SECURITIES & EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K



(Mark One)

 X   Annual report pursuant to Section 13 or 15(d) of the Securities  Exchange
---  Act of 1934

     For the fiscal year ended June 30, 1997

                                       or

     Transition  report  pursuant  to  Section  13 or 15(d)  or the  Securities
---  Exchange Act of 1934

     For the transition period from ___________ to ___________



                        Commission file number: 0-18847
                                                -------



                              HOME FEDERAL BANCORP
                              --------------------
             (Exact name of registrant as specified in its charter)


              United States                                 35-1807839
              -------------                                 ----------
     (State or other jurisdiction                        (I.R.S. Employer
     of incorporation or organization)                  Identification No.)

 

    222 West Second Street, Seymour, Indiana                47274
    ----------------------------------------                -----
    (Address of Principal Executive Offices)             (Zip Code)

     
    Registrants telephone number including area code:   (812) 522-1592
                                                        --------------



    Securities registered pursuant to Section 12(b) of the Act:   None   

    Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                                       and
                          Common Share Purchase Rights
                          ----------------------------
                                (Title of Class)



Indicate by check mark whether the Registrant (l) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports)  and (2) has been  subject to such  filing
requirements for the past 90 days. YES  X    NO
                                      -----    -----


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (229.405 of this chapter) is not contained  herein,  and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
____ or any amendment to this Form 10-K.


                                 
<PAGE>

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of September 10, 1997, was $96,586,080.

The number of shares of the Registrants Common Stock, no par value,  outstanding
as of September 10, 1997, was 3,398,114 shares.



                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders  for the year ended June 30, 1997,
are  incorporated  into Part II.  Portions of the Proxy  Statement  for the 1997
annual meeting of shareholders are incorporated into Part I and Part III.


                            Exhibit Index on Page 37
                               Page l of 40 Pages




                                      -2-
<PAGE>







                              HOME FEDERAL BANCORP

                                    FORM 10-K

                                      INDEX





Forward Looking Statement ................................................    4

Item 1.     Business .....................................................    4

Item 2.     Properties ...................................................   30

Item 3.     Legal Proceedings ............................................   31

Item 4.     Submission of Matters to a Vote of
              Security Holders ...........................................   31

Item 4.5    Executive Officers of Home Federal Bancorp ...................   31

Item 5.     Market for Registrant's Common Equity 
              and Related Stockholder Matters ............................   32

Item 6.     Selected Financial Data ......................................   33

Item 7.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations ........................   33
Item 7.A    Quantitative and Qualitative Disclosure About
              Market Risk ................................................   33

Item 8.     Financial Statements and Supplementary Data ..................   34

Item 9.     Changes in and Disagreements with Accountants 
              on Accounting and Financial Disclosure .....................   34

Item 10.    Directors and Executive Officers of the Registrant ...........   34

Item 11.    Executive Compensation .......................................   35

Item 12.    Security Ownership of Certain Beneficial Owners 
              and Management .............................................   35

Item 13.    Certain Relationships and Related Transactions ...............   35

Item 14.    Exhibits, Financial Statement Schedules,
              and Reports on Form 8-K ....................................   35

SIGNATURES ...............................................................   36



                                      -3-
<PAGE>




                           FORWARD LOOKING STATEMENTS


         This Annual Report on Form 10-K ("Form 10-K") contains statements which
constitute  forward  looking  statements  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-K and include  statements  regarding the intent,  belief,
outlook,  estimate  or  expectations  of the Company  (as  defined  below),  its
directors or its officers primarily with respect to future events and the future
financial  performance  of the Company.  Readers of this Form 10-K are cautioned
that any such forward looking  statements are not guarantees of future events or
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially from those in the forward  looking  statements as a result of
various  factors.  The  accompanying  information  contained  in this  Form 10-K
identifies  important factors that could cause such  differences.  These factors
include  changes in interest  rates,  loss of deposits  and loan demand to other
savings and financial  institutions,  substantial  changes in financial markets;
changes in real estate values and the real estate market; regulatory changes, or
unanticipated results in pending legal proceedings.


                                     PART I

Item 1.  Business

General

         Home Federal Bancorp (the "Company" or "HFB") is an Indiana corporation
organized in August,  1990 to become a unitary savings and loan holding company.
The  principal  asset  of  the  Company  consists  of  100%  of the  issued  and
outstanding  capital stock of Home Federal  Savings Bank ("Home  Federal" or the
"Bank").  The Company was a shell corporation until Home Federal  reorganized in
March, 1993.

         Home Federal began  operations  in Seymour,  Indiana under the name New
Building and Loan  Association  in 1908,  and  received its federal  charter and
changed  its name to Home  Federal  Savings  and Loan  Association  in 1950.  On
November 9, 1983,  Home Federal  Savings and Loan  Association  became a federal
savings bank and its name was changed to Home Federal  Savings  Bank. On January
14,  1988,  Home  Federal  converted  to stock form and on March 1,  1993,  Home
Federal  reorganized by converting  each  outstanding  share of its common stock
into one share of common stock of the Company, thereby causing the Company to be
the holding company of Home Federal.  Home Federal  currently  provides services
through its main office at 222 West Second Street in Seymour,  Indiana,  fifteen
full  service  branches  located in south  central  Indiana,  and the Magic Line
network of automated  teller machines at eight  locations in Seymour,  Columbus,
North  Vernon  and  Batesville.  As a  result,  Home  Federal  serves  primarily
Bartholomew, Jackson, Jefferson, Jennings, Scott, Ripley, Decatur and Washington
Counties in Indiana. Home Federal also participates in the nationwide electronic
funds transfer networks known as Plus System, Inc. and Cirrus System.

         Home Federal directly and, through its service corporation  subsidiary,
indirectly  offers a wide range of consumer and commercial  financial  services.
These services  include:  (i) residential and commercial real estate loans; (ii)
NOW accounts;  (iii) regular and term savings accounts and savings certificates;
(iv)  Linsco  Private  Ledger  Financial   Services,   Inc.  ("Private  Ledger")
full-service securities brokerage services; (v) consumer loans; (vi) annuity and
life insurance products;  (vii) Individual  Retirement Accounts and Keogh plans;
(viii) commercial loans; (ix) real estate development;  (x) trust services:  and
(xi) commercial demand deposit accounts.

         Home  Federal's  primary  source of revenue is  interest  from  lending
activities.  Its principal  lending  activity is the origination of conventional
mortgage loans to enable  borrowers to purchase or refinance one- to four-family
residential real property.  These loans are generally secured by first mortgages
on the  property.  Virtually  all of the real estate  loans  originated  by Home
Federal are secured by properties located in Indiana,  although Home Federal has
authority to make or purchase real estate loans throughout the United States. In
addition,  Home Federal  makes  secured and  unsecured  consumer  related  loans

                                      -4-
<PAGE>

(including consumer auto loans, second mortgage,  home equity,  mobile home, and
savings  account  loans)  and  commercial  loans  secured  by  mortgages  on the
underlying  property.  At June 30, 1997,  approximately  19.7% of its loans were
consumer-related  loans and 13.3% of its loans were  commercial  mortgage loans.
Home Federal  also makes  construction  loans,  which  constituted  9.1% of Home
Federal's loans at June 30, 1997. Finally,  Home Federal makes commercial loans,
which constituted 7.2% of its loans at June 30, 1997.

Lending Activities

     Loan Portfolio Data

     The following two tables set forth the  composition  of Home Federal's loan
porfolio by loan type and  security  type as of the dates  indicated.  The third
table represents a reconciliation of gross loans receivable after  consideration
of undisbursed  portions of loans in process,  deferred loans, the allowance for
loan   losses,   unearned   discounts   on   loans   and   purchase   discounts.

<TABLE>
<CAPTION>
                                                                                 At June 30,
                                            -------------------------------------------------------------------------------------
                                                 1997             1996               1995              1994             1993
                                            --------------   --------------    --------------    --------------    --------------
                                            Amount Percent   Amount Percent    Amount Percent    Amount Percent    Amount Percent
                                            ------ -------   ------ -------    ------ -------    ------ -------    ------ -------
                                                                           (Dollars in Thousands)
TYPE OF LOAN       
First mortgage loans:
<S>                                        <C>      <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
  One-to-four family residential loans.....$300,531  50.1%  $278,118  51.3%   $268,509  55.3%   $278,383  60.1%   $257,605  62.0% 
  Commercial and multi-family .............  79,696  13.3%    73,853  13.6%     63,215  13.0%     59,830  12.9%     51,393  12.4%
  Loans on property under construction ....  54,504   9.1%    40,407   7.4%     23,982   4.9%     25,547   5.5%     21,760   5.2%
   Loans on unimproved acreage ............   4,192   0.7%     3,252   0.6%      2,554   0.5%  .   2,053   0.4%      1,988   0.5%
 Second mortgage, home equity .............  63,658  10.6%    50,372   9.3%     40,536   8.4%     29,376   6.3%     27,157   6.5%
Commercial loans ..........................  43,112   7.2%    40,609   7.5%     28,881   6.0%     21,660   4.7%     17,234   4.1%
Consumer loans ............................  11,017   1.8%    11,952   2.2%     11,392   2.3%      4,381   0.9%      5,796   1.4%
Auto loans ................................  23,086   3.8%    20,883   3.8%     21,506   4.4%     19,164   4.1%     11,719   2.8%
Mobile home loans .........................  16,613   2.8%    18,833   3.5%     20,258   4.2%     19,287   4.2%     16,416   4.0%
Savings accounts loans ....................   3,989   0.7%     4,199   0.8%      4,407   0.9%      3,684   0.8%      4,295   1.0%
                                            ------- -----    ------- -----     ------- -----     ------- -----     ------- ----- 
     Gross loans receivable ...............$600,398 100.0%  $542,478 100.0%   $485,240 100.0%   $463,365 100.0%   $415,363 100.0%
                                            ======= =====    ======= =====     ======= =====     ======= =====     ======= ===== 


TYPE OF SECURITY
Residential:
     One to four family....................$397,962  66.3$  $358,003  66.0%   $326,296  67.2%   $326,055  70.4%   $298,478  71.9%
     Multi-dwelling units..................  22,166   3.7%    23,807   4.4%     20,488   4.2%     22,004   4.7%     16,664   4.0%
Commercial real estate.....................  78,261  13.0%    60,940  11.2%     49,458  10.2%     45,077   9.7%     42,773  10.3%
Commercial.................................  43,112   7.2%    40,609   7.5%     28,881   6.0%     21,660   4.7%     17,234   4.1%
Mobile home................................  16,613   2.8%    18,833   3.5%     20,258   4.2%     19,287   4.2%     16,416   4.0%
Savings account............................   3,989   0.7%     4,199   0.8%      4,407   0.9%      3,684   0.8%      4,295   1.0%
Auto.......................................  23,086   3.8%    20,883   3.8%     21,506   4.4%     19,164   4.1%     11,719   2.8%
Other consumer.............................  11,017   1.8%    11,952   2.2%     11,392   2.3%      4,381   0.9%      5,796   1.4%
Land acquisition...........................   4,192   0.7%     3,252   0.6%      2,554   0.5%      2,053   0.4%      1,988   0.5%
                                            ------- -----    ------- -----     ------- -----     ------- -----     ------- -----
     Gross loans receivable................$600,398 100.0$  $542,478 100.0%   $485,240 100.0%   $463,365 100.0%   $415,363 100.0%
                                            ======= =====    ======= =====     ======= =====     ======= =====     ======= =====  
LOANS RECEIVABLE-NET
Gross loans receivable.....................$600,398 104.3%  $542,478 104.3%   $485,240 103.3%   $463,365 103.9%   $415,363 103.8%
Deduct:
Undisbursed portion of loans in process.... (20,519) -3.6%   (18,249) -3.5%    (11,291) -2.4%    (13,377) -3.0%    (11,603) -2.9%
Deferred net loan fees.....................    (560) -0.1%      (963) -0.2%     (1,069) -0.2%     (1,204) -0.3%     (1,082) -0.3%
Allowance for loan losses..................  (3,649) -0.6%    (3,061) -0.6%     (2,806) -0.6%     (2,580) -0.6%     (2,257) -0.6%
Unearned discounts.........................      (5)  0.0%       (19)  0.0%        (53)  0.0%       (114)  0.0%       (220) -0.1%
Purchase discount..........................     (41)  0.0%       (89   0.0%       (138)  0.0%       (187)  0.0%       (221) -0.1%
                                            ------- -----    ------- -----     ------- -----     ------- -----     ------- -----    
 Net loans receivable......................$575,624 100.0%  $520,097 100.0$   $469,883 100.0%   $445,903 100.0%   $399,980 100.0%
                                            ======= =====    ======= =====     ======= =====     ======= =====     ======= =====  
</TABLE>


                                      -5-
<PAGE>


     The  following  tables  summarize  the  contractual   maturities  for  Home
Federal's  loan  portfolio   (including   participations   and   mortgage-backed
certificates) for the fiscal periods indicated and the interest rate sensitivity
of loans due after one year:

<TABLE>
<CAPTION>
                                                               Maturites in Fiscal
                             Balance    ---------------------------------------------------------------------------
                            Outstanding                                     2001       2003      2008       2013
                            At June 30,                                      to         to        to        and
                              1997         1998        1999      2000       2002       2007      2012    thereafter
                              ----         ----        ----      ----       ----       ----      ----    ----------
                                                                  (In Thousands)
<S>                          <C>         <C>        <C>        <C>        <C>        <C>       <C>        <C>      

Real estate ..............   $448,077   $  6,841   $  3,228   $  3,419   $ 15,386   $ 83,505   $113,748   $221,950
      Mortgage-backed
      certificates,
      collateralized
      mortgage obligations     24,961      1,068        795      3,897      4,506      6,293      3,243      5,159
Construction Loans .......     54,504     18,919      4,498      2,000         --      3,980      1,079     24,028
Commercial loans .........     43,112     17,399      3,341      3,711      6,888      8,229      2,668        876
Other loans ..............     54,705     10,078      4,972      9,333     15,632      5,989      8,568        133
                             --------   --------   --------   --------   --------   --------   --------   -------- 
      Total ..............   $625,359   $ 54,305   $ 16,834   $ 22,360   $ 42,412   $107,996   $129,306   $252,146
                             ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>


Interest Rate Sensitivity:                          
                                            Due After June 30, 1998
                                            -----------------------
                                            Fixed     Variable Rate 
                                             Rate      and Balloon
                                             ----      -----------
                                                (In Thousands)

Real estate ...........................   $134,846         $306,390
  Mortgage-backed certificates,
    collateralized mortgage obligations     19,686            4,207
Construction Loans ....................      2,434           33,151
Commercial loans ......................      8,555           17,158
Other loans ...........................     44,627               --
                                          --------         --------   
        Total .........................   $210,148         $360,906
                                          ========         ========

Residential Mortgage Loans

         Approximately  98.2% of Home  Federal's  residential  mortgage  lending
activity  involves  the  origination  of loans  secured  by  one-to  four-family
residential  properties.  Home Federal is authorized to make one-to  four-family
residential loans without any limitation as to interest rate,  amount, or number
of interest rate adjustments.  Pursuant to federal regulations,  such loans must
require  at least  semi-annual  payments  and be for a term of not more  than 40
years,  and, if the interest  rate is  adjustable,  it must be  correlated  with
changes in a readily  verifiable  index.  Home  Federal  also makes  residential
mortgage  loans secured by mid-size  multi-family  dwelling  units and apartment
complexes.  The residential  mortgage loans included in Home Federal's portfolio
are primarily conventional loans. As of June 30, 1997, $356.5 million, or 59.4%,
of Home Federal's total loan portfolio  consisted of residential  first mortgage
loans,  $300.5  million,  or 50.1%, of which were secured by one- to four-family
homes.

