UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                                    FORM 10-K

(Mark One)
[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                          ACT OF 1934 [NO FEE REQUIRED]
                   For the fiscal year ended December 31, 1996

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                     For the transition period from      to

                         Commission file number 0-23122

                           GREAT FINANCIAL CORPORATION
             (exact name of registrant as specified in its charter)

                  Delaware                             61-1251805
        (State or other jurisdiction of             (I.R.S. Employer
         incorporation or organization)            Identification No.)

                329 W. Main St.
                19th Floor
                Louisville, Kentucky                     40202
     (Address of principal executive offices)         (Zip Code)

                Registrant's telephone number: (502) 562-6000

     Securities registered pursuant to Section 12 (b) of the Act:
                                      None
     Securities registered pursuant to Section 12 (g) of the Act:
                          Common Stock, $.01 par value
                                (Title of class)

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K 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 10-K or any amendment to this Form
10-K. [x]

Indicate by check mark whether the registrant (1) 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  filing
requirements for the past 90 days. Yes [ X ] No [   ]

<PAGE>

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant  as  of  March 5,  1997  was  $419,845,388.  The   number  of  shares
outstanding  of   the  Registrant's  Common  Stock  as  of  March  5,  1997  was
14,021,732.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following  documents are incorporated by reference into the Form
10-K part indicated:

         DOCUMENT                               FORM 10-K

(1) Annual report to security holders for       Part I, II
      the year ended December 31, 1996
(2) Proxy statement for the annual              Part III
      meeting of shareholders to be
      held on April 23, 1997


<PAGE>
                                     PART I

ITEM 1. BUSINESS

GENERAL

         Great Financial  Corporation (Company) was  incorporated under the laws
of Delaware in December 1993 to become a savings and loan holding company,  with
Great Financial Bank, FSB (Bank),  a federally  chartered stock savings bank, as
its sole first tier subsidiary.  In March,  1994 the Company acquired all of the
capital stock of the Bank issued upon the Bank's conversion from mutual to stock
form. In July 1995 the Company  acquired First Federal  Savings Bank of Richmond
(FFSB).  FFSB  merged  with  the Bank in July  1996.  In June  1996 the  Company
acquired  Lexington Federal Savings Bank (LFSB).  LFSB merged with the Bank upon
acquisition. The Company currently engages in no significant business activities
other than those  conducted  through the Bank and the Bank's  subsidiaries.  The
Company is the largest (based on total assets of its subsidiaries) independently
owned financial institution headquartered in Kentucky.

         The Bank's  principal  business is attracting  retail deposits from the
general public in the areas  surrounding  its branch offices and investing those
deposits,  together with funds  generated from  operations,  loan and investment
principal  repayments,  and borrowings,  in one-to-four family,  owner-occupied,
residential mortgage loans, multi-family,  commercial real estate,  construction
and land loans,  commercial business loans and consumer loans. In addition,  the
Bank invests in securities  issued by the U.S.  Government and agencies thereof,
mortgage-backed  securities and other investments  permitted by federal laws and
regulations.  The Bank  originates  and purchases  loans for  investment and for
sale. The Bank's revenue is derived principally from interest and fees on loans,
mortgage loan servicing and subservicing  activities,  interest and dividends on
its investments and mortgage-backed  securities and mortgage banking activities.
The  Bank's  primary  sources  of funds are  deposits,  principal  and  interest
payments  on loans,  proceeds  from the sale of loans and,  to a lesser  extent,
Federal Home Loan Bank (FHLB) advances and other borrowed funds.

MARKET AREA AND COMPETITION

         The  Bank  is  a  community-oriented  savings  bank  which  offers  its
customers a full range of retail  products and  services,  as well as commercial
loan and mortgage loan products. The Bank's deposit gathering, consumer lending,
and a major  portion of its  retail  lending  markets  are  concentrated  in the
communities  surrounding its forty-five full service offices.  The Bank's retail
lending  activities  primarily  are  concentrated  in the three major markets of
Kentucky--Louisville  metropolitan area, Owensboro metropolitan area and Central
Kentucky.  The Bank also markets  retail  lending  products  nationwide  through
telemarketing.  The Bank conducts retail mortgage  lending  activities under the
names Great  Financial  Mortgage and Lincoln  Service  Mortgage  through  retail
production  offices  located in  Louisville,  Owensboro,  Paducah and Lexington,
Kentucky.

         Approximately 67% of the Bank's deposits are in branches located in the
Louisville  metropolitan  area  (including a new office in New Albany,  Indiana)
while 21% are located in the Owensboro  metropolitan  area and Western  Kentucky
and 12% in Central  Kentucky.  With the  acquisition  of LFSB in June 1996,  the
Bank's  presence  in  Central  Kentucky  increased  to 11 branch  locations  and
approximately $400 million in deposits.

         The  Kentucky   economy  is   characterized   by  a   relatively   high
concentration  of  employment in the  manufacturing  and  agricultural  sectors.
Kentucky's economic performance typically mirrors the national economy and shows
moderate economic fluctuations.  The Bank's three principal metropolitan markets
in Kentucky reflect the economic diversity in the Commonwealth of Kentucky.

         The  Louisville  metropolitan  area, the Bank's  headquarters  city and
principal market, has gradually  transitioned during the past two decades from a
manufacturing economy to a service and retail economy. Louisville is a major hub
for health services,  transportation,  convention  services and trade,  while it
retains a significant  industrial  economy.  Major  employers in the  Louisville
metropolitan  area include UPS; Humana,  Inc.; Ford Motor Company;  Columbia/HCA
Health Care; General Electric;  Brown Forman Corporation;  Providian Corporation
and the University of Louisville.

<PAGE>

         The Owensboro  metropolitan area is the third largest metropolitan area
in Kentucky and is considered the industrial hub of Western Kentucky, with major
manufacturers  in aluminum,  steel,  mining,  and natural  gas.  Among the major
employers in this area are  Commonwealth  Aluminum,  Pyramid  Mining,  Pinkerton
Tobacco, Texas Gas Transmission Corporation, and Kimberly-Clark.

         Employment  and income in the Lexington  metropolitan  area (the second
largest  metropolitan  area in Kentucky) and Central  Kentucky area are somewhat
concentrated  in the  service  sector,  especially  as it relates to tourism and
education.

         The Bank faces  significant  competition  in Kentucky  in  originating,
purchasing and selling loans on a retail basis. The Bank's principal competitors
are financial  institutions (many of which are superregional banks) and mortgage
banking companies,  many of which have greater financial resources than does the
Bank. The Bank's  competition for loans comes principally from commercial banks,
thrift  institutions,  mortgage  brokers and  banking  companies  and  insurance
companies.  Competition for deposits has historically come from commercial banks
and thrift institutions.  In addition, the Bank faces increasing competition for
deposits  from  non-bank  institutions,  such as brokerage  firms and  insurance
companies  in such  areas  as  short-term  money  market  funds,  corporate  and
government  securities funds, mutual funds and annuities.  Competition in retail
lending  may also  increase as a result of the  lifting of  restrictions  on the
interstate  operations of financial  institutions  and from the  acquisition  of
Kentucky-based financial institutions by out-of-state financial institutions.

LENDING ACTIVITIES

         LOAN  PORTFOLIO   COMPOSITION.   The  Bank's  loan  portfolio  consists
primarily of  conventional  first mortgage  loans secured by one-to-four  family
residences,   with  a  growing  emphasis  on   diversification   by  originating
multi-family  residential  and commercial  real estate loans,  construction  and
permanent  loans,  consumer loans,  and commercial  business loans. The types of
loans that the Bank may  originate  or purchase are subject to federal and state
laws and  regulations.  Interest rates charged by the Bank on loans are affected
by the  demand  for such loans and the  supply of money  available  for  lending
purposes  and the rates  offered by  competitors.  These  factors  are, in turn,
affected by, among other things,  economic conditions,  monetary policies of the
federal  government,  including the Federal  Reserve Board,  and legislative tax
policies.

<PAGE>

The following  table sets forth the  composition of the Company's loan portfolio
in dollar amounts and in  percentages of the respective  portfolios at the dates
indicated.

<TABLE>
<CAPTION>
                                                                          At December 31,
                             -------------------------------------------------------------------------------------------------------
                                     1996                 1995                 1994                 1993                 1992
                             ------------------   -------------------  -------------------  -------------------  -------------------
                                         Percent              Percent              Percent              Percent              Percent
                                            of                   of                   of                  of                    of
                               Amount     Total     Amount     Total     Amount     Total     Amount     Total     Amount     Total
                             ----------  -------  ----------  -------  ----------  -------  ----------  -------  ----------  -------
                                                                     (dollars in thousands)
<S>                          <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>
Mortgage loans:
  One-to-four family:
    Held for investment      $1,392,761   69.95%  $1,342,667   72.50%  $1,156,491   77.74%  $  829,517   57.39%  $  661,501   60.41%
    Held for sale                65,546    3.29%     144,163    7.78%      91,725    6.16%     423,993   29.34%     291,096   26.58%
  Multi-family                  150,816    7.58%     132,055    7.13%     106,499    7.16%      97,215    6.73%      80,015    7.31%
  Commercial real estate        102,409    5.14%      62,008    3.35%      44,652    3.00%      45,323    3.13%      34,548    3.16%
  Construction and land         129,770    6.52%      87,509    4.73%      54,286    3.65%      30,774    2.13%      24,281    2.22%
                             ----------  -------  ----------  -------  ----------- -------  ----------  -------  ----------- -------
    Total mortgage loans      1,841,302   92.48%   1,768,402   95.49%   1,453,653   97.71%   1,426,822   98.72%   1,091,441   99.68%
Consumer and other loans        149,647    7.52%      83,568    4.51%      34,053    2.29%      18,462    1.28%       3,521    0.32%
                             ----------  -------  ----------  -------  ----------- -------  ----------  -------  ----------- -------
Total loans                   1,990,949  100.00%   1,851,970  100.00%   1,487,706  100.00%   1,445,284  100.00%   1,094,962  100.00%
                                         =======              =======              =======              =======              =======
Less:
  Undisbursed portion of
    mortgage loans              (41,344)             (24,138)             (18,515)              (8,694)              (6,150)
  Unearned discounts
    and unamortized fees         (3,010)              (4,485)              (4,304)              (4,168)              (3,295)
  Allowance for loan losses     (13,538)             (11,821)             (11,076)             (10,108)              (2,426)
                             ----------           ----------           ----------          -----------           ----------
Loans receivable, net        $1,933,057           $1,811,526           $1,453,811           $1,422,314           $1,083,091
                             ==========           ==========           ==========          ===========           ==========


</TABLE>

<PAGE>

The  following  table  shows  the  maturity  of the  Company's  loans  held  for
investment  at  December  31,  1996.  The table does not  include the effects of
prepayments or scheduled principal amortization.

<TABLE>
<CAPTION>
                                                              At December 31, 1996
                           --------------------------------------------------------------------------------------------
                             One-to-Four       Multi-      Commercial     Construction     Consumer       Total Loans
                                Family         Family      Real Estate      and Land       and Other      Receivable
                           ---------------  ------------  -------------  --------------  -------------  ---------------
                                                                 (in thousands)
<S>                        <C>              <C>           <C>            <C>             <C>            <C>
Amounts due:
  Within one year             $      526      $    271       $    242        $ 66,951       $ 28,276       $   96,266
                           ---------------  ------------  -------------  --------------  -------------  ---------------
  After one year:
     Over 1 to 3 years             3,522         3,232          3,015          16,778         12,694           39,241
     Over 3 to 5 years            10,554         3,731          1,399              74         39,558           55,316
     Over 5 to 10 years           74,941         4,812         13,927           1,390         55,388          150,458
     Over 10 to 20 years         386,058        77,171         60,229          17,169         13,678          554,305
     Over 20 years               917,160        61,599         23,597          27,408             53        1,029,817
                           ---------------  ------------  -------------  --------------  -------------  ---------------
     Total due after one
      year                     1,392,235       150,545        102,167          62,819        121,371        1,829,137
                           ---------------  ------------  -------------  --------------  -------------  ---------------
Total amounts due             $1,392,761      $150,816       $102,409        $129,770       $149,647        1,925,403
                           ===============  ============  =============  ==============  =============

Less:
  Undisbursed portion of
    mortgage loans                                                                                            (41,344)
  Unearned discounts and
    unamortized fees                                                                                           (3,010)
  Allowance for loan losses                                                                                   (13,538)
                                                                                                        ---------------

Loans receivable, net                                                                                      $1,867,511
                                                                                                        ===============
</TABLE>

<PAGE>

The  following  table sets forth as of December  31,  1996 the dollar  amount of
loans due after  December 31, 1997,  and whether such loans have fixed  interest
rates of adjustable interest rates.

<TABLE>
<CAPTION>
                                                        Fixed        Adjustable
                                                        Rate            Rate           Total
                                                    ------------    ------------    -------------
                                                                   (in thousands)
<S>                                                 <C>             <C>             <C>
One-to-four family residential mortgage loans         $752,456        $639,779       $1,392,235
Multi-family residential mortgage loans                 38,437         112,108          150,545
Commercial real estate loans                            33,526          68,641          102,167
Construction and land loans                             15,882          46,937           62,819
Consumer and other loans                                86,623          34,748          121,371
                                                    ------------    ------------    -------------
        Total                                         $926,924        $902,213       $1,829,137
                                                    ============    ============    =============

</TABLE>

The  following  table sets forth  the  Company's loan  originations,  purchases,
sales, principal repayments and principal charged off for the periods indicated
(including loans held for sale).

<TABLE>
<CAPTION>
                                                           For the Years Ended December 31,
                                                    ---------------------------------------------
                                                         1996            1995            1994
                                                    ------------    ------------    -------------
                                                                       (in thousands)
<S>                                                 <C>             <C>             <C>
Mortgage loans (gross):
  At beginning of period                             $1,768,402      $1,453,653      $1,426,822
                                                    ------------    ------------    -------------
  Mortgage loans originated:
    One-to-four family                                  540,966         532,701       1,202,341
    Multi-family                                         26,796          18,418          14,512
    Commercial real estate                               39,376          24,418           9,963
    Construction and land                               156,222         131,616          97,071
                                                    ------------    ------------    -------------

      Total mortgage loans originated                   763,360         707,153       1,323,887

  Mortgage loans purchased                              210,850         183,727         165,699
                                                    ------------    ------------    -------------

      Total mortgage loans
        originated and purchased                        974,210         890,880       1,489,586

  Principal repayments                                 (424,538)       (308,995)       (274,786)
  Sales of mortgage loans                              (476,495)       (265,898)     (1,179,219)
  Principal charged off                                    (277)         (1,238)         (1,374)
  Transfers to claims receivable                                                         (7,376)
                                                    ------------    ------------    -------------

  At end of period                                    1,841,302       1,768,402       1,453,653
                                                    ------------    ------------    -------------

Consumer and other loans (gross):
  At beginning of period                                 83,568          34,053          18,462
  Other loans originated                                136,952          76,088          31,912
  Other loans purchased                                   2,701          12,995
  Principal repayments                                  (72,303)        (38,962)        (16,319)
  Principal charged off                                  (1,271)           (606)             (2)
                                                    ------------    ------------    -------------
  At end of period                                      149,647          83,568          34,053
                                                    ------------    ------------    -------------
Total loans (gross) at end of period                 $1,990,949      $1,851,970      $1,487,706
                                                    ============    ============    =============

</TABLE>

<PAGE>
         ONE-TO-FOUR FAMILY MORTGAGE LENDING.  The Bank offers  conventional and
FHA/VA fixed-rate  mortgage loans and adjustable rate mortgage (ARM) loans, with
maturities  up  to 30  years,  secured  by  owner-occupied,  one-to-four  family
residences,   including,  to  a  much  lesser  extent,   condominium  units  and
townhouses.  Depending  on  market  conditions,  the  Bank may  either  keep for
portfolio or sell these loans into the secondary  market.  See "Mortgage Banking
Activities." To a much lesser extent, the Bank makes loans on non-owner occupied
one-to-four  family  properties  acquired  as an  investment  by the  borrowers.
Certain  FHA/VA loans are also  purchased  for  investment  even though they are
delinquent. See "Delinquent Loans."

         Loan  originations  are  generally   obtained  from  existing  or  past
customers, members of the local communities and referrals from local real estate
agents, builders, attorneys and other professionals. In addition, the Bank has a
network  of  commissioned   originators  who  actively   solicit  mortgage  loan
applications  in the Bank's primary market areas and loan  counselors and branch
managers who receive mortgage loan applications in the Bank's branch offices.

         During 1996, the Bank  originated mortgage loans through  existing Bank
branches and three loan production offices.  Also, mortgage loans continue to be
originated  on a  nationwide  basis  through the Bank's  Corporate  and Affinity
Relations Division (CARD),  headquarted  in Owensboro. CARD's  primary focus has
been to develop business relationships with national corporations, credit unions
and  professional  associations for the purpose of providing  residential  first
mortgages  to their  relocating  employees  or  members  through  a  centralized
telesales  environment.  Although most of CARD's loan  production is on a retail
basis, a portion continues to be purchased on a wholesale basis.

         The Bank offers  fixed-rate  mortgage loans with terms ranging from ten
to thirty  years.  In addition,  some longer term loan products have fixed rates
for 5-10 years, which adjust to market rates at the end of the initial term. The
Bank  currently  offers a number of ARM loan programs with interest  rates which
adjust  annually  or every  three  years.  These ARM loans may carry an  initial
interest  rate  which is less than the  fully  indexed  rate for the  loan.  The
initial  discounted rate is determined by the Bank in accordance with market and
competitive  factors. All ARM loans currently offered by the  Bank have periodic
caps of 2% and lifetime  ceilings and floors.  Generally,  ARM loans pose credit
risks  somewhat  greater than the risk  inherent in fixed-rate  loans  primarily
because,  as interest rates rise, the underlying  payments of the borrower rise,
increasing the potential for default.

         One-to-four  family   conventional   residential   mortgage  loans  are
generally underwritten according to Federal National Mortgage Association (FNMA)
and Federal Home Loan Mortgage Corporation (FHLMC) guidelines. The Bank's policy
on owner-occupied,  one-to-four family residential  mortgage loans is to lend up
to the lesser of the sales price or 80% of the  appraised  value of the property
securing  the loan,  or the  lesser of the sales  price or up to 95% if  private
mortgage  insurance  is obtained on amounts  which  exceed 80% of the  appraised
value of the property.  In certain  cases,  on lower risk loans above 80% to 90%
loan-to-value,  the Bank will  waive the required private mortgage  insurance in
exchange for higher yield. On non-owner occupied  one-to-four family residential
mortgage loans, the Bank normally allows a maximum 80% loan-to-value ratio.

         For a discussion of the origination and purchase of one-to-four  family
residential  loans for resale in the secondary  market,  see  "Mortgage  Banking
Activities."

         MULTI-FAMILY  RESIDENTIAL  AND COMMERCIAL  REAL ESTATE  LENDING.  As of
December 31, 1996, $102.4  million,  or 5.1% of the Bank's total loan  portfolio
(including  mortgage loans held for sale),  consisted of commercial  real estate
loans and $150.8 million, or 7.6% of the Bank's total loan portfolio,  consisted
of multi-family loans.

         The commercial real estate and  multi-family  residential  loans in the
Bank's  portfolio  consist of fixed-rate and ARM loans which were  originated at
prevailing market rates. The Bank's policy has been to originate commercial real
estate or multi-family  loans only in its market area. These loans are generally
made in amounts up to 75% of the appraised value of the property. In making such
loans,  the Bank primarily  considers the net operating  income generated by the
real estate to support the debt  service,  the  financial  resources  and income
level  and  managerial  expertise  of the  borrower,  the  marketability  of the
property,  and the  Bank's  lending  experience  with  the  borrower.  The  Bank
generally obtains personal guarantees from the principals of the borrower. Loans
secured by commercial and  multi-family  real estate involve a greater degree of
risk than one-to-four  family  residential  loans. To a much lesser extent,  the
Bank  participates with other lenders in making commercial and multi-family real
estate  loans.  To a  limited  extent,  the Bank  also  invests  in real  estate
partnerships which generate low income housing and historic tax credits.

<PAGE>

         At  December  31,  1996,  the  average   outstanding  loan  balance  on
multi-family loans was approximately  $548,200.  The Bank's largest multi-family
loan at December  31,  1996 had an  outstanding  balance of $9.7  million and is
secured  by a 395-unit  apartment  building  and small  retail  shopping  center
located in New Albany,  Indiana and is  currently  performing  according  to its
terms.

         The Bank's  commercial  real  estate  loans  typically  are  secured by
properties such as retail stores, office buildings,  and strip shopping centers.
At December  31,  1996,  the  average  commercial  real estate loan  balance was
$514,700.  The Bank's largest  commercial real estate loan at December 31, 1996,
had an  outstanding  balance of $9.5  million  and is secured by a  multi-tenant
office building facility containing approximately 137,000 square feet located in
Louisville and is currently performing according to its terms.

         At December 31, 1996, the Bank's  largest  borrower had an aggregate of
$29.1 million in loans which consisted of twenty-one loans secured by commercial
real estate, all of which are current. This aggregate amount does not exceed the
Bank's loans-to-one borrower limit.

         CONSTRUCTION AND LAND LENDING. The Bank originates loans to finance the
construction of one-to-four  family homes and, to a lesser extent,  multi-family
and commercial real estate properties.  In addition,  the Bank also originates a
limited number of loans for the acquisition and development of land on which the
purchaser  may then  build.  At  December  31 1996  construction  and land loans
totaled  $117.2  million  and  $12.6  million,  respectively,  or 5.9% and 0.6%,
respectively, of the Bank's total loan portfolio.

         Construction   loans  on  single-family,   owner-occupied   residential
properties  are  made  on a  "pre-sold"  basis,  or  for  contractors  who  have
sufficient   financial  strength  and  a  proven  track  record  for  model  and
speculative purposes. Construction borrowers are approved in accordance with the
Bank's  commercial  loan  policy  and such  borrowers  primarily  are  builders.
Construction  loans on  one-to-four  family  properties  generally  provide  for
interest-only  payments and have terms of six to nine months. Longer terms of up
to 18 months are  typically  for  construction  loans  secured by  commercial or
multi-family properties. Construction loans on one-to-four family properties are
considered  for  loan-to-value  ratios  of up to  80%.  Construction  loans  for
multi-family  mortgage loans and commercial real estate loans are considered for
loan-to-value  ratios of up to 75%. Loan proceeds are disbursed in increments as
construction  progresses and as inspections warrant.  Inspections  generally are
made by an independent  party or an independent Bank inspector.  At December 31,
1996,  $68.4 million or 58.3% of the Bank's  construction  loans were secured by
one- to-four family properties.

         The  Bank  has  made  construction  loans  on  commercial  real  estate
generally  secured by properties used for business purposes such as small office
buildings, residential,  industrial, and retail facilities located in the Bank's
primary  market  areas.  At December  31,  1996,  the Bank had $48.8  million in
construction loans secured by commercial/investment real estate and multi-family
residential properties.

         Construction and land loans afford the Bank the opportunity to increase
the  interest  rate  sensitivity  of its loan  portfolio  and to receive  yields
greater than those which are obtainable on loans secured by existing residential
properties.  These higher yields  correspond to the higher risks associated with
construction  and land  loans.  Construction  and land  financing  is  generally
considered to involve a higher degree of risk of loss than  long-term  financing
on  improved,  occupied  real  estate.  Risk of loss on a  construction  loan is
dependent  largely upon the accuracy of the initial  estimate of the  property's
value at completion  of  construction  or  development  and the  estimated  cost
(including interest) of construction.

         CONSUMER  LENDING.  At December 31, 1996, $125.6 million or 6.3% of the
Bank's total loan portfolio  consisted of consumer loans,  including home equity
loans,  credit  cards and lines of credit for  consumer  purposes.  The Bank has
increased  its level of consumer  and other loans from $2.8  million at December
31,  1991,  to $149.6 million at December 31, 1996.  The Bank is  attempting  to
increase its level of consumer lending through a competitive  pricing structure,
promotional  activities,  and cross-selling consumer products through its branch
offices, without incurring unacceptable credit risk.

         The  Bank's  home  equity  and  second  mortgage  loans are  secured by
one-to-four family owner-occupied  residences,  on a fixed-rate basis with terms
of up to 10 years and on an adjustable  basis up to 15 years.  Generally,  these
loans have loan-to-value ratios up to 90%.

<PAGE>

         Consumer loans are offered primarily on a fixed-rate, short-term basis.
The  underwriting  standards  employed by the Bank for consumer  loans include a
determination  of  the  applicant's  payment  history  on  other  debts  and  an
assessment of the  borrower's  ability to make payments on the proposed loan and
other indebtedness,  through the use of an automated application  processing and
credit scoring system. In addition to the creditworthiness of the applicant, the
underwriting process also includes a comparison of the value of the security, if
any, to the proposed loan amount.  The Bank's consumer loans tend to have higher
interest rates and shorter  maturities  than  one-to-four  family first mortgage
loans, but are considered to entail a greater risk of default.

         The Bank has also  entered  into a Bank  Card  Agreement  with  another
Louisville  financial  institution,  whereby the Bank issues MasterCard and Visa
cards to its customers.  In general,  the credit card program is administered by
the other  institution,  with the proceeds  from the program being split between
such institution and the Bank.

         The Bank has also  implemented  "branchless  banking" through a "Direct
Bank" telesales  environment. In  1996 the  emphasis of  the Direct  Bank was on
cross-selling  deposit  products to the Bank's existing  mortgage loan servicing
customers  nationwide.  This will be followed by cross-selling  loan and deposit
products to new CARD residential  mortgage  customers and direct mail selling of
bank products to consumers in non-branch areas of Kentucky and nationwide.

         LOAN APPROVAL  PROCEDURES  AND AUTHORITY.  Loan approval  authority has
been granted by the Board of Directors to certain approved Bank underwriters for
loans up to $400,000 on one-to-four family dwelling units. The Board has granted
loan approval authority for one-to-four-family  mortgage loans up to $500,000 if
approved by three qualified Bank  underwriters.  Further approval  authority has
been granted up to $1,000,000 for one-to-four  family mortgage loans if approved
by four authorized Bank underwriters (which approval is subsequently reviewed by
the Executive Loan Committee). All one-to-four family loans over $1,000,000 must
be approved by the Executive Loan Committee.

