholders' equity (Notes 10, 11, 12, 14):
 No par common stock; Authorized: 5,000,000 shares
  Issued and outstanding: ............................       7,549        6,819
     3,396,329 shares at June 30, 1997
     3,339,423 shares at June 30, 1996
 Retained earnings, restricted .......................      50,421       44,953
 Unrealized loss on securities available for sale,
     net of deferred taxes of $ 36 and $ 170 .........         (53)        (255)
   Total shareholders' equity ........................      57,917       51,517
                                                         ---------    ---------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......   $ 682,796    $ 630,015
                                                         =========    =========
See notes to consolidated financial statements

<PAGE>



                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands except per share data)


<TABLE>
<CAPTION>

                                                               Years Ended June 30
                                                        --------------------------------
Interest income:                                           1997        1996        1995
                                                        --------------------------------
<S>                                                    <C>         <C>         <C>     
 Loans receivable (Note 3) ..........................   $ 47,923    $ 43,299    $ 39,231
 Securities available for sale and held to maturity .      3,306       3,272       3,443
 Other interest income ..............................        302         585         339
                                                        --------    --------    --------                                   
 Total interest income ..............................     51,531      47,156      43,013 
                                                        --------    --------    --------
Interest expense:
 Deposits (Note 8) ..................................     23,286      22,496      20,067
 Advances from Federal Home Loan Bank (Note 9) ......      4,651       3,855       3,211
 Borrowings - long term (Note 10) ...................        703         900       1,011
                                                        --------    --------    --------                                   
 Total interest expense .............................     28,640      27,251      24,289
                                                        --------    --------    --------

Net interest income .................................     22,891      19,905      18,724
Provision (credit) for loan losses ..................      1,129         638        (314)
                                                        --------    --------    --------                                   
Net interest income after provision for loan losses .     21,762      19,267      19,038
                                                        --------    --------    --------                                  
Other income:
 Gain on sale of loans ..............................      1,267       1,321         667
 Gain (loss) on sale of securities available for sale         19           1        (437)
 Income from joint ventures (Note 5) ................        432         530         252
 Insurance, annuity income, other fees ..............      1,474       1,406         778
 Service fees on NOW accounts .......................      1,673       1,635       1,494
 Net gain (loss) on real estate owned ...............        (24)        (18)        161
 Loan servicing income ..............................      1,030         945         805
 Miscellaneous ......................................      1,315       1,628       1,018
                                                        --------    --------    --------                                    
 Total other income .................................      7,186       7,448       4,738
                                                        --------    --------    --------
Other expenses:
 Compensation and employee benefits (Note 13) .......      8,153       7,662       6,581
 Occupancy and equipment ............................      2,104       1,929       1,659
 Service bureau expense .............................        779         777         694
 Federal insurance premium (Note 12) ................      3,652       1,065       1,029
 Marketing ..........................................        503         498         549
 Goodwill amortization ..............................        100         101         101
 Miscellaneous ......................................      2,498       2,399       2,870
                                                        --------    --------    --------                                   
 Total other expenses ...............................     17,789      14,431      13,483
                                                        --------    --------    --------                                   
                                                                    
Income before income taxes ..........................     11,159      12,284      10,293
Income tax provision (Note 11) ......................      4,313       4,932       3,757
                                                        --------    --------    --------                                  

Net Income ..........................................   $  6,846    $  7,352    $  6,536
                                                        ========    ========    ========                               
Earnings per common and common share
       equivalents ..................................   $   1.96    $   2.15    $   1.93
                                                        ========    ========    ========         
</TABLE>

See notes to consolidated financial statements

<PAGE>



                                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                    (in thousands except shares outstanding)




<TABLE>
<CAPTION>
                                                                                Unrealized
                                                                                 Loss net       Total
                                        Shares         Common     Retained     of Deferred  Shareholders'
                                      Outstanding       Stock     Earnings        Taxes        Equity
                                      ------------------------------------------------------------------
<S>                                  <C>          <C>           <C>           <C>           <C>       
Balance at July 1, 1994 ..........    2,166,474    $    6,312    $   32,890    $     (613)   $   38,589

Stock options exercised ..........       49,933           360                                       360
Tax benefit related to exercise
    of non-qualified stock options                         76                                        76
Cash dividends ($.25 per share) ..                                     (826)                       (826)
Net income .......................                                    6,536                       6,536
Change in unrealized loss on
    securities available for sale                                                     544           544
                                      -----------------------------------------------------------------                        
Balance at June 30, 1995 .........    2,216,407         6,748        38,600           (69)       45,279

Stock options exercised ..........        9,875            63                                        63
Tax benefit related to exercise
    of non-qualified stock options                          8                                         8
Cash dividends ($.30 per share) ..                                     (999)                       (999)
Net income .......................                                    7,352                       7,352
Change in unrealized loss on
    securities available for sale                                                    (186)         (186)
                                      -----------------------------------------------------------------           
Balance at June 30, 1996 .........    2,226,282         6,819        44,953          (255)       51,517

Stock split 3 for 2;
    fractional shares ............    1,113,000            (5)                                       (5)
Stock options exercised ..........       57,047           670                                       670
Tax benefit related to exercise
    of non-qualified stock options                         65                                        65
Cash dividends ($.41 per share) ..                                   (1,378)                     (1,378)
Net income .......................                                    6,846                       6,846
Change in unrealized loss on
    securities available for sale                                                     202           202
                                      ----------------------------------------------------------------- 
Balance at June 30, 1997 .........    3,396,329    $    7,549    $   50,421    $      (53)   $   57,917
                                      ================================================================= 
</TABLE>

See notes to consolidated financial statements

<PAGE>



                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (in thousands)
<TABLE>
<CAPTION>

                                                                           Years Ended June 30,
                                                                   -----------------------------------     
                                                                       1997         1996        1995
                                                                   -----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>          <C>          <C>      
Net income .....................................................   $   6,846    $   7,352    $   6,536
Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
      Accretion of discounts, amortization and depreciation ....       1,191        1,234        1,044
      Provision (credit) for loan losses .......................       1,129          638         (314)
      Net gain from sale of loans ..............................      (1,267)      (1,321)        (667)
      Net (gain) loss from sale of securities available for sale         (19)          (1)         437
      Net gain from joint ventures; real estate owned ..........        (408)        (504)        (396)
      Net loan fees deferred (recognized) ......................        (403)        (106)        (149)
      Proceeds from sale of loans held for sale ................      79,552      107,500       57,155
      Origination of loans held for sale .......................     (78,291)     (98,014)     (67,219)
      Decrease  in accrued interest and other assets ...........       1,468        6,339        1,058
      Increase (decrease) in other liabilities .................         (90)       1,510          206
                                                                   ---------    ---------    ---------
Net cash provided by (used in) operating activities ............       9,708       24,627       (2,309)
                                                                   ---------    ---------    ---------     
CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal disbursed on loans ...............................     (57,545)     (54,248)     (26,948)
Proceeds from:
      Maturities/Repayments of:
          Securities held to maturity ..........................         346        3,580        2,761
          Securities available for sale ........................      12,337        4,513        3,193
      Sales of:
          Securities available for sale ........................       8,572        5,507        9,932
          Real estate owned and other asset sales ..............         504          436          962
Purchases of:
      Loans ....................................................        (947)      (3,365)          --
      Securities available for sale ............................     (16,085)     (13,955)      (7,970)
      Securities held to maturity ..............................      (6,453)          --        (2,985)
      Federal Home Loan Bank stock .............................        (462)        (379)        (301)
Increase in cash surrender value of life insurance .............        (525)        (238)        (170)
Acquisition of property and equipment, net .....................      (1,129)        (654)      (2,329)
                                                                   ---------    ---------    ---------     
Net cash used in investing activities ..........................     (61,387)     (58,803)     (23,855)
                                                                   ---------    ---------    ---------     