         Many  of the  residential  mortgage  loans  currently  offered  by Home
Federal have adjustable  rates.  These loans generally have interest rates which
adjust (up or down)  semi-annually  or annually,  with maximum  rates which vary
depending  upon when the loans are written.  The  adjustment is currently  based
upon the weekly average of the one-year Treasury constant maturity rate.

                                      -6-
<PAGE>

         The rates  offered on Home  Federal's  adjustable-rate  and  fixed-rate
residential  mortgage loans are generally  competitive with the rates offered by
other financial institutions in its south central Indiana market area.

         Although  Home  Federal's  residential  mortgage  loans are written for
amortization  terms up to 30 years,  due to prepayments  and  refinancings,  its
residential mortgage loans in the past have generally remained outstanding for a
substantially  shorter  period  of time  than  the  maturity  terms  of the loan
contracts.

         All of the  residential  mortgages  Home Federal  currently  originates
include  "due on sale"  clauses,  which give Home Federal the right to declare a
loan  immediately  due and payable in the event that,  among other  things,  the
borrower  sells or  otherwise  disposes  of the  real  property  subject  to the
mortgage and the loan is not repaid.  Qualified  borrowers  are not permitted to
assume  mortgages at rates below the current market rate,  unless the instrument
does not include a due on sale provision.  Home Federal utilizes the due on sale
clause  as a means of  increasing  the rate of  interest  on  existing  loans by
negotiating with the buyer new interest rates at the time of sale.

         The Office of Thrift  Supervision (the "OTS") requires  institutions it
regulates to establish loan- to-value ratios  consistent with their  supervisory
loan-to-value  limits. The supervisory limits adopted by the OTS are 65% for raw
land  loans,  75%  for  land  development  loans,  80%  for  construction  loans
consisting of commercial,  multi-family and other non-residential  construction,
and 85% for improved property.  Multi-family  construction includes condominiums
and cooperatives.  A loan-to-value  limit has not been established for permanent
mortgage or home equity loans on owner-occupied  one-to four-family  residential
property.  However,  for any such loan with a loan-to-value ratio that equals or
exceeds 90 percent at  origination,  an institution  should require  appropriate
credit  enhancement  in  the  form  of  either  mortgage  insurance  or  readily
marketable  collateral.  The Board of  Directors  of Home  Federal  Savings Bank
approved a set of loan-to-value ratios consistent with these supervisory limits.
In some  instances,  Home Federal's  limits are more stringent than those set by
the OTS.

         It may be  appropriate  in  individual  cases to  originate  loans with
loan-to-value  ratios in excess of the OTS limits based on the support  provided
by other credit  factors.  The aggregate  amount of all loans in excess of these
limits should not exceed 100 percent of total capital.  Moreover,  loans for all
commercial,   agricultural,   multi-family  or  other   non-one-to   four-family
residential properties should not exceed 30 percent of total capital.

         Commercial Mortgage Loans

         At  June  30,  1997,  13.0%  of Home  Federal's  total  loan  portfolio
consisted of mortgage loans secured by commercial real estate.  These properties
consisted  primarily  of shopping  centers,  office  buildings,  nursing  homes,
manufacturing  plants,  warehouses,  motels,  apartment  buildings  and churches
located in central or south central Indiana.  The commercial  mortgage loans are
generally  adjustable-rate  loans, are written for terms not exceeding 20 years,
and require an 80% loan-to-value ratio. Commitments for these loans in excess of
$1 million must be approved in advance by Home Federal's Board of Directors. The
largest such loan as of June 30, 1997,  had a balance of $3.3  million.  At that
date, approximately 99% of Home Federal's commercial real estate loans consisted
of loans secured by real estate located in Indiana.

         Under the Financial Institutions Reform,  Recovery, and Enforcement Act
of 1989  ("FIRREA"),  a thrift's  portfolio of  commercial  real estate loans is
limited to 400% of its capital.  Also,  FIRREA's  Qualified  Thrift  Lender test
limits  the  amount  of  commercial  real  estate  loans  made by  thrifts.  See
"Regulation --Qualified Thrift Lender." Home Federal currently complies with the
commercial  real estate loan  limitation,  and neither that  limitation  nor the
Qualified Thrift Lender test significantly limits the ability of Home Federal to
make commercial real estate loans in its market area.

                                      -7-
<PAGE>

         Generally,  commercial  mortgage  loans  involve  greater  risk to Home
Federal than do residential loans.  Commercial  mortgage loans typically involve
large loan  balances  to single  borrowers  or groups of related  borrowers.  In
addition, the payment experience on loans secured by income-producing properties
is typically  dependent on the successful  operation of the related  project and
thus may be subject to adverse  conditions  in the real estate  market or in the
general economy.

         Construction Loans

         Home Federal offers conventional short-term construction loans. At June
30, 1997, 9.1% of Home Federal's total loan portfolio  consisted of construction
loans.   Normally,   a  95%  or  less  loan-to-value   ratio  is  required  from
owner-occupants of residential  property, an 80% loan-to-value ratio is required
from persons building residential property for sale or investment purposes,  and
an 80%  loan-to-value  ratio is required for commercial  property.  Construction
loans  are  also  made  to  builders  and  developers  for the  construction  of
residential or commercial  properties on a to-be-occupied or speculative  basis.
Construction normally must be completed in six months for residential loans. The
largest such loan on June 30, 1997, was $2.8 million.

         Consumer Loans

         Federal  laws  and  regulations  permit  federally   chartered  savings
institutions to make secured and unsecured consumer loans in an aggregate amount
of up to 35%  of the  institution's  total  assets.  In  addition,  a  federally
chartered  savings  institution  has lending  authority  above the 35% limit for
certain consumer loans, such as property  improvement loans and loans secured by
savings  accounts.  However,  the Qualified  Thrift Lender test  restricts  some
thrifts from making consumer loans. See "Regulation -- Qualified Thrift Lender."

         Consumer-related  loans,  consisting of second mortgage and home equity
loans,  mobile home loans,  automobile loans,  loans secured by savings accounts
and consumer loans were $118.4 million on June 30, 1997, or approximately  19.7%
of Home Federal's total loan portfolio.

         Second  mortgage  loans  are made for  terms of 5 - 15  years,  and are
fixed-rate  loans.  Home  Federal's  minimum for such loans is $5,000,  and Home
Federal will loan up to 90% of the  appraised  value of the  property,  less the
existing mortgage amount(s). As of June 30, 1997, Home Federal had $29.3 million
of second mortgage loans,  which equaled 4.9% of its total loan portfolio.  Home
Federal aggressively markets home equity loans, which are adjustable-rate loans.
As of June 30,  1997,  Home Federal had $34.3  million  drawn on its home equity
loans,  or 5.7% of its total loan  portfolio,  with $39.1  million of additional
credit available to its borrowers under existing home equity loans.

         Automobile  loans are generally made for terms of up to five years. The
vehicles  are  required to be for  personal  or family use only.  As of June 30,
1997, $23.1 million,  or 3.8%, of Home Federal's total loan portfolio  consisted
of automobile loans.

         As of June 30, 1997,  $16.6 million,  or 2.8%, of Home Federal's  total
loan portfolio consisted of mobile home loans.  Generally,  these loans are made
for terms of one year for each $1,000 of the sales price, with a maximum term of
15 years. On new mobile home loans, Home Federal requires a loan-to- value ratio
of 125% of the manufacturer's  invoice price plus sales tax or 90% of the actual
sales price,  whichever is lower.  Also, Home Federal makes loans for previously
occupied  mobile  homes up to a 90%  loan-to-value  ratio  based upon the actual
sales price or value as appraised, whichever is lower.

         Loans secured by savings account  deposits may be made up to 95% of the
pledged  savings  collateral at a rate 2% above the rate of the pledged  savings
account or a rate equal to Home  Federal's  highest  seven-year  certificate  of
deposit  rate,  whichever is higher.  The loan rate will be adjusted as the rate
for the pledged savings account changes.  As of June 30, 1997, $4.0 million,  or
0.7%, of Home Federal's total loan portfolio consisted of savings account loans.

                                      -8-
<PAGE>


Although  consumer-related  loans generally  involve a higher level of risk than
one-to  four-family  residential  mortgage loans, their relatively higher yields
and shorter  terms to  maturity  are  believed  to be helpful in Home  Federal's
asset/liability management.

         Commercial Loans

         Collateral for Home Federal's  commercial loans includes  manufacturing
equipment,  securities, real estate, inventory and accounts receivable. Terms of
these loans are normally for up to ten years and have  adjustable  rates tied to
reported  prime rates and  treasury  indexes.  Generally,  commercial  loans are
considered  to  involve a higher  degree of risk than  residential  real  estate
loans. However, commercial loans generally carry a higher yield and are made for
a shorter term than real estate loans.  As of June 30, 1997,  $43.1 million,  or
7.2%, of Home Federal's total loan portfolio consisted of commercial loans.

         Origination, Purchase and Sale of Loans

         Home Federal  originates  residential loans in conformity with standard
underwriting  criteria of the Federal Home Loan Mortgage  Corporation  ("FHLMC")
and the  Federal  National  Mortgage  Association  ("FNMA")  to  assure  maximum
eligibility for possible resale in the secondary  market.  Although Home Federal
currently has authority to lend anywhere in the United  States,  it has confined
its loan  origination  activities  primarily  to the central  and south  central
Indiana area.  Home Federal's  loan  originations  are generated  primarily from
referrals from real estate brokers, builders, developers and existing customers,
newspaper,   radio  and  periodical  advertising  and  walk-in  customers.  Home
Federal's loan approval process is intended to assess the borrower's  ability to
repay the loan,  the  viability of the loan and the adequacy of the value of the
property that will secure the loan.

         Home Federal studies the employment, credit history, and information on
the historical and projected income and expenses of its individual and corporate
mortgagors  to assess  their  ability to repay its mortgage  loans.  It uses its
staff appraisers or independent appraisers to appraise the property securing its
loans.  It requires  title  insurance or abstracts  accompanied by an attorney's
opinion  evidencing Home Federal's valid lien on its mortgaged real estate and a
mortgage  survey or survey  coverage  on all first  mortgage  loans and on other
loans  when  appropriate.  Home  Federal  requires  fire and  extended  coverage
insurance in amounts at least equal to the principal  amount of the loan. It may
also require flood insurance to protect the property securing its interest. When
private mortgage insurance is required,  borrowers must make monthly payments to
an escrow  account from which Home  Federal  makes  disbursements  for taxes and
insurance. Otherwise, such escrow arrangements are optional.

         The procedure for approval of loans on property under  construction  is
the same as for residential  mortgage loans,  except that the appraisal obtained
evaluates  the building  plans,  construction  specifications  and  estimates of
construction   costs.  Home  Federal  also  evaluates  the  feasibility  of  the
construction  project  and the  experience  and track  record of the  builder or
developer.

         Consumer loans are  underwritten on the basis of the borrower's  credit
history and an analysis of the borrower's income and expenses,  ability to repay
the loan and the value of the collateral, if any.

     In order to generate  loan fee and  servicing  income and recycle funds for
additional lending activities, Home Federal seeks to sell loans in the secondary
market.  Loan sales can enable Home Federal to recognize  significant fee income
and to reduce interest rate risk while meeting local market demand. Home Federal
sold $63.7 million of  fixed-rate  loans in the fiscal year ended June 30, 1997.
Home Federal's current lending policy is to sell fixed-rate residential mortgage
loans  exceeding  15  year  maturities.  In  addition,  when in the  opinion  of
management cash flow demands and asset/liability  concerns warrant, Home Federal
will  consider  keeping  fixed-rate  loans  with 15 year  maturities  as well as
adjustable-rate  loans.  Home  Federal  may  sell  participating   interests  in
commercial  real  estate  loans in order to share the risk with  other  lenders.
Mortgage  loans  held for sale are  carried  at lower of cost or  market  value,
determined on an aggregate  basis.  The servicing is retained on most loan sales

                                      -9-
<PAGE>


 except Veteran's Administration  ("VA"),  Federal Housing  Administration
("FHA") and Indiana Housing Finance Authority ("IHFA") loans.

         When loans are sold, Home Federal typically retains the  responsibility
for collecting and remitting loan payments,  inspecting the properties  securing
the loans,  making certain that monthly principal and interest payments and real
estate tax payments are made on behalf of borrowers, and otherwise servicing the
loans. Home Federal receives a servicing fee for performing these services.  The
amount of fees received by Home Federal varies,  but is generally  calculated as
an amount equal to 38 basis points per annum on the outstanding principal amount
of the loans  serviced.  The servicing fee is recognized as income over the life
of the loans.  At June 30, 1997,  Home Federal  serviced $298.0 million of loans
sold to other parties.  Gains and losses on sale of loans,  loan  participations
and mortgage-backed securities are recognized at the time of sale.

         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.

         Management believes that purchases of loans and loan participations may
be desirable and evaluates  potential  purchases as  opportunities  arise.  Such
purchases can enable Home Federal to take advantage of favorable lending markets
in other  parts of the state,  diversify  its  portfolio  and limit  origination
expenses. Any participations it acquires in commercial real estate loans require
a review of financial  information on the borrower, a review of the appraisal on
the property by a local designated appraiser, an inspection of the property by a
senior loan officer, and a complete financial analysis of the loan. Servicing of
loans purchased is generally done by the seller. At June 30, 1997, approximately
0.8%, or $5.0 million,  of Home  Federal's  gross loan portfolio was serviced by
others.
                                      -10-
<PAGE>
       The  following  table shows loan  activity  for Home  Federal  during the
periods indicated:

<TABLE>
<CAPTION>

                                                                        Year Ended June 30,        
                                                                        -------------------        
                                                                   1997        1996         1995
                                                                   ----        ----         ----
                                                                       (Dollars in Thousands)

<S>                                                             <C>          <C>          <C>   
Gross loans receivable at beginning of periods .............   $ 520,097    $ 469,883    $ 463,365

  Loans Originated:
  Mortgage loans and contracts:
    Construction:
      Residential ..........................................      39,116       45,336       24,465
      Commercial ...........................................      22,784       12,058        6,361
    Purchases:
      Residential ..........................................     113,265      112,549       88,692
      Commercial ...........................................      16,107        7,214        3,809
    Refinancing ............................................      56,911       88,861       26,723
    Other ..................................................       6,462        1,302        1,054
      Total ................................................     254,645      267,320      151,104

    Commercial .............................................      34,709       51,537       28,556
    Consumer ...............................................      38,150       35,800       42,037
      Total loans originated ...............................     327,504      354,657      221,697

    Loans purchased:
      Residential ..........................................          --        2,140           --
      Other ................................................         947        1,477           --
        Total loans originated and purchased ...............     328,451      358,274      221,697

    Real estate loans sold .................................      81,309      107,500       52,686
    Loan repayments and other deductions ...................     166,841      178,179      147,136
      Total loans sold, loan repayments and other deductions     248,150      285,679      199,822

    Net loan activity ......................................      80,301       72,595       21,875
    Gross loans receivable at end of period ................     600,398      542,478      485,240
    Adjustments ............................................     (24,774)     (22,381)     (15,357)

      Net loans receivable at end of period ................   $ 575,624    $ 520,097    $ 469,883

</TABLE>

         FIRREA  contains  a  generally  more  stringent   loans-to-one-borrower
limitation  than  that  applicable  to  savings   associations  before  FIRREA's
enactment.  Under FIRREA, a savings association  generally may not make any loan
to a  borrower  or its  related  entities  if the total of all such loans by the
savings  association exceeds 15% of its capital (plus up to an additional 10% of
capital  in the  case  of  loans  fully  collateralized  by  readily  marketable
collateral);  provided,  however,  that loans up to $500,000 irrespective of the
percentage  limitations may be made and certain housing  development loans of up
to $30 million or 30% of capital,  whichever is less, are permitted. The maximum
amount which Home Federal  could have loaned to one borrower and the  borrower's
related  entities at June 30, 1997 under the 15% of capital  limitation was $8.7
million.  At that date, the highest outstanding balance of loans by Home Federal
to one borrower and related entities was approximately  $6.3 million,  an amount
within such loans-to-one borrower limitations.