         Multi-family  residential and commercial real estate loan relationships
under  $1,000,000  are required to be approved by  authorized  Bank officers and
such  relationships over $1,000,000 and below $2.5 million must also be approved
by the  Senior  Loan  Committee.  Any loans or  relationships  in excess of $2.5
million must be approved by the Executive  Loan  Committee and reviewed with the
Board of Directors.

         Loan  approval  authority has been granted to certain loan officers for
consumer loans up to $500,000. Any consumer loan in excess of $500,000 must also
be approved by the Executive Loan Committee.

         Generally, commercial  business  loans  of $500,000  or  more  must  be
approved by the Executive  Loan  Committee.  However,  commercial  loan approval
authority  has been  granted to certain  loan  officers  up to  $500,000.  Also,
certain  members of the  Executive  Loan  Committee  may  approve,  under select
circumstances,  commercial loan relationship exposure up to $1,000,000. Any loan
approved  pursuant to this  authority  must be reported  to the  Executive  Loan
Committee at the next regular scheduled meeting.

         Loan  participations up to $500,000 must be approved by the Senior Loan
Committee.  Participations  in excess of this  amount  must be  approved  by the
Executive Loan Committee.

         Construction  loan  relationships  under  $1,000,000 may be approved by
certain  officers.  Such loan  relationships  in excess of this  amount  must be
approved by one or more of the appropriate Bank Loan Committees.

         Upon  receipt  of  a  completed   mortgage  loan   application  from  a
prospective  borrower,  the Bank verifies credit,  income and other  information
and, if necessary,  obtains additional  financial or credit related information.
An appraisal of the real estate used for collateral is also obtained on purchase
money mortgages and certain refinance transactions. All appraisals are performed
by  licensed  and/or  certified  general or  residential  appraisers.  The Board
periodically  reviews the Bank's appraisal policies,  which are contained in the
Bank's Appraisal Policy Statement.

         The Bank's policy is to require title and hazard  insurance on all real
estate  loans.  Borrowers  with a  loan-to-value  ratio over 80%  generally  are
required to advance  funds  together with each payment of principal and interest
to a mortgage impound account from which the Bank makes  disbursements for items
such as real estate  taxes,  hazard  insurance  premiums  and  private  mortgage
insurance premiums, if required.

<PAGE>

DELINQUENCIES, CLASSIFIED ASSETS AND IMPAIRED LOANS

         LOAN  COLLECTION  PROCEDURES.  When a borrower fails to make a required
payment on a loan,  the Bank takes a number of steps to have the  borrower  cure
the  delinquency  and  restore  the  loan  to  current  status.  In the  case of
residential  mortgage loans and consumer  loans,  the Bank  generally  sends the
borrower a written  notice of  non-payment  after the loan is first past due. In
the event  payment is not then  received,  additional  letters  and phone  calls
generally  are made.  If the loan is still not  brought  current  and it becomes
necessary for the Bank to take legal action, which typically occurs after a loan
is  delinquent  at least 90 days or more,  the Bank  will  commence  foreclosure
proceedings  against  any real  property  that  secures  the loan and attempt to
repossess any personal  property that secures a consumer  loan. If a foreclosure
action is  instituted  and the loan is not  brought  current,  paid in full,  or
refinanced  before the  foreclosure  sale,  the real property  securing the loan
generally is sold at foreclosure.  The Bank's  procedures for  repossession  and
sale of  consumer  collateral  are subject to various  requirements  under state
consumer protection laws.

         In the case of commercial business loans, commercial real estate loans,
construction and land loans, and development  loans, the Bank generally attempts
to contact the borrower by telephone  after any loan payment is 15 days past due
and a senior loan officer reviews all collection  efforts made if payment is not
received  after the loan is 30 days past due.  Decisions  as to when to commence
foreclosure  actions for  commercial  real estate loans,  construction  and land
loans,  and  development  loans are made on a case-by-case  basis.  The Bank may
consider  loan  work-out  arrangements  with these types of borrowers in certain
circumstances.

         DELINQUENT LOANS.  Loans are placed on non-accrual  status when, in the
judgment of management,  the  probability of  collection of  interest  is deemed
to be insufficient to warrant further accrual.

         At December 31, 1996, the Bank held in its portfolio  $144.7 million of
FHA/VA loans which it had  purchased  from GNMA pools it services and from third
parties.  These loans were delinquent at the time of purchase.

         As a servicer of GNMA pools, the Bank is obligated to remit to security
holders  interest  at the coupon rate  regardless  of whether  such  interest is
actually  received from the underlying  borrower.  The Bank, by purchasing  such
delinquent  loans out of the  pools,  is able to retain  the  benefit of the net
interest  rate  differential  between  the  coupon  rate it would  otherwise  be
obligated  to pay to the GNMA  security  holder and the Bank's  current  cost of
funds.  Most  of the  Bank's  investment  in  delinquent  FHA  and VA  loans  is
recoverable  through  claims made  against the FHA or VA, and any credit  losses
incurred are not greater or less than if the FHA/VA  loans  remained in the GNMA
pools and the Bank remained as servicer.  The same risk from foreclosure or from
loss of interest  exists for the Bank as servicer or owner of the loan,  and the
Bank, by purchasing delinquent FHA/VA loans, assumes only the interest rate risk
associated with investing in a fixed-rate loan if foreclosure does not occur.

         The  FHA/VA  loans  acquired  from  third parties  are  purchased  at a
discount  adequate to compensate the Bank for the credit and interest rate risks
associated with their purchase.  The Bank  purchased $4.5 million of insured FHA
and guaranteed VA loans from third parties during 1996.

<PAGE>

The   following   table  sets  forth   information   regarding   the   Company's
non-performing assets at the dates indicated.

<TABLE>
<CAPTION>

                                                                       At December 31,
                                            --------------------------------------------------------------------
                                                1996          1995          1994          1993          1992
                                            ------------  ------------  ------------  ------------  ------------
                                                                       (in thousands)
<S>                                         <C>           <C>           <C>           <C>           <C>
Non-accrual loans:
  Real estate loans:
    One-to-four family residential            $  2,512      $  2,774       $ 3,177       $ 3,718       $ 3,763
    Commercial real estate                       4,548         3,835         2,153         1,108         1,295
    Construction and land                                        643                                       108
  Consumer and other loans                         125           194
                                            ------------  ------------  ------------  ------------  ------------
       Total                                     7,185         7,446         5,330         4,826         5,166
                                            ------------  ------------  ------------  ------------  ------------

Accruing loans  which are  contractually
      past due 90 days or more:
  Real estate loans:
    One-to-four family residential:
      First mortgage, conventional               4,937         3,340         1,702         1,871         1,886
      First mortgage, FHA/VA (1)                88,185        88,852        57,723        47,963        33,978
    Multi-family residential                                                   136                         309
    Commercial real estate                          67           145             4                         410
    Construction and land                          110           125                                       294
  Consumer and other loans                         817           255            26            52
                                            ------------  ------------  ------------  ------------  ------------
       Total                                    94,116        92,717        59,591        49,886        36,877
                                            ------------  ------------  ------------  ------------  ------------

Restructured loans:
  Real estate loans:
    One-to-four family residential                 125           127           313           317
    Multi-family residential                     1,867         1,906         1,930         1,947
    Commercial real estate                                                                    68
                                            ------------  ------------  ------------  ------------  ------------
       Total                                     1,992         2,033         2,243         2,332
                                            ------------  ------------  ------------  ------------  ------------

Total non-performing loans                     103,293       102,196        67,164        57,044        42,043

Real estate owned                                2,815         1,136           278           767           961
                                            ------------  ------------  ------------  ------------  ------------

Total non-performing assets                   $106,108      $103,332       $67,442       $57,811       $43,004
                                            ============  ============  ============  ============  ============

------
<FN>

(1) FHA and VA delinquent loans have limited credit risk.

</FN>

</TABLE>

<PAGE>

         Non-performing  assets  increased  $2.8 million  during  1996 to $106.1
million at December 31, 1996. This increase resulted  primarily from an increase
of $1.6 million in convention  one-to-four  family residential real estate loans
contractually  past due 90 days or more and still  accruing,  and an increase of
$1.7  million in real estate  owned.  The $1.7  million  increase in real estate
owned was due to (i) the  increase  in the  number and  average  balance of GNMA
loans  serviced  and  subserviced  by the Company  during 1996 and (ii) the Bank
taking title to fifteen single family  residential  properties in various stages
of  construction  that the Bank had made  construction  loans on, from a builder
experiencing financial difficulties.  The Bank is completing the construction of
these properties and has them listed for sale. As of December 31, 1996, the Bank
had sold four of these properties.

         Foregone  interest  income  on   the  Bank's   non-accrual   loans  and
restructured  loans in accordance with their original terms totaled $717,000 for
the year ended December 31, 1996.  Interest income  attributable  to non-accrual
and  restructured  loans  included  in the Bank's  income  during the year ended
December 31, 1996 was $662,000.

         Real estate acquired through  foreclosure is initially  recorded at the
lower of the  recorded  investment  in the loan or the fair value of the related
assets at the date of foreclosure, less costs to sell. Thereafter, if there is a
further deterioration in value, the Bank writes down the real estate and charges
expense for the diminution in value.

         CLASSIFIED  ASSETS.  Federal  regulations  and the Bank's loan policies
require that the Bank utilize an internal  rating system as a means of reporting
problem and potential problem assets. The Bank has incorporated the OTS internal
asset  classifications  as a part of its  credit  monitoring  system.  The  Bank
currently  classifies problem assets as "Substandard,"  "Doubtful" or "Loss". An
asset is considered "Substandard" if it is inadequately protected by the current
net worth and paying  capacity of the obligor or of the value of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility" that the insured institution will sustain "some loss" if
the deficiencies are not corrected.  Assets classified as "Doubtful" have all of
the  weaknesses  inherent  in those  classified  "Substandard"  with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full", on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable".  Assets  classified as "Loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the establishment of a specific loss reserve is not warranted.

         When  an  insured  institution   classifies  one  or  more  assets,  or
proportions  thereof, as Substandard or Doubtful,  it is required to establish a
general  valuation  allowance  for loan  losses in an amount  deemed  prudent by
management.   General  valuation  allowances,  which  is  a  regulatory  phrase,
represent loss allowances  which have been established to recognize the inherent
risk associated with lending activities,  but which, unlike specific allowances,
have  not  been  allocated  to  particular  problem  assets.   When  an  insured
institution classifies one or more assets, or proportions thereof, as "Loss," it
is required to charge off such amount,  thereby  reducing the general  valuation
allowance.

         A savings  institution's  determination as to the classification of its
assets and the amount of its  valuation  allowances  is subject to review by the
OTS which can order the  establishment  of  additional  general or specific loss
allowances. The OTS, in conjunction with the other federal banking agencies, has
adopted an  interagency  policy  statement on the  allowance  for loan and lease
losses.  The policy statement  provides  guidance for financial  institutions on
both the  responsibilities of management for the assessment and establishment of
adequate  allowances  and  guidance  for  banking  agency  examiners  to  use in
determining the adequacy of general valuation allowances.  Generally, the policy
statement  requires that  institutions  have  effective  systems and controls to
identify,  monitor  and  address  asset  quality  problems;  have  analyzed  all
significant  factors  that  affect  the  collectibility  of the  portfolio  in a
reasonable  manner;  and  have  established   acceptable   allowance  evaluation
processes that meet the objectives set forth in the policy statement.

         The  Bank's  Asset  Classification   Committee  quarterly  reviews  and
classifies  the Bank's assets and reports the results of its review to the Board
of  Directors.  At December  31, 1996,  the Bank had an aggregate of  classified
assets  in the amounts  of $13.7  million,  $6,500,  and $261,100  classified as
substandard, doubtful and loss, respectively.

<PAGE>


         IMPAIRED LOANS.  The  Bank has  defined  impaired  loans as  commercial
loans   classified  as  Substandard,   Doubtful  or  Loss,  as  defined  by  OTS
regulations.  Impaired loans, net of related allowance, totaled $6.8 million and
$7.1  million at  December  31, 1996 and 1995,  respectively.  All of the Bank's
impaired loans are valued based on the fair value of collateral.

ALLOWANCE FOR LOAN LOSSES

         The Bank's allowance for loan losses  historically has been established
based on management's evaluation of the risks inherent in its loan portfolio and
actual loss  experience.  For the periods prior to 1993,  the Bank had no formal
general  valuation  allowance  policy.  The provisions  were based  primarily on
actual losses, which had been relatively insignificant.

         In 1993,  the Bank  revised its  allowance  for loan  losses  policy in
response to changes in the  portfolio  mix,  geographic  dispersion  of the loan
portfolio, increases in non-accrual and restructured loans, changing conditions,
and following a recommendation made during a regulatory examination. This policy
has been  followed  since that  time.  The  allowance  is based upon a number of
factors,  including  review of specific loans in the loan portfolio,  changes in
the  mix  and   geographic   dispersion  of  the  loan   portfolio,   trends  in
non-performing  assets,  growth  in  loan  portfolio,  actual  loss  experience,
comparisons to general  industry  practices,  including  peer group  statistics,
assessment  of  general  trends  in the real  estate  market,  and  current  and
prospective economic and regulatory conditions.  Accordingly,  the provision for
loan losses charged to operating  income during 1993 reflected the impact of the
revised allowance for loan losses policy.

         Net  charge-offs  were .07% of  average loans  during 1996, and .10% of
average  loans during 1995.  The provision for  loan losses to average loans was
 .13% and .14% for 1996 and 1995, respectively.

         As of December 31, 1996,  the Bank's ratio of allowance for loan losses
to non-performing assets was 12.8%. The Bank's ratios of non-performing loans to
total  loans  and  non-performing  assets  to total  assets  were 5.2% and 3.7%,
respectively,  at December 31,  1996.  The Bank's  ratios of allowance  for loan
losses to non-performing  assets and non-performing loans to total loans compare
unfavorably with regional peers. The inclusion of delinquent  FHA/VA loans which
have been purchased as part of the Bank's  investment  strategy,  have adversely
affected  the  Bank's   delinquency   level.   Management   believes  that  when
consideration  is given to the effects of this  strategy,  overall asset quality
and allowance ratios at December 31, 1996, compare more reasonably to peers. The
Bank will  continue  to monitor  and modify its  allowances  for loan  losses as
conditions  warrant.  Although  management believes it uses the best information
available to make  determinations  with respect to the Bank's allowance for loan
losses,  future  adjustments  may be necessary if economic and other  conditions
differ  substantially  from the economic and other conditions in the assumptions
used in making the  initial  determinations.  In  addition,  various  regulatory
agencies, as an integral part of their examination process,  periodically review
the Bank's valuation allowance. These agencies may require the Bank to establish
additional  valuation  allowances,  based on their  judgments of the information
available at the time of the examination.

         The  Bank   has  also  established  an   allowance  for  nonrecoverable
foreclosure  costs in  recognition  of the  potential  for  current  and  future
expenses  attributable  to servicing  FHA and VA loans.  See  "Mortgage  Banking
Activities."

         A specific  allowance is established for certain problem loans based on
an internal analysis, an appraisal, a drive-by inspection or a broker's opinion.
One or a combination of these methods may be used to determine the fair value of
the loan depending  upon the size and type of the loan and other  circumstances.
If the unpaid  balance  of the loan is  greater  than such  estimated  value,  a
charge-off is recorded for the difference between the carrying value of the loan
and the  estimated  net  realizable  value of the  property.  General  valuation
allowances, which is a regulatory term, represent loss allowances that have been
established to recognize the inherent risk associated  with lending  activities,
but which,  unlike  specific  allowances,  have not been allocated to particular
problem  assets.  As a result of  weaknesses  in certain  real  estate  markets,
increases in the general valuation allowance may be required in future periods.

<PAGE>

The following table sets forth the Bank's  allownace for loan losses and related
ratios at the dates indicated. (1)
                                                     
<TABLE>
<CAPTION>
                                                                At or For the Year Ended December 31,
                                             -------------------------------------------------------------------------
                                                 1996           1995            1994           1993           1992
                                             ------------   ------------   -------------  -------------  -------------
                                                                       (dollars in thousands)
<S>                                          <C>            <C>            <C>            <C>            <C>       
Allowance for Loan Losses:
  Balance at beginning of year                 $ 11,821       $11,076         $10,108        $ 2,426         $1,518        
                                             ------------   ------------   -------------  -------------  -------------
    Charge-offs:
      Real estate loans:
        One-to-four family                         (277)       (1,067)         (1,374)          (621)          (661)          
        Multi-family                                             (168)                           (20)
        Commercial real estate                                     (3)                           (27)          (153)          
      Consumer and other loans                   (1,271)         (606)             (2)
                                             ------------   ------------   -------------  -------------  -------------

        Total charge-offs                        (1,548)       (1,844)         (1,376)          (668)          (814)         
                                             ------------   ------------   -------------  -------------  -------------

    Recoveries:
      Real estate loans:
        One-to-four family                            9            34             116            212                            
        Multi-family                                               11
        Commercial real estate                                      8              12                            20
        Consumer and other loans                    170            53              25
                                             ------------   ------------   -------------  -------------  -------------

          Total recoveries                          179           106             153            212             20             
                                             ------------   ------------   -------------  -------------  -------------

             Net charge-offs                     (1,369)       (1,738)         (1,223)          (456)          (794)          
                                             ------------   ------------   -------------  -------------  -------------
  Acquired in mergers                               500           200                          3,479
  Transfers from allowance for
    nonrecoverable foreclosure costs                                              405
  Provision charged to income                     2,586         2,283           1,786          4,659          1,702          
                                             ------------   ------------   -------------  -------------  -------------

  Balance at end of year                        $13,538       $11,821         $11,076        $10,108         $2,426         
                                             ============   ============   =============  =============  =============

Ratio of net charge-offs during the
year to average loans outstanding
during the year                                   0.07%         0.10%           0.09%          0.04%          0.07%          
                                             ============   ============   =============  =============  =============

Ratio of allowance for loan losses
to total loans at the end of the year             0.68%         0.64%           0.74%          0.70%          0.22%          
                                             ============   ============   =============  =============  =============

Ratio of allowance for loan losses to
non-performing loans at the end of the year      13.11%        11.57%          16.49%         17.72%          5.77%          
                                             ============   ============   =============  =============  =============

<FN>

(1)       The table does not reflect the Company's  allowance for nonrecoverable
          foreclosure costs. See the table in "Mortgage Banking  Activities" for
          this information.

</FN>

</TABLE>

<PAGE>

The following  table sets forth the Bank's  allocation of its allowance for loan
losses by loan  category and the  percentage  of loans in each category to total
loans at the dates  indicated.  The  portion of the  allowance  for loan  losses
allocated to each loan category is not  necessarily  indicative of future losses
and does not  restrict the use of the total  allowance  to absorb  losses in any
category.

<TABLE>
<CAPTION>
                                                                          At December 31,
                                 --------------------------------------------------------------------------------------------------
                                        1996                1995                1994                1993                1992
                                 ------------------  ------------------  ------------------  ------------------  ------------------
                                           Percent             Percent             Percent             Percent             Percent
                                           of Loans            of Loans            of Loans            of Loans            of Loans
                                           to Total            to Total            to Total            to Total            to Total
                                  Amount    Loans     Amount    Loans     Amount    Loans     Amount    Loans     Amount    Loans
                                 -------- ---------  -------- ---------  -------- ---------  -------- ---------  -------- ---------
                                                                       (dollars in thousands)
<S>                              <C>       <C>       <C>        <C>      <C>        <C>      <C>        <C>       <C>       <C>     
At end of period allocated to:
  One-to-four family             $ 3,294    73.25%   $ 3,920    80.28%   $ 4,900    83.90%   $ 3,718    86.73%    $1,409    87.00%
  Multi-family                     2,357     7.58%     2,775     7.13%     2,626     7.16%     2,330     6.73%       461     7.31%
  Commercial real estate           2,536     5.14%     1,847     3.35%     2,320     3.00%     3,483     3.13%       479     3.15%
  Construction and land            2,409     6.52%     1,687     4.73%       653     3.65%       140     2.13%        68     2.22%
  Consumer and other loans         2,942     7.51%     1,592     4.51%       577     2.29%       437     1.28%         9     0.32%
                                 --------  --------  --------  --------  --------  --------  --------  --------   -------  --------
     Total                       $13,538   100.00%   $11,821   100.00%   $11,076   100.00%   $10,108   100.00%    $2,426   100.00%
                                 ========  ========  ========  ========  ========  ========  ========  ========   =======  ========

</TABLE>

<PAGE>

INVESTMENT ACTIVITIES

         The  investment  policy of the Bank,  which is approved by the Board of
Directors and  implemented  by certain  officers as authorized by the Board,  is
designed primarily to manage the interest rate sensitivity of its overall assets
and liabilities, to generate a favorable return without incurring undue interest
rate and  credit  risk,  to  provide a flow of  earnings  and a  countercyclical
balance to earnings,  to provide a balance of quality and diversification of the
Bank's  assets  and to provide  and  maintain  liquidity.  In  establishing  its
investment  strategies,  the Bank  considers its business and growth plans,  the
economic  environment,  its interest  rate  sensitivity  position,  the types of
securities  to  be  held,  and  other  factors.   Federally   chartered  savings
institutions have authority to invest in various types of assets, including U.S.
Treasury  obligations,  securities of various federal agencies,  mortgage-backed
and related  securities,  certain  certificates  of deposit of insured banks and
savings institutions, certain bankers acceptances,  repurchase agreements, loans
of  federal  funds,  and,  subject  to  certain  limits,  corporate  securities,
commercial paper and mutual funds.

         At  December  31,  1996,  the Bank had  $667.5  million  in  investment
securities   consisting   primarily  of  mortgage-backed   securities  and  U.S.
government  and  agency  obligations.   The  Bank's  mortgage-backed  securities
portfolio  consists  primarily  of  seasoned   fixed-rate  and   adjustable-rate
mortgage-backed securities. At December 31, 1996, the Bank had $474.7 million in
mortgage-backed  securities,  or 16.4% of total assets, insured or guaranteed by
either  the  FNMA,  FHLMC,  GNMA or SBA.  Included  in the  total  portfolio  of
mortgage-backed  securities at December 31, 1996 are $57.5 million in fixed rate
collateralized  mortgage  obligations  (CMOs). The Bank's CMOs have coupon rates
ranging  from  5.25%  to  9.00%  and had a  weighted  average  yield of 6.63% at
December 31, 1996.  The Bank's  current  policy is to purchase CMOs rated AAA by
nationally recognized rating services or issued by U.S. government agencies.

         CMOs are typically  issued by a special  purpose  entity,  which may be
organized  in a variety of legal  forms,  such as a trust,  a  corporation  or a
partnership.  The entity  aggregates  pools of pass-through  securities or whole
loans,  which are used to collateralize  the  mortgage-backed  securities.  Once
combined, the cash flows can be divided into "tranches" or classes of individual
securities,  thereby creating more  predictable  average lives for each security
than the  underlying  pools of loans or  pass-through  securities.  Accordingly,
under this security structure,  all principal paydowns from the various mortgage
pools of loans or pass-through securities may be allocated to a mortgage-related
securities  class or classes  structured to have priority until such classes are
paid off.

<PAGE>

The  following  table  sets  forth  the  amortized  cost and  fair  value of the
Company's portfolio of securities at the dates indicated.

<TABLE>
<CAPTION>
                                             
                                                                                    At December 31,
                                                    ------------------------------------------------------------------------------
                                                              1996                       1995                       1994
                                                    ------------------------   ------------------------   ------------------------
                                                     Amortized      Fair        Amortized      Fair        Amortized      Fair
                                                        Cost        Value          Cost        Value          Cost        Value
                                                    -----------  -----------   -----------  -----------   -----------  -----------
                                                                                   (in thousands)
<S>                                                   <C>          <C>           <C>          <C>           <C>          <C>        
Available-for-sale securities:
  U.S. Government and agency obligations              $189,048     $189,435      $112,082     $112,775      $ 69,847     $ 67,310
  Other debt securities                                  1,875        1,898         2,077        2,111         1,454        1,493
                                                    -----------  -----------   -----------  -----------   -----------  -----------
    Total debt securities                              190,923      191,333       114,159      114,886        71,301       68,803
  Mortgage-backed securities                           471,873      474,668       334,946      344,092        93,588       90,267
  Equity securities                                        275        1,541         1,115        2,352         2,407        2,995
                                                    -----------  -----------   -----------  -----------   -----------  -----------
      Total available-for-sale securities             $663,071     $667,542      $450,220     $461,330      $167,296     $162,065
                                                    ===========  ===========   ===========  ===========   ===========  ===========

Held-to-maturity securities:
  Mortgage-backed securities                                                                                $178,102     $171,888
                                                                                                          ===========  ===========
                                                                               
</TABLE>


<PAGE>


The following  table sets forth the scheduled  maturities,  amortized  cost, and
average  yields for the Company's  debt  securities at December 31, 1996, all of
which are  classified as  available-for-sale.  Yields on tax-exempt  obligations
have been computed on a tax-equivalent basis.

<TABLE>
<CAPTION>

                                                            At December 31, 1996
                             ---------------------------------------------------------------------------------
                               1 Year or Less      Over 1-5 Years      Over 5-10 Years   Total Debt Securities
                             ------------------  ------------------  ------------------  ---------------------
                             Amortized  Average  Amortized  Average  Amortized  Average   Amortized   Average
                                Cost     Yield      Cost     Yield      Cost     Yield      Cost       Yield 
                             ---------  -------  ---------  -------  ---------  -------  ----------  ---------
                                                              (dollars in thousands)
<S>                           <C>        <C>      <C>        <C>      <C>        <C>      <C>         <C>
U.S. Government and agency 
  obligations                 $82,350    5.41%    $81,697    6.52%    $25,001    8.02%    $189,048    6.23%
Other debt securities           1,000    7.25%        375    8.25%        500    6.50%       1,875    7.25%
                             ---------  -------  ---------  -------  ---------  -------  ----------  --------

Total debt securities         $83,350    5.43%    $82,072    6.53%    $25,501    7.99%    $190,923    6.24%
                             =========  =======  =========  =======  =========  =======  ==========  ========

</TABLE>

<PAGE>


SOURCES OF FUNDS

         GENERAL.  Deposits;  principal  and  interest  payments  on  loans  and
mortgage-backed  securities;  proceeds from  maturities  and sales of investment
securities; proceeds from mortgage banking activities; cash flows generated from
operations  and, to a lesser extent,  FHLB advances and other borrowed funds are
the primary  sources of the Bank's funds for use in lending,  investing  and for
other general purposes.

