<PAGE>
                                                                   EXHIBIT 28(b)


                         PIONEER FINANCIAL CORPORATION
                             WINCHESTER, KENTUCKY

                             25 E. Hickman Street
                          Winchester, Kentucky 40391
                                (606) 744-3972

                   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                        TO BE HELD ON JANUARY 14, 1998

     Notice is hereby given that the annual meeting of shareholders of Pioneer 
Financial Corporation (the "Corporation") will be held at 10:00 a.m. on January 
14, 1998 at the home office of the Corporation's wholly-owned subsidiary, 
Pioneer Federal Savings Bank, at 25 E. Hickman Street, Winchester, Kentucky, for
the following purposes:

     1.  To elect three Directors of the class whose term of office expires in 
1998, to serve for a term of three years, and to elect one Director of the class
whose term expires in 1998, to serve for a term of two years.

     2.  To ratify the appointment of Miller, Mayer, Sullivan & Stevens LLP to 
serve as the auditor of the Savings Bank for fiscal year 1998; and 

     3.  To receive the reports of officers and transact such other business as 
may properly come before the meeting. Management is not aware of any such other 
business.

     The Board of Directors has fixed the close of business on December 1, 1997 
as the record date for determining shareholders entitled to notice of and to 
vote at the annual meeting.

     The Proxy Statement accompanies this Notice.

                                   By Order of the Board of Directors

                                   CARL C. NORTON, PRESIDENT

Dated this 16th day of December, 1997
Winchester, Kentucky

YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER THIS PROXY MATERIAL CAREFULLY AND 
TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. YOU MAY REVOKE YOUR PROXY AT ANY TIME 
BEFORE IT IS VOTED BY DELIVERING TO THE SECRETARY OF PIONEER FINANCIAL 
CORPORATION EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY 
BEARING A LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND VOTING IN 
PERSON. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
 
                         PIONEER FINANCIAL CORPORATION

                             25 E. Hickman Street
                          Winchester, Kentucky  40391
                                (606) 744-3972

                                PROXY STATEMENT

                       Annual Meeting, January 14, 1998


The Proxy and Solicitation

This Proxy Statement is being mailed on December 16, 1997 to the shareholders of
Pioneer Financial Corporation in connection with the solicitation, by the Board
of Directors, of the enclosed form of proxy for the Annual Meeting of
Shareholders to be held at 10:00 a.m. on Wednesday, January 14, 1998, at the
main office, 25 East Hickman Street, Winchester, Kentucky. A shareholder may
revoke a writing appointing a proxy either by giving notice to the Corporation
in writing, by executing a later-dated proxy, or by appearing at the meeting and
voting in person. The cost of soliciting the proxy will be borne by Pioneer
Financial Corporation.

Purposes of Annual Meeting

The Annual Meeting has been called for the purposes of:  (1) electing four
Directors of the class whose term of office expires in 1998 (three of whom will
serve until January, 2001, and one of whom will serve until January, 2000); and
(2) ratifying the appointment of Miller, Mayer, Sullivan & Stevens LLP, as
auditor for the fiscal year 1998.  In addition, the shareholders may receive
reports of officers, and transact such other business as may properly come
before the meeting.

     The persons named in the enclosed proxy have been selected by the Board of
Directors and will vote shares represented by valid proxies.  They have
indicated that, unless otherwise specified in the proxy, they intend to vote to
elect as Directors the nominees listed on pages 6 and 7.  All of the nominees
are presently members of the Corporation's Board of Directors.

     The Board of Directors has no reason to believe that any of the nominees
will be unable to serve as a Director.  Each of the nominees has agreed to serve
as a Director, if elected, and has heretofore served as a Director.  In the
event, however, of the death or unavailability of any nominee or nominees, the
proxy to that extent will be voted for such other person or persons as the Board
of Directors may recommend.

     Miller, Mayer, Sullivan & Stevens LLP, has been appointed by the Board of
Directors as auditor of the Corporation for the fiscal year ending September 30,
1998.  If no contrary directions are indicated, proxies will be voted in favor
of ratification of the appointment of auditors.
<PAGE>
 
     The Corporation has no knowledge of any other matters to be presented to
the meeting.  In the event other matters do properly come before the meeting,
the persons named in the proxy will vote in accordance with their judgment on
such matters.

     Shares may be voted at the meeting in person or by proxy.  The accompanying
proxy is solicited by the Board of Directors of Pioneer Financial Corporation
and is intended to permit each shareholder as of the record date to vote.  All
valid proxies received prior to the meeting will be voted.  Unless marked to the
contrary, such proxies will be voted for the election of four Directors, and for
the ratification of the appointment of independent auditors.  If any other
business is brought before the meeting, the proxies will be voted in accordance
with the judgment of the persons voting the proxies.  A shareholder who has
given a proxy may revoke it at any time prior to such proxy being voted at the
meeting by filing with Pioneer Federal an instrument revoking it, or a duly
executed proxy bearing a later date, or by attending the meeting and giving
notice of such revocation.  Attendance at the meeting does not by itself
constitute revocation of a proxy.