         Origination and Other Fees

         Home Federal  realizes  income from fees for  originating  loans,  late
charges,  NOW  account  fees and fees for  other  miscellaneous  services.  Home
Federal charges origination fees which range from 0% to 3.5% of the loan amount.
Late charges are assessed  fifteen days after  payment is due. Home Federal also
receives commissions on Linsco Private Ledger full-service  securities brokerage
transactions  which its  subsidiary,  Home  Savings  Corporation,  offers to its
customers.
                                     -11-
<PAGE>
         Non-performing Assets

         Late  charges  on  mortgage  loans are  assessed  by Home  Federal if a
payment is not  received by the 16th day  following  its due date.  Any borrower
whose payment was not received by this time is mailed a past due notice.  At the
same time the notice is mailed,  the  delinquent  account is downloaded to a PC-
based collection system and assigned to a specific loan service  representative.
The loan service  representative  will attempt to make contact with the customer
via a phone call to efficiently and  effectively  resolve any problem that might
exist.  If contact by phone is not possible,  mail,  in the form of  preapproved
form  letters,  will be used  during  the  16th and the 30th  days  following  a
specific due date.  After the 30th day  following any due date, or at the time a
second  payment has come due, if no contact has been made with the  customer,  a
personal  visit will be  conducted  by a Loan  Service  Department  employee  to
interview  the customer and inspect the  property to  determine  the  borrower's
ability  to repay  the  loan.  Prompt  follow  up is a goal of the Loan  Service
Department with any and all delinquencies.

         When an advanced stage of  delinquency  appears  (generally  around the
90th day of delinquency) and if repayment cannot be expected within a reasonable
amount of time,  Home  Federal  will make a  determination  of how to proceed to
protect the interests of both the customer and Home Federal. It may be necessary
for the borrower to attempt to sell the property at Home Federal's request. If a
resolution  cannot be arranged,  Home Federal will consider avenues necessary to
obtain  title to the  property  which  include  foreclosure  and/or  accepting a
deed-in-lieu of foreclosure,  whichever may be most appropriate.  However,  Home
Federal attempts to avoid taking title to the property if at all possible.

         Home Federal has acquired certain real estate in lieu of foreclosure by
acquiring title to the real estate and then reselling it. Home Federal  performs
an updated  title check of the  property  and, if needed,  an  appraisal  on the
property before accepting such deeds.

         On June 30, 1997,  Home Federal held  $139,000 of real estate and other
repossessed  collateral acquired as a result of foreclosure,  voluntary deed, or
other means.  Such assets are is  classified  as "real estate owned" until sold.
When property is so acquired, it is recorded at the lower of cost or fair market
value less estimated cost to sell at the date of acquisition  and any subsequent
write down  resulting  therefrom is charged to the  allowance for losses on real
estate owned.  Interest  accrual ceases on the date of acquisition and all costs
incurred from that date in maintaining the property are expensed.

         Consumer  loan  borrowers  who  fail to  make  payments  are  contacted
promptly  by the  Loan  Service  Department  in an  effort  to  effectively  and
efficiently cure any delinquency.  A notice of delinquency is sent 10 days after
any specific due date when no payment has been received.  The delinquent account
is  downloaded to a PC-based  collection  system and assigned to a specific loan
service  representative.  The loan service  representative  will then attempt to
contact the borrower via a phone call.

         Continued follow-up in the form of phone calls,  letters,  and personal
visits (when necessary) will be conducted to resolve delinquency.  If a consumer
loan  delinquency  continues and advances to the 60- 90 days past due status,  a
determination  will be made by Home Federal on how to proceed.  Home Federal may
initiate  action to obtain  collateral  (if any) or collect the debt through the
legal remedies available.

         Collateral  obtained  as a result of loan  default is  retained by Home
Federal as an asset until sold or otherwise disposed.

         The table below sets forth the amounts and categories of Home Federal's
non-performing  assets  (non-accrual loans, loans past due 90 days or more, real
estate owned, and other  repossessed  assets) for the last five years. It is the
policy of Home Federal that all earned but uncollected  interest on conventional
loans be  reviewed  monthly  to  determine  if any  portion  thereof  should  be
classified as  uncollectible  for any portion that is due but  uncollected for a
period in excess of 90 days. The determination is based upon factors such as the
                               
                                     -12-
<PAGE>


amount  outstanding  of the loan as a percentage of the  appraised  value of the
property and the delinquency record of the borrower.

<TABLE>
<CAPTION>

                                                                  At June 30,
                                               -----------------------------------------------
                                                 1997      1996      1995      1994      1993
                                                 ----      ----      ----      ----      ----
                                                            (Dollars in Thousands)
Non-performing Assets:
       Loans:
<S>                                             <C>       <C>       <C>       <C>       <C>    
     Non-accrual ............................   $2,930    $2,871    $2,431    $1,887    $1,428
     Past due 90 days or more ...............       40        89        81       115     1,292
Restructured loans ..........................        1         1       102       283       597
                                                ------    ------    ------    ------    ------  
Total non-performing loans ..................    2,971     2,961     2,614     2,285     3,317
Real estate owned, net (1) ..................       51        --        --       370     1,025
Other repossessed assets, net ...............       88        48        41        71        25
                                                ------    ------    ------    ------    ------ 
     Total non-performing assets (2) ........   $3,110    $3,009    $2,655    $2,726    $4,367
                                                ======    ======    ======    ======    ======
                                                                                      

Total non-performing assets to total assets..     0.46%     0.48%     0.45%     0.50%     0.82%

Loans with allowance for
   uncollected interest......................   $2,930    $2,872    $2,531    $2,167    $2,018

<FN>
----------
(1)  Refers  to real  estate  acquired  by  Home  Federal  through  foreclosure,
     voluntary deed, or in-substance foreclosure, net of reserve.
(2)  At June 30, 1997, 58.5% of Home Federal's  non-performing  assets consisted
     of residential  mortgage loans, 8.3% consisted of commercial  loans,  28.7%
     consisted of  consumer-related  loans,  4.5% consisted of real estate owned
     and other  repossessed  assets,  none of which were  commercial real estate
     loans.
 </FN>
</TABLE>


         For the year  ended  June 30,  1997,  the  income  that would have been
recorded under original terms on the above  non-accrual and  restructured  loans
was $274,000  compared to actual income recorded of $266,000.  At June 30, 1997,
Home Federal had  approximately  $6.4 million in loans that were 30-89 days past
due.

         The allowance for loan losses  represents  amounts  available to absorb
future loan losses.  Loans or portions thereof are charged to the allowance when
losses are considered probable. Recoveries of amounts previously charged off are
added to the allowance and provisions for loan losses are charged or credited to
earnings to bring the allowance to a level considered necessary by management.

         For the year  ended  June 30,  1997,  Home  Federal  charged  off loans
totaling $620,000 and realized  recoveries of $78,000 on previously  charged-off
loans. Based on management's continuing review of the loan portfolio, historical
charge-offs and current economic  conditions,  Home Federal recorded a charge to
earnings of $1.1 million to adjust the  allowance to $3.6 million as of June 30,
1997.

Investments

         Home   Federal's    investment    portfolio   consists   primarily   of
mortgage-backed securities, collateralized mortgage obligations, overnight funds
with the FHLB of Indianapolis, U.S. Treasury obligations, U.S. Government agency
obligations,  corporate debt and municipal  bonds.  At June 30, 1997,  1996, and
1995,  Home Federal had  approximately  $56.7  million,  $57.9 million and $59.3
million in investments, respectively.

         Home  Federal's  investment  portfolio  is managed by its  officers  in
accordance  with an investment  policy  approved by the Board of Directors.  The
Board reviews all transactions  and activities in the investment  portfolio on a
monthly basis.  Home Federal does not purchase  corporate debt securities  which
are not  rated  in one of the top four  investment  grade  categories  by one of

                                      -13-
<PAGE>


several  generally  recognized  independent  rating  agencies.   Home  Federal's
investment  strategy  has enabled it to (i) shorten the average term to maturity
of its assets,  (ii)  improve the yield on its  investments,  (iii) meet federal
liquidity  requirements and (iv) maintain  liquidity at a level that assures the
availability of adequate funds.

         The OTS  requires  savings  associations  to maintain an average  daily
balance of liquid assets (cash, certain time deposits, bankers' acceptances, and
specified  United  States  government,  state  or  federal  agency  obligations,
corporate debt  securities,  commercial  paper,  certain  mutual funds,  certain
mortgage related securities,  and certain first lien residential mortgage loans)
equal to a monthly  average of not less than a specified  percentage  of its net
withdrawable  savings  deposits  plus  short-term  borrowings.   This  liquidity
requirement may be changed from time to time by the OTS to any amount within the
range  of 4% to 10%,  and is  currently  5%,  although  the OTS has  proposed  a
reduction  to 4%.  Monetary  penalties  may be imposed  for  failure to meet the
liquidity requirement. At June 30, 1997, Home Federal had liquid assets of $54.1
million,   and  a  liquidity  ratio  of  10.0%,  which  exceeded  its  liquidity
requirement.
             
                    
Source Of Funds

         General

         Deposits have  traditionally  been the primary  source of funds of Home
Federal for use in lending and investment  activities.  In addition to deposits,
Home Federal derives funds from loan amortization,  prepayments, borrowings from
the FHLB of Indianapolis and income on earning assets.  While loan  amortization
and income on earning  assets are relatively  stable  sources of funds,  deposit
inflows and outflows can vary widely and are  influenced by prevailing  interest
rates, money market conditions and levels of competition. Borrowings may be used
to  compensate  for  reductions  in  deposits  or  deposit  inflows at less than
projected  levels and may be used on a  longer-term  basis to  support  expanded
activities. See "-- Borrowings."

         Deposits

         Consumer and commercial deposits are attracted  principally from within
Home Federal's  primary market area through the offering of a broad selection of
deposit  instruments  including  checking accounts,  fixed-rate  certificates of
deposit, NOW accounts,  individual  retirement  accounts,  passbook accounts and
commercial  demand deposit  accounts.  Home Federal does not actively solicit or
advertise  for  deposits  outside  of the  counties  in which its  branches  are
located.  Deposit account terms vary, with the principal  differences  being the
minimum balance required, the amount of time the funds remain on deposit and the
interest  rate.  To attract  funds,  Home  Federal  pays higher  rates on larger
balances within the same maturity class.

         Under  regulations  adopted  by  the  FDIC,   well-capitalized  insured
depository  institutions  (those with a ratio of total capital to  risk-weighted
assets of not less  than  10%,  with a ratio of core  capital  to  risk-weighted
assets of not less than 6%, with a ratio of core  capital to total assets of not
less  than 5% and  which  have  not been  notified  that  they  are in  troubled
condition) may accept brokered  deposits without  limitations.  Undercapitalized
institutions  (those that fail to meet minimum regulatory capital  requirements)
are  prohibited  from  accepting  brokered  deposits.   Adequately   capitalized
institutions (those that are neither  well-capitalized nor undercapitalized) are
prohibited  from accepting  brokered  deposits unless they first obtain a waiver
from  the  FDIC.  Under  these  standards,   Home  Federal  would  be  deemed  a
well-capitalized institution.

         An  undercapitalized  institution may not solicit  deposits by offering
rates of interest that are  significantly  higher than the  prevailing  rates of
interest on insured  deposits (i) in such  institution's  normal market areas or
(ii) in the market area in which such deposits would otherwise be accepted.

         Interest  rates  paid,  maturity  terms,  service  fees and  withdrawal
penalties are established by Home Federal on a periodic basis.  Determination of
rates and terms are predicated on funds acquisition and liquidity  requirements,

                                      -14-
<PAGE>


rates paid by competitors, growth goals, federal regulations, and market area of
solicitation.

        Deposit accounts at Home Federal at June 30, 1997, were as follows:


                                  Minimum                           Weighted
                                  Opening   Balance at     % of     Average
Type of Account                   Balance  June 30, 1997  Deposits    Rate
---------------                   -------  -------------  --------    ----
                                           (Dollars  in
                                             Thousands)

Withdrawable:
Non-interest bearing .........   $      1   $ 23,506         4.4%
Passbook .....................          1     48,443         9.2%    2.85%
Money market savings .........      1,000     64,763        12.3%    4.41%
NOW ..........................          1     45,233         8.6%    2.10%
                                            --------        -----    
   Total withdrawable ........              $181,945        34.5%    2.85%
                                            --------        -----  

Certificates (original terms):
Less than 1 year .............        500     97,301        18.4%    5.46%
12 to 23 months ..............        500    110,242        20.9%    5.56%
24 to 35 months ..............        500     59,857        11.3%    5.62%
36 to 59 months ..............        500     22,596         4.3%    5.61%
60 to 120 months .............        500     55,847        10.6%    6.15%
                                            --------        -----   
    Total certificates .......              $345,843        65.5%    5.64%
                                            --------        -----    
Total deposits ...............              $527,788       100.0%    4.68%
                                            ========       ======


        The following  table sets forth by nominal  interest rate categories the
composition of deposits of HomeFederal at the dates indicated:

                                        
                                                 At June 30,
                                                 -----------
                                       1997         1996       1995
                                       ----         ----       ----
                                          (Dollars in Thousands) 

Non-interest bearing and below 2.99%   $117,394   $130,424   $124,334
3.00% - 4.99% ......................    106,914     62,219     78,023
5.00% - 6.99% ......................    298,811    289,019    242,125
7.00% - 9.00% ......................      4,669      7,911     22,238
9.01% or greater ...................         --         --        366
                                       --------   --------   -------- 
Total ..............................   $527,788   $489,573   $467,086
                                       ========   ========   ========

                                      -15-

<PAGE>
     The  following  table sets forth the change in dollar amount of deposits in
the various accounts offered by Home Federal for the periods indicated.
<TABLE>
<CAPTION>
                                                                       Deposit Activity
                                                                       ----------------
                                                                     (Dollars in Thousands)