         CUSTODIAL  ACCOUNTS.  In connection  with the Bank's  mortgage  banking
activities,  the Bank  maintains a large number of custodial  deposit  accounts.
These  accounts  are used to  accumulate  borrower  payments for  principal  and
interest,  and tax and  insurance  until such sums are  remitted  to  investors,
insurance companies or taxing  authorities.  At December 31, 1996 and 1995 there
were $76.3 million and $86.6  million,  respectively,  in custodial  accounts on
deposit with the Bank.

         DEPOSITS. The Bank offers a variety of deposit accounts with a range of
interest  rates and terms.  The  Bank's  deposits  consist  of regular  savings,
checking accounts,  money market deposit accounts,  and certificates of deposit.
The flow of deposits is influenced significantly by general economic conditions,
changes in interest  rates and  competition.  The Bank's  deposits  are obtained
predominantly  from the areas in which its branch offices are located.  The Bank
relies  primarily  on customer  service  and  long-standing  relationships  with
customers to attract and retain these deposits;  however,  market interest rates
and rates offered by competing financial  institutions  significantly affect the
Bank's ability to attract and retain deposits.

         Certificate  accounts in excess of $100,000 are  actively  solicited by
the Bank. However,  the Bank does not use brokers to obtain such deposits.  When
management  determines the levels of the Bank's deposit rates,  consideration is
given to local  competition,  U.S. Treasury  securities  offerings and the rates
charged on other sources of funds.  Management  continually  monitors the Bank's
certificate accounts and, based on historical experience, management believes it
will retain a large portion of such accounts upon maturity.


<PAGE>


         The following table  represents the deposit activity of the Company for
the periods indicated.
                                                            
<TABLE>
<CAPTION>
                                                      For the Years Ended December 31,
                                            ------------------------------------------------
                                                 1996             1995             1994
                                            --------------   --------------   --------------
                                                         (dollars in thousands)
<S>                                         <C>              <C>              <C>      
Beginning balance                              $1,458,861       $1,190,390       $1,293,738       
Deposits from acquisitions                        168,155          104,682                           
Net deposits (withdrawals)                        118,985          122,841         (138,531)         
Interest credited on deposits                      58,002           40,948           35,183          
                                            --------------   --------------   --------------

Ending balance                                 $1,804,003       $1,458,861       $1,190,390      
                                            ==============   ==============   ==============

Net increase (decrease)                        $  345,142       $  268,471       $ (103,348)     
                                            ==============   ==============   ==============

Percentage increase (decrease)                     23.66%           22.55%           (7.99%)           
                                            ==============   ==============   ==============


</TABLE>

     At December  31, 1996,  the Company had $175.9  million in  certificate  of
deposit accounts in amounts of $100,000 or more as follows:

<TABLE>
<CAPTION>

MATURITY PERIOD                                 Amounts
                                            --------------
                                            (in thousands)
<S>                                         <C>
Three months or less                           $ 47,501
Over three through six months                    38,315
Over six through twelve months                   36,570
Over twelve months                               53,473
                                            --------------

     Total                                     $175,859
                                            ==============

</TABLE>

<PAGE>

The following table sets forth the  distribution on the Bank's average  deposits
for the periods  indicated and the weighted  average interest rates paid on each
category of deposits presented.

<TABLE>
<CAPTION>
                                                           
                                                             For the Years Ended December 31,
                           ----------------------------------------------------------------------------------------------------
                                        1996                              1995                              1994
                           --------------------------------  --------------------------------  --------------------------------
                                      Percent of                        Percent of                        Percent of
                                       Average    Weighted               Average    Weighted               Average    Weighted
                            Average     Total     Average     Average     Total     Average     Average     Total     Average
                            Balance    Deposits  Rates Paid   Balance    Deposits  Rates Paid   Balance    Deposits  Rates Paid
                           ---------- ---------- ----------  ---------- ---------- ----------  ---------- ---------- ----------
                                                                 (dollars in thousands)
<S>                        <C>          <C>         <C>      <C>          <C>         <C>      <C>          <C>         <C>         
Non-interest bearing
  demand accounts          $  132,209     7.94%     0.00%    $  123,832     9.21%     0.00%    $  100,415     8.15%     0.00% 
Demand deposit accounts       121,731     7.31%     3.64%        55,111     4.10%     2.68%        51,053     4.14%     1.98% 
Passbook accounts             132,657     7.96%     3.15%       128,633     9.57%     3.19%       168,218    13.65%     2.86%    
Money market accounts         174,646    10.48%     4.78%       125,083     9.31%     4.83%       113,744     9.23%     3.01%    
Certificates of deposit     1,104,532    66.31%     5.89%       911,543    67.81%     5.95%       799,050    64.83%     5.01%    
                           ---------- ---------- ----------  ---------- ---------- ----------  ---------- ---------- ----------

       Total deposits      $1,665,775   100.00%     4.92%    $1,344,202   100.00%     4.90%    $1,232,480   100.00%     4.00%  
                           ========== ========== ==========  ========== ========== ==========  ========== ========== ==========


</TABLE>

The  following  table  represents,  by various  rate  categories,  the amount of
certificates  of deposit  outstanding at the dates  indicated and the periods to
maturity of the certificates of deposit outstanding at December 31, 1996.

<TABLE>
<CAPTION>
 
                                     At December 31,                         Period to Maturity From December 31, 1996
                         -------------------------------------    ---------------------------------------------------------------
                                                                    Within      One - Two   Two - Three   Over Three
                             1996         1995         1994        One Year      Years         Years        Years        Total
                         -----------  -----------   ----------    -----------  -----------  -----------  -----------  -----------
                                                                                      (in thousands)
<S>                      <C>          <C>           <C>           <C>          <C>          <C>          <C>          <C>        
Interest rate
  3.00% or less           $   1,493    $   2,187     $    433       $  1,219     $    239      $    35                 $   1,493
  3.01% to 4.00%                204       20,407      140,831            154           50                                    204
  4.01% to 5.00%             90,596       84,873      203,573         73,856       13,819        2,390     $    531       90,596
  5.01% to 6.00%            779,787      425,124      184,871        501,764      182,241       41,405       54,377      779,787
  6.01% to 7.00%            145,171      287,093      171,817         65,028       37,308       13,108       29,727      145,171
  7.01% to 8.00%            152,546      159,834       71,089         98,899        5,646        9,783       38,218      152,546
  8.01% to 9.00%             10,798       11,125       22,524          1,301        2,259        2,827        4,411       10,798
  9.01% to 10.00%             9,488       12,496       13,165            853           22        8,613                     9,488
10.01% and over                               17        2,043                                                                   
                        ------------  -----------  -----------    -----------  -----------  -----------  -----------  -----------

       Total             $1,190,083   $1,003,156     $810,346       $743,074     $241,584      $78,161     $127,264   $1,190,083
                         ===========  ===========  ===========    ===========  ===========  ===========  ===========  ===========

</TABLE>

<PAGE>

         BORROWINGS.  Although deposits are the Bank's primary  source of funds,
the  Bank's  policy  has been to  utilize  borrowings  where  appropriate  as an
alternative  or less costly source of funds.  The increase in borrowings  during
1996 was a result of the strategy to leverage the Company's  capital  base.  The
Bank obtains advances from the FHLB, which are  collateralized by certain of the
Bank's  mortgage  loans.  Such  advances are made  pursuant to different  credit
programs,  each of which has its own interest rate and range of maturities.  See
"Regulation and Supervision - Federal Home Loan Bank System."

         The maximum  amount that the FHLB  will advance to member institutions,
including the Bank, for purposes other than meeting withdrawals, fluctuates from
time to  time in  accordance with  the  policies  of the  OTS and  the FHLB.  At
December 31, 1996, the Bank had  $685.0 million in outstanding advances from the
FHLB and had $96.3 million in other borrowings.

         The  Bank  has entered  into sales  of securities  under  agreements to
repurchase (repurchase agreements) with nationally recognized primary securities
dealers  or  other  customers.   Repurchase  agreements  are  accounted  for  as
borrowings by the Bank and are secured by designated securities. The term of the
repurchase agreements may last up to one year; however,  normally the agreements
last less than 60 days. At December 31, 1996, the Bank had repurchase agreements
totaling $9,000,000.

         The Bank also has lines of credit  available to finance  mortgage loans
held for sale.  Two line of credit  arrangements  permitted  borrowings of up to
$175,000,000 and $125,000,000 at December 31, 1996 and 1995, respectively.

         The borrowing  limit under one  of the  line of  credit agreements  was
increased from  $100,000,000 at December 31, 1995 to  $150,000,000  during 1996.
Borrowings  under this line of credit  totaled  $84,600,000  and  $99,700,000 at
December  31,  1996 and 1995,  respectively,  and were used to finance  mortgage
loans held for sale which were made to employees of a third party.  The interest
rate on this line of credit is indexed to a certain  short-term  interest  rate.
Borrowings  under this line of credit are  guaranteed by the third party to whom
the Bank has granted a security  interest in these mortgage loans which are held
for sale.  Gains  and  losses,  if any,  on the sale of such  mortgage  loans to
permanent investors accrue to the account of the third party guarantor.

         Borrowings under  the $25,000,000 line of credit totaled $2,729,000 and
$17,175,000  at December 31, 1996 and 1995,  respectively.  The interest rate on
this line of credit  gives  effect to,  among  other  factors,  fluctuations  in
various short-term  interest rates and cash balances on deposit with the lending
institution.  Borrowings are  collateralized  by certain rights and interests in
various servicing agreements.


<PAGE>


The  following  table sets forth  certain  information  regarding  the Company's
short-term borrowings at or for the periods ended on the dates indicated.

<TABLE>
<CAPTION>
                                                             At or For the Years Ended December 31,
                                                            ----------------------------------------
                                                                1996          1995          1994
                                                            ------------  ------------  ------------
                                                                     (dollars in thousands)
<S>                                                         <C>           <C>           <C>      
Securities sold under agreements to repurchase:
  Average balance outstanding                                $ 72,295       $147,651
  Maximum amount outstanding at any month-end
    during the period                                         140,341        240,750
  Balance outstanding at end of period                          9,000        176,433
  Weighted average interest rate during the period              5.48%          6.02%
  Weighted average interest rate at end of period               5.37%          6.03%

Borrowings under lines of credit:
  Average balance outstanding                                $115,344       $ 96,699      $ 71,927       
  Maximum amount outstanding at any month-end
    during the period                                         144,415        116,875        87,135          
  Balance outstanding at end of period                         87,329        116,875        87,135          
  Weighted average interest rate during the period              6.54%          6.14%         4.14%           
  Weighted average interest rate at end of period               5.51%          5.27%         5.81%           

Advances from Federal Home Loan Bank:
  Average balance outstanding                                $ 29,144       $ 23,953      $ 51,229      
  Maximum amount outstanding at any month-end
    during the period                                         200,924        164,200       161,600       
  Balance outstanding at end of period                        200,924          2,150       161,600         
  Weighted average interest rate during the period              5.61%          6.27%         4.72%           
  Weighted average interest rate at end of period               5.62%          6.14%         7.00%           



</TABLE>

<PAGE>
MORTGAGE BANKING ACTIVITIES

         The Bank is engaged in a variety of mortgage banking activities,  which
are  primarily  conducted  through its  mortgage  banking  division,  which does
business  as Great  Financial  Mortgage  and  Lincoln  Service  Mortgage.  These
activities  include the  acquisition  and sale of mortgage loans and the related
activity of servicing and  subservicing  such mortgages for investors.  The Bank
limits its mortgage  banking  lending  activity to mortgage loans on one-to-four
family  individual  properties.   Mortgage  banking  revenues  consist  of  loan
origination  fees,  interest income on mortgages during the period they are held
for sale, less the interest expense incurred to finance the mortgages, gains (or
losses)  from the sale of  mortgage  loans,  loan  servicing  fees and gains (or
losses) from the sale of any loan servicing or subservicing.

         The Bank  primarily  produces  mortgage  loans  through  direct  retail
originations.  Retail  mortgage  loans are  originated by loan officers  through
referrals from real estate brokers,  builders,  developers and other sources and
through direct  telemarketing and mail solicitations.  Retail lending activities
are conducted through bank branches and three loan production offices located in
Kentucky.  The  telemarketing  and  mail  solicitation  functions,  which  serve
corporate customers and individual borrowers nationwide who are purchasing homes
or refinancing  existing  mortgages,  are conducted  primarily from the mortgage
division's headquarters. See "One-to-Four Family Mortgage Lending."

         The Bank's mortgage  originations include mortgage loans insured by the
FHA and guaranteed by the VA, as well as  conventional  loans.  Except for loans
specifically  originated  for  the  Bank's  loan  investment  portfolio,   loans
originated or purchased through the mortgage banking division are originated for
eventual sale into the secondary mortgage market. As such, these loans must meet
the origination and underwriting  criteria established by the final investors of
the  loans.  A  portion  of the  FHA/VA  loans  are  pooled  to form  securities
guaranteed by GNMA which are sold in the  secondary  mortgage  market.  The Bank
also originates FHA/VA loans for various state housing agency loan programs on a
servicing  retained  or  servicing  released  basis.  The Bank sells most of the
conventional  mortgage  loans  it  originates  into  mortgage-backed  securities
purchase and  guarantee  programs  sponsored by FNMA and FHLMC.  These  programs
provide  either  for  direct  sale of  mortgage  loans to FNMA or FHLMC,  or for
pooling of  mortgage  loans in exchange  for  securities  guaranteed  by FNMA or
FHLMC. In connection  with such exchanges,  the Bank pays fees to either FNMA or
FHLMC who in return  guarantee the payment of principal and interest to security
holders. It is this guarantee that enables the Bank to efficiently deliver loans
into the secondary mortgage market.  Conventional  mortgage loans originated for
sale by the Bank that do not meet FNMA and FHLMC  guidelines are sold to private
institutional investors.

         Exchanges  of loans  into  agency  securities  and  sales of loans  are
generally  made  without  recourse  to the Bank in the event of  default  by the
borrower,  except,  in the case of VA loans used to form GNMA  pools,  which are
subject  to  limitations  on  the  VA's  loan  guarantees.   Subject  to  market
conditions, the Bank retains or sells the servicing rights on the mortgage loans
underlying the mortgage-backed securities as well as loans sold to institutional
investors.

         Loans are sold  pursuant to master  commitments  negotiated  with FNMA,
FHLMC,  GNMA and  institutional  investors  to purchase  loans  meeting  defined
criteria.  The  agreements  generally  do not  require  the Bank to deliver  any
specific  amount  of  mortgage  loans.  The  Bank  expects  to  enter  into  new
commitments  with these entities and other  investors in the ordinary  course of
business.

         Between the time origination or purchase commitments are issued and the
time the loans or the  securities  into which they are converted  are sold,  the
Bank is exposed to  movements  in the  market  price due to changes in  interest
rates. The Bank attempts to manage this risk by utilizing  forward cash sales to
FNMA, FHLMC and other approved  investors or agencies,  forward  mortgage-backed
security sales to primary security dealers,  national  brokers,  other financial
institutions and private investors,  purchases of over-the-counter  put and call
options relating to mortgage-backed securities and put and call options relating
to U.S.  Treasury notes and bonds. The type, amount and delivery date of each of
the above instruments that are sold is based upon  management's  estimates as to
closing  volumes and the length of the origination or purchase  commitments.  As
most  loans are  closed and  funded,  they are pooled to create  mortgage-backed
securities  which will be  delivered to fulfill the  contracts  with the primary
dealers.  The remaining  loans are  delivered to other  investors or directly to
FNMA or FHLMC to fulfill delivery  commitments with those entities.  Differences
between  the volume and timing of actual loan  originations  and  purchases  and
management's estimates can expose the Bank to losses. If the Bank is not able to
deliver the mortgage loans during the appropriate  delivery period, the Bank may
be required to pay a non-delivery fee or repurchase the delivery  commitments at
current market prices. Similarly, if the Bank has too many loans to deliver, the
Bank must sell additional cash forward commitments at current market prices.

<PAGE>

         The Bank's loan  servicing  activities  include (i) the  collection and
remittance  of  mortgage  loan  payments,  (ii)  accounting  for  principal  and
interest,  (iii) holding and disbursing  escrow or impound funds for real estate
taxes  and  insurance  premiums,  (iv)  inspecting  properties,  (v)  contacting
delinquent  borrowers and (vi) acting as fiduciary on foreclosing  and disposing
of collateral properties.  In performing these activities,  the Bank must comply
with secondary  market guidelines or the general guidelines of private investors
and government regulations.

         The Bank receives a servicing  fee for  performing  these  services for
others.  For the years ended  December 31, 1996 and 1995,  the Bank earned $26.9
million and $27.0 million,  respectively,  in servicing  fees. The Bank collects
and  processes  payments made by  borrowers,  remits funds to investors,  taxing
authorities  and insurers and acts as fiduciary in foreclosing  and disposing of
collateral properties.  In connection with its fiduciary  responsibilities,  the
Bank advances funds which are repaid from sale proceeds by way of  reimbursement
from  investors  or  through  claims  submitted  to private  mortgage  insurance
companies,  the FHA or the VA.  These  advances  totaled  $5.7  million and $4.1
million at December 31, 1996 and 1995,  respectively,  and are included in other
assets  in  the  accompanying   Consolidated   Balance  Sheets.   Under  certain
circumstances,  and in the case of FHA/VA claims due largely to the  contractual
nature of the loan insurance/guarantee contract, these reimbursement requests or
claims cannot be collected in full. In  recognition of the potential for current
and  future  claims  that may not be  collected,  the Bank  has  established  an
allowance  for  nonrecoverable  foreclosure  costs  with  provisions  for losses
charged against income.

         While most of the Bank's servicing  portfolio is generated  through the
Bank's origination activities, when economically attractive, the Bank makes bulk
purchases of mortgage  servicing  rights from  financial  institutions.  For the
years ended  December 31, 1996 and 1995, the Bank acquired  servicing  rights to
approximately $400.7 billion and $1.0 billion, respectively, of unpaid principal
amounts of mortgage loans through bulk purchases.  The mortgage loans underlying
the servicing rights  purchased by the Bank have been  originated,  underwritten
and funded by retail  originators or wholesalers  who make  representations  and
warranties as to compliance with required  standards.  The price paid to acquire
servicing is based  on the  present  value  of the  estimated  future  servicing
revenues,  net of the expected servicing expenses,  for each acquisition.  Major
factors impacting the value of servicing rights include  contractual service fee
rates,   projected  mortgage   prepayment  rates,   projected   delinquency  and
foreclosure rates, investor servicing requirements, projected escrow, agency and
fiduciary  funds to be held in connection  with such servicing and the projected
benefit to be realized from such funds, geographic distribution, and whether the
loans are conforming or  non-conforming  conventional  loans or loans insured or
guaranteed by the FHA or VA,  respectively.  The Bank bases its assumptions with
respect to these factors on historical  and expected  experience  rather than on
conditions  prevailing  at any one  point in time.  The  Bank  employs  computer
simulations  to  project  and  value  cash flow  streams  after  management  has
evaluated  applicable  portfolio  risks.  Management  determines  an  acceptable
discount  rate to apply to the  projected  cash  flow,  after  considering  both
portfolio risk and market  conditions in evaluating  potential  acquisitions  of
servicing.

         Also,  when  economically  attractive,  the Bank  makes  bulk  sales of
mortgage  servicing  rights which it has created.  During 1996, the Bank sold an
aggregate of $188 million of servicing rights for $2.6 million.  During 1995, no
bulk sales of mortgage servicing rights were made by the Bank.

       At December 31, 1996, the Bank serviced $5.1 billion of loans for others.

<PAGE>


The following table summarizes certain information as to the Company's portfolio
of loans serviced for others at the dates shown.

<TABLE>
<CAPTION>
                                                 
                                                                         At December 31,
                                          ---------------------------------------------------------------------------------
                                                   1996                        1995                        1994
                                          -------------------------   -------------------------   -------------------------
                                            Number        Amount        Number        Amount        Number        Amount
                                          ----------   ------------   ----------   ------------   ----------   ------------
                                                                      (dollars in thousands)
<S>                                       <C>          <C>            <C>          <C>            <C>          <C>         
Loans serviced for others                   83,000      $5,068,896       79,300     $5,167,550       66,300     $4,578,846         
                                          ==========   ============   ==========   ============   ==========   ============

Unamortized mortgage servicing rights                   $   37,187                  $   35,751                  $   24,511
                                                       ============                ============                ============

Ratio of net servicing fee income (1)
  to net interest income                                    25.20%                      32.91%                      29.97%
                                                       ============                ============                ============

------
(1) Net servicing fee income is servicing fee income less amortization of MSRs.

</TABLE>

The  following  table  sets forth the  Company's  allowance  for  nonrecoverable
foreclosure  costs related  to loans serviced for others at the dates indicated.

<TABLE>
<CAPTION>
                                              For the Years Ended December 31,
                                         ----------------------------------------
                                             1996          1995           1994
                                         ------------  ------------   -----------
                                                      (in thousands)
<S>                                      <C>           <C>            <C>
Balance, beginning of year                  $ 2,319      $ 2,246        $2,542         
Provisions charged to income                  2,395        1,516           213             
Charge-offs                                  (2,699)      (1,443)         (104)         
Transfers to allowance for loan losses                                    (405)
                                         ------------  ------------   -----------

Balance, end of year                        $ 2,015      $ 2,319        $2,246
                                         ============  ============   ===========


</TABLE>

<PAGE>

         In addition to servicing loans for others,  mortgage banking activities
include subservicing loans for third-party  servicing owners,  including GNMA as
one of GNMA's Master  Subservicers.  Subservicing  generally involves the normal
operational  activities  of loan  servicing,  but  without  the normal  risks of
prepayments and defaults.  Subservicing is generally priced for a stated fee per
loan, plus various ancillary income arrangements.  The subservicing arrangements
are  generally  for a fixed term  substantially  shorter  than the related  loan
maturities.  In some cases these arrangements can be terminated at the servicing
owner's option and sometimes without penalty for early termination.  At December
31,  1996  the  Company  subserviced  approximately  10,700  loans  with  unpaid
principal balances totaling $908.5 million.

         In  addition,  at December  31,  1996,  the Bank held in its  portfolio
$144.7  million  of FHA/VA  loans  which it had  purchased  from  GNMA  pools it
services  and from third  parties.  These loans were  delinquent  at the time of
purchase. For a further discussion of these loans, see "Delinquent Loans."

BANK SUBSIDIARY ACTIVITIES

         Great Financial  Services,  Inc. (GFS), a  wholly-owned  subsidiary  of
the Bank,  is  currently  engaged,  on an agency  basis  through  offices  of an
independent agency and an independent registered  broker-dealer,  in the sale of
annuity products,  securities and mutual funds primarily to the Bank's customers
and  members  of the  local  community.  GFS is also a genreal  lines  insurance
agency,  licensed in the state of Kentucky,  and offers its  customers  products
such as  long-term  health care  insurance,  life  insurance,  and  property and
casualty insurance.

         The  Bank   also  has three other  wholly-owned   subsidiaries:   Great
Financial Properties, Inc., Lanidrac Service Corp. and First Appraisal Services,
Inc. Great Financial  Properties,  Inc. is periodically used to hold real estate
owned  and is not  material  to the  Bank's  consolidated  financial  condition.
Lanidrac  Service  Corp.  is a service  corporation  which  invests  in  certain
low-income housing  partnerships,  which provide the Company with certain income
tax credits.  First Appraisal Services,  Inc. is an inactive service corporation
which provided real estate appraisal services.

PERSONNEL

         At  December  31,  1996  the Bank had 745  full-time  employees  and 75
part-time employees.


<PAGE>

SUPERVISION AND REGULATION

         GENERAL

         The  Bank  is  subject  to  extensive   regulation,   examination   and
supervision by the Office of Thrift Supervision (OTS), as its chartering agency,
and the Federal Deposit  Insurance  Corporation  (FDIC), as the deposit insurer.
The Bank is a member of the FHLB System and its deposit  accounts are insured up
to applicable limits by the Savings Association Insurance Fund (SAIF) managed by
the FDIC.  The Bank must file reports with the OTS and the FDIC  concerning  its
activities and financial condition in addition to obtaining regulatory approvals
prior  to  entering  into  certain   transactions   such  as  mergers  with,  or
acquisitions of, other financial  institutions.  There are periodic examinations
by the OTS and the FDIC to test the Bank's  compliance  with various  regulatory
requirements.  This  regulation  and  supervision  establishes  a  comprehensive
framework  of  activities  in which an  institution  can engage and is  intended
primarily  for  the  protection  of  the  insurance  fund  and  depositors.  The
regulatory structure also gives the regulatory  authorities extensive discretion
in connection with their supervisory and enforcement  activities and examination
policies,  including  policies with respect to the  classification of assets and
the  establishment of adequate loan loss reserves for regulatory  purposes.  Any
change in such  policies,  whether by the OTS, the FDIC or the  Congress,  could
have a material  adverse impact on the Company,  the Bank and their  operations.
The Company,  as a savings and loan holding company, is required to file certain
reports with, and otherwise comply with the rules and regulations of the OTS and
the  SEC  under  the  federal   securities  laws.   Certain  of  the  regulatory
requirements  applicable to the Bank and to the Company are referred to below or
elsewhere herein.