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits, net ......................................      38,215       22,487       21,099
Proceeds from advances from Federal Home Loan Bank .............      50,800       28,200       63,500
Repayment of advances from Federal Home Loan Bank ..............     (41,555)     (17,500)     (47,500)
Repayment of senior debt .......................................      (1,300)      (1,300)      (1,300)
Net proceeds from overnight borrowings .........................         311        1,837          782
Common stock options exercised, net of fractional shares paid ..         730           71          436
Payment of dividends on common stock ...........................      (1,378)        (999)        (826)
                                                                   ---------    ---------    ---------     
Net cash provided by financing activities ......................      45,823       32,796       36,191
                                                                   ---------    ---------    ---------     

Net increase (decrease) in cash and cash equivalents ...........      (5,856)      (1,380)      10,027
Cash and cash equivalents, beginning of year ...................      25,628       27,008       16,981
                                                                   ---------    ---------    ---------     
Cash and cash equivalents, end of year .........................   $  19,772    $  25,628    $  27,008
                                                                   =========    =========    =========

Supplemental information:
Cash paid for interest .........................................   $  28,474    $  27,050    $  24,197
Cash paid for income taxes .....................................   $   4,224    $   4,450    $   3,394
Assets acquired through foreclosure ............................   $     192    $     133    $      44
                                                                   =========    =========    =========
</TABLE>
     
Noncash activities occurred  consisting of the  reclassification of $6.9 million
from  the  held to  maturity  securities  portfolio  to the  available  for sale
securities portfolio in fiscal year 1996.

See notes to consolidated financial statements


<PAGE>

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

The  accounting  policies of Home Federal  Bancorp (the  "Company"),  conform to
generally  accepted  accounting  principles and prevailing  practices within the
banking  and  thrift  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  subsidiary,  Home  Federal  Savings Bank (the "Bank") and its
wholly-owned   subsidiaries.   All   significant   intercompany   balances   and
transactions have been eliminated.

Description  of  Business 

The Company is a unitary  savings and loan holding  company.  The Bank  provides
financial  services to south-central  Indiana through its main office in Seymour
and 15 other full service branches.

Use of Estimates 

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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 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.
     In November 1995, the Financial  Accounting  Standards  Board allowed a one
time  reclassification  of  all  securities.   In  December  1995,  the  Company
reclassified  $6.9 million  held to maturity  securities  to available  for sale
securities.

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  Banking  Activities 

The Company adopted Statement of Financial  Accounting  Standards No. 122 ("SFAS
122"),  "Accounting for Mortgage  Servicing Rights" ("MSRs"),  effective July 1,
1996. SFAS 122 requires that the Company recognize as separate assets, rights to
service  mortgage  loans for others that have been acquired  through  either the
purchase or  origination  of a loan. An entity that sells or  securitizes  those
loans with  servicing  rights  retained  should  allocate  the total cost of the
mortgage  loans to the MSRs and the loans based on their  relative  fair values.
These costs are initially  capitalized and subsequently  amortized in proportion
to, and over the period of , estimated net loan servicing income.
     Additionally,  SFAS 122 requires that MSRs be reported on the  Consolidated
Balance  Sheet at the lower of cost or fair  value.  The  Company is required to
assess  its  capitalized  MSRs for  impairment  based upon the fair value of the
rights.  MSRs are  stratified  based  upon one or more of the  predominant  risk
characteristics  of the  underlying  loans.  Impairment is recognized  through a
valuation  allowance for each impaired stratum.  The provisions of SFAS 122 were
applied  prospectively  beginning in fiscal 1997. The ongoing impact of SFAS 122
is dependent  upon,  among other things,  the volume of loan  originations,  the
general  levels  of  market  interest  rates  and  the  rate of  estimated  loan
prepayments.  Accordingly,  management is unable to predict with any  reasonable
certainty  what effect  SFAS 122 will have on the  Company's  future  results of
operations or its financial condition.  SFAS 122 prohibits  restatement of prior
years' financial statements.

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  judgement,   the  interest  will  not  be
collectible in the normal course of business.
     The Company adopted  Statement of Financial  Accounting  Standards Nos. 114
and 118 ("SFAS 114 and 118"),  "Accounting by Creditors for Impairment of a Loan
and Income  Recognition and  Disclosures,"  as amended,  effective July 1, 1995.
These  statements  require that impaired  loans be measured based on the present
value of expected future cash flows discounted at the loan's effective  interest
rate or the fair value of the underlying  collateral,  and specifies alternative
methods for recognizing  interest income on loans that are impaired or for which
there are credit  concerns.  For purposes of applying  this  standard,  impaired
loans  have  been  identified  as  all  nonaccrual  loans  that  have  not  been
collectively evaluated for impairment.  The adoption of SFAS 114 and 118 did not
have any effect on the total reserve for credit losses or related provision.

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


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 time of sale.

Unearned  Discounts

Unearned  discounts  on mobile  home loans are  amortized  over the terms of the
loans.  Amortization  is  computed by methods  which  approximate  the  interest
method.

Uncollected  Interest

An allowance for the loss of uncollected interest is provided on loans which are
more than 90 days past due. The 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.

Provision for Losses 

A provision  for  estimated  losses on loans and real estate owned is charged to
operations based upon management's  evaluation of the potential losses.  Such an
evaluation,  which includes a review of all loans for which full  collectibility
may not be reasonably assured, considers, among other matters, the estimated net
realizable  value  of  the  underlying  collateral,   as  applicable,   economic
conditions,   historical  loan  loss  experience  and  other  factors  that  are
particularly susceptible to change that could result in a material adjustment in
the near term. While management endeavors to use the best information  available
in making its  evaluations,  future  allowance  adjustments  may be necessary if
economic conditions change substantially from the assumptions used in making the
evaluations.

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 cost or fair market  value
less  estimated cost to sell.  When property is acquired,  it is recorded at the
lower of cost or  estimated  fair  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
property 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-two years.

Derivatives 

The Company has only limited involvement with derivative  financial  instruments
and does not use them for trading purposes. The Company entered into an interest
rate swap  agreement as a means of managing the  interest  rate  exposure of its
senior  debt  obligation.  The  interest  rate swap is  accounted  for under the
accrual method.  Under this method,  the  differential to be paid or received on
the interest rate swap agreement is recognized over the life of the agreement in
interest  expense.  Changes in fair value of interest  rate swaps  accounted for
under  the  accrual  method  are not  reflected  in the  accompanying  financial
statements.  Realized  gains and losses on  terminated  interest  rate swaps are
deferred as an adjustment to the carrying  amount of the designated  instruments
and  amortized  over  the  remaining  original  life of the  agreements.  If the
designated instruments are disposed of, the fair value of the interest rate swap
or unamortized deferred gains or losses are included in the determination of the
gain  or loss on the  disposition  of such  instruments.  To  qualify  for  such
accounting,  the interest rate swap is designated to the senior debt  obligation
and alters its interest rate characteristics.