     The owners of a majority of the outstanding shares of the Corporation must
be present, in person or by proxy, at the Annual Meeting to constitute a quorum.

     The four nominees for Directors receiving a plurality of the votes cast at
the meeting in person or by proxy shall be elected.  All other matters require
for approval the favorable vote of a majority of shares voted at the meeting in
person or by proxy.

     In addition to the use of the mails, proxies may be solicited by the
Directors, officers and employees of Pioneer Federal Savings Bank, the wholly-
owned subsidiary of the Corporation, without additional compensation, by
personal interview, telephone, telegraph or otherwise.  Arrangements may also be
made with brokerage firms and other custodians, nominees and fiduciaries who
hold the voting securities of record for the forwarding of solicitation material
to the beneficial owners thereof.  Pioneer Financial Corporation will reimburse
such brokers, custodians, nominees and fiduciaries for the reasonable out-of-
pocket expenses incurred by them in connection therewith.

1999 Shareholder Proposals

The deadline for shareholders to submit proposals to be considered for inclusion
in the Proxy Statement for the 1999 Annual Meeting of Shareholders is expected
to be September 1, 1998.

Voting Securities

The Board of Directors has fixed the close of business on December 1, 1997 as
the record date for determining shareholders 

                                       2
<PAGE>
 
entitled to notice of the meeting and to vote. The Corporation has outstanding
and entitled to vote at the meeting 208,233 shares of common stock. Shareholders
are entitled to one vote for each share held on the record date on all matters
presented to the shareholders at the Annual Meeting except that, in the election
of Directors, cumulative voting rules will apply. Under cumulative voting, each
shareholder is entitled to cast as many votes in the aggregate as shall equal
the number of shares of common stock owned by him or her multiplied by the
number of Directors to be elected. Each shareholder, or his or her Proxy, may
cast all of his or her votes (as thus determined) for a single nominee for
Director or may distribute them among two or more nominees, in the shareholder's
discretion. As to the authority of the persons named as proxies in the
accompanying proxy card to cumulate votes, see the section entitled ITEM ONE -
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS OF OFFICE EXPIRING IN 2000 AND
2001.

     The following table sets forth information furnished to the Corporation
with respect to persons known by the Corporation to be the beneficial owners of
more than 5% of the Corporation's common stock (as of September 30, 1997).

<TABLE>
<CAPTION>
 
Name and Address of              Number of Shares             Percent  
 Beneficial Owner               Beneficially Owned            of Stock  
-------------------             ------------------            --------  
<S>                             <C>                           <C>       
Lee Ricketts                          10,736                    5.16%    
c/o Corner Drug Store
26 East Broadway
Winchester, Kentucky
</TABLE> 

     In addition, Cede & Company holds 29,199 shares (14.02%) as nominal owner
for other persons and entities.  We are assured by members of that firm that
none of the parties for whom it holds Pioneer Financial stock would be the
beneficial owner of more than 5% of the Corporation's stock.

     The following table sets forth, as of December 1, 1997, information
furnished to the Corporation with respect to the beneficial ownership by each
Director and nominee, and by all present Directors and officers as a group, of
the Corporation's common stock.  This table further provides, for each Director,
the age, period from which each has served as a Director of Pioneer Federal
Savings Bank (the Corporation's wholly-owned subsidiary), his or her principal
occupation or employment, and information with respect to the beneficial
ownership, as such term is defined under Rules and Regulations of the Securities
and Exchange Commission, of the outstanding shares of the Corporation's common
stock by each Director and by all Directors and officers as a group.