         FEDERAL  SAVINGS  INSTITUTION  REGULATION.  The  activities of  savings
institutions  are governed by the Home Owner's Loan Act, as amended  (HOLA) and,
in certain  respects, the Federal Deposit  Insurance Act (FDI Act). The HOLA and
the FDI Act were  amended by the  Financial  Institution  Reform,  Recovery  and
Enforcement Act of 1989 (FIRREA) and the Federal Deposit  Insurance  Corporation
Improvement  Act of  1991  (FDICIA).  FIRREA  was  enacted  for the  purpose  of
resolving  problem  savings  institutions,  establishing a new thrift  insurance
fund,  reorganizing the regulatory structure applicable to savings institutions,
and imposing bank-like standards on savings  institutions.  FDICIA,  among other
things,  requires  that federal  banking  regulators  intervene  promptly when a
depository  institution   experiences  financial   difficulties,   mandates  the
establishment of a risk-based  deposit insurance  assessment system and requires
imposition of numerous additional safety and soundness operational standards and
restrictions.  FIRREA and FDICIA  both  contain  provisions  affecting  numerous
aspects  of  the  operations  and  regulations  of   federally-insured   savings
associations  and  empowers  the OTS and the  FDIC,  among  other  agencies,  to
promulgate regulations implementing their provisions.

         BUSINESS ACTIVITIES.  The  federal  banking  statutes as amended by the
FIRREA and FDICIA (1) restrict the solicitation of brokered  deposits by savings
institutions  that  are  troubled  or not  well-capitalized,  (2)  prohibit  the
acquisition  of any corporate debt security that is not rated in one of the four
highest rating categories, (3) restrict the aggregate amount of loans secured by
non-residential  real estate property to 400% of capital, (4) permit savings and
loan  holding   companies  to  acquire  up  to  5%  of  the  voting   shares  of
non-subsidiary  savings  institutions  or  savings  and loan  holding  companies
without prior  approval,  (5) permit bank holding  companies to acquire  healthy
savings  institutions  and (6) require the federal banking agencies to establish
by regulation standards for extensions of credit secured by real estate lending.
Under the HOLA, the Bank has the authority to make certain loans or investments,
not exceeding 5% of its total assets, on each of (i) non-conforming loans (loans
in excess of the specific  limitations of the HOLA) and (ii) construction  loans
without  security,  for the  purpose of  financing  what is or is expected to be
residential  property.  To  assure  repayment  of such  loans,  the Bank  relies
substantially on the borrower's general credit standing, personal guarantees and
projected future income from the properties.

         LOANS  TO  ONE  BORROWER.  Under  the  HOLA, savings  institutions  are
generally  subject  to the  national  bank  limits  on  loans  to one  borrower.
Generally, savings institutions may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of the Bank's unimpaired  capital
and  surplus.  An  additional  amount  may be lent,  equal to 10% of  unimpaired
capital and surplus, if such loan is secured by  readily-marketable  collateral,
which is defined to include certain  securities and bullion,  but generally does
not include real estate.  At December 31, 1996,  the Bank did not have any loans
in excess of the applicable regulatory limit.

<PAGE>

         QTL TEST. The HOLA requires  savings  institutions  to meet a qualified
thrift lender (QTL) test.  Under the QTL test,  as modified by FDICIA,  at least
65% of a  savings  association's  "portfolio  assets"  (total  assets  less  (i)
specified liquid assets up to 20% of total assets;  (ii) intangibles,  including
goodwill and (iii) the value of property  used to conduct  business)  must be in
"qualified  thrift  investments"  (primarily  residential  mortgages and related
investments,  including certain  mortgage-backed  and related  securities,  and,
pursuant to recent  legislation,  credit card and education  loans) on a monthly
basis in 9 out of every 12 months. The QTL test may also be met by qualifying as
a "domestic  building and loan  association"  under the Internal Revenue Code of
1986, as amended.

         A savings  association that fails the QTL test must either convert to a
bank charter or operate under certain  restrictions.  If the savings association
does not convert to a bank  charter  generally  it will be  prohibited  from (i)
engaging in any new activity not  permissible  for a national bank,  (ii) paying
dividends not  permissible  under  national bank  regulations,  (iii)  obtaining
advances from any FHLB or (iv)  establishing any new branch office in a location
not permissible  under national bank regulations.  In addition,  beginning three
years  after the  association  failed  the QTL test,  the  association  would be
prohibited from engaging in any activity not permissible for a national bank and
would  have to  repay  any  outstanding  advances  from an FHLB as  promptly  as
possible.  For December 1996, the Bank maintained  87.6% of its portfolio assets
in qualified thrift investments and therefore, met the QTL test.

         LIMITATION ON CAPITAL DISTRIBUTIONS. OTS regulations impose limitations
upon all capital distributions by savings institutions,  such as cash dividends,
payments 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 rule establishes  three tiers of institutions,  which are
based primarily on an  institution's  capital level. An institution that exceeds
all fully phased-in  capital  requirements  before and after a proposed  capital
distribution and has not been advised by the OTS that it is in need of more than
normal  supervision,  could,  after prior notice but without the approval of the
OTS, make capital  distributions during a calendar year equal to the greater of:
(i) 100% of its net  earnings to date during the  calendar  year plus the amount
that would reduce by one-half its "surplus  capital  ratio" (the excess  capital
over its fully phased-in capital  requirements) at the beginning of the calendar
year;  or (ii) 75% of its net  earnings  for the  previous  four  quarters.  Any
additional capital distributions would require prior regulatory approval. In the
event the Bank's capital fell below its fully  phased-in  requirement or the OTS
notified  it  that  it  was  in  need  of  more  than  normal  supervision,  the
institution's  ability to make capital  distributions  could be  restricted.  In
addition,  the  OTS  could  prohibit  a  proposed  capital  distribution  by any
institution,  which would otherwise be permitted by the  regulation,  if the OTS
determines  that  such  distribution  would  constitute  an  unsafe  or  unsound
practice. Furthermore, under the OTS prompt corrective action regulations, which
took effect on December 19,  1992,  the  institution  would be  prohibited  from
making any capital  distribution  if, after the  distribution,  the  institution
would have (i) a total  risk-based  capital ratio of less than 8%, (ii) a Tier 1
risk-based  capital  ratio of less than 4% or (iii) a Tier 1  leverage  ratio of
less than 4%.

         LIQUIDITY. The Bank 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 a  monthly  average  of not  less  than a  specified  percentage  of its  net
withdrawable  deposit  accounts  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% depending  upon economic  conditions and the savings flows of
member  institutions,  and is currently  5%. OTS  regulations  also require each
savings  institution  to maintain an average daily balance of short-term  liquid
assets  at a  specified  percentage  (currently  1%) of  the  total  of its  net
withdrawable  deposit  accounts  and  borrowings  payable  in one  year or less.
Monetary   penalties  may  be  imposed  for  failure  to  meet  these  liquidity
requirements.  The Bank's average  liquidity  ratio for December 1996 was 8.05%,
which exceeded the then applicable requirements. The Bank has never been subject
to monetary penalties for failure to meet its liquidity requirements.

<PAGE>

         FINANCIAL  MANAGEMENT  REQUIREMENTS.  The FDICIA also imposes financial
reporting  requirements on all depository  institutions with assets of more than
$500 million,  their management and their  independent  auditors and establishes
rules for the composition,  duties,  and authority of such  institutions'  audit
committees and boards of directors. Under FDIC regulations,  all such depository
institutions  are required to prepare and make  available  to the public  annual
reports on their  financial  condition and management,  including  statements of
managements' responsibility for the financial statements,  internal controls and
compliance with certain designated federal banking laws and regulations relating
to safety and soundness,  and an assessment of the institution's compliance with
such internal  controls,  designated  laws and  regulations.  The  institution's
independent  public  accountants  are  required  to attest  to these  management
assessments.  Each such  institution also is required to have an audit committee
composed of independent directors.

         TRANSACTIONS  WITH RELATED  PARTIES.  The Bank's authority to engage in
transactions  with  related  parties or  "affiliates"  (i.e.,  any company  that
controls or is under common control with an  institution,  including the Company
and its  non-savings  institution  subsidiaries)  or to make  loans  to  certain
insiders,  is limited by Sections 23A and 23B of the Federal  Reserve Act (FRA).
Section 23A limits the  aggregate  amount of  transactions  with any  individual
affiliate to 10% of the capital and surplus of the savings  institution and also
limits the aggregate  amount of  transactions  with all affiliates to 20% of the
savings institution's capital and surplus.  Certain transactions with affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A and the purchase of low quality assets from  affiliates is generally
prohibited.  Section 23B provides  that certain  transactions  with  affiliates,
including loans and asset purchases,  must be on terms and under  circumstances,
including  credit  standards,  that  are  substantially  the same or at least as
favorable to the  institution  as those  prevailing  at the time for  comparable
transactions  with  nonaffiliated   companies.  In  the  absence  of  comparable
transactions,  such  transactions may only occur under terms and  circumstances,
including  credit  standards,  that in good  faith  would be offered to or would
apply to nonaffiliated companies.  Notwithstanding Sections 23A and 23B, savings
institutions  are  prohibited  from lending to any affiliate  that is engaged in
activities  that are not  permissible  for bank holding  companies under Section
4(c) of the Bank Holding Company Act (BHC Act).  Further, no savings institution
may purchase the securities of any affiliate other than a subsidiary.

         The Bank's authority to extend credit to executive officers,  directors
and 10% shareholders,  as well as certain related interests of such persons,  is
currently  governed by Sections  22(g) and 22(h) of the FRA,  and  Regulation  O
thereunder.  Among other things, these regulations require such loans to be made
on terms  substantially  the same as those offered to  unaffiliated  individuals
(provided that loans may be made on  preferential  terms to insiders if loans on
such terms are widely  available  to  non-insider  employees  pursuant to a Bank
benefit or  compensation  plan) and to not involve  more than the normal risk of
repayment, place limits on the amount of loans the Bank may make to such persons
based, in part, on the Bank's capital  position,  and require  certain  approval
procedures to be followed.  The OTS  regulations,  with certain minor variances,
apply Regulation O to savings institutions.

         ENFORCEMENT.  Under  the  FDI  Act,  the OTS  has  primary  enforcement
responsibility  over  savings  institutions  and  has  the  authority  to  bring
enforcement  action  against  all   "institution-related   parties,"   including
stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured  institution.  Civil  penalties  cover a wide  range of  violations  and
actions and range up to $25,000  per day unless a finding of reckless  disregard
is made, in which case penalties may be as high as $1 million per day.  Criminal
penalties  for  most  financial  institution  crimes  include  fines of up to $1
million  and  imprisonment  for up to 30 years.  In  addition,  regulators  have
substantial discretion to impose enforcement action on an institution that fails
to comply with its  regulatory  requirements,  particularly  with respect to the
capital requirements.  Possible enforcement action ranges from the imposition of
a capital plan and capital  directive to  receivership,  conservatorship  or the
termination of deposit insurance.  Under the FDI Act, the FDIC has the authority
to  recommend  to the  Director  of OTS that  enforcement  action be taken  with
respect  to a  particular  savings  institution.  If  action is not taken by the
Director,   the  FDIC  has   authority  to  take  such  action   under   certain
circumstances.

<PAGE>

         STANDARDS  FOR SAFETY  AND  SOUNDNESS.  FDICIA  requires  each  federal
banking agency to prescribe for all insured  depository  institutions  and their
holding companies  standards relating to internal controls,  information systems
and audit systems, loan documentation,  credit underwriting,  interest rate risk
exposure,  asset  growth,  compensation,  fees  and  benefits,  and  such  other
operational  and  managerial  standards  as the  agency  deems  appropriate.  In
addition,  the federal banking regulatory  agencies are required to prescribe by
regulation standards specifying (i) maximum classified assets to capital ratios;
(ii) minimum  earnings  sufficient to absorb losses without  impairing  capital;
(iii) to the extent feasible,  a minimum ratio of market value to book value for
publicly traded shares of depository  institutions or the depository institution
holding  companies  and (iv) such other  standards  relating  to asset  quality,
earnings and valuation as the agency deems  appropriate.  Finally,  each federal
banking agency is required to prescribe  standards for employment  contracts and
other compensation arrangements of executive officers, employees,  directors and
principal  stockholders of insured  depository  institutions that would prohibit
compensation and benefits and arrangements that are excessive or that could lead
to a material  financial  loss for the  institution.  If an  insured  depository
institution or its holding company fails to meet any of its prescribed standards
as described  above,  it will be required to submit to the  appropriate  federal
banking  agency  a plan  specifying  the  steps  that  will be taken to cure the
deficiency.  If an  institution  fails to submit an acceptable  plan or fails to
implement the plan,  the  appropriate  federal  banking  agency will require the
institution or holding  company,  to correct the deficiency and until corrected,
may impose  restrictions on the institution or the holding company including any
of the restrictions  applicable under the prompt corrective action provisions of
FDICIA.

         In  addition,  OTS  regulations  require each  savings  association  to
establish and maintain written internal real estate lending standards consistent
with  safe  and  sound  banking  practices  and  appropriate  to the size of the
institution and the nature and scope of its real estate lending activities.

         CAPITAL  REQUIREMENTS.  The OTS  capital  regulations  require  savings
institutions to meet three capital standards:  a 1.5% tangible capital standard,
a 3% leverage (core capital) ratio and an 8% risk based capital  standard.  Core
capital is defined as common stockholder's equity (including retained earnings),
certain  noncumulative  perpetual  preferred  stock  and  related  surplus,  and
minority  interests  in  equity  accounts  of  consolidated   subsidiaries  less
intangibles other than certain qualifying supervisory goodwill and certain other
identifiable intangible assets. The OTS regulations require that, in meeting the
leverage ratio,  tangible and risk-based  capital  standards,  institutions must
deduct  investments  in and loans to  subsidiaries  engaged  in  activities  not
permissible for a national bank.

         OTS capital regulations  respecting  intangible assets permit purchased
mortgage servicing rights (PMSRs),  originated mortgage servicing rights (OMSRs)
and  purchased  credit  card  relationships  (PCCRs) to be  included in a saving
association's capital,  provided the aggregate amount of such intangibles,  when
added  together,  do not exceed 50 percent of core  capital.  In  addition,  the
regulations  provide  that a savings  association  may  include  the same dollar
amount of these  intangible  assets in tangible capital that it includes in core
capital.  These types of intangible assets must be valued at the lower of 90% of
fair market value or 100% of remaining  unamortized book value. PMSRs, OMSRs and
PCCRs in excess of applicable limits, as well as core deposit intangibles,  must
be  deducted  from both  assets and  capital in  calculating  core and  tangible
capital.

         The risk-based capital standard for savings  institutions  requires the
maintenance  of total  capital  (which is defined as the sum of core capital and
supplementary  capital) to risk weighted assets of 8%. In determining the amount
of risk-weighted assets, all assets, including certain off-balance sheet assets,
are  multiplied by a  risk-weight  of 0% to 100%, as assigned by the OTS capital
regulation  based on the risks OTS  believes  are inherent in the type of asset.
The components of core capital are equivalent to those  discussed  earlier under
the 3% leverage  standard.  The  components  of  supplementary  capital  include
cumulative  preferred stock,  long-term  perpetual  preferred  stock,  mandatory
convertible  securities,  subordinated debt and intermediate preferred stock and
allowance  for loan and  lease  losses.  Allowance  for  loan and  lease  losses
includable in supplementary  capital is limited to a maximum of 1.25%.  Overall,
the amount of  supplementary  capital  included as part of total capital  cannot
exceed 100% of core capital.

<PAGE>

         Under the OTS rules,  savings associations with "above normal" interest
rate risk exposure are subject to a deduction from total capital for purposes of
calculating  their  risk-based  capital  requirements.  A savings  association's
interest rate risk is measured by the decline in the net portfolio  value of its
assets (i.e., the difference between incoming and outgoing discounted cash flows
from assets, liabilities and off-balance sheet contracts) that would result from
a hypothetical  200-basis  point  increase or decrease in market  interest rates
(except when the 3-month Treasury bond equivalent yield falls below 4%, then the
decrease  will be  equal to  one-half  of that  Treasury  rate)  divided  by the
estimated  economic  value  of  the  association's   assets,  as  calculated  in
accordance  with  guidelines set forth by the OTS. A savings  association  whose
measured  interest  rate risk  exposure  exceeds 2% must deduct an interest rate
component in calculating  its total capital under the  risk-based  capital rule.
The  interest  rate  risk  component  is an  amount  equal  to  one-half  of the
difference  between  the  institution's  measured  interest  rate  risk  and 2%,
multiplied by the estimated  economic value of the  association's  assets.  That
dollar amount is deducted  from an  association's  total capital in  calculating
compliance with its risk-based capital requirement.  The rule also provides that
the Director of the OTS may waive or defer an  association's  interest rate risk
component on a case-by-case basis.

         At December 31, 1996, the Bank met each of its capital requirements.

         PROMPT CORRECTIVE  REGULATORY  ACTION. FDICIA  establishes  a system of
prompt   corrective   action  to  resolve  the   problems  of   undercapitalized
institutions.  Under this system the  banking  regulators  are  required to take
certain supervisory actions against undercapitalized  institutions, the severity
of  which  depends  upon  the  institution's   degree  of   undercapitalization.
Generally,  subject to a narrow exception, FDICIA requires the banking regulator
to appoint a receiver  or  conservator  for an  institution  that is  critically
undercapitalized.  FDICIA authorizes the banking regulators to specify the ratio
of  tangible  capital  to  assets  at which an  institution  becomes  critically
undercapitalized and requires that ratio be no less than 2% of assets.

         Under the OTS final rule implementing the FDICIA standard, generally, a
savings  institution is treated as "well  capitalized"  if its total  risk-based
capital  ratio is at least 10%, its Tier 1 risk-based  capital ratio is at least
6%,  its  leverage  ratio is at least 5%, and it is not  subject to any  written
agreement,  order,  capital  directive,  or prompt  corrective  action directive
issued by the OTS to meet and  maintain  a  specific  capital  level.  A savings
institution  will be "adequately  capitalized" if its total  risk-based  capital
ratio is at least 8%, its Tier 1  risk-based  capital  ratio is at least 4%, and
its leverage ratio is at least 4%, (3% if the  institution is rated  composite 1
under  the  CAMEL  rating  system  in its most  recent  examination).  A savings
institution will be  "undercapitalized" if its total risk-based capital ratio is
under 8%, or its Tier 1  risk-based  capital  ratio is under 4%, or its leverage
ratio is under 4% (3% with a composite 1 CAMEL  rating).  A savings  institution
that  has a  total  risk-based  capital  ratio  of  less  than  6%,  or a Tier 1
risk-based capital ratio of less than 3%, or a leverage ratio of less than 3% is
considered to be "significantly  undercapitalized."  A savings  institution that
has a ratio of  tangible  equity  to total  assets  equal to or less  than 2% is
deemed to be "critically  undercapitalized."  Generally,  a capital  restoration
plan  must be filed  with  the OTS  within  45 days of the  date an  association
receives notice that it is "undercapitalized,"  "significantly undercapitalized"
or "critically  undercapitalized."  In addition,  numerous mandatory supervisory
actions become  immediately  applicable to the institution,  including,  but not
limited   to,   restrictions   on   growth,   investment   activities,   capital
distributions,  and affiliate transactions. The OTS could also take any one of a
number of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

<PAGE>

         INSURANCE OF DEPOSIT ACCOUNTS.  The FDIC has  established  a risk-based
assessment  system for insured  depository  institutions that takes into account
the risks attributable to different  categories and concentrations of assets and
liabilities.  Under FDIC rules,  the FDIC assigns an institution to one of three
capital categories based on the institution's  financial information,  as of the
reporting period ending seven months before the assessment period, consisting of
(i) well capitalized, (ii) adequately capitalized or (iii) undercapitalized, and
one  of  three  supervisory   subcategories   within  each  capital  group.  The
supervisory  subgroup  to  which  an  institution  is  assigned  is  based  on a
supervisory evaluation provided to the FDIC by the institution's primary federal
regulator  and  information  which the FDIC  determines  to be  relevant  to the
institution's  financial  conditions and the risk posed to the deposit insurance
funds  (which  may  include,   if  applicable,   information   provided  by  the
institution's state supervisor). An institution's assessment rate depends on the
capital  category and  supervisory  category to which it is assigned.  There are
nine assessment risk classifications  (i.e.,  combinations of capital groups and
supervisory subgroups) to which different assessment rates are applied.

         The  FDIC is  authorized  to raise  the  assessment  rates  in  certain
circumstances.  If the FDIC determines to increase the assessment  rates for all
institutions,  institutions in all risk categories  could be affected.  The FDIC
has exercised this authority  several times in the past and may raise  insurance
premiums  in the future.  If such action is taken by the FDIC,  it could have an
adverse effect on the earnings of the Bank.

         Prior  to  1997,  assessments  paid  by  healthy  savings  institutions
significantly  exceeded  those paid by healthy  commercial  banks.  Pursuant  to
legislation  passed in September 1996, the SAIF was  recapitalized  to eliminate
this  disparity.  Under  the  recapitalization  plan,  thrifts  paid  a  special
assessment  of $.657 per $100 of SAIF  deposits held at March 31, 1995, in order
to increase SAIF reserves to the level required by law. The Bank paid a one-time
special assessment of $9.7 million. Going forward, assessment rates in 1997 will
range from zero basis points for an  institution  in the highest  category (i.e.
well-capitalized  and  healthy)  to 27 basis  points for an  institution  in the
lowest category (i.e. undercapitalized and substantial supervisory concern). The
Bank's assessment rate for 1997 is zero basis points of deposits.  The plan also
provided that the cost of prior thrift  failures will be shared by both the SAIF
and  the Bank Insurance Fund (BIF), which will increase  assessments for thrifts
and banks by $.0648 and $.013, respectively, for every $100 of deposits.

         Under the FDI Act,  insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound  practices,
is in an unsafe or unsound condition to continue  operations or has violated any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
OTS.  The  management  of the Bank does not know of any  practice,  condition or
violation that might lead to termination of deposit insurance.

         FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB System,
which consists of 12 regional FHLBs. The FHLB provides a central credit facility
primarily  for  member  institutions.  The Bank,  as a member  of the  FHLB,  is
required to acquire and hold shares of capital  stock in its regional FHLB in an
amount at least  equal to 1% of the  aggregate  principal  amount of its  unpaid
residential  mortgage  loans and similar  obligations  at the  beginning of each
year, or 1/20 of its advances  (borrowings) from the FHLB, whichever is greater.
The Bank was in  compliance  with this  requirement  at December 31, 1996.  FHLB
advances  must be secured by specified  types of  collateral  and all  long-term
advances may only be obtained for the purpose of providing funds for residential
housing finance.

<PAGE>

         FEDERAL RESERVE SYSTEM.  The Federal Reserve Board regulations  require
savings  institutions to maintain  non-interest-earning  reserves  against their
transaction accounts (primarily interest bearing and regular checking accounts).
The  Federal  Reserve  Board  regulations  generally  require  that  reserves be
maintained  against aggregate  transaction  accounts.  The Bank is in compliance
with the  foregoing  requirements.  The balances  maintained to meet the reserve
requirements  imposed  by the  Federal  Reserve  Board  may be used  to  satisfy
liquidity  requirements  imposed by the OTS. Because  required  reserves must be
maintained in the form of either vault cash, a non-interest bearing account at a
Federal Reserve Bank or a pass-through account as defined by the Federal Reserve
Board,  the  effect  of  this  reserve  requirement  is  to  reduce  the  Bank's
interest-earning  assets. FHLB System members are also authorized to borrow from
the Federal Reserve  "discount  window," but Federal  Reserve Board  regulations
require institutions to exhaust all FHLB sources before borrowing from a Federal
Reserve Bank.

         HOLDING COMPANY REGULATION.  The  Company is a non-diversified  unitary
savings and loan holding company within the meaning of the HOLA, as amended.  As
such,  the Company is  required  to register  with the OTS and is subject to OTS
regulations,  examinations, supervision and reporting requirements. In addition,
the  OTS  has  enforcement  authority  over  the  Company  and  its  non-savings
institution subsidiaries.  Among other things, this authority permits the OTS to
restrict or prohibit  activities that are determined to be a serious risk to the
subsidiary  savings  institution.  The Bank must  notify the OTS 30 days  before
declaring any dividend to the Company.

         The HOLA  prohibits a savings  and loan  holding  company,  directly or
indirectly, or through one or more subsidiaries,  from acquiring another savings
institution or holding company  thereof,  without prior written  approval of the
OTS;  acquiring  or  retaining,  with  certain  exceptions,  more  than  5% of a
non-subsidiary  savings  institution,  a non-subsidiary  holding  company,  or a
non-subsidiary  company engaged in activities  other that those permitted by the
HOLA; or acquiring or retaining  control of an institution that is not federally
insured.  In evaluating  applications  by holding  companies to acquire  savings
institutions,  the OTS must consider the financial and managerial  resources and
future  prospects  of the company and  institution  involved,  the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.

         As a unitary savings and loan holding company, the Company generally is
not  restricted  under  existing laws as to the types of business  activities in
which it may engage,  provided  that the Bank  continues  to be a QTL.  Were the
Company to acquire another thrift and not merge that  institution with the Bank,
the Company  would  become a multiple  savings and loan  holding  company.  As a
multiple  savings and loan holding  company,  under HOLA the  activities  of the
Company and its non-insured institution  subsidiaries would be limited primarily
to activities  permissible  for bank holding  companies under Section 4(c)(8) of
the BHC Act, subject to the prior approval of the OTS, and activities authorized
by OTS regulation. In addition, in connection with legislation proposed to unify
the  banking  and thrift  charters,  the Company  might  become  subject to more
restrictive holding company requirements.

<PAGE>

         The Company is prohibited from making an acquisition of another savings
bank or savings  association  wherein  the bank or  association  is located in a
state other than  Kentucky and is held as a separate  subsidiary of the Company,
except  with  respect  to:  (i)  those  made  with the  approval  of  interstate
supervisory  acquisitions  by savings and loan  holding  companies,  or (ii) the
acquisition  of a savings  institution in another state if the laws of the state
of  the  target  savings  institution  specifically  permit  such  acquisitions.
Although the  conditions  imposed upon  acquisitions  in those states which have
enacted such legislation  vary, some statutes are of the "regional  reciprocity"
type which  require  both that the  acquiring  holding  company  be located  (as
defined by the  location  of its  subsidiary  savings  institutions)  in a state
within a defined  geographic  region  and that the state in which the  acquiring
holding company is located have enacted reciprocal  legislation allowing savings
institutions  in the  target  state  to  purchase  savings  institutions  in the
acquiror's  home state on terms no more  restrictive  than those  imposed by the
target state on the  acquiror.  Other states  allow full  nationwide  reciprocal
banking.  Some states authorize  acquisitions by out-of-state  holding companies
only in  supervisory  cases,  and  certain  states do not  authorize  interstate
acquisitions under any circumstances.