Goodwill  

The excess of cost over the fair value of assets acquired in connection with the
purchase of another  savings  institution is being  amortized using the straight
line method over 25 years.  Amortization expense for fiscal years 1997, 1996 and
1995,  was $100,000,  $101,000 and $101,000,  respectively.  Management  reviews
intangible  assets for possible  impairment if there is a significant event that
detrimentally affects operations.  Impairment is measured using estimates of the
future earnings potential of the entity or assets acquired.

Income Taxes 

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

Earnings  per Common Share 

Earnings per share of common stock are based on the weighted  average  number of
common  shares and common share  equivalents  outstanding  during the year.  The
adjusted  weighted average number of common shares and common share  equivalents
outstanding  was 3,494,829 for 1997,  3,419,909 for 1996 and 3,378,995 for 1995.
All  per  share   information   has  been  restated  to  reflect  the  Company's
three-for-two stock split in December 1996.

Changes in Presentation 

Certain  amounts  and items  appearing  in the  fiscal  1996 and 1995  financial
statements have been reclassified to conform with the fiscal 1997 presentation.

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


New Accounting Pronouncements

Statement of Financial Accounting Standards No. 128 ("SFAS 128"),  "Earnings per
Share," was issued in February 1997 and is effective for both interim and annual
fiscal periods ending after December 15, 1997.  Early adoption is not permitted.
SFAS 128  establishes  new standards for computing and  presenting  earnings per
share ("EPS").  Specifically,  SFAS 128 replaces the presentation of primary EPS
with a  presentation  of basic  EPS,  requires  dual  presentation  of basic and
diluted EPS on the face of the income  statement  for all entities  with complex
capital   structures  and  requires  a  reconciliation   of  the  numerator  and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Management has determined that the adoption of SFAS 128
will not have a material effect on the consolidated financial statements.
     Statement  of  Financial   Accounting   Standards  No.  130  ("SFAS  130"),
"Comprehensive Income", was issued in June 1997 and becomes effective for fiscal
periods beginning after December 15, 1997. SFAS 130 requires reclassification of
earlier  financial  statements for comparative  purposes.  SFAS No. 130 requires
that  changes in the  amounts  of  certain  items,  including  foreign  currency
translation  adjustments and gains and losses on certain  securities be shown in
the financial  statements.  SFAS No. 130 does not require a specific  format for
the  financial  statement in which  comprehensive  income is reported,  but does
require that an amount  representing total  comprehensive  income be reported in
that statement. Management has not yet quantified the effect of the new standard
on the consolidated financial statements.
     Statement  of  Financial   Accounting   Standards  No.  131  ("SFAS  131"),
"Disclosures  about  Segments of an  Enterprise  and Related  Information,"  was
issued in June 1997 and is effective for fiscal periods beginning after December
15, 1997. This statement will change the way public companies report information
about  segments  of their  business in their  annual  financial  statements  and
requires them to report selected segment  information in their quarterly reports
issued to  shareholders.  It also  requires  entity-wide  disclosures  about the
products and  services an entity  provides,  the material  countries in which it
holds assets and reports revenues,  and its major customers.  Management has not
yet  quantified  the effect of this new standard on the  consolidated  financial
statements.


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

<TABLE>
<CAPTION>
                                                                  June 30,                              
                            -----------------------------------------------------------------------------------
                                             1997                                        1996                  
                            ---------------------------------------     ---------------------------------------
                             Amortized   Gross Unrealized    Fair        Amortized   Gross Unrealized    Fair  
                                         ----------------                            ----------------          
                               Cost       Gains    Losses    Value         Cost       Gains    Losses    Value 
                            ---------------------------------------     ---------------------------------------
Held to maturity:                                                       
<S>                        <C>         <C>      <C>       <C>          <C>        <C>       <C>      <C>      
U.S. obligations .......    $  3,883    $   17   $    (1)  $  3,899     $     --   $    --   $    --  $      --
Municipal bonds ........         820        --        --        820           --        --        --         --
Collateralized mortgage                                                                                
        obligations ....       6,342        --      (123)     6,219        6,588        --      (225)     6,363
Pass-thru certificates .       2,070         5        (1)     2,074          402        --       (12)       390
                            --------    ------   -------   --------     --------   -------   -------  ---------                  
Total held to maturity .    $ 13,115    $   22   $  (125)  $ 13,012     $  6,990   $    --   $  (237) $   6,753
                            ========    ======   =======   ========     ========   =======   =======  ========= 
Available for sale:                                                                                    
U.S. obligations .......    $ 17,970    $   73   $   (52)  $ 17,991     $ 15,910   $    29   $  (117) $  15,822
Other agencies .........         689        --        (2)       687           --        --        --         --
Collateralized mortgage                                                                                
        obligations ....      10,487         5      (138)    10,354       11,542         8      (250)    11,300
Pass-thru certificates .       6,062        28       (29)     6,061        9,804        24      (143)     9,685
Corporate debt .........       1,000         7        --      1,007        4,043        28        (4)     4,067
Mutual funds ...........       3,925        19        --      3,944        3,701         2        (1)     3,702
Equity securities ......          75        --        --         75           75        --        --         75
                            --------    ------   -------   --------     --------   -------   -------  --------- 
Total available for sale    $ 40,208    $  132   $  (221)  $ 40,119     $ 45,075   $    91   $  (515) $  44,651
                            ========    ======   =======   ========     ========   =======   =======  ========= 
</TABLE>


Certain securities,  with both amortized cost and fair value of $3.0 million and
$3.1 million at June 30, 1997 and 1996, respectively, were pledged as collateral
for the Bank's  treasury,  tax and loan  account at the Federal  Reserve and for
certain IRA and KEOGH accounts.
     The one time reclassification under SFAS 115 occurred in December 1995, and
reclassified  securities  with  amortized  cost of  $6.9  million  from  held to
maturity to available for sale. The unrealized  gain at the time of the transfer
was $20,000.