                                       3
<PAGE>
 
<TABLE>
<CAPTION>
                                                          Amount & Nature      
Name, Age, Principal (1)                      Current     of Beneficial    
Occupation, Directorship         Director     Term        Ownership of      Percent
& Business Experiences           Since        Expires     Common Shares     of Stock 
------------------------         --------     -------     -------------     --------
<S>                              <C>          <C>         <C>               <C>
Nominees for Director:                                                    
William M. Cress (55)            1991         1998             1,050           .50%
  Engineer; Director                                                      
Carl C. Norton (41)              1993         1998             2,644          1.27%
  Banker; President and                                                   
  Director                                                                
Janet W. Prewitt (50)            1972         1998             7,350          3.53%
  Attorney; Director and                                                  
  Chairman of the Board                                                   
Robert G. Strode (58)            1974         1998             6,785          3.26%
  General Contractor;                                                     
   Director                                                               
Continuing Directors:                                                     
Thomas D. Muncie (60)            1974         2000             2,850          1.37%
  President, Muncie                                                       
  Buick-GMC Truck, Inc.;                                                  
  Director                                                                
Andrew James Ryan (38)           1995         1999                70           .03%
  President, Andy Ryan                                                    
  Pontiac Nissan, Inc.;                                                   
  Director                                                                
Nancy M. Lawwill (61)            1981         1999             2,000           .96%
  Banker; Director,                                                       
  Vice President, Treasurer                                               
  and Assistant Secretary                                                 
Wayne M. Martin (51)             1991         1999               600           .29%
  President, WKYT-TV 27;                                                  
  Director                                                                
Retiring Directors, who                                                   
 will                                                                     
  become Advisory Directors                                               
Ewart W. Johnson (75)            1989(4)      2000             5,275          2.53%
  Retired; Director                                                       
Nora M. Linville (75)            1976         2000             2,400          1.15%
  Retired; Director and                                                   
  Secretary to the Board                                                  
Advisory Directors to                                                     
  Pioneer Federal Savings                                                 
   Bank:                                                                  
Clifford R. Langley                                            5,000          2.40%
Willard M. Martin                                              5,015          2.41%
Beckner Shimfessel                                             2,500          1.20%
All Directors and executive                                   31,024         14.89%
officers as a group,                                                                    
excluding Advisory                                                                      
 Directors                                                                              
(10 persons)                                                                            
All Directors and executive                                   43,539         20.91% 
officers as a group,
including Advisory Directors
(13 persons)
</TABLE> 
---------------------   
(1)  All members of the Board of Directors have held the positions set forth
     above for at least five years, unless otherwise indicated.
(2)  Includes all shares of Corporation common stock owned by each Director's
     spouse, or as custodian or trustee over which shares such individuals
     effectively exercise sole voting and investment power.

                                       4
<PAGE>
 
(3)  Ms. Prewitt is an equity partner in the law firm of White, McCann &
     Stewart.  Her law firm received gross fees from Pioneer Federal of
     $101,805.59 during fiscal year ended September 30, 1997, including
     $10,858.02 of commissions from title insurance written in connection with
     loans made at the Savings Bank.  Ms. Prewitt's share of the gross fees was
     $24,433.34.
(4)  Mr. Johnson was elected Director of the Bank on May 28, 1965 and served in
     that position until his resignation on October 17, 1972.  He served as a
     Director Emeritus of the Savings Bank from 1972 until the January, 1989
     Annual Meeting of Shareholders, when he was elected to serve the remaining
     unexpired term then held by Clifford R. Langley.

     Each officer, Director and beneficial owner of more than 10% of any class
of equity securities of Pioneer Financial Corporation is required to file a
report with the Securities and Exchange Commission and/or Office of Thrift
Supervision initially reporting securities beneficially owned by him or her, and
then reporting any change in ownership of securities.  These reports must be
filed by the 10th day of the calendar month following the date on which such a
transaction occurred.  All of the statements of changes in beneficial ownership
of securities to be filed by officers and Directors of Pioneer Financial
Corporation have been timely filed in fiscal year 1997.

Changes in Directorship

     Ewart W. Johnson and Nora M. Linville having attained the age for mandatory
retirement as Director of Pioneer Financial Corporation are now retiring as of
the Annual Meeting.  They will continue to serve, however, as Advisory Directors
to Pioneer Federal Savings Bank.

     Further, George W. Billings, Jr. formerly served as a Director of the
Corporation.  However, he resigned as Director effective November 1, 1997 due to
ill health.  The effect of the resignation of Mr. Billings and the mandatory
retirement of Ms. Linville and Mr. Johnson was considered by the Board of
Directors of Pioneer Financial Corporation at its meeting on September 16, 1997.
The Board voted to amend the Bylaws of the Corporation, to reduce the number of
Directors of Pioneer Financial Corporation to ten effective November 1, 1997,
and to eight effective after the Annual Meeting on January 14, 1998.  The
amendment to the Bylaws is stated as follows:

                       ARTICLE III - BOARD OF DIRECTORS

          Section 2.  Number and term.  The Board of Directors shall consist of
          ten members from November 1, 1997 and eight members from the date of
          the next shareholders meeting thereafter.  The Board shall be divided
          into three classes as nearly equal in number as possible.  One member
          of the next class to be elected after November 1, 1997 shall be
          elected for a term of two years to equalize the size of the classes;
          all other members of 

                                       5
<PAGE>
 
          each class shall be elected for a term of three years until their
          successors are elected and qualified. One class shall be elected by
          ballot annually.

Nominees and Directors Whose Terms of Office will Continue

Pioneer Financial Corporation is governed by a Board of Directors to consist of
eight members effective January 14, 1998, as set forth in Pioneer's Bylaws,
above.  The Board is divided into three classes, with the members of each class
to serve for three year terms (except as stated above).  Information as to each
of the nominees and continuing Directors is given below.  Unless stated to the
contrary, the Directors have been engaged in their current occupations for at
least the five preceding years.  One class of the Board is due for election at
this Annual Meeting (Item No. One, below).