                                 Balance                          Balance                       Balance  
                                    at                               at                            at
                                 June 30,   % of     Increase     June 30,   % of     Increase  June 30,    % of     Increase
                                   1997    Deposits (Decrease)      1996    Deposits (Decrease)   1995    Deposits  (Decrease)
                                   ----    -------- ----------      ----    -------- ----------   ----    --------  ----------
Withdrawable:
<S>                             <C>          <C>     <C>        <C>         <C>      <C>        <C>         <C>      <C>  
Non-interest bearing ........   $ 23,506       4.5% $  1,528    $ 21,978       4.5% $  2,796    $ 19,182       4.1% $  2,508
Passbook ....................     48,443       9.2%  (10,545)     58,988      12.1%    2,991      55,997      12.0%   (2,323)
Money market savings ........     64,763      12.2%   39,575      25,188       5.1%    2,322      22,866       4.9%   (3,517)
NOW .........................     45,233       8.6%   (3,645)     48,878      10.0%      850      48,028      10.3%      199
                                --------     ------ --------    --------     ------  -------    --------     ------  -------  
   Total Withdrawable .......    181,945      34.5%   25,385     155,032      31.7%    8,959     146,073      31.3%   (3,133)
                                --------     ------ --------    --------     ------  -------    --------     ------  ------- 
Less than one year ..........     97,301      18.4%   13,471      83,830      17.1%   24,290      59,540      12.7%  (23,486)
12 to 23 months .............    110,242      20.9%   15,760      94,482      19.3%  (13,303)    107,785      23.1%   50,164
24 to 35 months .............     59,857      11.3%  (11,375)     71,232      14.5%    6,602      64,630      13.8%    9,509
36 to 59 months .............     22,596       4.3%   (4,312)     26,908       5.5%     (712)     27,620       5.9%   (5,667)
60 to 120 months ............     55,847      10.6%   (2,242)     58,089      11.9%   (3,349)     61,438      13.2%   (6,288)
                                --------     ------ --------    --------     ------  -------    --------     ------  ------- 
   Total certificate accounts    345,843      65.5%   11,302     334,541      68.3%   13,528     321,013      68.7%   24,232
                                --------     ------ --------    --------     ------  -------    --------     ------  -------  
        Total deposits ......   $527,788     100.0% $ 36,687    $489,573     100.0% $ 22,487    $467,086     100.0% $ 21,099
                                ========     ====== ========    ========     ====== ========    ========     ====== ========
</TABLE>

         The following table  represents,  by various  interest rate categories,
the amounts of deposits  maturing  during each of the three years following June
30, 1997,  and the  percentage  of such  maturities to total  deposits.  Matured
certificates  which  have  not  been  renewed  as of June 30,  1997,  have  been
allocated based upon certain rollover assumptions.
<TABLE>
<CAPTION>
                                                                              DEPOSITS MATURITIES
                                                                              -------------------
                                                                            (Dollars in Thousands)

                                     2.00      3.00      4.00      5.00       6.00       7.00       8.00
                                      to        to        to        to         to         to         to             Percent of
                                     2.99%     3.99%     4.99%     5.99%      6.99%      7.99%      9.00%     Total    Total
                                     -----     -----     -----     -----      -----      -----      -----     -----    -----
Certificate accounts maturing 
in the twelve-month period ending:
<S>                                  <C>     <C>       <C>       <C>         <C>        <C>        <C>      <C>      <C>

June 30, 1998......................$  212   $ 1,444   $ 29,757   $166,672   $ 19,928   $   742   $  1,605   $220,360   63.8%
June 30, 1999......................    --        --      9,976     37,719     24,890     1,432         84     74,101   21.4%
June 30, 2000......................    --        --        939      4,832     14,517       488         67     20,843    6.0%
Thereafter ........................    --        --         35     13,908     16,345       251         --     30,539    8.8%
                                   ------   -------   --------   --------   --------   -------   --------   --------  ----- 
  Total............................$  212   $ 1,444   $ 40,707   $223,131   $ 75,680   $ 2,913   $  1,756   $345,843  100.0%
                                   ======   =======   ========   ========   ========   =======   ========   ========  ===== 
</TABLE>

                Included  in the  deposit  totals in the above table are savings
certificates  of deposit with balances of over  $100,000.  The majority of these
deposits are from regular customers of Home Federal. None of these were brokered
deposits.  The  following  table  provides  a  breakdown  at  June  30,  1997 of
certificates of greater than $100,000 by maturity.

<TABLE>
<CAPTION>
                                                                      ACCOUNTS GREATER THAN $100,000
                                                                      ------------------------------
                                                                           (Dollars in Thousands)

                                      3.00       4.00     5.00     6.00      7.00       8.00  
                                       to         to       to       to        to         to                  Percent of
                                      3.99%      4.99%    5.99%    6.99%     7.99%      9.00%      Total        Total
                                      -----      -----    -----    -----     -----      -----      -----        -----
Certificate accounts maturing
 in the twelve-month period ending:
<S>                                   <C>       <C>     <C>      <C>       <C>          <C>       <C>         <C>       
June 30, 1998......................$   302   $   112   $   785   $55,035   $10,287   $   612    $  67,133       86.1%
June 30, 1999......................     --        --       111     2,243     3,342       292        5,988        7.7%
June 30, 2000......................     --        --        --       303       488        --          791        1.0%
Thereafter ........................     --       111       469     3,269       242        --        4,091        5.2%
                                   -------   -------   -------   -------   -------   -------    ---------      ----- 
  Total............................$   302   $   223   $ 1,365   $60,850   $14,359   $   904    $  78,003      100.0%
                                   =======   =======   =======   =======   =======   =======    =========      ===== 
                                                                                        
</TABLE>
                                      -16-
<PAGE>
         Borrowings

         Home  Federal  relies  upon  advances  (borrowings)  from  the  FHLB of
Indianapolis to supplement its supply of lendable funds, meet deposit withdrawal
requirements  and to  extend  the term of its  liabilities.  This  facility  has
historically  been Home Federal's major source of borrowings.  Advances from the
FHLB of Indianapolis  are typically  secured by Home Federal's stock in the FHLB
of  Indianapolis  and a  portion  of Home  Federal's  first  mortgage  loans and
mortgage-backed securities.

         Each FHLB credit program has its own interest rate,  which may be fixed
or variable,  and range of maturities.  Subject to the express limits in FIRREA,
the FHLB of  Indianapolis  may  prescribe  the  acceptable  uses to which  these
advances  may be put, as well as  limitations  on the size of the  advances  and
repayment provisions. At June 30, 1997, Home Federal had advances totaling $79.9
million outstanding from the FHLB of Indianapolis.

         On June 30,  1993,  the Company  borrowed  $13.0  million  from LaSalle
National  Bank of Chicago,  with the stock of Home Federal and its  subsidiaries
pledged as collateral (the "Senior  Debt").  The Senior Debt bears interest at a
variable rate of prime that was 8.50% at June 30, 1997. Of the net proceeds, the
Company  injected $10.0 million to Home  Federal's Tier l capital.  Home Federal
used the proceeds to prepay $9.0 million of subordinated  debt plus a prepayment
penalty of $1.8 million.  See Note 10 to the Consolidated  Financial  Statements
included in the 1997 Shareholder  Annual Report  incorporated into Item 8 hereof
for a description of the terms of the Senior Debt.

         Other than the FHLB advances and the Senior Debt,  Home  Federal's only
borrowings in recent years have been short-term borrowings.  The following table
sets  forth  the  maximum  amount  of each  category  of  short-term  borrowings
(borrowings  with remaining  maturities of one year or less)  outstanding at any
month-end  during  the  periods  shown and the  average  aggregate  balances  of
short-term borrowings for such periods.

                                                    For the year ended June 30,
                                                    ---------------------------
                                                     1997      1996      1995
                                                     ----      ----      ----
                                                       (Dollars in Thousands)

FHLB advances ....................................  $33,200   $16,000   $29,000
Official check overnight remittance ..............  $ 4,621   $ 4,280   $ 3,086
FHLB overnight remittance ........................  $    49   $    57   $    38
Average amount of total short-term
  borrowings outstanding .......................... $34,129   $ 6,822   $24,225


         The  following  table sets forth the amount of short term FHLB advances
outstanding at year end during the period shown and the weighted average rate of
such FHLB advances.

                                             At the year ended June 30,
                                             --------------------------
                                        1997            1996            1995
                                        ----            ----            ----
                                               (Dollars in Thousands)
FHLB advances:
Amount .........................    $  33,200       $  26,000       $  15,500
Weighted average rate ..........          6.7%            6.2%            6.9%

         See Note 9 in the Notes to Consolidated  Financial  Statements included
in the 1997  Shareholder  Annual  Report  incorporated  into Item 8 hereof for a
description of the terms of these borrowings.

                                      -17-
<PAGE>
         Service Corporation Subsidiaries

         Federal  savings banks generally may invest up to 2% of their assets in
service  corporations and make loans to such  subsidiaries and joint ventures in
which such subsidiaries are participants in an aggregate amount not exceeding 2%
of an association's  assets,  plus an additional 1% of assets if the amount over
2% is used for  specified  community  or  inner-city  development  purposes.  In
addition,  federal  regulations  permit  associations to make specified types of
loans to such subsidiaries  (other than special- purpose finance  subsidiaries),
in which the association owns more than 10% of the stock, in an aggregate amount
not exceeding 50% of the association's  regulatory  capital if the association's
regulatory capital is in compliance with applicable regulations.

         One of Home Federal's  subsidiaries,  Home Savings Corporation ("HSC"),
an Indiana corporation,  is currently engaged in three types of activities:  (i)
real estate  development;  (ii) sales of life insurance  products and annuities;
and (iii) full-service  securities brokerage services. With the exception of its
securities  brokerage  services,  all of HSC's activities are conducted  through
joint  ventures  in which it is an equity  investor.  HSC has  undertaken  these
activities as a part of Home Federal's  business  strategy of  diversifying  its
operations into areas which, although related to traditional activities in which
Home  Federal has  expertise  and often  involving a similar  pool of  potential
customers,  provide  opportunities  to earn income that are not as  sensitive to
changes in interest rates as is net interest income,  and also to meet the needs
of its customers by becoming a  full-service  financial  center.  Although these
activities create a potential for a higher rate of return than mortgage lending,
either directly through operations or indirectly  through  appreciation in value
of the business or real property, these activities involve greater and different
risks than those  associated  with thrift  lending and can affect  adversely the
savings  association's  regulatory  capital  calculations.  See  "Regulation  --
Regulatory  Capital." At June 30, 1997, Home Federal's  aggregate  investment in
HSC was $2.2 million.  For the year ended June 30, 1997, HSC reported  income of
$415,000  from these  operations.  HSC's  office is  located at 222 West  Second
Street,  Seymour,  Indiana.  The  consolidated  statements of operations of Home
Federal and its subsidiaries included elsewhere herein include the operations of
HSC.  Intercompany  balances  and  transactions  have  been  eliminated  in  the
consolidation.

         The following  table sets forth certain  information  regarding each of
the joint ventures in which HSC was involved at June 30, 1997.

<TABLE>
<CAPTION>
                                                     Date HSC                    Loans from 
                                                     Entered                     Home Federal
                                                     into the     Equity         Outstanding at
Name                     Type of Project             Project      Investment     June 30, 1997
----                     ---------------             -------      ----------     -------------
<S>                     <C>                         <C>           <C>            <C>    
Consortium Partners      Owns Family Financial       11/31/83     $  605,000     $       --
                         Life Insurance
                         Company of New
                         Orleans

Coventry Associates      Real Estate development     8/31/89      $   38,000     $       --
                         in Seymour, Indiana

Heritage Woods II        Rental Apartment            11/15/89     $  107,000     $       --
                         project of low income
                         housing (22 units)

Admirals Woods           Real estate development     4/20/93      $   22,000     $       --
                         in Indianapolis, Indiana

Home-Breeden             Real estate development     7/1/94       $2,312,000     $2,337,000
                         in Columbus, Indiana                                    
</TABLE>


                                      -18-
<PAGE>

         HSC has a 19% interest in Consortium Partners, a Louisiana partnership,
which owns 50% of the outstanding  shares of the Family Financial Life Insurance
Company  of  New  Orleans  ("Family  Financial").   The  remaining  50%  of  the
outstanding shares of Family Financial is owned  proportionately by the partners
of  Consortium  Partners.  Family  Financial  sells life,  accident,  and health
insurance  as  well  as  annuity  products  to the  customers  of the  partners'
parent-thrifts. HSC receives (1) dividends paid on Family Financial shares owned
directly by it, (2) a pro rata  allocation of dividends  received on shares held
by  Consortium  Partners,  which are  divided  among the  partners  based on the
actuarially  determined value of Family  Financial's  various lines of insurance
generated  by  customers  of these  partners,  and (3)  commissions  on sales of
insurance  products  made to customers.  For the year ended June  30,1997,  Home
Federal had income of $397,000,  on a consolidated  basis,  from commissions and
dividends paid on Family Financial activities.

         HSC markets  Linsco Private Ledger  full-service  securities  brokerage
services. At June 30, 1997, HSC received $932,000 in commissions from its Linsco
Private Ledger activities.

         In August,  1989, HSC entered into a financing  agreement with Greemann
Real Estate,  Inc. to purchase and develop  Coventry  Place, a residential  real
estate  subdivision  in Seymour,  Indiana.  HSC is to receive a development  fee
equal to 4% of total development costs. In addition to the interest on the loan,
which was paid off in April,  1996, HSC will receive 65% of the net profit after
the payment of all interest, development and sales fees.

         In  November,  1989,  HSC  invested  $184,000  as a limited  partner in
Heritage Woods II, a low income housing project in Columbus,  Indiana.  Over the
next six years,  HSC will receive tax credits equal to  approximately  9% of its
investment in the project.

         On April 20, 1993, HSC entered into a joint venture agreement with Gary
L. Sager and Emily Sager to develop a  moderately-priced  27 lot  subdivision in
Marion County,  Indiana,  called Admirals Woods. The joint venture  subsequently
executed loan documents with HSC for an acquisition and development  loan in the
amount of $980,000. In addition to interest on the loan, HSC will receive 50% of
the profits after all interest,  development and sales costs.  The loan was paid
off in December, 1995.

         On July 1,  1994,  HSC  entered  into a joint  venture  agreement  with
Breeden  Investment  Group,  Inc. to develop a 320 lot starter home  subdivision
with  additional   multi-family  and  commercial  land   ("McCullough's   Run").
McCullough's  Run is  located  on the  east  side  of  Columbus,  Indiana.  Loan
documents were executed on July 1, 1994 for land  acquisition and development of
phases I and II in an amount not to exceed $1,700,000.  Subsequent closings have
encompassed the balance of the six phases.  The outstanding loan balance of $2.3
million as of June 30, 1997,  reflects the development  costs to date of all six
phases.

         Home Federal also  organized  another  service  corporation  subsidiary
under Indiana law, HomeFed  Financial Corp., as a financing  subsidiary to issue
subordinated debt, collateralized mortgage obligations,  and similar securities.
This  corporation is currently a shell  corporation and has never engaged in any
business operations.

         Employees

         As of June 30, 1997,  Home Federal  employed 243 persons on a full-time
basis and 13 persons on a part-time basis. None of Home Federal's  employees are
represented by a collective bargaining group.  Management considers its employee
relations to be excellent.
                                      -19-
<PAGE>
         Competition

         Home Federal  operates in south central Indiana and makes almost all of
its  loans to,  and  accepts  almost  all of its  deposits  from,  residents  of
Bartholomew,  Jackson, Jefferson, Jennings, Scott, Ripley, Washington,  Decatur,
Monroe and Marion counties in Indiana.

         Home  Federal  is  subject  to  competition   from  various   financial
institutions,  including  state and  national  banks,  state and federal  thrift
associations,  and other companies or firms,  including  brokerage houses,  that
provide similar services in the areas of Home Federal's home and branch offices.
Also,  in Seymour,  Columbus,  North  Vernon and  Batesville,  Home Federal must
compete with banks and savings institutions in Indianapolis. To a lesser extent,
Home Federal competes with financial and other  institutions in the market areas
surrounding  Cincinnati,  Ohio  and  Louisville,  Kentucky.  Home  Federal  also
competes  with money  market  funds which  currently  are not subject to reserve
requirements,  and with  insurance  companies  with  respect  to its  Individual
Retirement and annuity accounts.