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


The amortized cost and fair value of securities at June 30, 1997, by contractual
maturity are summarized as follows (in thousands):

<TABLE>
<CAPTION>

                                              Held to Maturity                   Available for Sale
                                        -----------------------------      ------------------------------
                                        Amortized    Fair      Market      Amortized    Fair       Market
                                          Cost      Value      Yield          Cost      Value      Yield
                                        -----------------------------      ------------------------------
U.S. obligations:                                                        
<S>                                   <C>        <C>           <C>        <C>        <C>           <C>  
   Due in one year or less .........   $     --   $     --        --       $    998   $    996      5.60%
   Due after 1 year though 5 years .      3,883      3,899      6.80%        16,972     16,995      6.67%
Other agencies:                                                                       
  Due after 10 years ...............         --         --        --            689        687      6.33%
Municipal bonds:                                                                      
   Due after 1 year though 5 years .        565        565      6.80%            --         --        --
   Due after 5 years though 10 years        255        255      7.12%            --         --        --
Collateralized mortgage obligations       6,342      6,219      6.04%        10,487     10,354      6.14%
Pass-thru certificates .............      2,070      2,074      6.83%         6,062      6,061      6.24%
Corporate debt:                                                                       
   Due in one year or less .........         --         --        --          1,000      1,007      7.68%
Mutual funds .......................         --         --        --          3,925      3,944      5.90%
Equity securities ..................         --         --        --             75         75        --
                                       --------   --------      -----      --------   --------      ----- 
Total ..............................   $ 13,115   $ 13,012      6.45%      $ 40,208   $ 40,119      6.37%
                                       ========   ========      =====      ========   ========      =====
</TABLE>
                                                

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


                             Years Ended June 30,
                         ----------------------------
                            1997     1996      1995
                         ----------------------------
Proceeds from sales ...  $ 8,572   $ 5,507   $ 9,932
Gross gains on sales...  $   38    $     1   $    61
Gross losses on sales..  $   19    $    --   $   498
    
                                         

3.  LOANS RECEIVABLE
Loans receivable are summarized as follows (in thousands):

                                                   June 30,
                                           ----------------------
                                              1997         1996
First mortgage loans:                      ----------------------
     Residential single family .........   $ 300,531    $ 278,118
     Commercial and multi-family .......      79,696       73,853
     Property under construction .......      54,504       43,365
     Unimproved land ...................       4,192        3,252
Home equity ............................      34,391       28,073
Second mortgage ........................      29,267       22,299
Commercial .............................      43,112       37,651
Mobile home ............................      16,613       18,833
Automobile .............................      23,086       20,883
Consumer ...............................      11,017       11,952
Savings account ........................       3,989        4,199
                                           ---------    ---------
     Gross loans receivable ............     600,398      542,478
Allowance for loan losses ..............      (3,649)      (3,061)
Deferred loan fees .....................        (560)        (963)
Undisbursed loan proceeds ..............     (20,519)     (18,249)
Unearned interest and unearned discounts          (5)         (19) 
Purchase discount ......................         (41)         (89)
                                           ---------    ---------
Loans receivable, net ..................   $ 575,624    $ 520,097
                                           =========    =========
<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


The Bank originates  both  adjustable and fixed rate loans.  The adjustable rate
loans have interest rate adjustment limitations and are generally indexed to the
one 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
$2.9 million at June 30, 1997 and 1996.  The Bank would have  recorded  interest
income of  $274,000  in 1997 and 1996 if loans on  non-accrual  status  had been
current in accordance  with their original terms.  Actual interest  received was
$266,000 and $155,000 for fiscal years ending 1997 and 1996,  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  balances at June 30, 1997 and 1996 on these  restructured  loans were
immaterial each year.
     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 $79.7 million and $73.9 million at June 30, 1997 and 1996,
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,  $20.2
million  and $20.4  million  were  collateralized  by  multi-family  residential
property at June 30, 1997 and 1996, respectively.
     As a federally  chartered  savings bank,  aggregate  commercial real estate
loans may not exceed 400% of capital as determined  under the capital  standards
provisions of FIRREA.  This  limitation  was  approximately  $218.6  million and
$207.4 million at June 30, 1997 and 1996, respectively.  Also, under FIRREA, the
loans-to-one-borrower  limitation  is generally  15% of  unimpaired  capital and
surplus which, for the Bank, was approximately  $8.2 million and $7.8 million at
June 30, 1997 and 1996, respectively. As of June 30, 1997 and 1996, the Bank was
in compliance with these limitations.
     Aggregate loans to officers and directors  included above were $5.7 million
and $5.4 million as of June 30, 1997 and 1996, 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  year  ended  June 30,  1997,  loans  of $1.2  million  were
disbursed to officers and  directors  and  repayments  of $881,000 were received
from officers and directors.
     An analysis of the allowance for loan losses is as follows (in thousands):

                                          Years Ended June 30,
                                     -----------------------------   
                                       1997       1996       1995
                                     -----------------------------
Beginning balance ................   $ 3,061    $ 2,806    $ 2,580
Provision (credit) for loan losses     1,130        638       (314)
Charge-offs ......................      (620)      (453)      (375)
Recoveries .......................        78         70        915
                                     -------    -------    -------
Ending balance ...................   $ 3,649    $ 3,061    $ 2,806
                                     =======    =======    ========


Impaired loan information under SFAS 114 and 118 is as follows (in thousands):

                                               June 30,
                                          ------------------
                                           1997        1996
                                          ------------------
Impaired loans with a valuation reserve    $265        $100
Impaired loans with no valuation reserve     29         207
                                           ----        ----
Total impaired loans ...................   $294        $307
                                           ====        ====
                                                    
Valuation reserve on impaired loans ....   $265        $100
Average impaired loans .................   $363        $286
                                               
<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


4.  MORTGAGE BANKING ACTIVITIES

At June 30,  1997,  1996 and  1995,  the Bank was  servicing  loans  for  others
amounting to $298.0 million,  $266.8 million and $224.7  million,  respectively.
Net gain on sales of loans was $1.3  million,  $1.3 million and $667,000 for the
years ended June 30, 1997, 1996 and 1995.  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.
     The Bank is obligated to repurchase  certain loans sold to and serviced for
others which become delinquent as defined by the various agreements. At June 30,
1997 and 1996,  these  obligations  were limited to  approximately  $730,000 and
$559,000, respectively.
     The following  analysis  reflects the changes in mortgage  servicing rights
("MSRs") acquired for the year ended June 30, 1997, (in thousands)

Carrying Value July 1, 1996 ..........   $  --
     Additions .......................     420
     Amortization ....................     (33)
     Net change in valuation allowance      --
                                         -----
Carrying Value June 30, 1997 .........   $ 387
                                         =====

The  carrying  value  approximates  fair value at June 30,  1997.  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.  No valuation  allowance  existed as of
June 30, 1997.


5.  INVESTMENTS IN JOINT VENTURES

The Bank has invested in joint  ventures  through its  subsidiary,  Home Savings
Corporation ("HSC"). The investments,  including loans, are accounted for by the
equity  method.  The Bank's  interest  in these  investments  is as follows  (in
thousands):
                                      June 30,
                          Equity  ----------------
                         Interest   1997     1996
                         -------------------------     
Family Financial Life       19%   $  605   $  605
Heritage Woods ......       33%      107      132
Home-Breeden ........       50%    2,312    1,990
Coventry Associates .       65%       38       25
Admiral's Woods .....       50%       22      103
                                  ------   ------
Total investment ....             $3,084   $2,855
                                  ======   ======

Summarized condensed unaudited financial statements for these joint ventures are
as follows (in thousands):
                                  June 30,        
                              ----------------     
                                1997     1996 
Balance Sheets:               ----------------
Cash ......................   $  668   $  552
Investments ...............    3,615    3,384
Property and equipment, net      748      782
Inventory of developed lots    2,896    2,603
Other assets ..............      759      948
                              ------   ------
Total assets .  ...........   $8,686   $8,269
                              ======   ======
                               
Notes payable .............   $2,337   $2,183
Insurance liabilities .....    1,524    1,453
Other liabilities .........      148      141
                              ------   ------
  Total liabilities .......    4,009    3,777
                              ------   ------
Shareholders' equity ......    4,677    4,492
                              ------   ------
Total liabilities and
    Shareholders' equity ..   $8,686   $8,269
                              ======   ======
<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997