     The nominees for election as members of the Board of Directors, with
information furnished to the Corporation by them as of December 1, 1997, are as
follows:

          ITEM NO. ONE - NOMINEE FOR ELECTION AS DIRECTOR FOR TERM OF
                            OFFICE EXPIRING IN 2000

Janet W. Prewitt (age 50) has been a Director of Pioneer Federal since 1972.
She served as the Savings Bank's President from 1976 until 1993, and is
currently Chairperson of the Board of Directors of both Pioneer Financial
Corporation and its wholly-owned subsidiary, Pioneer Federal Savings Bank.  Ms.
Prewitt is an equity partner in the law firm of White, McCann & Stewart, a
general practice law firm located in Winchester, which serves as general counsel
to Pioneer Federal and Pioneer Financial.  Legal services performed by the law
firm are attended by Mr. John H. Rompf, Jr., and Mrs. Beverly Ann Shea (Ms.
Prewitt's sister) of the firm, who are not otherwise associated with the
Corporation nor the Savings Bank.  In fiscal 1997, Pioneer Federal paid White,
McCann & Stewart $101,805.59 in legal fees (including the law firm's percentage
of commissions paid on title insurance premiums paid by Pioneer Federal during
fiscal 1996 and some prior years).  Of this sum, $96,445.68 represented fees
earned in connection with title examinations and title insurance for real estate
loans, while the balance represented fees in foreclosure actions and fees for
quarterly and annual reports.

        ITEM NO. TWO - NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS OF
                            OFFICE EXPIRING IN 2001

Carl C. Norton (age 41) is President of Pioneer Financial Corporation and
Pioneer Federal Savings Bank, and as such is Chairman of all committees of the
Board of Directors.  He is a Winchester native, a past president of the Central
Kentucky League of Savings Institutions, Director of the Winchester- Clark
County Chamber of Commerce and the Winchester-Clark County Industrial
Development Authority.  Mr. Norton holds a Bachelors 

                                       6
<PAGE>
 
degree in accounting from the University of Kentucky and he is a graduate of the
Kentucky School of Banking and the School of Banking of the South. Mr. Norton
has over seventeen years of banking experience. He has served as a Director of
Pioneer Federal since January, 1993, and has been employed by Pioneer since
February, 1992. Prior to coming to Pioneer Federal, Mr. Norton was Executive
Vice-President and Chief Managing Officer of First Security Bank of Clark
County.

William M. Cress (age 55) is Executive Vice President of Hinkle Contracting
Corporation in Paris, Kentucky.  He has been employed by Hinkle since 1972,
having spent 12 years with the Kentucky Department of Highways prior to that.
He majored in Civil Engineering at the University of Kentucky and is a
Registered Professional Engineer.  He is a native of Powell County and currently
resides in Stanton.  He is Director of Beech Fork Golf Club and past President
of the Plant-Mix Asphalt Industry of Kentucky, Powell County Education
Foundation, and Powell County Alumni Association.  Mr. Cress was an Advisory
Director of the Savings Bank from June 17, 1980 until January 9, 1991, when he
was elected to serve the remaining unexpired term then held by John D. Harrison.
Mr. Cress serves on the Salary and Operations/Business Plan Committees.

Robert G. Strode (age 58) has been a Director of Pioneer Federal since 1974.
Mr. Strode retired in June, 1990 as Vice President of Ag-Gro Fertilizer Company,
a fertilizer processing company located in Winchester.  Mr. Strode currently
serves on the Audit and Executive Committees.

If any person or persons other than the aforesaid nominees are nominated as
Directors, then the proxies named in the enclosed proxy card, or their
substitutes, or a majority of them, shall have the right in their discretion to
vote for some number less than all the aforesaid nominees or for less than all
of the aforesaid nominees equally.  If any of the aforesaid nominees becomes
unwilling or unable to accept nomination or election, then the proxies shall
have the right to vote for any substitute nominee in place of the nominee who
has become unwilling or unable to accept nomination or election.

The Board of Directors has nominated Ms. Prewitt to serve as Director until
2000, and Messrs. Norton, Strode and Cress to serve as Directors until 2001, or
until their respective successors shall have been elected and shall qualify.
Election of the nominees requires the affirmative vote of a plurality of the
votes actually cast at the Annual Meeting.  THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF THESE NOMINEES AS DIRECTORS.

Continuing Directors

     Present Directors whose term of office will continue after the meeting,
with information furnished to the Savings Bank by them as of December 1, 1997,
are as follows:

                                       7
<PAGE>
 
            PRESENT DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN 1999

Nancy M. Lawwill (age 61) has been a Director of Pioneer Federal since 1981.
She has served as Pioneer Federal's Treasurer since 1973, as Assistant Secretary
since 1974 and as Vice President since 1994.  She has been with the Savings Bank
since 1966, and is the Savings Bank's data processing and computer coordinator
and is in charge of operations, as well as serving as a Loan Officer.  Mrs.
Lawwill serves on the Loan, Asset/Liability and CRA Committees.