         Under  current  law,  bank  holding   companies  may  acquire   savings
associations.  Savings associations may also acquire banks under federal law. To
date, several bank holding company  acquisitions of healthy savings associations
in Indiana have been completed.  Affiliations  between banks and healthy savings
associations  based in Indiana may also increase the  competition  faced by Home
Federal and the Company.

         In  addition,   The  Riegle-Neal   Interstate   Banking  and  Branching
Efficiency Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to
acquire  banks in other  states and,  with state  consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through merger
or de novo  expansion.  The State of Indiana  enacted  legislation  establishing
interstate  branching  provisions for Indiana state chartered  banks  consistent
with those  established by the Riegle- Neal Act (the "Indiana  Branching  Law").
The Indiana  Branching  Law  authorizes  Indiana  banks to branch  interstate by
merger or de novo expansion and authorizes  out-of-state  banks meeting  certain
requirements to branch into Indiana by merger or de novo expansion.  The Indiana
Branching Law became  effective  March 15, 1996.  This new  legislation may also
result in increased competition for Home Federal and the Company.

         The primary factors  influencing  competition for deposits are interest
rates, service and convenience of office locations.  Competition is affected by,
among other things,  the general  availability  of lendable  funds,  general and
local economic conditions,  current interest rate levels, and other factors that
are not readily predictable.

Regulation

         General

         Home Federal,  as a federally chartered stock savings bank, is a member
of the Federal  Home Loan Bank  System  ("FHLB  System")  and its  deposits  are
insured by the Savings Association Insurance Fund ("SAIF") which is administered
by the FDIC. Home Federal is subject to extensive regulation by the OTS. Federal
associations may not enter into certain  transactions  unless certain regulatory
tests are met or they obtain prior governmental  approval,  and the associations
must  file  reports  with the OTS about  their  activities  and their  financial
condition. Periodic compliance examinations of Home Federal are conducted by the
OTS which has, in conjunction with the FDIC in certain  situations,  examination
and enforcement  powers.  This supervision and regulation is intended  primarily
for the  protection of depositors  and federal  deposit  insurance  funds.  Home
Federal is also subject to certain reserve requirements under regulations of the
Board of Governors of the Federal Reserve System ("FRB").

         Congress  is  considering  legislation  that would  require all federal
savings associations, such as Home Federal, either to convert to a national bank
or a  state-chartered  bank by a specified date to be  determined.  In addition,
under the  legislation,  the Company  likely  would no longer be  regulated as a
savings and loan  holding  company but rather as a bank  holding  company.  This
                              
                                      -20-
<PAGE>

proposed  legislation would abolish the OTS and transfer its functions among the
other federal banking regulators. It cannot be predicted with certainty whether,
or in what form, the legislation will be enacted.

         An OTS  regulation  establishes  a schedule for the  assessment of fees
upon all savings  associations to fund the operations of the OTS. The regulation
also  establishes a schedule of fees for the various types of  applications  and
filings made by savings associations with the OTS. The general assessment, to be
paid on a  semiannual  basis,  is based  upon the  savings  association's  total
assets, including consolidated  subsidiaries,  as reported in a recent quarterly
thrift financial report.  Currently,  the quarterly  assessment rates range from
 .01164%  of assets  for  associations  with  assets of $67.0  million or less to
 .00308% for associations with assets in excess of $35.0 billion.  Home Federal's
current  semiannual  assessment,  based upon total  assets at March 31,  1997 of
$663.3 million, is $72,000.

         Home Federal is also subject to federal and state regulation as to such
matters as loans to officers,  directors,  or principal  shareholders,  required
reserves,  limitations as to the nature and amount of its loans and investments,
regulatory  approval of any merger or consolidation,  issuance or retirements of
it's own securities,  and limitations upon other aspects of banking  operations.
In addition,  the  activities  and  operations  of Home Federal are subject to a
number of additional  detailed,  complex and sometimes  overlapping  federal and
state laws and regulations.  These include state usury and consumer credit laws,
state  laws  relating  to  fiduciaries,  the  Federal  Truth-In-Lending  Act and
Regulation Z, the Federal  Equal Credit  Opportunity  Act and  Regulation B, the
Fair Credit  Reporting  Act,  the  Community  Reinvestment  Act,  anti-redlining
legislation and anti-trust laws.

         Federal Home Loan Bank System

         Home  Federal  is a member of the FHLB  System,  which  consists  of 12
regional  banks.  The Federal  Housing  Finance Board  ("FHFB"),  an independent
agency,  controls the FHLB System including the FHLB of  Indianapolis.  The FHLB
System  provides  a  central  credit  facility   primarily  for  member  savings
associations and other member financial  institutions.  Home Federal is required
to hold  shares of  capital  stock in the FHLB of  Indianapolis  in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential  mortgage loans, home purchase contracts and similar  obligations at
the end of each  calendar  year,  .3% of its  assets  or 1/20 (or  such  greater
fraction  established  by the FHLB) of outstanding  FHLB advances,  commitments,
lines of credit and letters of credit.  Home Federal is currently in  compliance
with this requirement.  At June 30, 1997, Home Federal's  investment in stock of
the FHLB of Indianapolis was $4.3 million.

         In past years,  Home Federal has received  dividends on its FHLB stock.
All 12  FHLB's  are  required  by law to  provide  funds for the  resolution  of
troubled  savings  associations  and to establish  affordable  housing  programs
through direct loans or interest subsidies on advances to members to be used for
lending   at   subsidized   interest   rates   for  low-  and   moderate-income,
owner-occupied  housing projects,  affordable rental housing,  and certain other
community  projects.  These contributions and obligations could adversely affect
the FHLB's  ability to pay  dividends and the value of FHLB stock in the future.
For the year ending June 30, 1997, dividends paid to Home Federal by the FHLB of
Indianapolis totaled $315,000,  for an annual rate of 7.8%. A reduction in value
of such stock may result in a corresponding reduction of Home Federal's capital.

         The FHLB of Indianapolis serves as a reserve or central bank for member
institutions  within its assigned  region.  It is funded primarily from proceeds
derived from the sale of consolidated  obligations of the FHLB System.  It makes
advances to members in accordance  with policies and  procedures  established by
the FHFB and the Board of Directors of the FHLB of Indianapolis.

         All FHLB advances  must be fully  secured by  sufficient  collateral as
determined by the FHLB. FIRREA proscribes  eligible collateral as first mortgage
loans less than 90 days delinquent or securities  evidencing  interests therein,
securities (including mortgage-backed  securities) issued, insured or guaranteed
by the federal government or any agency thereof, FHLB deposits and, to a limited
extent,  real  estate  with  readily  ascertainable  value in which a  perfected
security interest may be obtained.  Other forms of collateral may be accepted as

                                      -21-
<PAGE>

over  collateralization  or, under certain  circumstances,  to renew outstanding
advances.  All long-term  advances are required to provide funds for residential
home financing and the FHLB has established  standards of community service that
members must meet to maintain access to long-term advances.

         Interest rates charged for advances vary  depending upon maturity,  the
cost of funds to the FHLB of  Indianapolis  and the  purpose  of the  borrowing.
Under  current law,  savings  associations  which cease to be  Qualified  Thrift
Lenders are ineligible to receive advances from their FHLB.

         Liquidity

         For each  calendar  month,  Home  Federal is  required  to  maintain an
average daily balance of liquid assets (cash,  certain time  deposits,  bankers'
acceptances,  specified  United  States  Government,  state  or  federal  agency
obligations,   shares  of  certain  mutual  funds  and  certain  corporate  debt
securities  and  commercial  paper) equal to an amount not less than a specified
percentage of its net withdrawable  deposit accounts plus short-term  borrowings
during the preceding  calendar month. This liquidity  requirement may be changed
from  time to  time  by the OTS to any  amount  within  the  range  of 4% to 10%
depending upon economic conditions and the savings flows of member institutions,
and is currently 5%, although the OTS has proposed a reduction of the percentage
to 4%. OTS regulations also require each member savings  association to maintain
an average daily balance of short-term  liquid assets at a specified  percentage
(currently  l %) of the  total  of its net  withdrawable  deposit  accounts  and
short-term  borrowings during the preceding calendar month. The OTS has proposed
abolishing  this  latter  requirement.  Monetary  penalties  may be imposed  for
failure to meet these liquidity  requirements.  The monthly average liquidity of
Home Federal for June, 1997 was 10.0% which exceeded the applicable 5% liquidity
requirement.  Its average  short-term  liquidity ratio for June, 1997, was 4.6%.
Home  Federal has never been subject to monetary  penalties  for failure to meet
its liquidity requirements.

         Insurance of Deposits

         Deposit  Insurance.  The FDIC is an  independent  federal  agency  that
insures the deposits,  up to prescribed  statutory  limits, of banks and thrifts
and  safeguards  the safety and soundness of the banking and thrift  industries.
The FDIC administers two separate  insurance funds, the BIF for commercial banks
and state  savings  banks and the SAIF for savings  associations  and banks that
have  acquired  deposits  from  savings  associations.  The FDIC is  required to
maintain  designated  levels of reserves in each fund. As of September 30, 1996,
the reserves of the SAIF were below the level required by law, primarily because
a significant  portion of the  assessments  paid into the SAIF have been used to
pay the cost of prior  thrift  failures,  while the  reserves of the BIF met the
levels required by law in May, 1995. However, on September 30, 1996,  provisions
designed to recapitalize  the SAIF and eliminate the premium  disparity  between
the BIF and the SAIF were signed into law. See "--Assessments" below.
                                  
         Assessments.  The  FDIC is  authorized  to  establish  separate  annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF.  The FDIC may  increase  assessment  rates for either fund if necessary to
restore the fund's  ratio of reserves  to insured  deposits to the target  level
within a reasonable  time and may  decrease  these rates if the target level has
been met. The FDIC has established a risk-based  assessment system for both SAIF
and BIF members.  Under this system,  assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's  risk level is
determined  based on its  capital  level  and the  FDIC's  level of  supervisory
concern about the institution.

          On September 30, 1996,  President  Clinton signed into law legislation
which included  provisions  designed to recapitalize  the SAIF and eliminate the
significant  premium  disparity between the BIF and the SAIF. Under the new law,
Home Federal was charged a one-time  special  assessment equal to $.657 per $100
in assessable  deposits at March 31, 1995. Home Federal recognized this one-time
assessment as a non-recurring operating expense of $3,001,000, ($1,726,000 after
tax), during the three-month  period ending September 30, 1996, and Home Federal
paid the assessment on November 27, 1996.  The  assessment was fully  deductible
for both federal and state income tax purposes.  Beginning January 1, 1997, Home

                                      -22-
<PAGE>

Federal's  annual deposit  insurance  premium was reduced from .23% to .0644% of
total  assessable   deposits.   BIF  institutions  pay  lower  assessments  than
comparable SAIF  institutions  because BIF institutions pay only 20% of the rate
paid by SAIF  institutions on their deposits with respect to obligations  issued
by the  federally-chartered  corporation which provided some of the financing to
resolve the thrift  crisis in the 1980's,  ("FICO").  The 1996 law also provides
for the merger of the SAIF and the BIF by 1999,  but not until such time as bank
and thrift  charters are  combined.  Until the charters  are  combined,  savings
associations  with SAIF  deposits may not transfer  deposits into the BIF system
without  paying  various  exit and entrance  fees,  and SAIF  institutions  will
continue to pay higher FICO assessments. Such exit and entrance fees need not be
paid if a SAIF institution  converts to a bank charter or merges with a bank, as
long as the resulting bank continues to pay applicable insurance  assessments to
the SAIF, and as long as certain other conditions are met.

         Regulatory Capital

         Currently,  savings  associations are subject to three separate minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 3% of
total assets. Core capital is generally defined as common  stockholders'  equity
(including retained income), noncumulative perpetual preferred stock and related
surplus,   certain  minority  equity   interests  in  subsidiaries,   qualifying
supervisory  goodwill  purchased  mortgage servicing rights and purchased credit
card relationships  (subject to certain limits) less nonqualifying  intangibles.
Under the tangible  capital  requirement,  a savings  association  must maintain
tangible  capital (core  capital less all  intangible  assets  except  purchased
mortgage  servicing  rights which may be included  after making the  above-noted
adjustments  in an amount up to 100% of  tangible  capital)  of at least 1.5% of
total assets.  Under the risk-based  capital  requirements,  a minimum amount of
capital must be maintained by a savings  association to account for the relative
risks inherent in the type and amount of assets held by the savings association.
The risk- based capital  requirement  requires a savings association to maintain
capital  (defined  generally  for these  purposes as core  capital  plus general
valuation  allowances  and  permanent or maturing  capital  instruments  such as
preferred stock and subordinated debt less assets required to be deducted) equal
to 8.0% of  risk-weighted  assets.  Assets  are ranked as to risk in one of four
categories  (0-100%)  with a credit  risk-free  asset such as cash  requiring no
risk-based  capital  and an  asset  with a  significant  credit  risk  such as a
non-accrual loan being assigned a factor of 100%. At June 30, 1997, based on the
capital  standards  then in effect,  Home  Federal  was in  compliance  with all
capital requirements.

         The OTS has  delayed  implementation  of a rule  which  sets  forth the
methodology  for  calculating an interest rate risk component to be incorporated
into the OTS regulatory capital rule. Under the rule, only savings  associations
with "above normal"  interest rate risk  (institutions  whose  portfolio  equity
would decline in value by more than 2% of assets in the event of a  hypothetical
200-basis point move in interest rates) will be required to maintain  additional
capital for interest rate risk under the risk-based capital framework. A savings
association  with an "above  normal"  level of  exposure  will have to  maintain
additional  capital  equal to  one-half  the  difference  between  its  measured
interest rate risk (the most adverse change in the market value of its portfolio
resulting from a 200-basis point move in interest rates divided by the estimated
market  value of its  assets)  and 2%,  multiplied  by the  market  value of its
assets. That dollar amount of capital is in addition to a savings  association's
existing risk-based capital  requirement.  Although the OTS has decided to delay
implementation  of this rule, it will  continue to closely  monitor the level of
interest  rate  risk at  individual  savings  associations  and it  retains  the
authority,  on a case-by-case  basis, to impose additional capital  requirements
for individual savings associations with significant interest rate risk.

         In periods of rapidly changing interest rates, the Bank's balance sheet
is subject to  significant  fluctuations  in market  value  (interest  rate risk
exposure).  However, as the delayed interest rate risk rules proposed by the OTS
currently  read,  the Bank at June 30, 1997,  would have no  additional  capital
requirement.  The Bank's management  remains cognizant of the proposed rules and
continues to monitor its interest rate risk position.

                                      -23-
<PAGE>                                    

         The  following is a summary of Home  Federal's  regulatory  capital and
capital requirements at June 30, 1997:
<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>

         If an association is not in compliance  with its capital  requirements,
the OTS is required to prohibit  asset growth and to impose a capital  directive
that may restrict,  among other  things,  the payment of dividends and officers'
compensation.  In  addition  to the  specific  sanctions  provided in FIRREA for
failing to meet the capital  requirements,  the OTS and the FDIC  generally  are
authorized to take enforcement  actions against a savings association that fails
to meet its capital  requirements,  which  actions may include  restrictions  on
operations  and banking  activities,  the imposition of a capital  directive,  a
cease and desist order,  civil money  penalties or harsher  measures such as the
appointment  of a  receiver  or  conservator  or a forced  merger  into  another
institution.