                                            Years Ended June 30,
                                          ------------------------  
                                           1997     1996     1995
Income Statements:                        ------------------------
Income:
  Insurance premiums and commissions ..   $3,484   $3,569   $3,372
  Investment income ...................      334      272      273
  Net lot sales .......................      653      989      127
  Other income ........................      107      107      106
                                          ------   ------   ------    
  Total income ........................    4,578    4,937    3,878
                                          ------   ------   ------
Expenses:
  Commissions .........................    1,892    1,807    1,732
  Insurance benefits ..................      443      613      563
  Interest expense ....................       48       52       55
  Other expense .......................    1,439    1,612    1,340
                                          ------   ------   ------
  Total expense........................    3,822    4,084    3,690
                                          ------   ------   ------
Net income ............................   $  756   $  853   $  188
                                          ======   ======   ======

The notes payable  include $1.9 million and $1.7 million due to HSC and $144,000
and  $145,000 due to the Bank at June 30, 1997 and 1996,  respectively.  At June
30, 1997and 1996, open  commitments to these joint ventures  included letters of
credit totaling $391,000 and $1.1 million, respectively.



6.  ACCRUED INTEREST RECEIVABLE

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

                                                        June 30,     
                                                   ---------------- 
                                                     1997     1996  
                                                   ----------------  
Loans, less reserve of $173 and $202............   $ 3,896  $ 3,497
Securities .....................................       371      393
Interest-bearing deposits ......................         5        3
                                                   -------  ------- 
Total accrued interest receivable ..............   $ 4,272  $ 3,893
                                                   =======  ======= 


7.  PREMISES AND EQUIPMENT

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

                                                        June 30,
                                                   ----------------- 
                                                      1997    1996
                                                   -----------------
Land ...........................................   $ 1,480  $ 1,386
Buildings and improvements .....................     8,056    7,861
Furniture and equipment ........................     5,816    5,559
                                                   -------  -------
 Total .........................................    15,352   14,806
Accumulated depreciation .......................    (7,181)  (6,716)
                                                   -------  -------
Total premises and equipment....................   $ 8,171  $ 8,090
                                                   =======  =======

Depreciation  expense  included in operations for the years ended June 30, 1997,
1996 and 1995 totaled $1.0 million, $1.0 million and $813,000, respectively.

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


8. DEPOSITS
Deposits are summarized as follows (in thousands):
                         
                                                       June 30,
                                       ---------------------------------------
                                               1997                 1996
                                       ---------------------------------------
                                                  Weighted             Weighted 
                                                   Average              Average
                                          Amount    Rate       Amount     Rate 
                                       --------------------------------------- 
Non-interest-bearing .................   $ 23,506             $ 21,978
NOW accounts .........................     45,233    2.10%      48,878    2.09%
Passbook savings .....................     48,443    2.85%      58,988    3.00%
Money market savings .................     64,763    4.41%      25,188    3.05%
                                         --------    -----    --------    ----- 
     Total transaction accounts.......    181,945    2.85%     155,032    2.30%
                                         --------    -----    --------    -----
Certificates of deposit:                                
  Less than one year .................     97,301    5.46%      83,830    5.32%
  12-23 months .......................    110,242    5.56%      94,482    5.81%
  24-35 months .......................     59,857    5.62%      71,232    5.99%
  36-59 months .......................     22,596    5.61%      26,908    5.54%
  60-120 months ......................     55,847    6.15%      58,089    6.24%
                                         --------    -----    --------    -----
     Total certificate accounts.......    345,843    5.64%     334,541    5.78%
                                         --------    -----    --------    -----
Total deposits .......................   $527,788    4.68%    $489,573    4.68%
                                         ========    =====    ========    =====
                                                     
At June 30,  1997 and 1996,  certificates  of deposit in amounts of  $100,000 or
more totaled $78.0 million and $58.0 million respectively.

A summary of certificate  accounts by scheduled  maturities at June 30, 1997, is
as follows (in thousands):

<TABLE>
<CAPTION>
                   1998       1999       2000      2001       2002    Thereafter    Total
                --------------------------------------------------------------------------               
<S>            <C>        <C>        <C>        <C>        <C>        <C>        <C>     
3.99% or less   $  1,656   $     --   $     --   $     --   $     --   $     --   $  1,656
4.00% - 4.99%     29,757      9,976        939         35         --         --     40,707
5.00% - 5.99%    166,672     37,719      4,832      6,576      4,907      2,425    223,131
6.00% - 6.99%     19,928     24,890     14,517      4,549     11,575        221     75,680
7.00% - 9.00%      2,347      1,516        555          9        242         --      4,669
                --------------------------------------------------------------------------
                $220,360   $ 74,101   $ 20,843   $ 11,169   $ 16,724   $  2,646   $345,843
                ==========================================================================
</TABLE>


A summary of interest  expense for the past three fiscal years is as follows (in
thousands):

                                            Years Ended June 30,
                                         ---------------------------
                                           1997      1996      1995
                                         ---------------------------
NOW accounts .........................   $   880   $ 1,004   $ 1,104
Passbook savings .....................     1,509     1,657     1,654
Money market savings .................     2,030       729       587
Certificates of deposit...............    18,867    19,106    16,722
                                         ---------------------------
Total interest expense................   $23,286   $22,496   $20,067
                                         ===========================

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


9.  FEDERAL HOME LOAN BANK ADVANCES

The Bank was eligible to receive advances from the FHLB up to $206.7 million and
$159.9 million at June 30, 1997 and 1996, respectively, which represented 50% of
the Bank's eligible assets. 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):

                                                     June 30, 
                                      -----------------------------------------
                                             1997                    1996
                                      -----------------------------------------
                                               Weighted                Weighted
   Fiscal Year                                  Average                 Average
     Maturity                           Amount    Rate         Amount     Rate
                                      -----------------------------------------
      1997.....................       $    --      --         $26,000    6.15%
      1998.....................        33,200    6.63%         16,900    6.30%
      1999.....................        18,500    6.55%         14,500    6.67%
      2000.....................         9,300    6.29%          3,300    5.95%
      2001.....................         7,400    5.55%          7,400    5.55%
      2002.....................         7,000    6.34%          2,600    6.00%
      Thereafter...............         4,545    6.32%             --      --
                                      -----------------------------------------
   Total FHLB advances.........       $79,945    6.43%        $70,700    6.22%
                                      ========================================= 
                                    
                                 
10.  OTHER BORROWINGS

Senior Debt On June 30,  1993,  the Company  borrowed  $13 million  from LaSalle
National  Bank.  The note bears  interest at a variable  rate of prime (8.50% at
June 30, 1997) and matures on November 1, 1999. Of the net proceeds, the Company
injected $10 million to the Bank's Tier 1 capital. The note is collateralized by
the outstanding common shares of the Bank and its subsidiaries.  Under the terms
of the  agreement,  the Company is bound by certain  restrictive  debt covenants
relating to earnings,  net worth and various  financial  ratios.  As of June 30,
1997,  the Company was in  compliance  with the debt  covenants.  Maturities  of
senior debt based on minimum scheduled  payments as of June 30, 1997 are: 1998 -
$1,300 and 1999 - $6,500.
     Effective  July 1, 1993,  the Company  entered  into an interest  rate swap
agreement with LaSalle National Bank to make fixed rate payments at 7.24% and to
receive variable rate payments at the LaSalle National Bank prime rate (8.50% at
June 30, 1997) on a notional  amount of $13 million with quarterly  amortization
of $325,000.  The maturity  date of the swap  agreement is October 1, 1997.  The
interest rate swap agreement is accounted for on a settlement basis. The Company
is exposed to credit  loss in the event of  nonperformance  by LaSalle  National
Bank for the net interest rate differential when floating rates exceed the fixed
maximum rate.  However,  the Company does not anticipate  nonperformance  by the
counterparty.