Wayne M. Martin (age 51) was elected to Pioneer Federal's Board of Directors on
January 9, 1991, to serve the remainder of Mr. Beckner Shimfessel's term.  He is
President and General Manager for WKYT-TV 27 in Lexington, and has been with
WKYT since March, 1987.  He is a Winchester native, and is President of the
Kentucky Broadcasters Association.  Mr. Martin holds a Bachelors degree in
Business Administration, a Masters degree in Education and a Rank I
Administrative certification - all from Morehead State University.  He also
serves on the Board of Trustees of Cardinal Hill Hospital, is Chairman of the
Lexington Area Sports Authority, Director and President of the Child Advocacy
Center of the Bluegrass, and is an Elder of First Christian Church, Winchester,
Kentucky.  Mr. Martin currently serves on the Salary, CRA and Executive
Committees.

Andrew James Ryan (age 38) was elected a Director of Pioneer Federal and Pioneer
Financial on December 1, 1995 to fill the remainder of the term of Michael S.
Houlihan, who died suddenly on November 28, 1995.  Mr. Ryan is President of Andy
Ryan Pontiac Nissan, Inc., an automobile dealership in Winchester.  He was
General Manager of White Chevrolet and Pontiac of Manchester from 1982 until
moving to Winchester in November, 1991 to assume his current duties.  He is past
President of the Winchester New Car Dealers Association, a member of the
Winchester Rotary and Kiwanis Clubs, and is a deacon of First Christian Church,
Winchester, Kentucky.  Mr. Ryan currently serves on the Operations/Business Plan
Committee.

           PRESENT DIRECTOR WHOSE TERM OF OFFICE WILL EXPIRE IN 2000

Thomas D. Muncie (age 60) has been a Director of Pioneer Federal since 1974.  He
is President of Muncie Buick-GMC Truck, Inc., an automobile dealership located
in Winchester.  Mr. Muncie currently serves on the Executive and
Operations/Business Plan Committees.

             RETIRING DIRECTORS WHO WILL BECOME ADVISORY DIRECTORS

Ewart W. Johnson (age 75) is a retired businessman and former Kentucky State
Parks Commissioner.  He was elected a Director of Pioneer Federal on May 28,
1965 and served in that position until his resignation on October 17, 1972.  He
served as a Director Emeritus of the Savings Bank from 1972 until the January,
1989 Annual Meeting of Shareholders, when he was elected to serve the 

                                       8
<PAGE>
 
remaining unexpired term then held by Clifford R. Langley. Mr. Johnson serves on
the Operations/Business Plan Committee. Mr. Johnson, having attained the
mandatory retirement age, will be retiring from the Board of Directors of
Pioneer Financial Corporation at its meeting on January 14, 1998. It is
anticipated that Mr. Johnson will be elected an Advisory Director of Pioneer
Federal Savings Bank, as stated below.

Nora M. Linville (age 75) has been a Director of the Savings Bank since 1976.
She retired from Pioneer Federal as Executive Vice President in 1992, having
been with Pioneer Federal since 1952.  She serves as Secretary to the Board and
on the Executive, Salary and Audit Committees.  Ms. Linville, having attained
the mandatory retirement age, will be retiring from the Board of Directors of
Pioneer Financial Corporation at its meeting on January 14, 1998.  It is
anticipated that Ms. Linville will be elected an Advisory Director of Pioneer
Federal Savings Bank, as stated below.

Advisory Directors

Pioneer Federal Savings Bank, Pioneer Financial's wholly-owned subsidiary,
currently has three Advisory/Emeritus Directors.  Advisory Directors are elected
to that position by the Board of Directors when, in the opinion of the Board of
Directors, the Savings Bank would benefit from the particular expertise of such
persons.  These Directors are assigned to the various committees of the Bank's
Board of Directors.  Advisory Directors do not have voting or other authority at
the Board and committee meetings.  Advisory Directors who have served as
Directors of the Savings Bank carry the honorary title of Director Emeritus.
Directors are routinely asked to serve as Advisory Directors upon retirement as
Directors.  The following persons currently serve as Advisory/Emeritus Directors
to the Savings Bank:  Clifford R. Langley, Beckner Shimfessel and Willard M.
Martin (all of whom were appointed Directors Emeritus upon retirement from the
Board of Directors).  Roger Davis, Martha W. Hampton and Nellie K. Meadows
formerly served as Advisory Directors to Pioneer Federal Savings Bank; however,
when Pioneer Federal ceased operation of a branch office in Stanton, effective
October 17, 1997, Ms. Hampton, Ms. Meadows and Mr. Davis resigned as Advisory
Directors.  It is anticipated that Nora M. Linville and Ewart W. Johnson will be
elected as Advisory/Emeritus Directors to Pioneer Federal Savings Bank,
following their retirement as Directors of Pioneer Financial Corporation.