         Prompt Corrective Regulatory Action

         The  Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991
("FedICIA") requires, among other things, federal bank regulatory authorities to
take "prompt  corrective  action" with respect to institutions  that do not meet
minimum capital  requirements.  For these  purposes,  FedICIA  establishes  five
capital  tiers:  well  capitalized,  adequately  capitalized,  undercapitalized,
significantly  undercapitalized,  and critically  undercapitalized.  At June 30,
1997,  Home Federal was  categorized  as "well  capitalized,"  meaning that Home
Federal's  total  risk-based  capital ratio  exceeded 10%, Home Federal's Tier I
risk-based capital ratio exceeded 6%, Home Federal's leverage ratio exceeded 5%,
and Home Federal was not subject to a regulatory  order,  agreement or directive
to meet and maintain a specific capital level for any capital measure.



         Capital Distributions Regulation

         An OTS regulation imposes limitations upon all "capital  distributions"
by savings associations, including cash dividends, payments by an institution to
repurchase or otherwise acquire its shares,  payments to shareholders of another
institution  in a  cash-out  merger  and  other  distributions  charged  against
capital.  The regulation  establishes a three-tiered system of regulation,  with
the greatest  flexibility  being afforded to  well-capitalized  institutions.  A
savings  association  which has total  capital  (immediately  prior to and after
giving effect to the capital  distribution)  that is at least equal to its fully
phased-in  capital   requirements  would  be  a  Tier  l  institution  ("Tier  1
Institution").  An  institution  that has total  capital  at least  equal to its
minimum  capital  requirements,  but  less  than  its  fully  phased-in  capital
requirements,  would  be  a  Tier  2  institution  ("Tier  2  Institution").  An
institution  having  total  capital  that  is  less  than  its  minimum  capital
requirements would be a Tier 3 institution ("Tier 3 Institution").  However,  an
institution which otherwise  qualifies as a Tier 1 institution may be designated
by the OTS as a Tier 2 or Tier 3  institution  if the OTS  determines  that  the
institution  is "in need of more  than  normal  supervision."  Home  Federal  is
currently a Tier l Institution.

         A Tier 1 Institution could, after prior notice but without the approval
of the OTS, make capital  distributions during a calendar year up to 100% of its
net income to date during the calendar  year plus an amount that would reduce by

                                      -24-
<PAGE>


one-half  its  "surplus  capital  ratio" (the  excess  over its fully  phased-in
capital  requirements)  at the beginning of the calendar  year.  Any  additional
amount of capital distributions would require prior regulatory approval.

         The OTS has proposed  revisions to these regulations which would permit
savings  associations  to declare  dividends in amounts  which would assure that
they remain adequately  capitalized following the dividend declaration.  Savings
associations  in a holding company system which are rated Camel 1 or 2 and which
are  not in  troubled  condition  would  need  to  file a  notice  with  the OTS
concerning such dividend declaration.

         Safety and Soundness Standards

         On February 2, 1995, the federal banking  agencies adopted final safety
and soundness standards for all insured depository institutions.  The standards,
which were issued in the form of guidelines rather than  regulations,  relate to
internal   controls,   information   systems,   internal  audit  systems,   loan
underwriting  and  documentation,  compensation  and interest rate exposure.  In
general,  the standards are designed to assist the federal  banking  agencies in
identifying and addressing  problems at insured depository  institutions  before
capital becomes impaired.  If an institution fails to meet these standards,  the
appropriate  federal  banking  agency may  require the  institution  to submit a
compliance  plan.  Failure to submit a compliance plan may result in enforcement
proceedings.  On August 27,  1996,  the  federal  banking  agencies  added asset
quality and earnings standards to the safety and soundness guidelines.

         Real Estate Lending Standards

         OTS regulations require savings  associations to establish and maintain
written  internal  real estate  lending  policies.  Each  association's  lending
policies  must  be  consistent  with  safe  and  sound  banking   practices  and
appropriate  to the size of the  association  and the  nature  and  scope of its
operations.   The  policies  must  establish   loan  portfolio   diversification
standards;  establish prudent underwriting  standards,  including  loan-to-value
limits, that are clear and measurable;  establish loan administration procedures
for the  association's  real  estate  portfolio;  and  establish  documentation,
approval,   and  reporting   requirements   to  monitor   compliance   with  the
association's real estate lending policies.

         The association's written real estate lending policies must be reviewed
and approved by the association's board of directors at least annually. Further,
each association is expected to monitor  conditions in its real estate market to
ensure that its lending  policies  continue to be appropriate for current market
conditions.

         Federal Reserve System

         Under FRB  regulations,  Home Federal is required to maintain  reserves
against its  transaction  accounts  (primarily  checking and NOW  accounts)  and
non-personal  money  market  deposit  accounts.  The  effect  of  these  reserve
requirements  is to increase Home  Federal's  cost of funds.  Home Federal is in
compliance with its reserve  requirements.  A federal savings association,  like
other depository  institutions  maintaining reservable accounts, may borrow from
the FRB "discount  window," to meet these requirements but the FRB's regulations
require the savings association to exhaust other reasonable alternative sources,
including  borrowing  from its regional  FHLB,  before  borrowing  from the FRB.
FedICIA  imposes  certain   limitations  on  the  ability  of   undercapitalized
depository institutions to borrow from FRBs.

         Holding Company Regulation

         The Company (the "Holding  Company") is regulated as a "non-diversified
unitary savings and loan holding company" within the meaning of the Home Owners'
Loan Act,  as amended  ("HOLA"),  and  subject to  regulatory  oversight  of the
Director of the OTS. As such, the Holding Company is registered with the OTS and
thereby  subject to OTS  regulations,  examinations,  supervision  and reporting

                                     -25-
<PAGE>

requirements.  As a  subsidiary  of a savings  and loan  holding  company,  Home
Federal is subject to certain  restrictions  in its  dealings  with the  Holding
Company and with other companies affiliated with the Holding Company.

         The HOLA  generally  prohibits  a  savings  and loan  holding  company,
without prior approval of the Director of the OTS, from (i) acquiring control of
any other savings association or savings and loan holding company or controlling
the assets  thereof or (ii)  acquiring or  retaining  more than 5% of the voting
shares  of a savings  association  or  holding  company  thereof  which is not a
subsidiary.  Additionally,  under  certain  circumstances,  a  savings  and loan
holding  company is permitted  to acquire,  with the approval of the Director of
the OTS, up to 15% of previously unissued voting shares of an  under-capitalized
savings  association  for cash  without that  savings  association  being deemed
controlled  by the  holding  company.  Except  with the  prior  approval  of the
Director  of the OTS,  no  director  or  officer of a savings  and loan  holding
company or person owning or  controlling  by proxy or otherwise more than 25% of
such company's stock may also acquire control of any savings association,  other
than a subsidiary association, or any other savings and loan holding company.

         The Holding Company's Board of Directors  presently intends to continue
to operate the Holding  Company as a unitary  savings and loan holding  company.
There are generally no restrictions on the permissible  business activities of a
unitary  savings  and loan  holding  company.  However,  if the  Director of OTS
determines that there is reasonable  cause to believe that the continuation by a
savings and loan holding  company of an activity  constitutes  a serious risk to
the  financial  safety,  soundness,  or  stability  of  its  subsidiary  savings
association,  the  Director  of the OTS may impose such  restrictions  as deemed
necessary  to address  such risk and  limiting  (i) payment of  dividends by the
savings  association,  (ii) transactions between the savings association and its
affiliates,  and (iii) any  activities  of the  savings  association  that might
create a serious  risk  that the  liabilities  of the  holding  company  and its
affiliates may be imposed on the savings association.

         Notwithstanding  the above rules as to permissible  business activities
of unitary  savings  and loan  holding  companies,  if the  savings  association
subsidiary of such a holding  company fails to meet the Qualified  Thrift Lender
("QTL") test,  then such unitary  holding  company  would become  subject to the
activities  restrictions  applicable to multiple holding companies.  (Additional
restrictions on securing  advances from the FHLB also apply).  See  "--Qualified
Thrift Lender." At June 30, 1997, Home Federal's asset composition was in excess
of that required to qualify Home Federal as a QTL.

         If the  Holding  Company  were to acquire  control  of another  savings
association other than through a merger or other business  combination with Home
Federal,  the Holding Company would thereupon become a multiple savings and loan
holding  company.  Except where such acquisition is pursuant to the authority to
approve  emergency  thrift   acquisitions  and  where  each  subsidiary  savings
association meets the QTL test, the activities of the Holding Company and any of
its  subsidiaries   (other  than  Home  Federal  or  other  subsidiary   savings
associations) would thereafter be subject to further restrictions. HOLA provides
that,  among other  things,  no multiple  savings  and loan  holding  company or
subsidiary thereof which is not a savings association shall commence or continue
for a limited period of time after becoming a multiple  savings and loan holding
company or subsidiary  thereof,  any business activity other than (i) furnishing
or performing  management  services for a subsidiary savings  association,  (ii)
conducting an insurance agency or escrow business,  (iii) holding,  managing, or
liquidating assets owned by or acquired from a subsidiary  savings  association,
(iv) holding or managing  properties  used or occupied by a  subsidiary  savings
association,  (v) acting as trustee under deeds of trust,  (vi) those activities
previously  directly  authorized by the FSLIC by regulation as of March 5, 1987,
to be  engaged  in by  multiple  holding  companies  or (vii)  those  activities
authorized  by the FRB as  permissible  for bank holding  companies,  unless the
Director  of the OTS by  regulation  prohibits  or limits  such  activities  for
savings and loan holding  companies.  Those activities  described in (vii) above
must also be approved by the Director of the OTS prior to being  engaged in by a
multiple holding company.

         The Director of the OTS may also approve acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
associations  in more than one state,  if the multiple  savings and loan holding

                                      -26-
<PAGE>

company involved controls a savings  association which operated a home or branch
office in the state of the  savings  association  to be  acquired as of March 5,
1987,  or if the laws of the  state  in  which  the  savings  association  to be
acquired  is  located   specifically  permit  associations  to  be  acquired  by
state-chartered  associations or savings and loan holding  companies  located in
the state where the  acquiring  entity is located (or by a holding  company that
controls such state-chartered  savings associations).  Also, the Director of the
OTS may approve an acquisition  resulting in a multiple savings and loan holding
company controlling  savings  associations in more than one state in the case of
certain emergency thrift acquisitions.

         No subsidiary saving  association of a savings and loan holding company
may declare or pay a dividend on its permanent or  nonwithdrawable  stock unless
it  first  gives  the  Director  of the  OTS 30  days  advance  notice  of  such
declaration and payment.  Any dividend  declared during such period,  or without
the giving of such notice, shall be invalid.

         Federal Securities Law

         The shares of Common Stock of the Holding  Company are registered  with
the SEC under the Securities  Exchange Act of 1934 (the "1934 Act"). The Holding
Company is subject  to the  information,  proxy  solicitation,  insider  trading
restrictions  and  other  requirements  of the 1934 Act and the rules of the SEC
thereunder.  If the  Holding  Company  has fewer than 300  shareholders,  it may
deregister  its  shares  under  the 1934  Act and  cease  to be  subject  to the
foregoing requirements.

         Shares  of Common  Stock  held by  persons  who are  affiliates  of the
Holding Company may not be resold without registration unless sold in accordance
with the resale  restrictions  of Rule 144 under the Securities Act of 1933 (the
"1933  Act").  If the  Holding  Company  meets the  current  public  information
requirements  under Rule 144, each affiliate of the Holding Company who complies
with the other  conditions of Rule 144 (including a one-year  holding period and
conditions  that require the  affiliate's  sale to be  aggregated  with those of
certain  other  persons)  will be able to  sell in the  public  market,  without
registration,  a number of shares not to exceed, in any three-month  period, the
greater of (i) l % of the outstanding  shares of the Holding Company or (ii) the
average  weekly  volume of trading in such  shares  during  the  preceding  four
calendar weeks.

         Qualified Thrift Lender

         Savings  associations  must meet a QTL test  which  requires  a savings
association to have at least 65% of its portfolio  assets invested in "qualified
thrift  investments"  on a monthly  average  basis in 9 out of every 12  months.
Qualified  thrift  investments  under the QTL test  include:  (i) loans  made to
purchase, finance, construct,  improve or repair domestic residential housing or
manufactured housing; (ii) home equity loans; (iii) mortgage-backed  securities;
(iv) direct or indirect  existing  obligations of either the FDIC or the Federal
Savings and Loan Insurance  Corporation ("FSLIC") for ten years from the date of
issuance,  if issued prior to July 1, 1989; (v) obligations of the FDIC,  FSLIC,
FSLIC  Resolution  Fund and the  Resolution  Trust  Corporation  for a five year
period from July 1, 1989, if issued after such date; (vi) FHLB stock;  (vii) 50%
of the dollar amount of residential mortgage loans originated and sold within 90
days of origination;  (viii) investments in service  corporations that derive at
least  80%  of  their  gross  revenues  from  activities   directly  related  to
purchasing,   refinancing,   constructing,   improving  or  repairing   domestic
residential real estate or manufactured  housing; (ix) 200% of the dollar amount
of   loans   and   investments   made  to   acquire,   develop   and   construct
one-to-four-family  residences that are valued at no more than 60% of the median
value of homes  constructed  in the area; (x) 200% of the dollar amount of loans
for the  acquisition  or improvement  of  residential  real property,  churches,
schools,  and nursing  homes  located  within,  and loans for any purpose to any
small  business  located  within,  an area  where  credit  needs  of its low and
moderate  income  residents are determined not to have been adequately met; (xi)
loans  for the  purchase,  construction,  improvement  or  upkeep  of  churches,
schools, nursing homes and hospitals not qualified under (x); (xii) up to 10% of
portfolio assets held in consumer loans or loans for educational  purposes;  and
(xiii) FHLMC and FNMA stock.  However,  the aggregate  amount of  investments in
categories  (vii)-(xiii)  which may be taken  into  account  for the  purpose of
whether an institution meets the QTL test cannot exceed 15% of portfolio assets.
                                 
                                      -27-
<PAGE>


Portfolio assets under the QTL test include all of an association's  assets less
(i)  goodwill  and other  intangibles,  (ii) the value of  property  used by the
association to conduct its business,  and (iii) its liquid assets as required to
be maintained under law up to 20% of total assets.


         A savings  association  which  fails to meet the QTL test  must  either
convert to a bank (but its deposit  insurance  assessments  and payments will be
those of and paid to SAIF) or be subject to the following penalties:  (i) it may
not enter into any new activity except for those permissible for a national bank
and for a savings association; (ii) its branching activities shall be limited to
those  of a  national  bank;  (iii) it shall  not be  eligible  for any new FHLB
advances; and (iv) it shall be bound by regulations applicable to national banks
respecting  payment of dividends.  Three years after  failing the QTL test,  the
association must (i) dispose of any investment or activity not permissible for a
national  bank and a savings  association  and (ii) repay all  outstanding  FHLB
advances.  If such a savings  association  is  controlled  by a savings and loan
holding  company,  then such holding  company  must,  within a  prescribed  time
period,  become  registered as a bank holding  company and become subject to all
rules  and  regulations   applicable  to  bank  holding   companies   (including
restrictions as to the scope of permissible business activities).