Other  Borrowings 

In addition to the other  borrowings  scheduled below (in  thousands),  the Bank
also has a $5 million  overdraft line of credit with the Federal Home Loan Bank,
none of which was used as of June 30, 1997 or 1996.

                                                                  June 30,
                                                              ---------------
                                                               1997     1996
                                                              ---------------
Official check overnight remittance........................   $4,621   $4,280
FHLB overnight remittance .................................       27       57
                                                              ---------------
Total other borrowings ....................................   $4,648   $4,337
                                                              ===============

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


11.  INCOME TAXES

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

                                                        Years Ended June 30,  
                                                    ----------------------------
                                                      1997       1996      1995
                                                    ----------------------------
Current:               
    Federal .....................................   $ 3,435    $ 3,163   $ 2,400
    State .......................................       947      1,032       648
Deferred ........................................       (69)       737       709
                                                    ----------------------------
    Income tax provision.........................   $ 4,313    $ 4,932   $ 3,757
                                                    ============================

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

                                                         Years Ended June 30,
                                                    ----------------------------
                                                      1997      1996      1995
                                                    ----------------------------
Income tax provision at federal statutory rate ...  $ 3,794   $ 4,177   $ 3,500
State tax, net of federal tax benefit ............      615       701       582
Increase in cash surrender value of life insurance      (92)      (81)      (58)
Other ............................................       (4)      135      (267)
                                                    ----------------------------
Income tax provision .............................  $ 4,313   $ 4,932   $ 3,757
                                                    ============================

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 prior to 1988, which total $6 million. 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 June 30, 1997 and 1996, respectively.  Pursuant to SFAS 109, 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  currently  provided for in Section 593 of the IRC. The
provision requires thrifts to recapture any reserves  accumulated after 1987 but
forgives taxes owed on reserves  accumulated prior to 1988. Thrift  institutions
will be given six years to account for the recaptured excess reserves, beginning
with the first  taxable  year after  1995,  and will be  permitted  to delay the
timing of this  recapture  for one or two years  subject  to  whether  they meet
certain residential loan test requirements. The adoption of the act did not have
a material adverse effect on the Company's consolidated financial position.
     The Company's deferred income tax assets and liabilities are as follows (in
thousands):
                                                         June 30,
                                                     ---------------  
                                                       1997     1996
                                                     ---------------
Deferred tax assets:
Bad debt reserves ................................   $  486   $  337
Unrealized losses on securities available for sale       36      170
Deferred compensation ............................      639      550
Deferred fees ....................................       --      105
                                                     ---------------
    Total deferred tax assets ....................    1,161    1,162
                                                     ---------------
Deferred tax liabilities:
Difference in basis of fixed assets ..............      721      805
FHLB dividend ....................................      205      205
Deferred fees ....................................      175       --
Other ............................................       17       44
                                                     ---------------
    Total deferred tax liabilities ...............    1,118    1,054
                                                     ---------------
Net deferred tax assets ..........................   $   43   $  108
                                                     ===============

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


12.  REGULATORY MATTERS

The Bank is 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 Bank's 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 Bank to maintain minimum capital amounts and ratios
(set forth in the table below).  The Bank's primary  regulatory agency, the OTS,
requires that the Bank maintain  minimum ratios of tangible  capital (as defined
in the  regulations)  of 1.5%,  core  capital  (as  defined)  of 3%,  and  total
risk-based  capital  (as  defined)  of 8%.  The Bank is also  subject  to prompt
corrective  action  capital  requirement  regulations  set forth by the  Federal
Deposit Insurance Corporation  ("FDIC").  The FDIC requires the Bank to maintain
minimum  of  total  and  Tier I  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 June 30,  1997,  the Bank met all capital  adequacy
requirements to which it is subject.
     As of June 30, 1997 and 1996,  the most recent  notifications  from the OTS
categorized the Bank as "well  capitalized"  under the regulatory  framework for
prompt corrective  action. To be categorized as "well capitalized" the Bank 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 the institution's category.
<TABLE>
<CAPTION>
                                                                                To Be Categorized
                                                                              as "Well Capitalized"
                                                                                  Under Prompt
                                                             For Capital        Corrective Action
    (dollars in thousands)                Actual          Adequacy Purposes        Provisions
---------------------------------------------------------------------------------------------------
                                      Amount   Ratio        Amount   Ratio       Amount    Ratio
---------------------------------------------------------------------------------------------------
As of June 30, 1997
<S>                                 <C>       <C>         <C>       <C>         <C>       <C>
Tangible capital (to total assets)   $54,655    8.07%      $10,158    1.50%      $ N/A     $ N/A
Core capital (to total assets) ...   $54,655    8.07%      $20,317    3.00%      $ N/A     $ N/A
Total risk-based capital
    (to risk-weighted assets) ....   $57,980   12.06%      $38,454    8.00%      $48,068    10.00%
Tier 1 risk-based capital
    (to risk-weighted assets) ....   $54,655   11.37%      $ N/A     $ N/A       $28,841     6.00%
Tier 1 leverage capital
    (to average assets) ..........   $54,655    8.45%      $ N/A     $ N/A       $32,355     5.00%
</TABLE>
<TABLE>
<CAPTION>
                                                                                To Be Categorized
                                                                              as "Well Capitalized"
                                                                                  Under Prompt
                                                             For Capital        Corrective Action
    (dollars in thousands)                Actual          Adequacy Purposes        Provisions
---------------------------------------------------------------------------------------------------
                                      Amount   Ratio        Amount   Ratio       Amount    Ratio
---------------------------------------------------------------------------------------------------
As of June 30, 1996
<S>                                 <C>      <C>         <C>        <C>        <C>       <C>  
Tangible capital (to total assets)   $51,859   8.28%      $ 9,396      1.50%    $ N/A     $ N/A
Core capital (to total assets) ...   $51,859   8.28%      $18,791      3.00%    $ N/A     $ N/A
Total risk-based capital                                  
    (to risk-weighted assets) ....   $54,513  12.35%      $35,320      8.00%    $44,149   10.00%
Tier 1 risk-based capital                                 
    (to risk-weighted assets) ....   $51,859  11.75%      $ N/A      $ N/A      $26,489    6.00%
Tier 1 leverage capital                                   
   (to average assets) ...........   $51,859   8.67%      $ N/A      $ N/A      $29,924    5.00%

</TABLE>

                                                         
<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


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 June  30,  1997,
approximately  $11.9 million of retained  earnings  were  available for dividend
declaration without prior regulatory approval.