Family Associations Among Directors and Officers

Wayne M. Martin, Director, is the son of Willard M. Martin, a Director Emeritus
of the Savings Bank.

Committees of the Board of Directors

The Board of Directors of the Corporation and of Pioneer Federal Savings Bank,
its principal subsidiary, have established the following committees, the members
of which are designated 

                                       9
<PAGE>
 
annually by the Board of Directors of the Corporation and of the Savings Bank.
The President serves as Chairman of all committee meetings (except Salary
Committee), and the Chairman of Pioneer Financial's Board serves as an ex-
officio member of all committees.

     Loan Committee.  The Loan Committee meets at least weekly, and makes
decisions on all mortgage loan applications.  All loans approved are presented
to the Board of Directors for ratification, except that loans to a borrower who
owes or would owe the Savings Bank more than $200,000 are presented to the Board
of Directors for approval.  Regular members of the Loan Committee include the
Executive Officers of the Savings Bank and its Loan Officers.

     Audit Committee.  The Audit Committee meets on an as-needed basis.  The
committee nominates the independent auditor, discusses accounting changes, and
analyzes the financial position of the Savings Bank.  Members of the Audit
Committee include Messrs. Strode, Willard Martin and Mrs. Linville.

     Asset/Liability Committee.  The Asset/Liability Committee meets quarterly
to analyze the Savings Bank past and present performance and the risks inherent
in future strategies, which may be employed by the Bank.  Members of the
Asset/Liability Committee are Ms. Prewitt, Mrs. Lawwill and Mrs. Vermillion.

     Operations/Business Plan Committee.  The Operations/Business Plan Committee
meets on an as-needed basis, to discuss, analyze, and monitor operation systems
and procedures of the Corporation and of the Savings Bank.  Members of the
committee include Messrs. Cress, Johnson, Muncie, Shimfessel and Ryan.

     CRA (Community Reinvestment Act) Committee.  This Committee meets
periodically to review HMDA (Home Mortgage Disclosure Act) data and CRA
activities conducted by the Savings Bank.  This Committee also sets CRA policy
and direction for the upcoming months.  Members of the CRA Committee include Ms.
Prewitt, Mrs. Lawwill, and Messrs. Norton, Wayne Martin, Trent and Ryan.

     Executive Committee.  The Executive Committee acts for the Board of
Directors between Board meetings.  Committee members include Mrs. Linville, and
Messrs. Norton, Wayne Martin, Strode and Muncie.  The committee meets on an as-
needed basis.

     Salary Committee.  The Salary Committee meets on an as-needed basis to
review salaries of employees.  Members of this committee include Mrs. Linville,
and Messrs. Cress and Wayne Martin.

     Nominating Committee.  Pursuant to the Corporation's By-laws, the Board of
Directors as a whole acts as a Nominating Committee for selecting the
management's nominees for election as Directors.  The Nominating Committee must
deliver its written nominations to its secretary at least 20 days prior to the
Annual 

                                      10
<PAGE>
 
Meeting. No other nominations for Directors shall be voted upon at the Annual
Meeting, except those made by shareholders in writing delivered to the secretary
at least 10 days prior to the Annual Meeting. If the Nominating Committee does
not act prior to 20 days before the Annual Meeting, then nominations may be made
at the meeting by any shareholder entitled to vote. The Board, at its September
16, 1997 meeting, nominated Ms. Prewitt and Messrs. Norton, Strode and Cress for
election as Directors for the above-listed term.

     During the fiscal year ended September 30, 1997, the Savings Bank's Board
of Directors held 12 regular meetings and 4 special meeting.  The Savings Bank's
Loan Committee met 52 times, while the Salary Committee met once during fiscal
1997.  The Operations/Business Plan Committee met once; the Executive Committee
met 9 times during the fiscal year.  The Audit Committee held 1 formal meeting,
to receive the report of the Corporation's auditors for fiscal year 1997.  The
CRA Committee met 3 times; the Asset/Liability Committee held 3 meetings.  A
Powell County Branch Committee (consisting of Directors and Advisory Directors
from Powell County) meets on a regular basis to discuss procedures and issues
particularly pertinent to the operation of the Powell County Branch.  This
Committee held 11 meetings during fiscal 1997.  During fiscal 1997, the
Corporation's Board of Directors held 4 regular meetings and 2 special meetings,
and no unanimous consents without meeting.  No Director of the Corporation
attended fewer than 75% of the total meetings of the Board of Directors and
committees on which such Board member served during this period, except for
Ewart W. Johnson, who was out of the state for a significant period of time.