         A savings  association  failing to meet the QTL test may requalify as a
QTL if it thereafter  meets the QTL test. In the event of such  requalification,
it shall not be subject to the penalties  described above. A savings association
which  subsequently  again  fails to  qualify  under the QTL test  shall  become
subject to all of the described  penalties  without  application  of any waiting
period.

         At June 30, 1997, 75.2% of Home Federal's  portfolio assets (as defined
on that date) were invested in qualified thrift  investments (as defined on that
date),  and therefore Home  Federal's  asset  composition  was in excess of that
required  to qualify  Home  Federal as a QTL.  Home  Federal  does not expect to
significantly  change its lending or  investment  activities in the near future,
and therefore  expects to continue to qualify as a QTL, although there can be no
such assurance.

         Community Reinvestment Act Matters

         Federal law requires that ratings of depository  institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a  four-unit  descriptive  rating -- using terms such as  satisfactory  and
unsatisfactory -- and a written  evaluation of each  institution's  performance.
Each FHLB is required to establish standards of community  investment or service
that its members must maintain for continued  access to long-term  advances from
the FHLBs. The standards take into account a member's  performance under the CRA
and its record of lending to first-time  homebuyers.  The FHLBs have established
an  "Affordable  Housing  Program" to subsidize the interest rate of advances to
member associations engaged in lending for long-term,  low- and moderate-income,
owner-occupied  and affordable  rental housing at subsidized rates. Home Federal
is  participating  in this program.  The  examiners  have  determined  that Home
Federal has an outstanding record of meeting community credit needs.

Taxation

         Federal Taxation

         The Holding  Company and its  subsidiary  file a  consolidated  federal
income tax return on the accrual  basis for each fiscal year ending June 30. The
consolidated   federal   income  tax  return  has  the  effect  of   eliminating
intercompany   distributions,   including  dividends,   in  the  computation  of
consolidated  taxable income.  Income of the Holding Company generally would not
be taken into  account in  determining  the bad debt  deduction  allowed to Home
Federal,  regardless  of whether a  consolidated  tax return is filed.  However,
certain  "functionally  related" losses of the Holding Company would be required
to be taken into account in determining the permitted bad debt deduction  which,
depending  upon  the  particular  circumstances,   could  reduce  the  bad  debt
deduction.  Home  Federal's  federal income tax returns have not been audited in
the last five years.

                                      -28-
<PAGE>


         Historically,  savings  associations,  such as Home Federal,  have been
permitted to compute bad debt deductions using either the bank experience method
or the percentage of taxable income method.  However,  for years beginning after
December 31, 1995,  Home Federal will no longer be able to use the percentage of
taxable  income method of computing its allocable tax bad debt  deduction.  Home
Federal will be required to compute its allocable deduction using the experience
method.  As a result of the repeal of the  percentage of taxable  income method,
reserves  taken  after  1987  using the  percentage  of  taxable  income  method
generally  must be included  in future  taxable  income over a six-year  period,
although  a  two-year  delay  may  be  permitted  for  institutions   meeting  a
residential   mortgage  loan  origination  test.  Home  Federal  will  recapture
approximately  $2.5  million  over a six-year  period  that will begin in fiscal
1999. In addition,  the pre-1988  reserve,  in which no deferred taxes have been
recorded,  will not have to be recaptured into income unless (i) Home Federal no
longer qualifies as a bank under the Code, or (ii) excess dividends are paid out
by Home Federal.

         Depending  on the  composition  of its items of income and  expense,  a
savings  institution  may be subject to the  alternative  minimum tax. A savings
institution must pay an alternative  minimum tax equal to the amount (if any) by
which 20% of  alternative  minimum  taxable  income  ("AMTI"),  as reduced by an
exemption  varying with AMTI,  exceeds the regular tax due. AMTI equals  regular
taxable  income   increased  or  decreased  by  certain  tax   preferences   and
adjustments,  including depreciation  deductions in excess of that allowable for
alternative  minimum tax purposes,  tax-exempt interest on most private activity
bonds  issued  after  August 7, 1986  (reduced by any related  interest  expense
disallowed  for  regular  tax  purposes),  the  amount  of the bad debt  reserve
deduction  claimed in excess of the deduction based on the experience method and
75% of the excess of adjusted current earnings over AMTI (before this adjustment
and before any alternative tax net operating loss).  AMTI may be reduced only up
to 90% by net operating loss carryovers,  but alternative  minimum tax paid that
is  attributable  to most  preferences  (although  not to  post-August  7,  1986
tax-exempt interest) can be credited against regular tax due in later years.

         State Taxation

         Home  Federal  is  subject  to  Indiana's  Financial  Institutions  Tax
("FIT"),  which is imposed at a flat rate of 8.5% on  "adjusted  gross  income."
"Adjusted  gross  income,"  for purposes of FIT,  begins with taxable  income as
defined by Section 63 of the Code, and thus, incorporates federal tax law to the
extent that it affects the computation of taxable income. Federal taxable income
is then adjusted by several Indiana modifications.  Other applicable state taxes
include generally applicable sales and use taxes plus real and personal property
taxes.

         Home  Federal's  state  income tax returns have not been audited in the
last five years.

Current Accounting Issues

         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 gain 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

                                      -29-
<PAGE>


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.



Item 2.           Properties.

         At June 30, 1997,  Home Federal  conducted  its business  from its main
office at 222 West Second Street, Seymour, Indiana and 15 full-service branches.
Home  Federal  owns  two  buildings  that it  uses  for  certain  administrative
operations located at 218 West Second Street,  Seymour, and 211 Chestnut Street,
Seymour.  The headquarters of its Private Ledger  operations,  conducted through
its  service  corporation  subsidiary,  are  located at 501  Washington  Street,
Columbus, Indiana. Information concerning these properties, as of June 30, 1997,
is presented in the following table:
<TABLE>
<CAPTION>

                                                      Net Book         
                                                      Value of            
                                                      Property,     Approximate       
                                        Owned or   Furniture and      Square       Lease
Description and Address                  Leased       Fixtures       Footage     Expiration
-----------------------                  ------       --------       -------     ----------
                                              (Dollars in Thousands)
<S>                                      <C>          <C>             <C>         <C>
Principal Office                          Owned      $ 3,207            9,200        N/A
222 West Second Street

Operations Center                         Owned      $   255           20,000        N/A
218 West Second Street

Loan Processing Center                    Owned      $   100            5,130        N/A
211 North Chestnut

Branch Offices:
Columbus Branches:
     501 Washington Street                Owned      $   614           14,800        N/A
     3805 25th Street                     Owned      $   358            5,800        N/A
     2751  Brentwood Drive                Owned      $   428            3,200        N/A
     4330 West Jonathon Moore Pike        Owned      $   794            2,600        N/A

Hope Branch                           1/2 Owned      $    35            2,000        4/99
332 Jackson Street                    1/2 Leased


Austin Branch                             Owned      $    45            3,600        N/A
67 West Main Street

Brownstown Branch                         Leased     $     8            2,400      Month to
101 North Main Street                                                               Month
                                                                
North Vernon Branches
     111 North State Street               Owned      $   394            1,900        N/A


                                      -30-
<PAGE>



     1540 North State Street              Leased     $    42            1,600       10/02
 
Osgood Branch                             Owned      $   110            1,280        N/A
South Buckeye Street

Salem Branch
     R.R, #1, Highway 60 West (old)       Owned      $    33            2,000        N/A
     1208 South Jackson (new)             Owned      $   196            1,860        N/A

Seymour Branch                            Owned      $   407            6,800        N/A
1117 East Tipton Street

Batesville Branch                         Owned      $   678            2,175        N/A
12 West Pearl Street

Madison Branch                            Owned      $   445            2,550        N/A
201 Clifty Drive

Greensburg Branch                         Leased     $    22            2,440        8/97
115 East North Street
</TABLE>

         Home Federal owns its computer and data  processing  equipment  that is
used for  accounting,  financial  forecasting,  and general  ledger  work.  Home
Federal also has  contracted for the data  processing and reporting  services of
NCR headquartered in Dayton, Ohio. The contract with NCR expires in October
2000.

Item 3.           Legal Proceedings.

         Neither the Company,  Home Federal nor its  subsidiaries  is a party to
any pending legal proceedings,  other than routine litigation  incidental to its
business activities.

Item 4.           Submission of Matters to a Vote of Security Holders.

         No  matter  was  submitted  to  the  Corporation's  or  Home  Federal's
shareholders during the quarter ended June 30, 1997.

Item 4.5.          Executive Officers of Home Federal Bancorp.

     Presented below is certain information  regarding the executive officers of
HFB who are not also directors.

                                           Position with HFB
                                           -----------------
Lawrence E. Welker                Executive Vice President, Treasurer,
                                  Chief Financial Officer and Secretary

Gerald L. Armstrong               Chief Operating Officer and
                                  Executive Vice President

         Lawrence  E. Welker (age 50) has been  employed by Home  Federal  since
1979.  He was  Controller  from 1979 to 1982.  In 1982,  he was elected as Chief
Financial  Officer  and  Treasurer,  and in 1994 he  became  an  Executive  Vice
President.

         Gerald L.  Armstrong  (age 57) has been  employed by Home Federal since
February,  1992 as its Executive Vice President,  and Chief  Operating  Officer.
Before being employed by Home Federal, he was President, Chief Executive Officer
and a Director of Seymour  National Bank, a commercial  bank located in Seymour,
Indiana.

                                      -31-
<PAGE>
                                     PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder
                  Matters.

         Home Federal  converted from mutual to stock form effective January 14,
1988 (the "Conversion").  Home Federal then reorganized  effective March 1, 1993
by converting  each  outstanding  share of its common stock,  par value $.01 per
share,  into one share of common  stock,  without  par value,  of HFB, a unitary
savings and loan holding  company  organized in Indiana (the  "Reorganization").
HFB's principal asset is 100% of the outstanding  capital stock of Home Federal.
HFB's common stock  ("Common  Stock") is quoted on the National  Association  of
Securities  Dealers  Automated  Quotation  System  ("NASDAQ"),  National  Market
System,  under the symbol  "HOMF."  HFB's  Common Stock was  substituted  on the
NASDAQ, National Market System for Home Federal's common stock on March 1, 1993,
subject to the  Reorganization.  Home Federal's  common stock had been quoted on
the NASDAQ,  National Market System since its initial  issuance  pursuant to the
Conversion  on January 14, 1988.  For certain  information  related to the stock
prices and dividends paid by HFB, see  "Management's  Discussion and Analysis of
Financial   Condition  and  Results  of  Operations  --  Quarterly   Results  of
Operations" on page 5 of HFB's 1997 Shareholder  Annual Report (the "Shareholder
Annual  Report").  As of June 30, 1997, there were 582 shareholders of record of
HFB's Common Stock.

         It is  currently  the policy of HFB's Board of Directors to continue to
pay  quarterly  dividends,  but any future  dividends are subject to the Board's
discretion  based on its  consideration  of HFB's operating  results,  financial
condition, capital, income tax considerations, regulatory restrictions and other
factors.

         Since  HFB has no  independent  operations  or  other  subsidiaries  to
generate  income,  its ability to  accumulate  earnings  for the payment of cash
dividends to its  shareholders  is directly  dependent  upon the ability of Home
Federal to pay dividends to the Company.

         Under OTS regulations,  a converted savings association may not declare
or pay cash  dividends  if the effect would be to reduce its net worth below the
amount required for the liquidation account created at the time it converted. In
addition,  under OTS regulations,  the extent to which a savings association may
make  a  "capital  distribution,"  which  includes,  among  other  things,  cash
dividends, will depend upon in which one of three categories,  based upon levels
of capital, that savings association is classified.  Home Federal is a "tier one
institution" and therefore would be able to pay cash dividends to HFB during any
calendar  year up to 100% of its net income  during that  calendar year plus the
amount that would  reduce by one half its  "surplus  capital  ratio" (the excess
over its capital  requirements)  at the  beginning  of the  calendar  year.  See
"Regulation--Capital Distributions Regulation" in Item 1 hereof. Prior notice of
any  dividend to be paid by Home Federal to the Company will have to be given to
the OTS.

         Income of Home Federal  appropriated  to bad debt reserves and deducted
for federal  income tax purposes is not available for payment of cash  dividends
or other  distributions  to HFB without the payment of federal  income  taxes by
Home  Federal on the amount of such income  deemed  removed from the reserves at
the then-current income tax rate. At June 30, 1997,  approximately $6 million of
Home Federal's  retained  income  represented  bad debt  deductions for which no
federal income tax provision had been made. See "Taxation--Federal  Taxation" in
Item 1 hereof.

         Unlike Home Federal,  generally  there is no regulatory  restriction on
the payment of dividends by HFB, subject to the determination of the Director of
the OTS that there is reasonable  cause to believe that the payment of dividends
constitutes  a serious risk to the financial  safety,  soundness or stability of
Home Federal.  Indiana law,  however,  would prohibit HFB from paying a dividend
if, after giving effect to the payment of that  dividend,  HFB would not be able
to pay its debts as they  become due in the usual  course of  business  or HFB's
assets  would be less than the sum of its total  liabilities  plus  preferential
rights of holders of preferred stock, if any.

                                      -32-
<PAGE>


         On November 22, 1994, the Board of Directors of HFB declared a dividend
of one common share purchase right (a "Right" or "Rights") for each  outstanding
share of  Common  Stock.  The  dividend  was  paid on  December  6,  1994 to the
shareholders  of record as of November 22, 1994.  If and when the Rights  become
exercisable,  each Right will entitle the registered holder to purchase from HFB
one Common Share at a purchase price of $60.00 (the "Purchase  Price"),  subject
to  adjustment  as  described  in the Rights  Agreement  between the Company and
LaSalle  National  Bank,  Chicago,  Illinois,  (the  "Rights  Agreement")  which
specifies  the  terms of the  Rights.  The  Rights  will be  represented  by the
outstanding Common Share  certificates and the Rights cannot be bought,  sold or
otherwise  traded  separately  from the Common  Shares  until the  "Distribution
Date," which is the earliest to occur of (i) 10 calendar days following a public
announcement  that a person or group (an  "Acquiring  Person")  has (a) acquired
beneficial  ownership  of 15% or more of the  outstanding  Common  Shares or (b)
become the beneficial  owner of an amount of the outstanding  Common Shares (but
not less than 10%) which the Board of Directors determines to be substantial and
which  ownership  the  Board  of  Directors  determines  is  intended  or may be
reasonably  anticipated,  in general, to cause HFB to take actions determined by
the Board of Directors to be not in HFB's best long-term  interests (an "Adverse
Person"), or (ii) 10 business days following the commencement or announcement of
an intention to make a tender offer or exchange offer the  consummation of which
would result in the beneficial  ownership by a person or group of 30% or more of
such outstanding Common Shares.

         The Rights have  certain  anti-takeover  effects.  The Rights may cause
substantial  dilution to a person or group that attempts to acquire HFB on terms
not  approved  by the Board of  Directors  of HFB,  except  pursuant to an offer
conditioned on a substantial number of Rights being acquired.  The Rights should
not  interfere  with any merger or other  business  combination  approved by the
Board of  Directors  since the Rights may be  redeemed  by HFB at $.01 per Right
prior to the time that a person or group has  acquired  beneficial  ownership of
15% or more of the Common Shares.

Item 6.           Selected Financial Data.

         The  information  required by this item is incorporated by reference to
the material under the heading "Summary of Selected Consolidated Financial Data"
on page 4 of the Shareholder Annual Report.

Item 7.           Management's Discussion and Analysis of Financial Condition 
                  and Results of  Operation.