Recapitalization  of SAIF

On September  30, 1996,  the  President of the United  States signed into law an
omnibus  appropriations  act for fiscal  year 1997 that  included,  among  other
things, the  recapitalizaition of the Savings Association  Insurance Fund (SAIF)
in a section entitled "The Deposit Insurance Funds Act of 1996" ("the Act"). The
Act  included a provision  where all insured  depository  institutions  would be
charged a one-time  special  assessment on their SAIF assessable  deposits as of
March 31, 1995. The Company  recorded a pre-tax charge of $3,001,000  during the
year ended June 30, 1997,  which  represented 65.7 basis points of the March 31,
1995, assessable deposits.


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, 1996, the latest  actuarial  valuation,  the total plan
assets exceeded the actuarially determined value of accrued benefits.

Supplemental   Retirement   Program

The Bank  has  entered  into  supplemental  retirement  agreements  for  certain
officers and directors.  Benefits under these agreements are generally paid over
a 15 year  period.  The present  value of the benefit to be paid is accrued over
the  active  period of  employment  of  individual  participants.  The amount of
benefit expense for fiscal years 1997, 1996 and 1995, was $350,000, $281,000 and
$243,000, respectively.

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 $75,000, $71,000 and $61,000 during fiscal
years 1997, 1996 and 1995, respectively.


14.  STOCK OPTIONS

The  Company  has stock  option  plans for the  benefit of  officers,  other key
employees and  directors.  The plans are authorized to grant options to purchase
212,928 additional shares of the Company's common stock. The option price is not
to be less than the fair  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 an analysis of the stock option  activity for each of the
years in the three  year  period  ended  June 30,  1997,  and the stock  options
outstanding  at the end of the  respective  periods:  

                                                           Weighted 
                                                            Average
Options                                        Shares        Price
-------                                        ------        -----
Outstanding July 1, 1994 ..................    354,221    $    9.83
Granted ...................................     73,395    $   15.89
Expired ...................................       (752)   $   14.59
Exercised .................................    (74,899)   $    4.80
                                               -------
Outstanding June 30, 1995 .................    351,965    $   12.16
Granted ...................................      4,770    $   16.75
Expired ...................................    (10,875)   $   14.59
Exercised .................................    (14,813)   $    4.26
                                               -------
Outstanding June 30, 1996 .................    331,047    $   12.50
Fractional shares dropped in  3 for 2 split         (4)   $   13.03
Granted ...................................    151,020    $   24.31
Expired ...................................         --    $    N/A
Exercised .................................    (57,047)   $   11.75
                                               -------
Outstanding June 30, 1997 .................    425,016    $   16.76
                                               =======

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


As of June 30, 1997,  options  outstanding had exercise prices between $2.23 and
$27.375 and a weighted  average  remaining  contractual  life of 7.3 years.  The
majority of options  outstanding  have  exercise  prices  ranging from $12.87 to
$27.375 with a weighted average remaining contractual life of 7.8 years.
     The Company  applies APB Opinion No. 25,  "Accounting  for Stock  Issued to
Employees,"  and  related   interpretations  in  accounting  for  the  plan.  No
compensation  cost has been  recognized  for the plan  because the stock  option
price is equal  to or  greater  than the  fair  value  at the  grant  date.  Had
compensation  cost for the plan been  determined  based on the fair value at the
grant dates for awards under the plan  consistent  with the fair value method of
SFAS 123, " Accounting for Stock-Based  Compensation,"  the Company's net income
and net income per share would have decreased to the pro forma amounts indicated
below (in thousands, except per share data):


                                             Years ended June 30,
                                            ----------------------- 
                                                1997        1996
                                            -----------------------
Net income:
   As reported ..........................   $   6,846   $   7,352
   Pro forma ............................   $   6,108   $   7,335

Net income per share:
   As reported ..........................   $    1.96   $    2.15
   Pro forma ............................   $    1.75   $    2.14


The weighted  average fair value of options granted was $8.15 in 1997 and $ 5.96
in 1996.  The fair value of the option grants are estimated on the date of grant
using an option  pricing model with the following  assumptions:  dividend  yield
ranging  from 1.46% to 1.97%,  risk-free  interest  rates  ranging from 7.32% to
8.04%,  expected  volatility  ranging from 27.9% to 30.3% and expected life of 5
years. The pro forma amounts are not  representative  of the effects on reported
net income for future years.


15. COMMITMENTS

Financial  Instruments  with  Off-Balance  Sheet Risk 

In the normal course of business,  the Bank makes various  commitments to extend
credit  which  are not  reflected  in the  accompanying  consolidated  financial
statements.   At  June  30,  1997  and  1996,  the  Bank  had  loan  commitments
approximating   $38.5  million  and  $27.6  million,   respectively,   excluding
undisbursed  portions of loans in process.  Loan  commitments  at June 30, 1997,
include  commitments  to originate  fixed rate loans with interest rates ranging
from 7.6% to 9.8% totaling  $3.7 million and  adjustable-rate  loan  commitments
with  interest   rates  ranging  from  6.5%  to  9.5%  totaling  $34.8  million.
Commitments,  which are disbursed  subject to certain  limitations,  extend over
various  periods  of time.  Generally,  unused  commitments  are  canceled  upon
expiration  of the  commitment  term as  outlined in each  individual  contract.
Outstanding  letters of credit were $2.3  million and $3.0  million for 1997 and
1996,  respectively.  Additionally,  the Bank had approximately  $5.9 million in
commitments to sell fixed rate residential loans and $9.4 million in commitments
to sell adjustable  rate commercial  loans at June 30, 1997. 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>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


16.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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

<TABLE>
<CAPTION>

                                                           June 30, 
                                           ------------------------------------------
                                            Carrying     Fair     Carrying      Fair
                                              Value      Value      Value      Value
                                           ------------------------------------------
Assets:
<S>                                       <C>         <C>        <C>        <C>     
   Cash .................................  $  16,274   $ 16,274   $ 19,327   $ 19,327
   Interest-bearing deposits ............      3,498      3,498      6,301      6,301  
   Securities available for sale ........     40,119     40,119     44,651     44,651  
   Securities held to maturity ..........     13,115     13,012      6,990      6,753  
   Loans held for sale ..................      4,629      4,688      4,623      4,666  
   Loans, net ...........................    575,624    576,597    520,097    519,002  
   Accrued interest receivable ..........      4,272      4,272      3,893      3,893  
   Federal Home Loan Bank stock .........      4,260      4,260      3,798      3,798  
   Cash surrender value of life insurance      5,529      5,529      5,004      5,004  

Liabilities:
    Deposits ............................    527,788    527,405    489,573    488,649
    Federal Home Loan Bank advances .....     79,945     80,105     70,700     70,397  
    Senior debt .........................      7,800      7,831      9,100      9,100  
    Other borrowings ....................      4,648      4,648      4,337      4,337  
    Advance payments by borrowers                                                      
       for taxes and insurance ..........        296        296        621        621  
                                                                                       
Unrecognized financial instruments:                                                    
    Interest rate swap ..................         --          2         --        175  
</TABLE>

The estimated fair values of financial  instruments  have been determined by the
Company,   using  available   market   information  and  appropriate   valuation
methodologies.  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 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 Swap 
          The fair value of the interest  rate swap  agreement is the  estimated
     amount the Company would have to pay to enter into an equivalent  agreement
     at June 30, 1997 and 1996, with the counterparty to the swap agreement.