         Federal law  generally  provides that no "person,"  acting  directly or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a  federally-insured
savings  institution  without giving at least 60 days' written notice to the OTS
and providing the OTS an  opportunity  to disapprove  the proposed  acquisition.
Such acquisitions of control may be disapproved if it is determined, among other
things,  that (i) the acquisition would substantially  lessen competition;  (ii)
the financial  condition of the acquiring  person might jeopardize the financial
stability  of  the  savings  institution  or  prejudice  the  interests  of  its
depositors  or (iii) the  competency,  experience  or integrity of the acquiring
person or the proposed  management  personnel  indicates that it would not be in
the  interest  of the  depositors  or the  public to permit the  acquisition  of
control by such person.

         In November,  1994, the OTS issued final regulations  restricting stock
repurchases of recently converted stock savings institutions.  These regulations
prohibit  repurchases  in the  first  year  following  conversion  and  restrict
repurchases  in years  two and three to five  percent  during  any  twelve-month
period.  The  regulations,  however,  do permit an association to petition for a
waiver  of the  regulatory  limitations  described  above.  As the  Bank was the
subject of a conversion in March,  1994, it is subject to these  limitations  on
repurchases.

         STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES.  Certain  information
required  under  Exchange Act Industry Guide 3 promulgated by the Securities and
Exchange  Commission  can be found in Part II,  items 6., and 7., of this report
entitled  "Selected  Financial Data,"  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations".

<PAGE>

ITEM 2.  PROPERTIES

         At  December 31, 1996, the Company  conducts its  business through  its
headquarters  located in  Louisville,  Kentucky,  and  fourty-four  full service
banking  offices,  three loan  production  offices and three  stand-alone ATM or
drive-through  locations.  Of  these  business  locations,  30 are  owned by the
Company  and 21 are leased.  The  Company's  forty-fifth  full  service  banking
office, located in New Albany, Indiana, opened for business on February 5, 1997.
This location is owned by the Company.


ITEM 3.  LEGAL PROCEEDINGS

         A regular compliance  examination by the OTS has raised questions about
the  accuracy  of the  Bank's  Truth in  Lending  (TIL)  disclosures  on certain
adjustable-rate  mortgages.  The TIL  disclosure  errors were brought about as a
result of problems  incurred  in the use of certain  computer  programs  for the
calculation  of the  disclosures.  Under  applicable  federal  law,  in  certain
circumstances, the fact that improper TIL disclosures were generated as a result
of errors in a computer program may provide a defense. However, the OTS regional
compliance  director has rejected the Bank's computer error defense. As a result
of that rejection,  the Bank  investigated  the extent of the restitution  which
could be required under  applicable  law and  determined  that the most probable
amount  in  the  event  that   the  computer   error  and   other  defenses  are
unsuccessful  (along with related  attorney  fees) is $1.5  million.  Management
intends to  aggressively  assert  available  defenses to this  proceeding and to
attempt to minimize any damage award. In addition to current cash payments,  the
Bank would also be  responsible  in certain  circumstances  for reducing  future
mortgage interest payments on affected loans, a result of which would be reduced
earnings for the Bank.  Management does not believe that future interest payment
reductions  would have a material  adverse effect on the financial  condition or
results of operations of the Bank or the Company.

         Except as discussed  above,  the Company and its  subsidiaries  are not
involved in any pending legal  proceedings  other than routine legal proceedings
occurring in the ordinary course of business.  Such routine legal proceedings in
the  aggregate  are believed by  management  to be  immaterial  to the Company's
financial condition or results of operations.

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

         There were no matters submitted to a vote of security holders,  through
solicitation of proxies or otherwise, during the fourth quarter of 1996.

                      
<PAGE>

                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


The   Common   Stock  of  Great   Financial   Corporation   is   traded  in  the
over-the-counter  market  and is listed  under the  symbol  "GTFN" on the NASDAQ
National  Market  System.  The  stock  began  trading  on March  31,  1994.  The
registered number of stockholders as of March 5, 1997, was 3,461.

<TABLE>
<CAPTION>

Stock Data
                                                         Dividends
                                                          Paid Per
Year         Period               High         Low         Share
<S>      <C>                     <C>          <C>          <C>
1996     First Quarter           24 3/4       22 1/2       $0.10
         Second Quarter          27 5/8       24 1/2       $0.12
         Third Quarter           29 1/4       25 1/4       $0.12
         Fourth Quarter          30           28 1/8       $0.12

1995     First Quarter           17 1/2       14 7/8       $0.08
         Second Quarter          19 1/8       13 3/8       $0.10
         Third Quarter           24           19           $0.10
         Fourth Quarter          24 1/8       20 1/8       $0.10

</TABLE>

<PAGE>

ITEM 6.  SELECTED FINANCIAL AND OTHER DATA

                                        
Set forth  below  are  selected  consolidated  financial  and other  data of the
Company.  This  financial  data is derived  in part from,  and should be read in
conjunction  with,  the  Consolidated  Financial  Statements  and Notes  thereto
presented elsewhere in this report.

<TABLE>
<CAPTION>

                                                                        At December 31,
                                            -----------------------------------------------------------------------
                                                1996           1995         1994(1)        1993(2)         1992
                                            ------------  -------------  -------------  -------------  ------------
                                                                        (in thousands)
<S>                                          <C>            <C>            <C>            <C>           <C>
Selected Financial Data:
    Total assets                             $2,897,162     $2,486,256     $1,912,497     $1,738,121    $1,397,688
    Cash and cash equivalents                   126,323         84,167         17,013         13,662        11,579
    Securities                                  667,542        461,330        340,167        207,815       200,102
    Mortgage loans held for sale                 65,546        144,163         91,725        423,993       291,096
    Loans receivable, net                     1,867,511      1,667,363      1,362,086        998,321       791,995
    Federal Home Loan Bank stock                 34,816         21,917         17,304         13,677        10,796
    Mortgage servicing rights                    37,187         35,751         24,511         30,063        63,802
    Deposits                                  1,804,003      1,458,861      1,190,390      1,293,738     1,127,392
    Borrowed funds                              781,297        714,209        416,648        297,073       122,459
    Stockholders' equity/Retained earnings      280,454        287,110        284,636        128,653       131,575


                                                               For the Years Ended December 31,
                                            -----------------------------------------------------------------------
                                               1996           1995         1994(1)        1993(2)         1992
                                            ------------  -------------  -------------  -------------  ------------
                                                         (dollars in thousands except per share data)
<S>                                            <C>            <C>            <C>            <C>           <C>
Selected Operating Data:
    Interest income                            $199,255       $160,632       $119,466       $110,912      $106,693
    Interest expense                            123,417         98,088         61,120         57,927        64,628
                                            ------------  -------------  -------------  -------------  ------------
    Net interest income                          75,838         62,544         58,346         52,985        42,065
    Provision for loan losses                     2,586          2,283          1,786          4,659         1,702
                                            ------------  -------------  -------------  -------------  ------------
    Net interest income after provision
      for loan losses                            73,252         60,261         56,560         48,326        40,363
                                            ------------  -------------  -------------  -------------  ------------
    Non-interest income:
      Servicing fee income                       26,852         26,976         24,918         30,091        30,350
      Amortization of mortgage servicing 
        rights                                   (7,739)        (6,391)        (7,429)       (44,739)      (16,370)
      Gain on sale of mortgage loans              6,890          4,308          7,203         12,800         6,152
      Gain on sale of mortgage servicing 
        rights                                    2,519            170          4,780          2,588
      Other                                       7,316          4,370          4,512          3,232         1,966
                                            ------------  -------------  -------------  -------------  ------------
        Net non-interest income                  35,838         29,433         33,984          3,972        22,098
                                            ------------  -------------  -------------  -------------  ------------
    Non-interest expense:
      Compensation and benefits                  32,734         27,036         30,370         29,168        23,250
      Office occupancy and equipment              9,265          7,150          7,734          6,370         5,696
      Other non-interest expense                 36,627         21,607         20,945         21,422        17,456
                                            ------------  -------------  -------------  -------------  ------------
        Total non-interest expense               78,626         55,793         59,049         56,960        46,402
                                            ------------  -------------  -------------  -------------  ------------
    Income (loss) before income taxes and
      cumulative effect of change
      in accounting principle                    30,464         33,901         31,495         (4,662)       16,059
    Income tax expense (benefit)                 10,957         12,211         11,404         (2,709)        5,694
                                            ------------  -------------  -------------  -------------  ------------
    Income (loss) before cumulative effect
      of change in accounting principle          19,507         21,690         20,091         (1,953)       10,365

    Cumulative effect to January 1, 1993 of
      change in accounting for income taxes                                                     (969)
                                            ------------  -------------  -------------  -------------  ------------
    Net income (loss)                           $19,507        $21,690        $20,091        $(2,922)      $10,365
                                            ============  =============  =============  =============  ============
    Earnings per share:
      Primary                                     $1.36          $1.46          $1.05(3)
                                            ============  =============  =============
      Fully diluted                               $1.36          $1.44          $1.05(3)
                                            ============  =============  =============
    Cash dividends declared per share             $0.46          $0.38          $0.08
                                            ============  =============  =============
    Dividend payout ratio                         33.82%         26.39%          7.62%
                                            ============  =============  =============

<PAGE>

                                                                    At or For the Year Ended December 31,
                                                     ---------------------------------------------------------------------
                                                         1996          1995         1994(1)       1993(2)         1992
                                                     ------------  ------------  ------------  ------------   ------------
Selected Financial Ratios and Other Data:
     Performance Ratios:
        Return on average assets                         0.73%         1.00%         1.16%        -0.19%          0.75%
        Return on average equity                         7.00%         7.78%         8.60%        -2.22%          8.20%
        Average equity to average assets                10.42%        12.89%        13.54%         8.47%          9.10%
        Equity to total assets                           9.68%        11.55%        14.88%         7.40%          9.41%
        Interest rate spread(4)                          2.38%         2.22%         2.82%         3.17%          2.66%
        Net interest margin(5)                           3.03%         3.07%         3.58%         3.66%          3.28%
        Operating expense to average assets              2.94%         2.58%         3.42%         3.66%          3.34%
        Average interest-earning assets to average
          interest-bearing liabilities                 113.19%       117.64%       120.51%       112.33%        112.28%

     Asset Quality Ratios:
        Non-performing loans to total loans(6)(8)        5.19%         5.52%         4.51%         3.95%          3.84%
        Non-performing assets to total assets(7)(8)      3.66%         4.16%         3.53%         3.33%          3.08%
        Allowance for loan losses to total loans         0.68%         0.64%         0.74%         0.70%          0.22%
        Allowance for loan losses to non-performing
          loans                                         13.11%        11.57%        16.49%        17.72%          5.77%
        Allowance for loan losses to non-performing
          assets                                        12.76%        11.44%        16.42%        17.48%          5.64%

     Other Data:
        Number of deposit accounts                    180,100       153,500       126,800       134,300        112,800
        Number of real estate loans in portfolio       24,000        23,400        21,100        20,000         15,000
        Number of real estate loans serviced for 
          others                                       83,000        79,300        66,300        78,600         82,500
        Number of facilities:
          Full service offices                             44            41            36            39             30
          Loan origination offices                          3             3            12            13             13

     -------
<FN>

     (1) The 1994 information includes the effects of the offering and sale of 
         the Company's common stock in connection with the conversion on March 
         30, 1994 of the Bank from a federal mutual savings and loan association
         to a federal stock savings bank.

     (2) The 1993 information includes the effects of the write-down of the 
         carrying value of purchased mortgage service rights in the amount of 
         $23.3 million.

     (3) Earnings per share since conversion on March 30, 1994.

     (4) The interest rate spread represents the difference between the weighted
         average yield on interest-earning assets and the weighted average cost
         of interest-bearing liabilities.

     (5) The net interest margin represents net interest income as a percent of 
         average interest-earning assets.

     (6) Non-performing loans consist of non-accrual loans, accruing loans 90 
         days or more past due, and restructured loans. Total loans include 
         loans held for sale.

     (7) Non-performing assets consist of non-performing loans and foreclosed 
         real estate owned.

     (8) Includes delinquent FHA/VA loans which have limited credit risk.  See 
         "Management's Discussion and Analysis -- Non-Performing Assets."

</FN>

</TABLE>

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


GENERAL

Great Financial  Corporation  (GFC) became publicly held on March 30, 1994, when
its wholly-owned subsidiary completed a conversion from a federal mutual savings
and loan  association to a federal stock savings bank, Great Financial Bank, FSB
(Bank).  On July 14, 1995,  GFC completed  the  acquisition  of First  Financial
Shares,  Inc. (FFS),  the  holding  company  for First  Federal Savings Bank  of
Richmond, Kentucky  (First  Federal).  On August 9, 1995,  FFS merged  into GFC,
leaving First Federal as the second  wholly-owned  subsidiary of GFC. On July 7,
1996,  First  Federal  merged  with  the  Bank,  reducing  the  number  of GFC's
wholly-owned subsidiaries to one. On June 7, 1996, GFC completed the acquisition
of LFS Bancorp,  Inc. (LFS),  parent company of Lexington  Federal Savings Bank,
(Lexington  Federal).   LFS   was  dissolved  upon   acquisition  and  Lexington
Federal merged with the Bank.  The purpose of the discussion  that follows is to
provide  insight  into the  consolidated  financial  condition  and  results  of
operations of GFC and its subsidiary,  the Bank (collectively the Company). This
discussion  should  be read  in  conjunction  with  the  Consolidated  Financial
Statements and Notes thereto printed elsewhere in this report.
 
The Company's  consolidated results of operations are dependent primarily on net
interest income,  which is the difference  between the interest income earned on
interest-earning assets, such as loans and securities,  and the interest expense
incurred on interest-bearing  liabilities,  such as deposits and borrowed funds.
The results are also  significantly  affected by its mortgage banking activities
which involve the  origination,  purchase,  sale,  servicing and subservicing of
residential mortgage loans. The Company also generates  non-interest income such
as  transactional  fees and  gain or loss on sale of  mortgage  loans,  mortgage
servicing  rights and securities.  In addition,  commissions are earned from the
sale of annuity,  mutual fund and insurance  products.  The Company's  operating
expenses consist primarily of employee compensation, occupancy expenses, federal
deposit insurance  premiums and other general and administrative  expenses.  The
Company's  results of  operations  are  significantly  affected by its  periodic
amortization of mortgage servicing rights and by its provisions for loan losses.
The Company's results of operations are also  significantly  affected by general
economic and  competitive  conditions,  particularly  changes in market interest
rates, government policies and actions of regulatory agencies.

Any forward-looking statements included in this report or in any report included
by reference,  which reflect  management's best judgment based on factors known,
involve risks and uncertainties, as discussed above. Actual results could differ
materially from those expressed or implied.

OVERVIEW

The Company's  1996  business  activities  continued to focus on the  strategies
adopted in 1994 following its conversion to a stock  company.  These  strategies
were to leverage the Company's capital base through internal and external growth
in order to increase  the return on  stockholders'  equity,  and to focus on the
delivery of retail banking products to new and existing customers in the primary
market area of Kentucky and southern Indiana.  As a result, the Company's assets
increased  17%, or $411  million,  to a total of $2.9 billion in 1996.  Deposits
increased  24% to $1.8  billion,  and  loans  receivable  increased  12% to $1.9
billion.  Contributing  significantly  to this  growth  was the  acquisition  of
Lexington Federal in June. At acquisition, Lexington Federal had total assets of
approximately $240 million and operated four offices in central Kentucky.

The  long-awaited  recapitalization  of the Savings  Association  Insurance Fund
(SAIF), a major step toward merging the thrift and banking industries,  occurred
in  September.  The Deposit  Insurance  Funds Act of 1996  required  all insured
savings  institutions  to pay a special  assessment of 65.7 cents for every $100
(0.657%) of applicable  deposits  held as of March 31, 1995.  The Company took a
charge  in the  1996 third  quarter of  $6.3 million  net of  taxes, or $.45 per
share, as required  by this  legislation.  With the  recapitalization  of  SAIF,
the FDIC lowered the Company's federal deposit insurance rates by 72%, effective
January 1, 1997, which will enhance earnings in future periods.

In 1996 the Company continued the stock repurchase plan initiative begun in 1995
to increase  shareholder  value by increasing  earnings per share. The Company's
fourth  stock  repurchase  plan was  announced  in  August,  and  calls  for the
repurchase  of up to 5% or 709,000  shares of the Company's  outstanding  common
stock. As of December 31, 1996, the Company had repurchased  2,415,000 shares of
stock at an average cost of $20.23 per share under stock repurchase plans.

The quarterly cash dividend was increased by 20% in April.

<PAGE>
ASSET/LIABILITY MANAGEMENT

The Company  monitors its interest rate risk, or sensitivity of its net interest
income to changes in interest rates,  since the level of such risk significantly
affects certain of its operating  strategies.  Net interest income is subject to
volatility  due to (i) a mismatch  in the timing of  maturity  or  repricing  of
interest-earning assets and interest-bearing liabilities and (ii) changes in the
relative levels of interest rates for different maturities along the yield curve
(i.e., the shape of the yield curve). An Asset/Liability Committee,  established
by the Bank's Board of Directors,  is responsible  for managing  asset/liability
policies and the Company's  interest rate risk position.  This  committee  meets
monthly  and  reports  interest  rate  risk  levels  and  trends to the Board of
Directors on a quarterly basis.

One means of evaluating the sensitivity of an institution's  net interest income
to changes in  interest  rates is to examine  the extent to which its assets and
liabilities  are "interest rate  sensitive"  and by monitoring an  institution's
interest rate  sensitivity  "gap".  An asset or liability is said to be interest
rate sensitive within a specific time period if it will mature or reprice within
that time period. The interest rate sensitivity gap is defined as the difference
between the amount of  interest-earning  assets  maturing or repricing  within a
specific time period and the amount of interest-bearing  liabilities maturing or
repricing  within that same time period.  A gap is considered  positive when the
amount of interest  rate  sensitive  assets  exceeds the amount of interest rate
sensitive liabilities.  A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive assets.
During a period  of  falling  interest  rates,  the net  interest  income  of an
institution  with  a  positive  gap  may  be  adversely   affected  due  to  its
interest-earning  assets repricing to a greater extent than its interest-bearing
liabilities,  while an  institution  with a negative  gap would  likely  have an
opposite result.  Conversely,  during a period of rising interest rates, the net
interest  income of an  institution  with a positive  gap  position may increase
since it is able to  increase  the  yield on its  interest-earning  assets  more
rapidly than the cost of its interest-bearing liabilities,  while an institution
with a negative gap would likely have an opposite result.

The  following   interest  rate  sensitivity  table  sets  forth  the  Company's
interest-earning  assets and interest-bearing  liabilities at December 31, 1996,
which are anticipated,  based upon certain assumptions,  to reprice or mature in
each of the future time periods  shown.  Except as stated  below,  the amount of
assets and liabilities  shown which reprice or mature during a particular period
were  determined in accordance  with the earlier of the term to repricing or the
contractual maturities of the asset or liability.  The Company's loan prepayment
and deposit  decay rate  assumptions  are  management's  estimates  derived from
sources which the  Asset/Liability  Committee  uses in monitoring  the Company's
interest rate risk position.

Specifically,   the   table   assumes   a  25%   annual   prepayment   rate  for
adjustable-rate,  single-family residential mortgage loans, substantially all of
which reprice at a margin over a current index such as the weekly  average yield
of  U.S.  Treasury  securities  adjusted  to a  constant  maturity  of  one-year
(one-year Treasury index).  Fixed-rate mortgage loans  were assigned  prepayment
rates as follows:

<TABLE>
<CAPTION>
                                                Assumed Annual 
          Loan Interest Rate                   Prepayment Rate
        --------------------------------------------------------
          <S>                                         <C>
          Less than 7%                                 7%

          7 to 7.99%                                   9%

          8 to 8.99%                                  15%

          9 to 9.99%                                  23%

          10% or greater                              20%
</TABLE>

Decay   rates   estimate   the  annual   rate  at  which   balances  in  certain
interest-bearing  liability  accounts  will  reprice  or be  transferred  by the
depositor to an account with a more favorable interest rate. The following table
assumes that passbook  savings and DDA accounts are repriced or withdrawn at the
annual  percentage  rate of 20% in the first year, 53% of the remaining  balance
during years two and three, and 100% of the remaining  balance during years four
and five.  Money market  accounts are assumed to reprice  within three months or
less since rates on such accounts are adjusted to market conditions.

<PAGE>

<TABLE>
<CAPTION>

INTEREST RATE SENSITIVITY

                                                   Time to Repricing or Maturity from December 31, 1996
                                    -----------------------------------------------------------------------------------
                                                 4 Months     Over 1      Over 3      Over 5
                                     3 Months     through     through     through     through     Over 10
                                      or Less     1 year      3 Years     5 Years    10 Years      Years       Total
                                    ----------- ----------- ----------- ----------- ----------- ----------- -----------
                                                             (dollars in thousands)
<S>                                  <C>         <C>         <C>         <C>         <C>         <C>        <C>
Interest-earning assets:
  Loans receivable, net              $293,210    $499,268    $586,412    $154,176    $189,377    $145,068   $1,867,511
  Mortgage loans held for sale         65,546                                                                   65,546
  Mortgage-backed securities           45,109      87,906      88,221      66,875     108,266      78,291      474,668
  Debt and equity securities           79,880      28,571      15,464      66,653          15      37,107      227,690
  Other                                98,621                                                                   98,621
                                    ----------- ----------- ----------- ----------- ----------- ----------- -----------
    Total interest-earning assets     582,366     615,745     690,097     287,704     297,658     260,466    2,734,036
                                    ----------- ----------- ----------- ----------- ----------- -----------
    Non-interest-earning assets                                                                                163,126
                                                                                                            -----------
    Total assets                                                                                            $2,897,162
                                                                                                            ===========

Interest-bearing liabilities:
  Passbook accounts                     6,614      17,954      45,613      64,634                           $  134,815
  Demand deposit accounts               8,246      22,383      56,866      80,199                              167,694
  Money market accounts               199,282                                                                  199,282
  Certificate accounts                222,008     528,460     312,600      78,234      48,748          33    1,190,083
  Borrowed funds                      448,466     178,264      45,551      93,947      13,111       1,958      781,297
                                    ----------- ----------- ----------- ----------- ----------- ----------- -----------
    Total interest-bearing 
      liabilities                     884,616     747,061     460,630     317,014      61,859       1,991    2,473,171
                                    ----------- ----------- ----------- ----------- ----------- -----------
    Non-interest-bearing liabilities
      and stockholders' equity                                                                                 423,991
                                                                                                            -----------
    Total liabilities and
      stockholders' equity                                                                                  $2,897,162
                                                                                                            ===========
Interest sensitivity gap            $(302,250)  $(131,316)  $ 229,467   $ (29,310)   $235,799    $258,475   $  260,865
                                    =========== =========== =========== =========== =========== =========== ===========
Cumulative interest sensitivity 
  gap                               $(302,250)  $(433,566)  $(204,099)  $(233,409)     $2,390    $260,865
                                    =========== =========== =========== =========== =========== ===========
Cumulative net interest-earning
  assets as a percentage of
  interest-bearing liabilities          65.83%      73.43%      90.25%      90.31%     100.10%     110.55%
                                    =========== =========== =========== =========== =========== ===========
Cumulative interest sensitivity gap
  as a percentage of total assets      -10.43%     -14.97%      -7.04%      -8.06%       0.08%       9.00%
                                    =========== =========== =========== =========== =========== ===========

</TABLE>

<PAGE>

As the preceding table indicates, the Company has a moderate negative cumulative
gap for assets and  liabilities  maturing or repricing  within one year equal to
14.97% of total  assets.  Thus,  decreases  in interest  rates  during this time
period  would  generally  increase the  Company's  net  interest  income,  while
increases in interest rates would generally  decrease the Company's net interest
income.  However,  certain  limitations  are  inherent in the method of analysis
presented in the  foregoing  table.  For example,  although  certain  assets and
liabilities may have similar maturities or periods to repricing,  they may react
in different  degrees to changes in market  interest  rates.  Also, the interest
rates on certain  types of assets and  liabilities  may  fluctuate in advance of
changes in the market  interest  rates,  while interest rates on other types may
lag  behind  changes  in market  rates.  Additionally,  certain  assets  such as
adjustable  rate mortgage (ARM) loans have features  which  restrict  changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of changes in interest  rates,  prepayment and decay rates may deviate
significantly from those assumed in calculating the table.  Finally, the ability
of many  borrowers to afford the payments on their ARM loans may decrease in the
event of an interest rate increase.

While the  preceding  table  provides an indication  of the  sensitivity  of the
Company's net interest  income to future changes in interest  rates, it does not
include any  indication of the  sensitivity to such changes of fee income earned
by the  Company  on loans  serviced  for  others.  These  fees are  included  in
non-interest  income in the Company's  consolidated  statements  of income.  The
monthly  fees  received  for  servicing  loans for  others are  calculated  as a
percentage of the principle balances of the loans being serviced.  In periods of
rising  interest  rates,  when  prepayments  on  loans  generally  decline,  the
servicing fee income on a given group of loans generally  remains higher than if
rates had not  increased.  The converse  generally  occurs in periods of falling
interest  rates.  The rate at which  mortgage  servicing  rights  are  amortized
generally decreases during periods of rising interest rates and increases during
periods  of  falling  interest  rates.  Thus,  the net  servicing  fees from the
portfolio  of loans  serviced  for others  will  generally  remain  higher  when
interest rates rise and will generally be reduced when interest rates fall.