Directors' Fees

Directors are paid by Pioneer Federal Savings Bank a fee of $400 per month, plus
$25 for each committee meeting attended.  Directors Emeritus are paid $400 per
month.  When the Bank has had Advisory Directors who are not Directors Emeritus,
they were paid $200 per month.  Directors who are officers of the Corpo-ration
receive no fees for serving on the Board of Directors or for attending Board
meetings or committee meetings.

Officers Who Are Not Directors

The following information is supplied with respect to officers and significant
employees of Pioneer Federal Savings Bank, the Corporation=s principal
subsidiary, who do not serve on the Corporation's nor the Savings Bank's Board
of Directors. No arrangements or understandings exist between the Corporation or
Pioneer Federal and any person listed below pursuant to which such person was
elected as an officer.

                                      11
<PAGE>
 
<TABLE> 
<CAPTION> 

    Name          Age               Positions Currently Held
                                      With Pioneer Federal
 <S>              <C>      <C> 
 Janet Tutt       55       Assistant Treasurer since 1980;
                            employee of Pioneer since 1974

 Doris Estes      50       Bypass Branch Manager and Loan
                            Officer since August, 1993;
                            Employee of Pioneer since 1984

 Bobby R. Trent   48       Compliance/Security since June,
                            1995; was previously Chief Operations
                            Officer/Compliance Officer with
                            Salt Lick Deposit Bank

 Vicki Rupard     37       Loan Officer since September, 1995;
                            was previously Mortgage
                            Administrative Assistant with
                            Peoples Commercial Bank

 Lisa Earlywine   26       Loan officer since February, 1997; was
                            previously a Loan Processor with
                            Pioneer Federal Savings Bank

 Dianna Davis     48       Stanton Branch Manager/Loan Officer
                            since October, 1995, and an employee
                            of the Bank since 1985

</TABLE> 

Remuneration of Officers

The following table sets forth for the fiscal year ended September 30, 1997,
certain information as to compensation received by all executive officers of the
Corporation as a group for services in all capacities to the Corporation.
During such period, only one executive officer of the Corporation or of Pioneer
Federal received total cash compensation in excess of $60,000.00, that being
President Carl C. Norton.  Mr. Norton's cash compensation by Pioneer Federal
during fiscal 1997 was $90,000.00.  Ms. Prewitt's  compensation as Chairman of
the Board of Pioneer Federal and of the Corporation, when added to her equity
portion of the fees paid by Pioneer to White, McCann & Stewart, did not exceed
$60,000.00 during fiscal 1997 or any prior year.

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
        Number of Persons               Capacities in             Cash
             in Group                   Which Served         Compensation (1)
--------------------------------------------------------------------------------
<S>                                  <C>                     <C>     
All Executive Officers               Executive Officers          $ 217,545
  as a Group (4 persons,              (including Chief
  4 positions)                        Financial Officer)
Other Significant Employees          Branch Managers,            $ 172,226
  as a group (6 persons,              Asst. Treas., Loan
 4 positions)                         Officers, Compliance/
                                      Security

</TABLE> 

                                      12
<PAGE>
 
(1)  In addition to cash compensation, all executive officers of the Savings
Bank, except Ms. Prewitt, are participants in the Savings Bank's group life
insurance and Blue Cross/Blue Shield major medical insurance plans, the costs of
which are paid by the Savings Bank.  The Savings Bank maintains a "401(k)"
employee profit sharing plan as described under the Employees' Retirement Income
Security Act of 1974.  The Plan became effective December 19, 1985.  Under the
Plan, the Savings Bank may make contributions in accordance with Section 401(k)
of the Internal Revenue Code.  The Savings Bank's contributions are allocated to
each participant based on the ratio the participant's compensation bears to the
total compensation.  Employees may also contribute to the Plan.  The Plan covers
all full-time employees who have attained the age of 20 1/2 years once they have
completed 6 months of service at an anniversary date of the Plan.  The
participant's account balance vests at 20% after completing 2 years of service;
this vesting is increased by 20% for each year thereafter, with 100% vesting
after 6 years of service.  Upon retirement, the employee may withdraw all or
parts of his vested portion of the Plan at his discretion (in accordance with
Section 401(k)).  The Board Chairperson of the Savings Bank participates in the
"401(k)" plan.  During fiscal 1997 the Savings Bank made no contributions to the
"401(k)" plan on behalf of the Executive Officers or Other Significant
Employees.  Ms. Prewitt participates in the life insurance and 401(k) plans
only.

In addition, Pioneer Federal Savings Bank established an Employee Stock
Ownership Plan on October 31, 1994.  Under the Plan, the Savings Bank may make
contributions in accordance with Section 401(a) of the Internal Revenue Code in
the form of cash or stock for employees of the Savings Bank who are eligible on
attainment of age 20 1/2 and completion of at least a six-month period of
service are eligible to participate.  The Savings Bank made a contribution to
the ESOP of $38,487.56 for fiscal year 1997; of this sum, $11,365.19 was
contributed to the ESOP on behalf of the Executive Officers and $13,167.82 was
contributed to the ESOP on behalf of the Other Significant Employees.