         The  information  required by this item is incorporated by reference to
pages 6 to 13 of the Shareholder Annual Report.

Item 7. A         Quantitative and Qualitative Analysis of Financial Condition
                  and Results of Operations

         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 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

                                      -33-
<PAGE>


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 an  institution.  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  institution's   interest  rate
sensitivity of NPV as of June 30, 1997, (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


Item 8.           Financial Statements and Supplementary Data.

         The  Company's  Consolidated  Financial  Statements  and Notes  thereto
contained on pages 14 to 32 of the  Shareholder  Annual Report are  incorporated
herein by reference.  HFB's Quarterly Results of Operations  contained on page 5
of the Shareholder Annual Report are incorporated herein by reference.

Item 9.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure.

         There are no such  changes  and  disagreements  during  the  applicable
period.

                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.

         The  information  required by this item with  respect to  directors  is
incorporated  by reference to pages 2 to 4 of the Company's  Proxy Statement for
its 1997 annual shareholder  meeting (the "1997 Proxy  Statement").  Information
concerning  the  Company's  executive  officers  who are not also  directors  is
included in Item 4.5 in Part I of this report.

         The  information  required by this item with respect to the  compliance
with Section 16(a) of the  Securities  Exchange Act of 1934 is  incorporated  by
reference to page 11 of the 1997 Proxy Statement.

                                      -34-

<PAGE>


Item 11.          Executive Compensation.

         The  information  required  by this  item  with  respect  to  executive
compensation  is  incorporated  by  reference to pages 4 to 11 of the 1997 Proxy
Statement.



Item 12.          Security Ownership of Certain Beneficial Owners and
                  Management.

         The  information  referred by this item is incorporated by reference to
pages 1 to 3 of the 1997 Proxy Statement.

Item 13.          Certain Relationships and Related Transactions.

         The  information  required by this item is incorporated by reference to
page 10 of the 1997 Proxy Statement.

                                   
                                     PART IV

Item 14.          Exhibits. Financial Statement Schedules and Reports
                  on Form 8-K.

         (a)       List the following documents filed as a part of the report:

Financial Statements                                             Page in 1997
                                                                 Shareholder
                                                                 Annual Report

Consolidated Balance Sheets as of
         June 30, 1997 and 1996...................................    14

Consolidated Statements of Income for each of
         the years in the three-year period ended
         June 30, 1997............................................    15


Consolidated Statements of  Shareholders' Equity
         for each of the years in the three-year period
         ended June 30, 1997......................................    16

Consolidated Statements of Cash Flows for each
         of the years in the three-year period ended
         June 30, 1997............................................    17

Notes to Consolidated Financial Statements........................    18

Report of Deloitte & Touche LLP
         Independent Auditors.....................................    33

         (b)       Reports on Form 8-K

         Registrant has filed no reports on Form 8-K for the quarter ending June
30, 1997.

         (c) The exhibits filed herewith or incorporated by reference herein are
set forth on the Exhibit Index on page 37.

         (d) All schedules are omitted as the required information either is not
applicable or is included in the  Consolidated  Financial  Statements or related
notes.

                                      -35-

<PAGE>





                                   SIGNATURES
                                   ----------



         Pursuant  to the  requirements  of Section  13 or 15(d) the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on behalf of the undersigned,  thereto duly authorized,  this 22nd day
of September, 1997.


                                            HOME FEDERAL BANCORP
DATE: September 22, 1997                    /s/ John K. Keach, Jr.
     -------------------                    ----------------------
                                            John K. Keach, Jr., President and
                                            Chief Executive Officer




         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant  and in the  capacities  indicated on this 22nd day of September,
1997.



/s/ Lawrence E. Welker                      /s/ John K. Keach, Jr.
----------------------                      ----------------------
Lawrence E. Welker, Executive               John K. Keach, Jr.,
Vice President, Treasurer,                  President and Chief
Chief Financial Officer and Secretary       Executive Officer
(Principal Financial Officer)               (Principal Executive
                                            Officer)



/s/ Melissa M. Arnold                       /s/ John K. Keach, Jr.
---------------------                       ----------------------
Melissa M. Arnold, Vice                     John K. Keach, Jr.,Director
President and Controller
(Principal Accounting Officer)



/s/ John K. Keach, Sr.                      /s/ John T. Beatty
----------------------                      ------------------
John K. Keach, Sr., Director                John T. Beatty, Director



/s/ Lewis Essex                             /s/ Harold Force
---------------                             ----------------
Lewis Essex, Director                       Harold Force, Director



/s/ David W. Laitinenen                     /s/ Harvard W. Nolting, Jr.
-----------------------                     ---------------------------
David W. Laitinen, Director                 Harvard W. Nolting, Jr., Director





                                      -36 -
<PAGE>



                                  EXHIBIT INDEX
                                  -------------

Reference to
Regulation S-K                                                    Sequential
Exhibit Number                      Document                      Page Number
--------------                      --------                      -----------

  2              Agreement and Plan of Reorganization
                 (incorporated by reference from Exhibit A to
                 Registrant's Registration Statement on Form S-4
                 (Registration No. 33-55234)).

  3(a)           Articles of  Incorporation  (incorporated by
                 reference  from  Exhibit  B to  Registrant's
                 Registration    Statement    on   Form   S-4
                 (Registration
                 No. 33-55234)).

  3(b)           Code of By-Laws  (incorporated  by reference
                 from Exhibit C to Registrant's  Registration
                 Statement  on  From  S-4  (Registration  No.
                 33-55234)).

  4(a)           Article 6 of the  Articles of  Incorporation
                 (incorporated by reference from Exhibit B to
                 Registrant's  Registration Statement on Form
                 S-4 (Registration No. 33-55234)).

  4(b)           Article   III  of  the   Code   of   By-Laws
                 (incorporated by reference from Exhibit C to
                 Registrant's  Registration Statement on From
                 S-4 (Registration No. 33-55234)).

 10(a)           Stock Option Plan (incorporated by reference from
                 Exhibit 10(a) to Registrant's Registration Statement
                 on Form S-4 (Registration No. 33-55234)).

 10(b)            1993 Stock  Option  Plan  (incorporated  by
                  reference    from    Exhibit    10(b)    to
                  Registrant's Form 10-K for the
                 year ended June 30, 1994).

 10(c)           Employment Agreement with Lawrence E. Welker
                 (incorporated by reference from Exhibit 10(c) to
                 Registrants Registration Statement on Form S-4
                 (Registration No. 33-55234)).

 10(d)           Employment Agreement with John K. Keach, Jr.
                 (incorporated by reference from Exhibit 10(d) to
                 Registrant's Registration Statement on Form S-4
                 (Registration No. 33-55234)).

 10(f)           Employment Agreement with Gerald L. Armstrong
                 (incorporated by reference from Exhibit 10(f) to
                 Registrant's Registration Statement on Form S-4
                 (Registration No. 33-55234)).

 10(g)           April 1, 1989 Promissory Note and related
                 documents pertaining to the Illinois Building
                 (incorporated by reference from Exhibit 10(f) to
                 Home Federal Savings Bank's Form 10-K for the year
                 ended June 30, 1989).

                                      -37-
<PAGE>

 10(i)           Stock Option Agreement with Harvard W. Nolting, Jr.
                 (incorporated by reference from Exhibit 10(i) to Home
                 Federal Savings Bank's Form 10-K for the fiscal year
                 ended June 30, 1991).

 10(j)           Stock Option Agreement with David W. Laitinen
                 (incorporated by reference from Exhibit 10(j)
                 to Home Federal Savings Bank's Form 10-K for 
                 the fiscal year ended June 30, 1991).

 10(k)           Stock Option Agreement with John T. Beatty
                 (incorporated by reference from Exhibit 10(k) to Home
                 Federal Savings Bank's Form 10-K for the fiscal year
                 ended June 30, 1991).

 10(l)           Stock Option Agreement with Harold Force
                 (incorporated by reference from Exhibit 10(l) to
                 Home Federal Savings Bank's Form 10-K for the fiscal
                 year ended June 30, 1991).

 10(n)           Executive Supplemental Retirement Income Agreement
                 with John K. Keach, Jr. (incorporated by reference from
                 Exhibit 10(n) to Home Federal Savings Bank's
                 Form 10-K for the fiscal year ended June 30,
                 1991)  and  First   Amendment  to  Executive
                 Supplemental   Retirement  Income  Agreement
                 (incorporated   by  reference  from  Exhibit
                 10(n)  to  Registrant's  Form  10-K  for the
                 fiscal year ended June 30, 1992).

 10(o)           Executive Supplemental Retirement Income Agreement
                 with Lawrence E. Welker (incorporate by reference 
                 from Exhibit 10(o) to Home Federal Saving Bank's
                 Form 10-K  for the fiscal year ended June 30, 1991)
                 and First Amendment to Executive Supplemental Retirement
                 Income Agreement (incorporated by reference from Exhibit
                 10(o) to Registrant's Form 10-K for the fiscal year ended
                 June 30, 1992).

 10(p)           Executive Supplemental Retirement Income Agreement
                 with Buryl S. Line (incorporated by reference
                 from Exhibit 10(p) to Home Federal Savings Bank's
                 Form 10-K for the fiscal year ended June 30, 1991)

 .10(v)           Deferred Compensation Agreement with John K. Keach, Sr.
                 (incorporated by reference from Exhibit 10(v) to Home 
                 Federal Savings Bank Form 10-K for the fiscal year 
                 ended June 30, 1992) and First Amendment to Deferred
                 Compensation Agreement (incorporated by reference from
                 Exhibit 10(v) to Registrant's Form 10-K for the year 
                 ended June 30, 1994).

 10(w)           Deferred Compensation Agreement with Buryl S. Line 
                 (incorporated by reference from Exhibit 10(w)
                 to Home Federal Savings Bank Form 10-K for the 
                 fiscal year ended June 30, 1992).

 10(x)           Executive Supplemental Retirement Income Agreement
                 with Gerald L. Armstrong (incorporated by reference
                 from Exhibit 10(x) to Home Federal Savings Bank Form
                 10-K for the fiscal year ended June 30, 1992) and 
                 First Amendment to Executive Supplemental Retirement
                 Income Agreement (incorporated by reference from
                 Exhibit 10(x) to Registrant's Form 10-K for the year
                 endedJune 30, 1994).

                                      -38-
<PAGE>

 10(y)           Employment Agreement with Gerald L. Armstrong 
                 (incorporated by reference from Exhibit l0(aa) 
                 to Home Federal Savings Bank Form 10-K for the
                 fiscal year ended June 30, 1992).

 10(ab)          Stock Option Agreement with Gerald L. Armstrong 
                 (incorporated by reference from Exhibit 10(ab) to
                 Home Federal Savings Bank Form 10-K for the fiscal   
                 year ended June 30, 1992).

 10(ac)          Director Deferred Compensation Agreement with 
                 John Beatty (incorporated by reference from     
                 Exhibit l0(ac) to Home Federal Savings Bank 
                 Form 10-K for the fiscal year ended June 30, 1992).

 10(ad)          Director  Deferred  Compensation   Agreement
                 with Lewis Essex  (incorporated by reference
                 from Exhibit 10(ad) to Home Federal  Savings
                 Bank Form 1 0-K for the  fiscal  year  ended
                 June 30, 1992).

 10(ae)          Director  Deferred  Compensation   Agreement
                 with Harold Force (incorporated by reference
                 from Exhibit 10(ae) to Home Federal  Savings
                 Bank Form  l0-K for the  fiscal  year  ended
                 June 30, 1992).

 10(af)          Director  Deferred  Compensation   Agreement
                 with  David  W.  Laitinen  (incorporated  by
                 reference   from  Exhibit   10(af)  to  Home
                 Federal  Savings  Bank  Form  10-K  for  the
                 fiscal year ended June 30, 1992).

 10(ag)          Director Deferred Compensation Agreement with
                 William Nolting (incorporated by reference from
                 Exhibit 10(ag) to Home Federal Savings Bank     
                 Form 10-K for the fiscal year ended June 30,
                 1992).

 10(ah)          Non-Qualified Stock Option Agreement,  dated
                 December22,   1992,   with  John  T.  Beatty
                 (incorporated   by   referencefrom   Exhibit
                 10(ah) to Registrant's Form 10-K for theyear
                 ended June 30, 1994)

 10(ai)          Non-Qualified  Stock Option Agreement,
                 dated December 22, 1992, with Lewis W. Essex
                 (incorporated   by  reference  from  Exhibit
                 10(ai)  to  Registrant's  Form  10-K for the
                 year ended June 30, 1994).

 10(aj)          Non-Qualified  Stock Option Agreement,
                 dated  December 22, 1992,  with Harold Force
                 (incorporated   by  reference  from  Exhibit
                 10(aj)  to  Registrant's  Form  10-K for the
                 year ended June 30, 1994).

 10(ak)          Non-Qualified Stock Option Agreement, dated 
                 December 22, 1992, with David W. Laitinen
                 (incorporated by reference from Exhibit 10(ak)
                 to Registrant's Form 10-K for the year ended 
                 June 30, 1994).

 10(al)          Non-Qualified Stock Option Agreement, dated
                 December 22, 1992, with Harvard W. Nolting, Jr
                 (incorporated by reference from Exhibit 10(al) 
                 to Registrant's Form 10-K for the year ended June
                 30, 1994).

 10(am)          Non-Qualified Stock Option Agreement,  dated
                 August   24,1993,   with   John  T.   Beatty
                 (incorporated   by  reference  from  Exhibit
                 10(am)  to  Registrant's  Form  10-K for the
                 year ended June 30, 1994).

                                      -39-
<PAGE>

 10(an)          Non-Qualified Stock Option Agreement, dated 
                 August 24,1993, with Lewis W. Essex (incorporated
                 by reference from Exhibit 10(an) to Registrant's 
                 Form 10-K for the year ended June 30, 1994).

 10(ao)          Non-Qualified  Stock Option Agreement,
                 dated  August 24,  1993,  with Harold  Force
                 (incorporated   by  reference  from  Exhibit
                 10(ao)  to  Registrant's  Form  10-K for the
                 year ended June 30, 1994).

 10(ap)          Non-Qualified  Stock Option Agreement,
                 dated  August  24,   1993,   with  David  W.
                 Laitinen  (incorporated  by  reference  from
                 Exhibit 10(ap) to Registrant's Form 10-K for
                 the year ended June 30, 1994).

 10(aq)          Non-Qualified Stock Option Agreement, dated
                 August 24, 1993, with Harvard W. Nolting, Jr.
                 (incorporated by reference from Exhibit 10
                 (aq) to Registrant's Form 10-K for the year 
                 ended June 30, 1994).

 10(ar)          Rights Agreement, dated as of November 22, 1994, 
                 between Registrant and LaSalle National Bank,
                 Chicago, Illinois, as Rights Agent (incorporated
                 by reference from Exhibit 1 to Registrant's
                 Registration Statement on Form 8-A filed with 
                 the SEC on December 5, 1994).

 10(as)          1995 Stock Option Plan (incorporated by reference 
                 from Exhibit A to Registrant's Proxy Statement
                 for its  1995 annual shareholder meeting).
 .
 13              1997 Shareholder Annual Report

 21              Subsidiaries of the Registrant (incorporated
                 by reference from Exhibit 21 to Registrant's
                 Form 10-K for the year ended June 30, 1993).

 23.1            Independent Auditors' Consent.


 27              Financial Data Schedule (to be filed electronically)

                                      -40-