The Company is also exposed to changes in interest rates in connection  with its
mortgage banking  activities.  As part of its mortgage banking  activities,  the
Company originates loans for subsequent sale into the secondary market on either
a  servicing  retained  or  servicing  released  basis.  Between  the time  that
origination  commitments  are  issued and the time the loans are  committed  for
sale,  the  Company  is  exposed  to  movements  in the price (due to changes in
interest  rates)  of such  loans or of  securities  into  which  such  loans are
converted.  The Company  attempts to manage this risk by  utilizing  the sale of
forward  commitments  through  which  the  Company  agrees  to sell  loans  at a
specified  price  on a  future  specified  date.  The  amount  of  such  forward
commitments  and the date on  which  they  settle  is  based  upon  management's
estimates  of  closing  volumes  and the  expiration  dates  of the  origination
commitments. Differences between management's estimates and the volume or timing
of actual loan  originations  or actual sales of loans can expose the Company to
significant  losses.  This activity is managed daily.  There can be no assurance
that the  Company  will be  successful  in its  efforts  to  reduce  the risk of
interest rate fluctuation between the time of origination of a mortgage loan and
the time of the ultimate sale of the loan.

<PAGE>
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME

Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing  liabilities. Net interest income depends
on the volume of interest-earning  assets and  interest-bearing  liabilities and
the  rates  earned or paid on them.  The  following  table  sets  forth  certain
information  relating to the Company's average  consolidated  balance sheets and
consolidated  statements of income for the years ended  December 31, 1996,  1995
and 1994. The yields and costs are derived by dividing  income or expense by the
average  balance  of assets  or  liabilities,  respectively.  For 1996 and 1995,
average balances for interest-earning  assets and  interest-bearing  liabilities
are derived from daily  balances.  All other  average  balances are derived from
month-end  balances.  For 1994, average balances for debt and equity securities,
other  interest-earning  assets,  short-term borrowings and long-term borrowings
are derived from daily  balances.  All other  average  balances are derived from
month-end balances.  Management does not believe that the use of average monthly
balances  instead of average daily balances has caused any material  differences
in the information  presented.  The average balance of loans receivable includes
loans on which the Company has discontinued  accruing  interest.  The yields and
costs include fees which are considered adjustments to yields and costs.

<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                    ------------------------------------------------------------------------------------------------
                                                  1996                             1995                            1994
                                     ------------------------------  -------------------------------   -----------------------------
                                                            Average                          Average                         Average
                                      Average                Yield/    Average                Yield/    Average               Yield/
                                      Balance     Interest    Cost     Balance     Interest    Cost     Balance    Interest    Cost
                                     ----------  ---------  -------  -----------  ---------  -------  -----------  --------  -------
                                                                         (dollars in thousands)
<S>                                  <C>          <C>        <C>      <C>          <C>        <C>      <C>          <C>       <C>
Assets:
  Interest-earning assets:
    Loans receivable, net (1)        $1,920,801   $157,893   8.22%    $1,662,707   $134,244   8.07%    $1,308,704   $99,975   7.64%
    Mortgage-backed securities (2)      456,617     33,186   7.27%       280,848     20,675   7.36%       172,693    12,463   7.22%
    Debt and equity securities (2)       80,749      5,159   6.39%        61,516      3,591   5.84%        91,688     4,658   5.08%
    Other                                20,061      1,039   5.18%        14,882        862   5.79%        40,524     1,529   3.77%
    FHLB stock                           28,280      1,978   6.99%        18,474      1,260   6.82%        14,758       841   5.70%
                                     ----------  ---------  -------  -----------  ---------  -------  -----------  --------  -------
      Total interest-earning 
       assets                         2,506,508    199,255   7.95%     2,038,427    160,632   7.88%     1,628,367   119,466   7.34%
                                                 ---------  -------               ---------  -------               --------  -------
  Non-interest-earning assets           166,634                          125,843                           98,422
                                     ----------                      -----------                      -----------
  Total assets                       $2,673,142                       $2,164,270                       $1,726,789
                                     ==========                      ===========                      ===========
Liabilities and stockholders' 
 equity:
  Interest-bearing liabilities:
    Passbook accounts                $  132,657      4,181   3.15%    $  128,633      4,103   3.19%    $  168,218     4,813   2.86%
    Demand deposit accounts             121,731      4,433   3.64%        55,111      1,479   2.68%        51,053     1,012   1.98%
    Money market accounts               174,646      8,343   4.78%       125,083      6,047   4.83%       113,744     3,427   3.01%
    Certificate accounts              1,104,532     65,024   5.89%       911,543     54,217   5.95%       799,050    40,009   5.01%
    Short-term borrowings               216,783     13,141   6.06%       268,303     16,326   6.08%       123,156     5,396   4.38%
    Long-term borrowings                464,088     28,295   6.10%       244,036     15,916   6.52%        96,030     6,463   6.73%
                                     ----------  ---------  -------  -----------  ---------  -------   ----------  --------  -------
      Total interest-bearing 
       liabities                      2,214,437    123,417   5.57%     1,732,709     98,088   5.66%     1,351,251    61,120   4.52%
                                                 ---------  -------               ---------  -------               --------  -------
  Non-interest-bearing liabilities      180,110                          152,615                          141,813
                                     ----------                      -----------                       ----------
    Total liabilities                 2,394,547                        1,885,324                        1,493,064
  Stockholders' equity                  278,595                          278,946                          233,725
                                     ----------                      -----------                       ----------
  Total liabilities and stockholder  $2,673,142                       $2,164,270                       $1,726,789
                                     ==========                      ===========                       ==========

Net interest income / interest rate 
  spread (3)                                      $ 75,838   2.38%                 $ 62,544   2.22%                 $58,346   2.82%
                                                 =========  =======               =========  =======               ========  =======
Net interest earning assets / net
   interest margin (4)               $  292,071              3.03%      $305,718              3.07%      $277,116             3.58%
                                     ==========             =======  ===========             =======   ==========            =======
Ratio of interest-earning assets
   to interest-bearing liabilities       113.19%                          117.64%                          120.51%
                                     ==========                      ===========                       ==========
<PAGE>

<FN>
-------------
(1)  Loans receivable, net include mortgage loans held for sale.
(2)  Yields on securities do not give effect to changes in fair value that are 
     reflected as a component of stockholders' equity.
(3)  Interest rate spread represents the difference between the average yield on
     average interest-earning assets and the average cost of average
     interest-bearing liabilities.
(4)  Net interest margin represents net interest income divided by average 
     interest-earning assets.

</FN>

</TABLE>

<PAGE>

RATE/VOLUME ANALYSIS

The following  table  presents the extent to which changes in interest rates and
changes  in  the  volume  of   interest-earning   assets  and   interest-bearing
liabilities  have affected the Company's  interest  income and interest  expense
during the periods  indicated.  Information  is provided in each  category  with
respect to (i)  changes  attributable  to changes in volume  (changes  in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate  multiplied  by prior  volume),  and (iii) the net  change.  The changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately to the changes due to volume and the changes due to rate.

<TABLE>
<CAPTION>
                                                  1996 vs. 1995                            1995 vs. 1994
                                      -------------------------------------    -------------------------------------
                                           Increase (Decrease) Due to               Increase (Decrease) Due to
                                      -------------------------------------    -------------------------------------
                                         Volume        Rate        Total          Volume        Rate        Total
                                      ------------  ----------  -----------    ------------  ----------  -----------
                                                                      (in thousands)
<S>                                      <C>          <C>         <C>             <C>          <C>         <C>
Interest-earning assets:
  Loans receivable, net (1)              $21,176      $2,473      $23,649         $28,314      $5,955      $34,269
  Mortgage-backed securities              12,778        (267)      12,511           7,957         255        8,212
  Debt and equity securities               1,204         364        1,568          (1,690)        623       (1,067)
  Other                                      221         (44)         177          (1,248)        581         (667)
  FHLB stock                                 685          33          718             235         184          419
                                      ------------  ----------  -----------    ------------  ----------   ----------
   Total                                  36,064       2,559       38,623          33,568       7,598       41,166
                                      ------------  ----------  -----------    ------------  ----------   ----------

Interest-bearing liabilities:
  Passbook accounts                          127         (49)          78          (1,220)        510         (710)
  Demand deposit accounts                  2,281         673        2,954              86         381          467
  Money market accounts                    2,368         (72)       2,296             371       2,249        2,620
  Certificate accounts                    11,367        (560)      10,807           6,086       8,122       14,208
  Short-term borrowings                   (3,123)        (62)      (3,185)          8,219       2,711       10,930
  Long-term borrowings                    13,479      (1,100)      12,379           9,659        (206)       9,453
                                      ------------  ----------  -----------    ------------  ----------   ----------
   Total                                  26,499      (1,170)      25,329          23,201      13,767       36,968
                                      ------------  ----------  -----------    ------------  ----------   ----------
Net change in net interest income        $ 9,565      $3,729      $13,294         $10,367     $(6,169)      $4,198
                                      ============  ==========  ===========    ============  ==========   ==========

-----------------
<FN>

(1)  Loans receivable, net include mortgage loans held for sale.

</FN>

</TABLE>

<PAGE>

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 TO DECEMBER 31, 1995

The  Company's  total assets grew 16.5%,  or $411  million,  during 1996 to $2.9
billion.  Contributing  significantly  to this increase was the  acquisition  of
Lexington  Federal,  which was  completed in the second  quarter of 1996.  Total
assets  acquired  from  Lexington  Federal  were   approximately  $240  million,
including $128.2 million in net loans receivable and $56.5 million in investment
securities. Deposits acquired from Lexington Federal totaled $168.2 million.

Net loans  receivable  totaled $1.9 billion at year-end,  increasing  12.0% from
year-end 1995.  While the Company  continues to focus on its one-to-four  family
residential  mortgage lending  business,  it also is continuing to diversify its
loan  portfolio by pursuing both  commercial and consumer  loans.  The following
table summarizes the growth in each loan category during 1996:

<TABLE>
<CAPTION>
                                                                       Loan Portfolio Composition
                                     1996 Loan Portfolio Growth              at December 31,
                                     --------------------------        --------------------------
                                        Amount      Percentage             1996          1995
                                     -----------   ------------        ------------  ------------
                                                        (dollars in thousands)
<S>                                   <C>             <C>                  <C>           <C>
Loan category:
  One-to-four family residential      $ 50,094         3.7%                72.4%         78.6%
  Multi-family residential              18,761        14.2%                 7.8           7.8
  Commercial real estate                40,401        65.2%                 5.3           3.6
  Construction and land                 42,261        48.3%                 6.7           5.1
  Non-mortgage, primarily 
   installment                          66,079        79.1%                 7.8           4.9
                                     -----------                       ------------  ------------
                                       217,596        12.7%               100.0%        100.0%
                                                                       ============  ============
  Undisbursed portion of loans,
   deferred fees and allowance
   for loan losses                     (17,448)
                                     -----------
  Loans receivable, net               $200,148        12.0%
                                     ===========
</TABLE>

The  Company is  diversifing  its loan  portfolio  to enhance  portfolio  yield.
Commercial real estate loans,  construction  and land loans,  and consumer loans
generally have higher interest rates than one-to-four  family  residential loans
since the credit  risks  associated  with these types of lending are  considered
greater than those  associated  with  one-to-four  family  residential  lending.
Management  believes  that  the Bank has  established  appropriate  underwriting
standards  and loan review  systems for such loans to  adequately  evaluate  and
manage credit  risks,  thereby  enabling the Company to increase loan  portfolio
yield without incurring excessive losses.

Mortgage loans held for sale at December 31, 1996  decreased  $78.6 million from
the balance  outstanding  at December  31,  1995,  due to the timing of sales of
loans to secondary market investors. Average outstanding mortgage loans held for
sale during 1996 of $156.7 million exceeded average  outstanding  mortgage loans
held  for  sale in 1995 of  $119.7  million  by $37.0  million.  Mortgage  loans
originated for sale totaled $414.7 million for 1996,  exceeding 1995  production
of $324.0 million by $90.7 million.  Interest rates related to mortgage  lending
remained at low levels  throughout  1996  allowing  the  Company to  originate a
larger portfolio of loans for sale in the secondary market in 1996 than in 1995.
Also,  fewer mortgage  loans were  originated for the portfolio in line with the
Company's strategy to diversify its loan portfolio.

<PAGE>

Mortgage-backed  securities  increased  $130.6  million  or 38.0%  in  1996.  In
addition to $37.1 million of mortgage-backed  securities acquired from Lexington
Federal,  this  increase was the result of the Company  replacing  certain lower
yielding  debt  and  equity  securities  with  higher  yielding  mortgage-backed
securities,  and purchasing mortgage-backed securities funded by borrowings from
the Federal Home Loan Bank (FHLB).  The leveraged  purchases were  structured to
increase the Company's assets without incurring  significant interest rate risk.
U.S. Government and agency obligations increased $76.7 million or 68.0% in 1996.
A portion  of this  growth  was the  result of  increased  regulatory  liquidity
requirements  due to growth in the Company's  assets.  The Company also invested
excess liquidity available at year-end in short-term government securities.

Deposits  increased $345.1 million or 23.7% in 1996.  Approximately $184 million
of  this  increase  was due to  growth  in  retail  deposits  attracted  through
advertising,  competitive deposit rates and increased retail sales efforts.  The
balance of the increase was  primarily  from deposits  acquired  from  Lexington
Federal totaling $168.2 million, partially offset by a decrease of $10.3 million
in custodial account balances.

Borrowed funds  increased $67.1 million or 9.4% during 1996, with long-term FHLB
advances  increasing by $65.3 million and  short-term  borrowings  increasing by
$1.8 million. The Company increased long-term fixed and variable rate borrowings
with the FHLB to fund purchases of mortgage-backed securities.

Stockholders'  equity  totaled  $280.5  million at December 31, 1996,  down $6.7
million  from the  previous  year-end.  Equity as a  percentage  of total assets
decreased from 11.5% at year-end 1995 to 9.7% at year-end 1996.  This leveraging
of capital  was the result of the  Company  purchasing  813,000  shares of stock
under stock repurchase  programs at a cost of $20.7 million,  internal growth in
assets, the cash acquisition of Lexington Federal and dividends declared of $6.1
million.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 
1995

OVERVIEW.  The  Company's net income was $19.5 million in 1996 compared to $21.7
million in 1995. This decline was due to the one-time charge of $6.3 million net
of taxes required to recapitalize SAIF.

NET INTEREST INCOME.  Net interest income increased 21.3%, or $13.3 million,  in
1996 versus 1995. This increase was due to growth in the Company's balance sheet
and an increase in the interest rate spread.

Average  interest-earning  assets  and  average   interest-bearing   liabilities
increased $468.1 million and $481.7 million,  respectively, in 1996 versus 1995,
resulting  in a $9.6  million  increase in net interest  income.  These  average
balance increases were the result of growth from normal business  operations and
the acquisition of Lexington Federal.

The average yield on interest-earning assets rose from 7.88% in 1995 to 7.95% in
1996,  primarily due to a shift in the loan portfolio mix to a lower  percentage
of  one-to-four  residential  loans and a larger  percentage of higher  yielding
commercial and consumer loans. The average cost of interest-bearing  liabilities
decreased from 5.66% in 1995 to 5.57% in 1996. This decease in cost of funds was
primarily  due  to a  shift  in  certificate  of  deposit  accounts  to  shorter
maturities,   and  lower  interest   rates.   These  average  rate  changes  for
interest-earning  assets and  interest-bearing  liabilities  resulted  in a $3.7
million  increase in net interest  income and an increase in the  interest  rate
spread from 2.22% in 1995 to 2.38% in 1996.  Net interest  margin  declined from
3.07% in 1995 to 3.03% in 1996 primarily due to the effect of stock  repurchases
on net interest-earning assets.

PROVISION FOR LOAN LOSSES.  In evaluating the adequacy of the allowance for loan
losses to absorb  potential losses in the loan portfolio,  management  regularly
analyzes many factors. These factors include the status of specific loans in the
portfolio,  changes in the mix and geographic  dispersion of the loan portfolio,
trends in  non-performing  assets,  growth of the loan  portfolio,  actual  loss
experience,  comparisons  to general  industry  practices  including  peer group
statistics,  an  assessment  of general  trends in the real estate market and in
commercial  and  consumer  lending,  and current and  prospective  economic  and
regulatory conditions.

<PAGE>

While the provision for loan losses increased in 1996 from the year before, as a
percentage of average loans it decreased from 0.14% in 1995 to 0.13% in 1996. As
a percentage of average loans,  net charge-offs  decreased from 0.10% in 1995 to
0.07% in 1996. The decrease in net  charge-offs  included a decrease of $917,000
in net real estate  charge-offs,  partially offset by an increase of $549,000 in
net consumer loan charge-offs. The increase in net consumer loan charge-offs was
primarily due to growth in the  outstanding  balances of consumer loans over the
previous year. As a percentage of total loans, including mortgage loans held for
sale, the allowance for loan losses increased from 0.64% at December 31, 1995 to
0.68% at December 31, 1996.

NON-INTEREST INCOME. The increase of $6.4 million in non-interest income in 1996
from 1995 was  substantially  due to increases in gain on sale of mortgage loans
and mortgage  servicing rights,  partially offset by an increase in amortization
of mortgage servicing rights. The favorable interest rate environment related to
mortgage lending allowed the Company's  mortgage banking business to originate a
larger  number of loans for sale in the  secondary  market in 1996 than in 1995,
resulting in an increase of $2.6 million in gain on sale of mortgage loans.  The
increase  of $2.3  million  in gain on sale  of  servicing  rights  for  1996 in
comparison  to 1995,  was due to an increase in bulk sales of servicing  rights.
Servicing  rights  related to $196 million of mortgage  loans were sold in 1996.
The Company  actively  manages  interest  rate  prepayment  risk inherent in its
mortgage banking business by periodically selling mortgage servicing rights. The
increased amortization of mortgage servicing rights of $1.3 million in 1996 from
1995, was primarily due to increased  investments in mortgage  servicing  rights
during 1995 and 1996.

The increase in other non-interest income of $2.3 million for 1996 in comparison
to 1995,  was  primarily  due to increases in service  charges  attributable  to
growth in transaction accounts and increased fee income from sales of investment
products.

NON-INTEREST  EXPENSE.  In 1996 non-interest  expense increased $22.8 million in
comparison  with 1995.  A  significant  portion of this  increase was due to the
special  insurance   premium  assessed  to  recapitalize   SAIF.  The  Company's
assessment,  based on  applicable  deposits,  was  $9.7  million.  Without  this
one-time charge, non-interest expense as a percentage of average assets remained
constant at 2.58% in comparison with 1995,  indicating  that operating  expenses
are increasing proportionate to the Company's growth.

Increases in compensation  and benefits  resulted  primarily from a reduction in
deferrals of  origination  costs in connection  with the shift in origination of
single family loans from portfolio production to secondary market production, as
well as the cost of additional staff required to deliver and support an expanded
line of retail banking and investment products. Also, a portion of this increase
was attributable to an increase in the cost of the employee stock ownership plan
due to the higher average market price of the Company's stock in 1996.

Occupancy  and  equipment  expense  increased  as a  result  of  banking  office
construction  and  renovation  initiated  to enhance  service to retail  banking
customers.

The rise in other  non-interest  expense was  primarily  due to a charge of $1.5
million for possible  reimbursement  to borrowers based on the  determination by
the Office of Thrift  Supervision  (OTS) that  Truth-in-Lending  disclosures  on
certain  adjustable  rate  mortgages  were  inaccurate  (see note 14 of Notes to
Consolidated Financial Statements),  and increased expenses related to increased
payoffs of serviced  loans and  increased  costs  associated  with growth in the
number of defaulted FHA/VA loans being serviced.

INCOME TAX EXPENSE.  The  effective  income tax rate was 36.0% for both 1996 and
1995.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1995 TO DECEMBER 31, 1994

The  Company's  total assets grew by 30.0% during 1995 to $2.5  billion.  Of the
growth of $574 million in total  assets,  $305 million was in loans  receivable,
$52 million was in loans held for sale, and $121 million was in securities.

In 1995 the  Company  initiated a strategy to enhance  loan  portfolio  yield by
reducing the percentage of one-to-four family residential loans in the portfolio
mix. This resulted in one-to-four  family residential loan decreasing from 82.9%
of the loan portfolio in 1994 to 78.6% of the portfolio in 1995; and commercial,
construction  and consumer  loans  increasing to 21.4% of the loan  portfolio in
1995 from 17.1% in 1994.  These  results  also  include  loans  totaling  $100.4
million obtained in the acquisition of First Federal.

<PAGE>
The substantial growth in the loans was achieved even though total mortgage loan
originations and purchases  amounted to $891 million,  down from $1.5 billion in
1994. Most of this decline was in origination of single family loans for sale in
the  secondary  market which  followed a decrease in mortgage  loan  refinancing
activity.  This decline was also  attributed  to aggressive  contraction  of the
Company's  mortgage banking operations begun in the 1994 fourth quarter to focus
on the delivery of consumer-oriented  banking products and services to customers
in the Company's  primary  market area of Kentucky and southern  Indiana.  While
medium- to long-term  interest rate levels during 1995 were generally lower than
in 1994, loan prepayments remained fairly stable throughout the year.

Mortgage  loans held for sale at December 31, 1995 increased over the balance at
December 31, 1994 due to the shift in the mix of single  family loan  production
in mid-1995 from portfolio production to secondary market production.

Growth of $11.6  million in mortgage  servicing  rights during 1995 included the
acquisition  of $1.0  billion of GNMA  servicing  on March 31, 1995 at a cost of
$15.4  million and the  capitalization  of $1.7 million of  originated  mortgage
servicing  rights  following  the adoption of Statement of Financial  Accounting
Standards (SFAS) No. 122 effective July 1, 1995. Total loans serviced for others
amounted  to $5.2  billion at December  31,  1995,  up from $4.6  billion a year
earlier.

Deposits  increased by $268.5 million or 22.6% during 1995.  Most of this growth
was in  certificates  of deposit and  resulted  from  expanded  advertising  and
marketing  efforts,  the  introduction  of new  products in 1995,  increases  in
certain  retail  deposit  rates and deposits of $105.0  million  obtained in the
acquisition of First Federal.

Borrowed funds grew by $297.6 million or 71.4% in 1995. The additional  borrowed
funds were used primarily to fund the purchase of mortgage-backed securities and
loan originations. In order to reduce borrowing costs, the Company repaid in the
1995  first  quarter  most of its  short-term  advances  from the FHLB  from the
proceeds of securities sold under agreements to repurchase. Also, in response to
reduced interest rates in mid-1995, the Company repaid certain of its short-term
borrowings with long-term advances from the FHLB.

Stockholders'  equity at  December  31, 1995  totaled  $287.1  million,  up $2.5
million from a year earlier. The Company's  stockholders' equity as a percent of
total assets decreased from 14.88% at the beginning of the year to 11.55% at the
end of the year.  This  leveraging  of  capital  resulted  from the  substantial
internal growth in assets, the cash acquisition of First Federal,  completion of
two stock  repurchase  programs in which a total of 1.6 million shares at a cost
of $28.3 million were purchased,  and continuation of a quarterly  dividend.  No
shares were purchased in 1995 under a third stock  repurchase  plan announced in
November 1995.

COMPARISON  OF RESULTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 1995 AND
1994

OVERVIEW. The Company's net income of $21.7 million in 1995 was up 8.0% over the
1994 net income of $20.1 million.  This improvement  resulted from increased net
interest income and reduced operating expenses,  partially offset by a reduction
in non-interest  income.  The impact of adopting SFAS No. 122 was an increase in
net income of $1.1 million in 1995.

NET INTEREST INCOME.  An increase of $4.2 million or 7.2% in net interest income
for 1995 over 1994 was  achieved  primarily  through  substantial  growth in the
Company's interest-earning assets and interest-bearing  liabilities. This growth
caused net interest  income to increase by $10.4 million,  more than  offsetting
the decrease of $6.2 million caused by changes in rates.

The average balance of interest-earning assets grew by $410.1 million, while the
average balance of  interest-bearing  liabilities  grew by $381.5  million.  The
Company's  growth  in  interest-earning  assets  was  concentrated  in loans and
mortgage-backed securities, while the growth in interest-bearing liabilities was
primarily in certificates  of deposit and borrowed  funds.  The average yield on
interest-earning assets increased from 7.34% in 1994 to 7.88% in 1995, while the
average cost of interest-bearing  liabilities  increased more sharply from 4.52%
in 1994 to 5.66% in  1995.  As a result  of  these  rate  changes,  the  average
interest rate spread declined from 2.82% to 2.22%.  The combined effect of these
volume and rate changes reduced the net interest margin from 3.58% to 3.07%.

<PAGE>

PROVISION FOR LOAN LOSSES. While the provision for loan losses increased in 1995
from the year before,  as a percentage of average loans it remained at 0.14%. As
a percentage of average loans, net charge-offs  increased slightly from 0.09% in
1994 to 0.10% in 1995. The increase in net charge-offs was largely from the non-
mortgage  consumer  loan  portfolio  which  grew  substantially  in  1995.  As a
percentage of total loans, including mortgage loans held for sale, the allowance
for loan losses  decreased  from 0.74% at December 31, 1994 to 0.64% at December
31, 1995.

NON-INTEREST  INCOME. The decrease of $4.6 million in total non-interest  income
in 1995 from 1994 resulted  primarily from the  substantial  decrease in gain on
sale of mortgage servicing rights. The 1994 gain of $4.8 million was from a bulk
sale of servicing  rights.  Servicing  rights are sold on a bulk basis or a flow
basis to control prepayment risk and take advantage of market opportunities.  In
addition,  1994  non-interest  income  included a $1.2  million  gain on sale of
equipment.  Servicing  fee  income  increased  8.3% as the  portfolio  of  loans
serviced and  subserviced  for others grew during 1995,  while  amortization  of
mortgage  servicing  rights  decreased by 14.0% as prepayment  rates on mortgage
loans remained at fairly low levels  throughout  1995.  Gain on sale of mortgage
loans dropped sharply from the 1994 level as the volume of loan originations for
sale declined.  The decrease in origination  volumes was due both to a reduction
in the level of mortgage loan refinancing activity and the Company's strategy to
focus its  originations  in its primary  market area of  Kentucky  and  southern
Indiana.  Excluding gain (loss) on sales of equipment and  securities  from both
1994 and 1995,  growth  of 25.0%  was  achieved  in other  non-interest  income,
resulting  primarily from increases in fees on new and existing  retail loan and
deposit products.  The Company invested significantly in training and technology
during 1995 to cross-sell these products to existing customers.