The following chart shows annual compensation (there being no long-term
compensation) of the Corporation's President and Chief Managing Officer for the
last three fiscal years (including his compensation by Pioneer Federal Savings
Bank):

<TABLE>
<CAPTION>
                          SUMMARY COMPENSATION TABLE
                                                             
                                                 ANNUAL COMPENSATION                   
NAME AND PRINCIPAL    FISCAL YEAR  ----------------------------------------------        
    POSITION          ENDED 9/30      SALARY        BONUS       OTHER (BENEFITS)  
------------------    -----------  ------------  ------------  ------------------
<S>                   <C>          <C>           <C>           <C>
Carl C. Norton,          1997        $ 90,000.00   $      -0-    $ 10,741.83
President and            1996        $ 83,892.34   $ 2,500.00    $ 10,656.35
Chief Managing           1995        $ 79,999.92   $ 2,500.00    $  9,374.60
Officer                  1994        $ 72,115.84   $ 2,700.00    $  8,993.84

</TABLE>

                                      13
<PAGE>
 
Transactions Involving Directors and Officers

Pioneer Federal currently offers loans to its officers and Directors for various
purposes consistent with the Corporation's and the Savings Bank's regular
lending policies as limited by applicable law and regulation.  These loans are
made in the ordinary course of business, are made on the same terms and
conditions as those prevailing at the time for comparable transactions with non-
affiliated persons, and, in the judgment of management, do not involve more than
normal risk of collectibility or present other unfavorable features.

     Set forth below is certain information relating to loans made to Pioneer
Federal executive officers and Directors (and their affiliates and immediate
family members) whose total aggregate loan balances exceeded $60,000.00 at any
time during the year ended September 30, 1997.  Loans which were originated by
the Savings Bank but have been sold on the secondary market are not included.

<TABLE>
<CAPTION>
 
----------------------------------------------------------------------------------------------
 Borrower and                                 Original    Original     Current
   Type of                      When            Loan      Interest    Interest       9/30/97
    Loan                     Originated        Amount       Rate        Rate         Balance
----------------------------------------------------------------------------------------------
<S>                          <C>             <C>          <C>         <C>          <C> 
Wayne Martin,                  8/29/96       $51,375.00      9%          9%        $ 45,616.64
Director:                                  
 residential/                              
 real estate                               
                                           
Chris Martin, son of           5/30/96        52,700.00      6%          8%        $ 50,747.17
Director Martin:                                                                    ----------
 residential/                              
 real estate                                
 (first mortgage,                           
 home)                                      
                                            
                                           
Total:                                                                             $ 96,363.81

</TABLE> 

During the year ended September 30, 1997, there were no loans made to Pioneer
Federal officers (who are not considered principal officers for the purposes of
the annual audit) whose total aggregate loan balances exceeded $60,000 at any
time during the fiscal year.  Loans which were originated by the Savings Bank
but have been sold on the secondary market are not included.

ITEM NO. THREE - SELECTION OF INDEPENDENT AUDITOR

Miller, Mayer, Sullivan & Stevens LLP, have been appointed as the Corporation's
independent auditor for the fiscal year ending September 30, 1998 pursuant to
the recommendation of the Audit Committee of the Board of Directors.  A
representative of Miller, Mayer, Sullivan & Stevens LLP is expected to be
present at the meeting with an opportunity to make a statement if he desires to
do so and to answer appropriate questions with respect to that 

                                      14
<PAGE>
 
firm's audit of the Corporation's consolidated financial statements and records
for the fiscal year ended September 30, 1997.

     The appointment of the auditors must be approved by a majority of the votes
cast by the stockholders of the Corporation at the meeting.  THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF AUDITORS.

                         ITEM NO. FOUR - OTHER MATTERS

The Board of Directors is not aware of any business to come before the meeting
other than those matters described above in this Proxy Statement.  However, if
any other matters should properly come before the Meeting, it is intended that
Proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the person or persons holding the proxies.

Annual Report

The Annual Report of the Corporation for the fiscal year ended September 30,
1997 is enclosed herewith.  The consolidated financial statements of the
Corporation and its subsidiary and the accompanying notes and report of
independent auditors, the quarterly data and supplementary information on the
effects of inflation, the selected financial data for each of the last five
fiscal years, and management's discussion and analysis of the summary of
operations contained in the Annual Report are incorporated by reference in this
Proxy Statement.

                              By Order of the Board of Directors


                              CARL C. NORTON, PRESIDENT

Dated this 16th day of December, 1997, Winchester, Kentucky

--------------------------------------------------------------------------------
FORM 10-K
--------------------------------------------------------------------------------

     A COPY OF THE CORPORATION'S FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, PIONEER FINANCIAL
CORPORATION, 25 EAST HICKMAN STREET, WINCHESTER, KENTUCKY 40391.

                                      15