     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 June 30, 1997 and 1996.  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.

<PAGE>
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
                  THREE YEARS IN THE PERIOD ENDED JUNE 30, 1997


17.  PARENT COMPANY FINANCIAL STATEMENTS

The condensed  financial  statements of Home Federal  Bancorp are as follows (in
thousands):
<TABLE>
<CAPTION>
                                                                            June 30,
Condensed Balance Sheets                                               --------------------
(Parent Company only)                                                    1997        1996
Assets:                                                                --------------------
<S>                                                                   <C>         <C>       
Cash ...................................................               $  5,634    $  4,694  
Investment in subsidiary ...............................                 59,891      55,817
Other ..................................................                    504         577
                                                                       --------------------                      
  Total assets .........................................               $ 66,029    $ 61,088

Liabilities:                                                                       
Senior debt ............................................               $  7,800    $  9,100
Other ..................................................                    312         471
                                                                       --------------------                      
  Total liabilities ....................................                  8,112       9,571
                                                                       --------------------                      
Shareholders' equity ...................................                 57,917      51,517
                                                                       --------------------                      
   Total liabilities and shareholders' equity ...........              $ 66,029    $ 61,088
                                                                       ====================                    
</TABLE>
<TABLE>
<CAPTION>

                                                             For the Years Ended June 30:
Condensed Statements of Income                             -------------------------------- 
(Parent Company only)                                         1997       1996        1995
                                                           --------------------------------
<S>                                                       <C>         <C>         <C>     
Dividends from subsidiary ..............................   $  3,457    $  3,247    $  3,152
Other ..................................................        497         514         463
                                                           --------------------------------
  Total income .........................................      3,954       3,761       3,615
                                                           --------------------------------
Interest on senior debt ................................        703         900       1,010
Other expenses .........................................        600         674         717
                                                           --------------------------------
  Total expenses .......................................      1,303       1,574       1,727
                                                           --------------------------------
Income before taxes and change in
 undistributed earnings of subsidiary ..................      2,651       2,187       1,888
Applicable income tax credit ...........................       (323)       (420)       (505
                                                           --------------------------------
Income before change in undistributed
 earnings of subsidiary ................................      2,974       2,607       2,393
Increase in undistributed earnings of subsidiary .......      3,872       4,745       4,143
                                                           --------------------------------
Net income .............................................   $  6,846    $  7,352    $  6,536
                                                           ================================
</TABLE>
<TABLE>
<CAPTION>
                                                              For the Years Ended June 30:  
Condensed Statements of Cash Flows :                       -------------------------------- 
(Parent Company only)                                         1997       1996        1995  
                                                           --------------------------------
Operating activities:                                      
<S>                                                       <C>         <C>         <C>     
Net income .............................................   $  6,846    $  7,352    $  6,536
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Decrease (increase) in other assets ..................         73         565        (354)
  Increase (decrease) in accrued expenses and
   other liabilities ...................................       (159)        383         (28)
  Increase in undistributed earnings
   of subsidiary .......................................     (3,872)     (4,745)     (4,143)
                                                           -------------------------------- 
Net cash provided by operating activities ..............      2,888       3,555       2,011

Financing activities:
Repayment of senior debt ...............................     (1,300)     (1,300)     (1,300)
Payment of dividends ...................................     (1,378)       (999)       (826)
Exercise of stock options, net of fractional shares paid        730          71         436
                                                           -------------------------------- 
Net cash used in financing activities ..................     (1,948)     (2,228)     (1,690)
                                                           -------------------------------- 
Net increase in cash ...................................        940       1,327         321
Cash at beginning of year ..............................      4,694       3,367       3,046
                                                           -------------------------------- 
Cash at end of year ....................................   $  5,634    $  4,694    $  3,367
                                                           ================================
</TABLE>
 
<PAGE>


                                                   INDEPENDENT AUDITORS' REPORT







    To the Shareholders and the Board of Directors of Home Federal Bancorp:


We have audited the  accompanying  consolidated  balance  sheets of Home Federal
Bancorp and its subsidiary (the "Company") as of June 30, 1997 and 1996, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for each of the three years in the period ended June 30, 1997.  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  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
     In our opinion,  such consolidated  financial statements present fairly, in
all material  respects,  the financial  position of Home Federal Bancorp and its
subsidiary at June 30, 1997 and 1996,  and the results of their  operations  and
their cash flows for each of the three  years in the period  ended June 30, 1997
in conformity with generally accepted accounting principles.
     As  discussed  in  Note 1 to the  consolidated  financial  statements,  the
Company  adopted the provisions of Statement of Financial  Accounting  Standards
No. 122, "Accounting for Mortgage Servicing Rights", on July 1, 1996.


/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
July 23, 1997

<PAGE>

BOARD OF DIRECTORS & OFFICERS
of Home Federal Bancorp
                                                       
BOARD OF                     Eugene E. Burke
DIRECTORS                    Director Emeritus         
                             Retired                   
John K. Keach, Sr.                                     
Chairman of the Board,       Robert Weber              
Home Federal Bancorp         Director Emeritus         
                             Retired                   
John K. Keach, Jr.                                     
President and                                          
Chief Executive Officer
Home Federal Bancorp         OFFICERS                  
                                                       
John T. Beatty               John K. Keach, Jr.        
President,                   President and             
Beatty Insurance, Inc.       Chief Executive Officer
                                                       
Lewis W. Essex               Gerald L. Armstrong       
Retired from Essex           Executive Vice President  
Castings, Inc.               and Chief Operating Officer
                                                       
Harold Force                 Lawrence E. Welker
President,                   Executive Vice President, 
Force Construction           Chief Financial Officer,  
Company, Inc.                Treasurer and Secretary   
                                                       
David W. Laitinen, MD        The Directors of          
Orthopedic Surgeon           Home Federal Bancorp
                             Also Serve As Directors of
Harvard W. Nolting, Jr.      Home Federal Savings Bank. 
Retired form Nolting                                   
Foods, Inc.                                            




Executive Officers                                     
of Home Federal Savings Bank
                                                       
John K. Keach, Jr.           John F. Schilling         
President and                Senior Vice President     
Chief Executive Officer      Commercial Lending        
                                                       
Gerald L. Armstrong          Keith E. Luken            
Executive Vice President     Senior Vice President     
and Chief Operating Officer  Mortgage Lending
                                                       
Lawrence E. Welker           Mark A. Dennis            
Executive Vice President,    First Vice President
Chief Financial Officer,     MIS                       
Treasurer and Secretary                                
                             Melissa M. Arnold         
S. Elaine Pollert            Vice President            
Senior Vice President        Controller                
Retail Banking                                         
                                                       


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 National Bank                                 
c/o Corporate Trust Operations                        
135 South LaSalle Street, Room 1811                   
Chicago, Illinois  60603                       
(800) 246-5761                                        
                                                      
GENERAL COUNSEL                                       
Barnes & Thornburg                                    
1313 Merchants Bank Building                          
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 June 30,   
1997, 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                                        
(800) 952-6646                                        
                                                      
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                                        
(800) 952-6646