NON-INTEREST EXPENSE.  Total non-interest expense was 5.5% less than in 1994. As
a percent of average assets,  non-interest  expenses were 2.58%, down from 3.42%
for 1994. This reduction was achieved  primarily from aggressive  contraction of
the Company's mortgage banking operations begun in June 1994 in response to much
lower loan  origination  volumes  and  further  efficiencies  gained  when those
operations  were merged  into the Bank on January 1, 1995.  As a result of these
efficiencies,  compensation  and benefits  totaled 11.3% less in 1995, even with
the increased  cost for the employee stock  ownership  plan resulting  primarily
from the higher  average  market price of the  Company's  stock in 1995.  Office
occupancy and equipment  costs  decreased  7.8% due to  contraction  of mortgage
banking  operations,  net of increased  facility costs  associated  with banking
office  construction  and renovation.  Advertising and marketing costs increased
26.5% as the  Company  continued  a new  identity  campaign  begun in the fourth
quarter of 1994 and promoted several new retail banking  products  introduced in
1995. The rise in other non-interest  expense was largely due to increased costs
associated with a $1.0 billion GNMA servicing portfolio.

INCOME TAX EXPENSE.  The effective  income tax rate for 1995 was 36.0%,  a small
decrease from 36.2% for 1994.

<PAGE>

NON-PERFORMING ASSETS

The   following   table  sets  forth   information   regarding   the   Company's
non-performing assets at the dates indicated.

<TABLE>
<CAPTION>
                                                           At December 31,
                                                  1996          1995          1994
                                                --------      --------       -------  
                                                       (dollars in thousands)
<S>                                             <C>           <C>            <C>
Non-performing loans:
  Non-accrual loans                             $  7,185      $  7,446       $ 5,330
  Accruing loans which are 
   contractually past due 90 days 
   or more:
    FHA/VA loans                                  88,185        88,852        57,723 
    Other loans                                    5,931         3,865         1,868  
  Restructured loans                               1,992         2,033         2,243
                                               ----------    ----------    ----------
  Total non-performing loans                     103,293       102,196        67,164
Real estate owned                                  2,815         1,136           278
                                               ----------    ----------    ----------
Total non-performing assets                     $106,108      $103,332       $67,442
                                               ==========    ==========    ==========
Non-performing loans to total loans:
  Including FHA/VA loans                            5.19%         5.52%         4.51%
  Excluding FHA/VA loans                            0.76%         0.72%         0.63%

Non-performing assets to total assets:
  Including FHA/VA loans                            3.66%         4.16%         3.53%
  Excluding FHA/VA loans                            0.62%         0.58%         0.51%

Allowance for loan losses to total loans            0.68%         0.64%         0.74%

Allowance for loan losses to 
 non-performing loans:
  Including FHA/VA loans                           13.11%        11.57%        16.49%
  Excluding FHA/VA loans                           89.61%        88.59%       104.19%

Allowance for loan losses to 
 non-performing assets:
  Including FHA/VA loans                           12.76%        11.44%        16.42%
  Excluding FHA/VA loans                           75.53%        81.63%       101.21%

</TABLE>

Certain accruing FHA/VA loans which are  contractually  past due 90 days or more
are  purchased  by the Company  from GNMA pools it  services.  The Company  also
purchases  portfolios of insured FHA and guaranteed VA loans,  most of which are
90 days or more past due, from third parties.  At December 31, 1996, the Company
held in its  portfolio  $144.7  million  of  FHA/VA  loans  most of  which  were
delinquent  at the time of  purchase.  Such  loans  totaled  $128.7  million  at
December 31, 1995.

As a servicer  of GNMA  pools,  the  Company is  obligated  to remit to security
holders  interest  at the coupon rate  regardless  of whether  such  interest is
actually received from the underlying borrower.  The Company, by purchasing such
delinquent  loans out of the  pools,  is able to retain  the  benefit of the net
interest  rate  differential  between  the  coupon  rate it would  otherwise  be
obligated to pay to the GNMA security  holder and the Company's  current cost of
funds.  Most of the  Company's  investment  in  delinquent  FHA and VA  loans is
recoverable  through  claims made  against the FHA or VA, and any credit  losses
incurred are not greater or less than if the FHA/VA  loans  remained in the GNMA
pools and the Company  remained as servicer.  The same risk from  foreclosure or
from loss of  interest  exists for the Company as servicer or owner of the loan,
and the  Company,  by  purchasing  delinquent  FHA/VA  loans,  assumes  only the
interest rate risk associated with investing in a fixed-rate loan if foreclosure
does not occur.

The  FHA/VA  loans  acquired  from third  parties  are  purchased  at a discount
adequate  to  compensate  the  Company  for the credit and  interest  rate risks
associated  with their purchase.  The Company  purchased $4.5 million of insured
FHA and guaranteed VA loans from third parties during 1996.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  primary  sources of funds are  deposits,  principal and interest
payments on loans and  mortgage-backed  securities,  proceeds from maturing debt
securities,  advances from the FHLB,  and other  borrowed  funds.  Proceeds from
mortgage  banking  activities  are  also a  source  of  funds.  While  scheduled
maturities of debt securities and amortization of loans are predictable  sources
of funds,  deposit flows and  prepayments on mortgage loans and  mortgage-backed
securities  are  greatly  influenced  by the general  level of  interest  rates,
economic conditions, and competition.

The Bank is required to maintain an average  daily  balance of liquid assets and
short-term  liquid assets as a percentage of net  withdrawable  deposit accounts
plus short-term  borrowings as defined by OTS regulations.  The minimum required
liquidity and short-term liquidity ratios are currently 5% and 1%, respectively.
For December  1996, the Bank had liquidity and  short-term  liquidity  ratios of
8.05% and 4.29%, respectively.

At December 31, 1996, the Company had commitments outstanding to originate loans
totaling  $93.1  million,  some of which were to be  originated  for sale in the
secondary  market.  The Company  anticipates  that it will have sufficient funds
available to meet its current loan origination commitments.

The Bank is subject to various regulatory capital  requirements  administered by
the OTS. Currently,  the minimum required levels are a tangible capital ratio of
1.5% of tangible  assets,  a core  capital  ratio of 3.0% of  adjusted  tangible
assets,  and a risk-based  capital  ratio of 8.0% of  risk-weighted  assets.  At
December 31, 1996,  the Bank's  capital  substantially  exceeded each of the OTS
capital requirements.

In  accordance  with federal  regulations,  at the time the Bank  converted to a
stock  institution,  the Bank  restricted  a portion  of  retained  earnings  by
establishing a liquidation  account.  The liquidation  account is maintained for
the benefit of eligible  account holders who continue to maintain their accounts
at the Bank.  The  liquidation  account is reduced  annually  to the extent that
eligible  account  holders have reduced their  qualifying  deposits.  Subsequent
increases  will  not  restore  an  eligible  account  holder's  interest  in the
liquidation  account.  In the event of a  complete  liquidation,  each  eligible
account  holder is  entitled  to  receive a  distribution  from the  liquidation
account in an amount  proportionate to the current adjusted  qualifying balances
for accounts then held.

Under  current  regulations,  the Bank is not  permitted to pay dividends to the
Parent Company on its stock after the conversion if its regulatory capital would
thereby be reduced  below (i) the amount then  required  for the  aforementioned
liquidation  account or (ii) the Bank's regulatory  capital  requirements.  As a
"Tier 1"  institution  (an  institution  with  capital in excess of its  capital
requirements, both immediately before the proposed capital distribution and on a
pro forma basis after  giving  effect to such  distribution),  the Bank may make
capital  distributions without the prior consent of the OTS in any calendar year
up to the  greater of (i) 100% of its net income to date  during  such  calendar
year plus the amount that would reduce by one-half its capital  surplus ratio at
the beginning of such calendar  year, or (ii) 75% of its net income for the most
recent four  quarters.  At December 31, 1996, the Bank would be permitted to pay
up to $70.8 million in dividends to the Parent Company under these regulations.

The Company  paid its initial  quarterly  cash  dividend of $.08 during the 1994
fourth quarter.  The quarterly dividend rate was increased 25% to $.10 per share
during the  second  quarter  of 1995 and was again  increased  during the second
quarter of 1996 by 20% to $.12 per share. Total dividends of $.46 per share were
paid during 1996 and represented a dividend payout ratio of 33.8%.  Although the
Company  intends  to pay a  quarterly  cash  dividend,  the  payment  of  future
dividends will depend on consolidated earnings, financial condition,  liquidity,
capital and other factors,  including economic  conditions and any regulatory or
statutory restrictions.

During 1996 the Company  repurchased  813,000 shares of its  outstanding  common
stock at a total cost of $20.7 million pursuant to two Stock  Repurchase  Plans.
This  included  67,000  shares  under the plan  announced in August 1996 for the
purchase of up to 709,000  shares.  Management  determined  that the repurchases
were in the best  interest of the  Company's  shareholders  and that the Company
remained well capitalized.

<PAGE>

IMPACT OF NEW LEGISLATION

The Small Business Job Protection Act passed by Congress in August 1996 included
a provision  that repealed the  percentage of taxable  income bad debt deduction
for federal income tax purposes.  The Bank used this method to determine its bad
debt  deduction  when  computing  federal  taxes in applicable  years.  This new
legislation also requires  recapture of the excess of bad debt reserves over the
base year reserves (December 31, 1987). For years subsequent to the base year, a
deferred tax  liability has been recorded by the Bank for an amount equal to the
excess of the bad debt reserves over the base year reserves;  thus no additional
tax  liability  is  required  as a result  of this  legislation.  Under  the new
legislation,  the Bank is  required  to use the  specific  charge-off  method to
calculate  the bad debt  deduction  for  federal  income tax  purposes.  The new
legislation is effective for calendar years beginning after December 31, 1995.

The Deposit  Insurance  Funds Act of 1996 was passed by Congress and signed into
law by the President on September 30, 1996. This legislation includes provisions
designed to recapitalize  SAIF and required all insured savings  institutions to
pay a special  assessment  of 65.7 cents for every $100  (0.657%) of  applicable
deposits  held as of March  31,  1995.  The  Company  took a charge in the third
quarter of $6.3  million  net of taxes,  or $.45 per share,  as required by this
legislation. As a result of the recapitalization, the FDIC lowered SAIF premiums
from $0.23 per $100 of insured deposits to $0.064 per $100 of insured  deposits,
thereby lowering the Company's federal deposit insurance rates by 72%, effective
January 1, 1997, which will enhance earnings in future periods.

IMPACT OF NEW ACCOUNTING STANDARD

In June 1996,  the  Financial  Accounting  Standards  Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of  Liabilities,"  which  requires  adoption  for  transfers  and  servicing  of
financial assets and extinguishments of liabilities occurring after December 31,
1996, and is to be applied prospectively.  Earlier or retroactive application is
not permitted.

The accounting and reporting  standards for transfers and servicing of financial
assets and  extinguishments of liabilities  provided by this statement are based
on a financial-components approach that focuses on control. Under this approach,
after a transfer of financial  assets,  an entity  recognizes  the financial and
servicing  assets it controls and the liabilities it has incurred,  derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished.

The statement  requires that servicing  assets and other  retained  interests in
transferred  assets be measured  by  allocating  the  previous  carrying  amount
between  the assets  sold and the  interests  retained,  if any,  based on their
relative  fair  values  at the date of  transfer.  Liabilities  and  derivatives
incurred or obtained as part of a transfer of  financial  assets are required to
be  initially  measured at fair  value,  if  practicable.  This  statement  also
requires that servicing  assets and liabilities be subsequently  measured by (a)
amortization  in  proportion  to and over the period of estimated  net servicing
income or loss and (b) assessment for asset  impairment or increased  obligation
based on their fair values.

SFAS  No.  125 is not  expected  to  have a  material  effect  on the  Company's
financial condition or results of operations.

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated  financial  statements and notes thereto  presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial  position and operating results in terms of
historical  dollars without  considering the changes in the relative  purchasing
power of money over time due to inflation.  The impact of inflation is reflected
in the increased cost of the Company's operations.  Unlike industrial companies,
nearly all of the assets and  liabilities of the Company are monetary in nature.
As a result,  interest rates have a greater impact on the Company's  performance
than do the  effects  of  general  levels of  inflation.  Interest  rates do not
necessarily  move in the same  direction  or to the same  extent as the price of
goods and services.


                    
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   


Board of Directors
Great Financial Corporation
Louisville, Kentucky

We have audited the accompanying  consolidated balance sheets of Great Financial
Corporation  and subsidiary  (Company) as of December 31, 1996 and 1995, and the
related consolidated  statements of income,  stockholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1996.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of Great Financial  Corporation and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996 in conformity with generally accepted accounting principles.

As discussed in Note 1 to the  consolidated  financial  statements,  in 1995 the
Company implemented  Statement of Financial Accounting Standards (SFAS) No. 122,
"Accounting for Mortgage Servicing Rights",  and in 1994 the Company changed its
method of accounting for securities to conform with SFAS No. 115.




/s/ Deloitte & Touche LLP
February 10, 1997
Louisville, Kentucky



<PAGE>

GREAT FINANCIAL CORPORATION 

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                              1996          1995
                                                                 (in thousands,
                                                               except share data)
                                                                                                     
<S>                                                        <C>           <C>                           
ASSETS:
  Cash and cash equivalents                                $  126,323    $   84,167
  Available-for-sale securities, at fair value                667,542       461,330
  Mortgage loans held for sale                                 65,546       144,163
  Loans receivable, net of allowance for loan losses 
    of $13,538 (1996)and $11,821 (1995)                     1,867,511     1,667,363
  Federal Home Loan Bank stock, at cost                        34,816        21,917
  Property and equipment                                       34,127        26,871
  Mortgage servicing rights                                    37,187        35,751
  Other assets                                                 64,110        44,694  
                                                           ----------    ----------                                            
TOTAL ASSETS                                               $2,897,162    $2,486,256  
                                                           ==========    ==========                                                
LIABILITIES:                                                                                               
  Deposits:
    Non-interest bearing                                   $  112,129    $  103,969
    Interest bearing                                        1,691,874     1,354,892
                                                           ----------    ----------
      Total depdosits                                       1,804,003     1,458,861
  Borrowed funds                                              781,297       714,209
  Other liabilities                                            31,408        26,076  
                                                           ----------    ----------                                                
           Total liabilities                                2,616,708     2,199,146  
                                                           ----------    ----------                                                
COMMITMENTS AND CONTINGENCIES                                                                              
                                                                                                           
STOCKHOLDERS' EQUITY:                                                                                      
  Preferred stock, $1.00 par value; 1,000,000 
    shares authorized and unissued                               
  Common stock, $.01 par value; 24,000,000 shares 
    authorized; 16,531,250 shares issued                          165           165
  Additional paid-in capital                                  162,279       159,786
  Retained earnings - subject to restrictions                 177,201       163,822
  Treasury stock, 2,414,518 (1996) and
    1,608,355 (1995) shares, at cost                          (48,845)      (28,230)
  Unearned ESOP shares                                        (10,194)      (11,296)
  Unearned compensation - stock compensation plans             (3,058)       (4,359)
  Net unrealized gains on available-for-sale
    securities                                                  2,906         7,222  
                                                           ----------    ----------
                                                
           Total stockholders' equity                         280,454       287,110  
                                                           ----------    ----------  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $2,897,162    $2,486,256  
                                                           ==========    ==========

See notes to consolidated financial statements.

</TABLE>
                                                    
<PAGE>

GREAT FINANCIAL CORPORATION 

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                          1996         1995         1994
                                                                  (in thousands,
                                                             except per share amounts)

<S>                                                     <C>          <C>          <C>
INTEREST INCOME:                                       
  Loans                                                 $157,893     $134,244     $ 99,975
  Securities                                              40,323       25,526       17,962
  Other                                                    1,039          862        1,529  
                                                        --------     --------     --------                                          
   Total interest income                                 199,255      160,632      119,466
                                                        --------     --------     --------                                          
INTEREST EXPENSE:                                                                                 
  Deposits                                                81,981       65,846       49,261
  Borrowed funds                                          41,436       32,242       11,859  
                                                        --------     --------     --------                   
   Total interest expense                                123,417       98,088       61,120  
                                                        --------     --------     --------                                          
NET INTEREST INCOME                                       75,838       62,544       58,346
PROVISION FOR LOAN LOSSES                                  2,586        2,283        1,786  
                                                        --------     --------     --------                                          
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES       73,252       60,261       56,560  
                                                        --------     --------     --------                                          
NON-INTEREST INCOME:                                                                              
  Servicing fee income                                    26,852       26,976       24,918
  Amortization of mortage servicing rights                (7,739)      (6,391)      (7,429)
  Gain on sale of mortgage loans                           6,890        4,308        7,203
  Gain on sale of mortgage servicing rights                2,519          170        4,780
  Gain on sale of securities                                 848          221
  Other                                                    6,468        4,149        4,512  
                                                        --------     --------     --------              
   Net non-interest income                                35,838       29,433       33,984  
                                                        --------     --------     --------                                          
NON-INTEREST EXPENSE:                                                                             
  Compensation and benefits                               32,734       27,036       30,370
  Office occupancy and equipment                           9,265        7,150        7,734
  Office supplies, postage and telephone                   5,045        4,481        4,750
  Advertising and marketing                                3,231        2,549        2,015
  State tax on deposits                                    1,675        1,452        1,299
  Federal deposit insurance premiums                      13,133        2,892        2,934
  Other                                                   13,543       10,233        9,947  
                                                        --------     --------     --------                                          
   Total non-interest expense                             78,626       55,793       59,049  
                                                        --------     --------     --------                                          
INCOME BEFORE INCOME TAXES                                30,464       33,901       31,495
INCOME TAX EXPENSE                                        10,957       12,211       11,404  
                                                        --------     --------     --------                             
NET INCOME                                              $ 19,507     $ 21,690     $ 20,091  
                                                        ========     ========     ========  
EARNINGS PER SHARE:
  Primary                                               $   1.36     $   1.46
  Fully diluted                                         $   1.36     $   1.44
                                                                                      
EARNINGS PER SHARE SINCE CONVERSION ON MARCH 30, 1994                             $   1.05

See notes to consolidated financial statements.

</TABLE>

<PAGE>

GREAT FINANCIAL CORPORATION 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (in thousands, except per share
amounts)

<TABLE>
<CAPTION>                                                      
                                                                                                               Net Unrealized
                                                                              Treasury                         Gains (Losses)      
                                          Common Stock  Additional              Stock     Unearned             on Available-
                                          -------------  Paid-in   Retained -------------    ESOP    Unearned    for-Sale
                                          Shares Amount  Capital   Earnings Shares Amount  Shares  Compensation  Securites   Total
<S>                                       <C>    <C>    <C>        <C>      <C>    <C>    <C>      <C>         <C>         <C>
Balance, January 1, 1994                                           $128,653                                                $128,653
   
 Cumulative effect to January 1, 1994,    
  of change in accounting for securities                                                                          $2,454      2,454
 Proceeds from sale of common stock,  
  net of costs of issuance of $4,239      16,531  $165  $160,909                         $(13,225)                          147,849
 Shares purchased for stock compensation 
  plans                                                   (3,058)                                    $(6,613)                (9,671)
 Net income                                                          20,091                                                  20,091
 Cash dividends declared ($0.08 per share)                           (1,216)                                                 (1,216)
 Fair value of shares committed to be                                         
  released from ESOP plan                                    526                              827                             1,353
 Compensation expense under stock                                     
  compensation plans                                                                                     957                    957
 Net change in unrealized gains (losses)                          
  on available-for-sale securities                                                                                (5,834)    (5,834)
                                         -------  ----  --------   -------- ------ ------ --------   --------     -------  ---------
Balance, December 31, 1994                16,531   165   158,377    147,528               (12,398)    (5,656)     (3,380)   284,636 
                                         -------  ----  --------   -------- ------ ------ --------   --------     -------  ---------
                                                                                                                                  
Net Income                                                          21,690                                                  21,690
Cash dividends declared ($0.38 per share)                          (5,376)                                                  (5,376)
Fair value of shares committed to be                                                                                                
  released from ESOP plan                                  1,047                              1,102                          2,149
Compensation expense under stock                                                                                                   
  compensation plans                                                                                   1,297                 1,297
Net change in unrealized gains (losses) 
  on available-for-sale securities                                                                                10,602    10,602
Purchase of treasury stock                                                  1,611  (28,277)                                (28,277)
Exercise of stock options                                             (20)     (3)      47                                      27
Other                                                        362                                                               362 
                                         -------  ----  -------- --------  ------  -------  --------  --------   -------  --------- 
Balance, December 31, 1995                16,531   165   159,786  163,822   1,608  (28,230) (11,296)   (4,359)     7,222   287,110  
                                         -------  ----  -------- --------  ------  -------  --------  --------   -------  ---------
                        
Net income                                                         19,507                                                   19,507
Cash dividends declared ($0.46 per share)                          (6,095)                                                  (6,095)
Fair value of shares committed to be
  released from ESOP plan                                  1,827                              1,102                          2,929
Compensation expense under stock
  compensation plans                                                                                    1,301                1,301 
Net change in unrealized gains (losses)
  on available-for-sale securities                                                                                (4,316)   (4,316) 
Purchase of treasury stock                                                    813  (20,748)                                (20,748)
Exercise of stock options                                             (33)     (7)     133                                     100 
Other                                                        666                                                               666
                                         -------  ----  -------- --------  ------  -------  --------  --------   -------  ---------
Balance, December 31, 1996                16,531  $165  $162,279 $177,201   2,414 $(48,845)$(10,194)  $(3,058)    $2,906  $280,454  
                                         =======  ====  ======== ========  ======  =======  ========  ========   =======  =========

See notes to consolidated financial statements.
                                                                                                                  
</TABLE>

<PAGE>

GREAT FINANCIAL CORPORATION 

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                              1996            1995            1994
                                                                                         (in thousands)
<S>                                                                         <C>            <C>             <C>
OPERATING ACTIVITIES:
 Net income                                                                 $  19,507      $  21,690       $  20,091
 Adjustments to reconcile net income to net cash                                         
  provided by (used in) operating activities:                                           
  Amortization of:                                                                      
   Deferred fees                                                               (1,627)        (5,452)         (1,593)
   Mortgage servicing rights                                                    7,739          6,391           7,429
   Discounts on securities                                                       (315)          (490)         (1,087)
   Intangible assets                                                              659            244             121
  Depreciation and amortization of property and equipment                       3,484          2,904           2,841
  Provision for loan losses                                                     2,586          2,283           1,786
  ESOP and stock compensation plans expense                                     4,230          3,446           2,310
  Net gain on sale of available-for-sale securities                              (848)          (221)
  Gain on sale of mortgage loans                                               (6,890)        (4,308)         (7,203)
  Gain on sale of mortgage servicing rights                                    (2,519)          (170)         (4,780)
  Proceeds from sales of loans                                                500,220        275,936       1,184,925
  Originations and purchases of loans held for sale                          (414,643)      (324,066)       (854,574)
  Net (gain) loss on sales of property and equipment and other assets              19            522          (1,046)
  Federal Home Loan Bank stock dividend                                        (1,977)        (3,601)           (841)
  Changes in assets and liabilities, net of business acquired:                          
   Accrued interest receivable                                                 (1,457)        (5,457)         (3,575)
   Other assets                                                                12,315          1,428             249
   Other liabilities                                                           (9,301)        (4,701)          2,555  
                                                                            ----------     ----------      ----------
     Net cash provided by (used in) operating activities                      111,182        (33,622)        347,608
                                                                            ----------     ----------      ----------
INVESTING ACTIVITIES:                                                     
 Purchases of available-for-sale securities                                  (431,528)      (159,607)       (411,745)
 Maturities of available-for-sale securities                                   84,406         35,230         241,492
 Principal collected on mortgage-backed securities                             62,604         35,677          29,870
 Proceeds from sale of available-for-sale securities                          128,045          3,966
 Increase in loans receivable                                                 (75,705)      (210,078)       (353,753)
 Purchase of Lexington Federal Savings Bank,    
  net of cash and cash equivalents acquired                                   (30,363)
 Purchase of First Federal Savings Bank of Richmond                      
  net of cash and cash equivalents acquired                                                   (9,142)
 Purchases of property and equipment and other assets                          (9,067)        (3,815)         (7,790)
 Proceeds from sale of property and equipment                                     394            204           1,717
 Originations of mortgage servicing rights                                     (4,928)        (1,693)
 Purchases of mortgage servicing rights                                        (4,337)       (13,754)         (2,430)
 Proceeds from sale of mortgage servicing rights                                2,609            170           5,083  
 Purchases of Federal Home Loan Bank stock                                     (9,247)
 Proceeds from sale of other real estate owned                                  1,313
                                                                            ----------     ----------      ----------             
     Net cash used in investing activities                                   (285,804)      (322,842)       (497,556)
                                                                            ----------     ----------      ---------- 
</TABLE>
                                                                         
<PAGE>

GREAT FINANCIAL CORPORATION 

CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                              1996            1995            1994
                                                                                          (in thousands)                           
<S>                                                                        <C>              <C>             <C>     
FINANCING ACTIVITIES:
 Net proceeds from issuance of common stock                                                                 $147,849
 Increase (decrease) in deposits                                           $176,989         $163,714        (103,348)
 Increase in short-term borrowings                                            1,795           43,593           3,988
 Long-term advances from Federal Home Loan Bank                              90,758          250,985         125,000
 Payments on long-term advances from Federal Home Loan Bank                 (25,793)          (4,404)         (9,413)
 Dividends paid                                                              (6,095)          (5,376)         (1,216)
 Purchases of treasury stock                                                (20,748)         (28,277)
 Exercise of stock options                                                      100               27
 Purchase of shares for recognition and retention plans                                                       (9,671)
 Other                                                                         (228)           3,356             110  
                                                                          ----------       ----------      ----------  
     Net cash provided by financing activities                              216,778          423,618         153,299  
                                                                          ----------       ----------      ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                    42,156           67,154           3,351
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                 84,167           17,013          13,662  
                                                                          ----------       ----------      ----------               
CASH AND CASH EQUIVALENTS, END OF YEAR                                     $126,323         $ 84,167        $ 17,013  
                                                                          ==========       ==========      ==========               
CASH PAID DURING THE YEAR FOR:                                                            
 Interest                                                                  $122,231         $ 96,440        $ 61,185
 Income taxes                                                              $  5,371         $  8,688        $  9,499
                                                                                          
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:                                            
 Additions to real estate acquired in settlement of loans                  $  3,231         $  2,145        $    163


See notes to consolidated financial statements.

</TABLE>

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      CONVERSION,  PRINCIPLES OF CONSOLIDATION AND BUSINESS - On March 30, 1994,
      Great  Financial  Federal  completed a  conversion  from a federal  mutual
      savings  and loan  association  to a federal  stock  savings  bank,  Great
      Financial  Bank,  FSB  (Bank).  All stock of the Bank was  issued to Great
      Financial  Corporation  (Parent  Company),  a  holding  company  formed in
      connection  with  the  conversion.   Simultaneously,  the  Parent  Company
      completed  an  offering  and sale of its common  stock.  The  accompanying
      consolidated  financial statements include the accounts of Great Financial
      Corporation  and its subsidiary,  Great Financial Bank, FSB  (collectively
      the Company). All significant  intercompany balances and transactions have
      been eliminated.

      The Company's  consolidated  results of operations are dependent primarily
      on net  interest  income,  which is the  difference  between the  interest
      income earned on  interest-earnings  assets, such as loans and securities,
      and the interest expense incurred on interest-bearing liabilities, such as
      deposits and borrowed funds. The  results are also  significantly affected
      by  its  mortgage  banking   activities  which  involve  the  origination,
      purchase,  sale, servicing and subservicing of residential mortgage loans.
      Non-interest  income from mortgage banking  activities  includes  mortgage
      servicing fee income and net gains on sale of mortgage  loans and mortgage
      servicing rights.

      The   Company's   operating   expenses   consist   primarily  of  employee
      compensation,  occupancy expenses,  federal deposit insurance premiums and
      other  general  and  administrative  expenses.  The  Company's  results of
      operations  are  significantly  affected by its periodic  amortization  of
      mortgage  servicing  rights and by its  provisions  for loan  losses.  The
      Company's results of operations are also significantly affected by general
      economic  and  competitive  conditions,  particularly  changes  in  market
      interest rates, government policies and actions of regulatory agencies.

      CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
      cash  equivalents  include cash on hand,  amounts due from banks,  federal
      funds sold and securities purchased under agreements to resell.

      SECURITIES - Effective  January 1, 1994, the Company adopted  Statement of
      Financial  Accounting  Standards  (SFAS) No. 115  "Accounting  for Certain
      Investments in Debt and Equity Securities."  Available-for-sale securities
      are  reported  at fair  value  and  consist  of debt  and  mortgage-backed
      securities and certain  equity  securities.  Unrealized  holding gains and
      losses, net of income tax, on  available-for-sale  securities are reported
      as a net amount in a separate  component  of  stockholders'  equity  until
      realized.

      Federal Home Loan Bank stock is not  considered to be a marketable  equity
      security under SFAS No. 115 and, therefore, is carried at cost.

      MORTGAGE LOANS HELD FOR SALE - Mortgage loans originated or  purchased and
      intended for sale in the secondary market are carried at the lower of cost
      or aggregate  market  value.  The Company  controls its interest rate risk
      with respect to mortgage loans held for sale and loan commitments expected
      to close by entering into forward delivery contracts. The aggregate market
      value of mortgage  loans held for sale considers the  sales prices of such
      forward  delivery contracts. The Company  also provides  currently for any
      losses on uncovered commitments to lend or sell.

      LOANS  RECEIVABLE - Loans  receivable  that management  has the intent and
      ability to hold for the foreseeable future or until maturity or payoff are
      reported at the principal amount outstanding net of unearned discount, net
      deferred loan  origination fees, undisbursed  portions of loans in process
      and allowance for loan losses.

      Loan  origination  fees net of certain direct loan  origination  costs are
      deferred and recognized over the contractual lives of the related loans as
      an adjustment of the loans' yield using the level yield method.

      The accrual of interest is  discontinued on loans when, in the judgment of
      management,  the  probability  of  collection  of interest is deemed to be
      insufficient to warrant further accrual (usually when a loan is delinquent
      for more than 90 days). When interest accrual is discontinued,  all unpaid
      accrued  interest  is  reversed.  Interest  income  on such  loans is then
      recognized  only to the  extent  cash is  received  and future  collection
      of principal is probable.
<PAGE>

      ALLOWANCES FOR LOSSES - The allowance  for loan losses is maintained at an
      amount  management considers adequate to  cover estimated losses  in loans
      receivable, which  are deemed  probable and  estimable.  The  Company also
      provides an allowance for nonrecoverable foreclosure  costs in recognition
      of the potential for losses related to loans serviced for others.

      Consumer loans, other than  revolving loans, are charged to  the allowance
      for loan losses when  they become 120 days delinquent unless they are well
      secured and in  the process of collection.  Unsecured  revolving loans are
      charged to the allowance for  loan losses when a loss has been  determined
      or at 180 days delinquent, whichever comes first.  Revolving loans secured
      by real  estate for which a loss has been determined or which have reached
      180 days delinquent, are charged  to the allowance for loan  losses to the
      extent that book value exceeds fair value, less estimated costs to sell.  
      All other loans are charged to the allowance for loan losses when, in 
      management's opinion, all or a portion of the loan balance is deemed to be
      uncollectible.

      Although  management  believes it uses the best  information  available to
      make  determinations  with  respect to the  Company's  allowances,  future
      adjustments  may be  necessary  if economic  and other  conditions  differ
      substantially  from the economic and other  conditions in the  assumptions
      used in making the initial  determinations,  and such adjustments could be
      material.

      Effective  January  1,  1995,  the  Company   implemented  SFAS  No.  114,
      "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.
      118. SFAS No. 114 defines a loan as  "impaired" when it is probable that a
      creditor  will be unable to  collect  all  amounts  due  according  to the
      contractual  terms of the loan  agreement.  The  Company  has  defined its
      population  of  impaired  loans  as  commercial   real  estate  loans  and
      commercial loans which are "classified" as substandard, doubtful, or loss,
      as defined by Office of Thrift Supervision (OTS) regulations.  The Company
      recognizes  interest  income on an impaired  loan when earned,  unless the
      loan is on nonaccrual  status, in which case interest income is recognized
      when received.

      PROPERTY  AND  EQUIPMENT - Property  and  equipment  are recorded at cost.
      Depreciation is provided by both the straight-line and accelerated methods
      over the estimated useful lives of the depreciable assets. Estimated lives
      are 30 to 50 years  for  buildings  and  improvements,  5 to 10 years  for
      furniture,  fixtures,  and equipment,  and 3 to 5 years for transportation
      equipment.

      MORTGAGE  SERVICING  RIGHTS (MSRs) - MSRs are capitalized and amortized in
      proportion to, and over the period of, the estimated  future net servicing
      income.  

      Prior to July 1,  1995,  the  Company  accounted  for  purchased  mortgage
      servicing  rights in  accordance  with  the  provisions  of SFAS  No.  65,
      "Accounting For Certain Mortgage Banking Activities."  Under  SFAS No. 65,
      the  costs  of  originating  mortgage  servicing  rights were  charged  to
      earnings  when the  related  loans were  sold  and the costs  of purchased
      mortgage servicing rights (PMSRs) were capitalized.

      Effective July 1, 1995, the Company adopted the SFAS No. 122,  "Accounting
      for Mortgage  Servicing  Rights,"  which amended SFAS No. 65. SFAS No. 122
      eliminates the distinction  between originated  mortgage servicing  rights
      (OMSRs) and  PMSRs and  requires  that an  entity  recognize, as  separate
      assets, rights  to  service  mortgage  loans  for  others,  however  those
      servicing  rights are acquired. An entity that acquires mortgage servicing
      rights  through  either  the  purchase  or  origination of mortgage loans,
      and sells or  securitizes those loans with the servicing  rights  retained
      must  allocate  the total  cost of  the  mortgage loans  to  the  mortgage
      servicing rights  and the  loans (without the  mortgage servicing  rights)
      based on their relative fair values.  Further,  SFAS No. 122 requires that
      an entity  assess its capitalized mortgage servicing rights for impairment
      based on the  fair value of those rights.  Impairment  of servicing rights
      is   recognized  through  a  valuation  allowance.  The  Company  recorded
      originated  mortgage servicing  rights totaling $1,693,000  during the six
      months ended December 31, 1995.  The impact  of adopting  SFAS No. 122 was
      an  increase in  net income of  $1,053,000 or $0.07 per share for the year
      ending December 31, 1995.

<PAGE>

      To determine the fair value of OMSRs, the Company uses market prices under
      comparable servicing sale contracts when available or, alternatively, uses
      a  valuation model  that calculates the  present value of future servicing
      cash flows. In applying  this valuation  method,  the Company incorporates
      assumptions that it  believes market participants would  use in estimating
      future  net servicing  income  which  includes  estimates  of the  cost of
      servicing  per loan, the discount rate,  float value,  an  inflation rate,
      ancillary  servicing income,  loan prepayment  speeds,  and default rates.
   
      For  purposes  of  evaluating  and  measuring  impairment  of  capitalized
      mortgage  servicing rights,  the Company stratifies such rights based upon
      the predominate risk  characteristics of the underlying loans. The Company
      has  determined  those risk  characteristics  to be loan  type,  portfolio
      seasoning and interest  rate. 

<PAGE>
      
      GOODWILL - Goodwill, included  in other assets,  represents the  excess of
      the cost of  acquired companies  over the  fair value  of  the net  assets
      acquired, and is being amortized on a straight-line basis over 15 years.

      INCOME  TAXES - Deferred  tax  assets and  liabilities  are  reflected  at
      currently  enacted income tax rates  applicable to the period in which the
      deferred tax assets or liabilities are expected to be realized or settled.
      As  changes  in tax laws or rates are  enacted,  deferred  tax  assets and
      liabilities are adjusted through the provision for income taxes.

      LOAN  SERVICING - Loan  servicing  fees are  credited to income as monthly
      principal and interest payments are collected on mortgages.  Costs of loan
      servicing are charged to expense as incurred.

      FINANCIAL  INSTRUMENTS  - In the  ordinary  course of business the Company
      enters  into  off-balance  sheet  financial   instruments   consisting  of
      commitments to extend credit,  commitments  under  credit card and related
      arrangements,  commercial letters of credit and standby letters of credit.
      Such financial  instruments are recorded in the financial  statements when
      they are funded or related fees are incurred or received.

      FAIR  VALUES  OF  FINANCIAL   INSTRUMENTS  -  The  following  methods  and
      assumptions  were used  by  the  Company  in  estimating  fair  values  of
      financial instruments as disclosed herein:

      Cash and cash  equivalents - The carrying amount is a reasonable  estimate
      of fair value.

      Available-for-sale  securities - Fair value of debt and equity  securities
      equals quoted market price, if available.  If a quoted market price is not
      available,  fair value is estimated using quoted market prices for similar
      securities. The estimated fair value for mortgage-backed securities issued
      by  government-sponsored  entities  is based on  quoted  market  prices or
      quoted market prices of similar securities.

      Mortgage  loans held for sale -  Estimated fair value is determined as the
      current quoted secondary market price for such loans without regard to the
      Company's  other  commitments  to make and sell  loans or  mortgage-backed
      securities.

      Loans  receivable - The fair  value of  adjustable rate one-to-four family
      residential  mortgage loans is  estimated by  discounting  the cash  flows
      until the next  repricing date at the  yield at which  the loans  could be
      sold into the secondary market.  At the repricing date, it is assumed that
      these loans will  reprice at the then current  market rate.  For all other
      loans, the fair value is  estimated by discounting  the future cash  flows
      using the current rates at which  similar loans would be made to borrowers
      with similar credit ratings and for the same remaining maturities.

      Federal  Home  Loan  Bank  stock - The  carrying  amount  is a  reasonable
      estimate of fair value.

      Mortgage  servicing  rights - Fair  value is  determined  based on  market
      prices  of   comparable   servicing   arrangements   when   available   or
      alternatively  a valuation  model that  calculates  the  present  value of
      future  servicing cash flows.  Cash flows are estimated using  assumptions
      prevalent  in the market with respect to such factors as cost of servicing
      per loan, discount rate, float value,  inflation rate, ancillary servicing
      income, loan prepayment speeds, and default rates.
      
      Deposits - The fair value of  interest-bearing  demand  accounts,  savings
      accounts and certain money market deposits is the amount payable on demand
      at the reporting  date. The fair value of  fixed-maturity  certificates of
      deposit is  estimated  using the rates  currently  offered for deposits of
      similar remaining maturities.

      Borrowed  funds - The fair  value  is  estimated  based  on the  estimated
      present  value of future cash  outflows  using the current  rates at which
      similar loans with the same remaining maturities could be obtained.

<PAGE>

      Commitments  to extend  credit - The fair value of  commitments  to extend
      credit is based upon the difference between the interest rate at which the
      Company  is  committed  to make the loans and the  current  rates at which
      similar loans would be made to borrowers  with similar  credit ratings and
      for the same remaining  maturities,  adjusted for the estimated  volume of
      loan commitments actually expected to close.

      Commitments  to sell - The fair  value  of  commitments  to sell  loans or
      mortgage-backed securities is based upon the difference between the prices
      at which the  Company is  committed  to sell the loans or  mortgage-backed
      securities and the current quoted secondary market price for similar loans
      or mortgage-backed securities.

      ESOP, STOCK COMPENSATION, AND STOCK OPTION PLANS - Shares of common  stock
      issued to the Company's employee stock ownership plan (ESOP) are initially
      recorded as unearned ESOP shares in stockholders' equity at the fair value
      of the shares at the date of issuance to the plan. As shares are committed
      to be released  as  compensation  to  employees,  the Company  reduces the
      carrying  value of the unearned  shares and records  compensation  expense
      equal to the current fair value of the shares.

      Shares of common stock  awarded  under the  Company's  stock  compensation
      plans are initially  recorded as unearned  compensation  in  stockholders'
      equity at the fair  value of the  shares  at the date of award.  The total
      compensation  cost is measured by the fair value of the shares at the date
      of the award and is being  recognized  as expense over sixty  months,  the
      term over which the awards vest.

      The  Company  accounts for  stock-based  compensation  using the intrinsic
      value method  prescribed  in  Accounting  Principles  Board (APB)  Opinion
      No.  25,  "Accounting  for  Stock  Issued  to  Employees,"   and   related
      interpretations.  Accordingly,  compensation  cost for  stock  options  is
      measured  as  the  excess, if  any, of  the  quoted  market  price of  the
      Company's  stock at the date of the grant over the amount an employee must
      pay to acquire the stock.

      EARNINGS  PER  SHARE -  Primary  earnings  per share for 1996 and 1995 and
      earnings per share since  conversion on March 30, 1994 are computed on the
      basis of the weighted  average number of shares of common stock and common
      stock equivalents  outstanding of 14,293,326,  14,905,852,  and 15,863,166
      respectively.  Shares  of  common  stock  held by the ESOP are  considered
      outstanding when they are committed to be released. Shares of common stock
      held by the stock compensation plans are considered  outstanding when they
      are awarded to the participants.

      Fully-diluted  earnings per common share for 1996 and 1995 are computed on
      the basis of 14,356,511 and 15,068,240  weighted  average number of shares
      of common stock and common stock  equivalents  outstanding.  Fully diluted
      earnings per share in 1994 were the same as primary earnings per share.

      USE OF ESTIMATES - The preparation of  financial statements  in conformity
      with generally accepted  accounting principles requires management to make
      estimates  and assumptions that affect the  reported amounts of assets and
      liabilities and  disclosures of  contingent assets and  liabilities at the
      dates of the financial statements and  the reported amounts of revenue and
      expense during  the reporting  periods.  Actual results  could differ from
      those estimates.

      RECLASSIFICATIONS  AND  PRESENTATIONS - Certain 1995 and 1994 amounts have
      been reclassified to conform to the 1996 presentations.

<PAGE>

2.    CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                               1996        1995
                                                (in thousands)
<S>                                          <C>          <C>
Cash and due from banks                      $ 27,702     $29,792
Interest-bearing deposits with banks            1,315
Federal funds sold                             33,200      54,375
Securities purchased under agreements 
  to resell                                    64,106  
                                             --------     -------                                       
Total cash and cash equivalents              $126,323     $84,167                                      
                                             ========     =======

</TABLE>

      The Company is required by OTS  regulations  to maintain an average  daily
      balance  of liquid  assets  equal to a monthly  average of not less than a
      specified  percentage  of  its  net  withdrawable  deposit  accounts  plus
      short-term   borrowings.   The  Company  was  in  compliance   with  these
      requirements at December 31, 1996.

      The Company entered  into agreements  to purchase U.S. Treasury securities
      under  agreements  to  resell  substantially   identical  securities.  The
      amounts advanced under these agreements  represent short-term investments.
      The  securities are  held  by  the Company.  At  December 31, 1996,  these
      agreements mature  within 30 days.  Securities purchased  under agreements
      to resell averaged approximately $3,628,000  during 1996, and  the maximum
      amount outstanding at any month-end was $64,106,000.

3.    SECURITIES

<TABLE>
<CAPTION>
                                                                          1996
                                              ------------------------------------------------------

                                                                 Gross         Gross
                                                  Amortized    Unrealized    Unrealized    Fair
                                                    Cost         Gains         Losses      Value
                                                                    (in thousands)
<S>                                               <C>             <C>           <C>          <C>
Available-for-sale securities:
 U.S. Government and agency obligations           $189,048        $  686      $  (299)    $189,435
 Other debt securities                               1,875            23                     1,898
                                                  ---------    ----------    ----------   --------- 
   Total debt securities                           190,923           709         (299)     191,333                                
 Mortgage-backed securities                        471,873         5,183       (2,388)     474,668  
 Equity securities                                     275         1,268           (2)       1,541 
                                                  ---------    ----------    ----------   ---------
Total available-for-sale securities               $663,071        $7,160      $(2,689)    $667,542
                                                  =========    ==========    ==========   ========= 


     
                                                                          1995
                                               -----------------------------------------------------

                                                                 Gross         Gross
                                                  Amortized    Unrealized    Unrealized     Fair
                                                    Cost         Gains         Losses       Value
                                                                    (in thousands)
<S>                                               <C>           <C>           <C>          <C>
Available-for-sale securities:
  U.S. Government and agency obligations          $112,082      $    793      $  (100)     $112,775
  Other debt securities                              2,077            34                      2,111  
                                                  --------      --------      --------     --------
    Total debt securities                          114,159           827         (100)      114,886
  Mortgage-backed securities                       334,946         9,317         (171)      344,092
  Equity securities                                  1,115         1,237                      2,352  
                                                  --------      --------      --------     -------- 
Total available-for-sale securities               $450,220       $11,381      $  (271)     $461,330  
                                                  ========      ========      ========     ========

</TABLE>

<PAGE>

      On December 31, 1995, as  permitted by  the Financial Accounting Standards
      Board's  Special  Report "A Guide to  Implementation  of  Statement 115 on
      Accounting  for Certain  Investments  in Debt and  Equity Securities," the
      Company transferred  held-to-maturity securities with an amortized cost of
      $160,021,000  and  unrealized  gains  of $5,501,000 to  available-for-sale
      securities.  This   reclassification   had   the   effect  of   increasing
      stockholders' equity by $3,576,000, net of taxes.

      Gross realized gains on the sale of available-for-sale  securities totaled
      $2,013,956 and $226,684 and gross realized  losses totaled  $1,165,526 and
      $5,334  during the years ended  December 31, 1996 and 1995,  respectively.
      Cost is  determined  by the  specific  identification  method in computing
      gains and losses.  There were no sales of securities in 1994.

      The amortized  cost and estimated  fair value of  available-for-sale  debt
      securities at December 31, 1996, by contractual maturity, are as follows:

<TABLE>
<CAPTION>

                                             Amortized         Fair
                                                Cost           Value
                                                   (in thousands)
<S>                                          <C>               <C>
Due in one year or less                      $ 83,350          $ 83,373
Due after one year through five years          82,072            82,351                                
Due after five years through ten years         25,501            25,609                                                  
                                            ----------         ---------                                         
Total debt securities                        $190,923          $191,333               
                                            ==========         =========                                                     

</TABLE>
 
      Certain available-for-sale securities, with a fair value of $31,867,000 at
      December 31, 1996, were pledged to secure public and other deposits.

<PAGE>

4.    LOANS RECEIVABLE

<TABLE>
<CAPTION>
                                                  1996             1995
                                                      (in thousands)
<S>                                           <C>              <C>
Real estate loans:
 Loans on residential properties:
  One-to-four units                           $ 1,392,761      $ 1,342,667
  More than four units                            150,816          132,055
 Commercial real estate loans                     102,409           62,008
 Construction and land loans                      129,770           87,509  
                                              -----------      -----------                                
      Total real estate loans                   1,775,756        1,624,239
Other loans - primarily consumer loans            149,647           83,568  
                                              -----------      -----------                                               
      Total real estate and other loans         1,925,403        1,707,807  
                                              -----------      -----------                                                 
Less:                                                                        
 Undisbursed portion of loans                      41,344           24,138
 Unearned discounts and unamortized fees            3,010            4,485
 Allowance for loan losses                         13,538           11,821  
                                              -----------      -----------                                                 
      Total reductions                             57,892           40,444  
                                              -----------      -----------                                        
Loans receivable, net                         $ 1,867,511      $ 1,667,363
                                              ===========      ===========  
</TABLE>
                                                                             
      Approximately  $1,161,585,000 and $998,470,000 of the Company's total real
      estate loans at December 31, 1996 and 1995, respectively,  represent loans
      to  borrowers  in Kentucky and southern  Indiana,  the  Company's  primary
      market.  The balance of the loan  portfolio  is  geographically  dispersed
      throughout the United States.  The Company's  policy is to make loans that
      generally do not exceed 80% of appraised value of the underlying  property
      for  conventional  loans,  and to require  borrowers  to purchase  private
      mortgage insurance where the borrower's down payment is less than 20%.

      The Company purchases certain  delinquent  Federal Housing  Administration
      (FHA)/Department  of Veterans Affairs (VA)  insured/guaranteed  loans from
      GNMA pools it services for others and from third parties. Included in real
      estate loans on one-to-four unit residential properties in the above table
      are  $144,688,000  and  $128,692,000 of purchased FHA/VA loans at December
      31, 1996 and 1995, respectively.

      Activity in the allowance for loan losses is summarized as follows:

<TABLE>
<CAPTION>

                                                1996        1995        1994
                                                       (in thousands)
<S>                                           <C>         <C>         <C>
Balance, beginning of year                    $ 11,821    $ 11,076    $ 10,108
Provision charged to income                      2,586       2,283       1,786
Charge-offs                                     (1,548)     (1,844)     (1,376)
Recoveries                                         179         106         153
Transfers from allowance for nonrecoverable                                      
 foreclosures costs                                                        405
Acquired in mergers                                500         200                    
                                              --------    --------    --------                                   
Balance, end of year                          $ 13,538    $ 11,821    $ 11,076
                                              ========    ========    ========  

</TABLE>

<PAGE>

Information about the Company's  investment  in impaired loans, all of which are
commercial real estate loans, is as follows:

<TABLE>
<CAPTION>
                                              December 31,     December 31,
                                                  1996             1995
                                                     (in thousands)   
<S>                                              <C>              <C>
Gross impaired loans which have allowances                        $ 2,601
Less:  Related allowances for loan losses                            (258) 
                                                                  --------                                                   
Net impaired loans with related allowances                          2,343
Impaired loans with no related allowances        $ 6,827            4,734  
                                                 --------         --------                                                   
Total                                            $ 6,827          $ 7,077 
                                                 ========         ========
</TABLE>

<TABLE>
<CAPTION>
                                               Year Ended December 31,         
                                             1996                  1995
                                                   (in thousands)        
<S>                                         <C>                   <C>
Average impaired loans outstanding          $ 6,604               $ 6,891
Interest income recognized                  $   555               $   544
Interest income received                    $   534               $   566

</TABLE>

All of  the  Company's  impaired  loans  are  valued based on  the fair value of
collateral.

5.    PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>

                                                 1996            1995
                                                    (in thousands)
<S>                                            <C>             <C>
Land                                           $ 4,856         $ 3,473
Buildings and improvements                      26,573          20,934
Furniture, fixtures and equipment               26,709          22,221  
                                               --------        --------                                          
       Total property and equipment             58,138          46,628
Less accumulated depreciation                  (24,011)        (19,757) 
                                               --------        --------                                                  
Net property and equipment                     $34,127         $ 26,871  
                                               ========        ========  

</TABLE>

The  Company  is the  lessee  under  long-term  noncancelable  operating  leases
covering  certain  offices  and  equipment.  Net rental  expense was $1,287,000,
$1,201,000 and $2,162,000 for 1996, 1995 and 1994, respectively.

Minimum rental commitments as of December 31, 1996 are payable as follows:

<TABLE>
<CAPTION>

                                                    (in thousands)
<S>                                                   <C>
1997                                                  $   1,416
1998                                                      1,331
1999                                                        850
2000                                                        658
2001                                                        607
Thereafter                                                3,893  
                                                      ----------                                           
Total minimum rental commitments                      $   8,755  
                                                      ==========

</TABLE>

<PAGE>

6.    LOAN SERVICING

      The Company was  servicing a portfolio  consisting  of 83,000,  79,300 and
      66,300  loans owned by  investors  at December  31,  1996,  1995 and 1994,
      respectively,  that are not recorded in the financial statements. Mortgage
      loans serviced for others are summarized as follows:

<TABLE>
<CAPTION>
                                      1996           1995           1994
                                                (in thousands)
<S>                                <C>            <C>            <C>
GNMA                               $3,184,843     $3,215,249     $2,576,015
FNMA                                  970,435      1,226,666      1,356,769
FHLMC                                 672,976        510,068        428,838
Other investors                       240,642        215,567        217,224  
                                   ----------     ----------     ----------                                                 
Total servicing portfolio          $5,068,896     $5,167,550     $4,578,846  
                                   ==========     ==========     ==========

</TABLE>

      During the  year ended December 31, 1996,  the Company issued 47 GNMA loan
      pools  with security  proceeds of $74,508,000.  Additionally, the  Company
      was servicing 3,634 GNMA loan pools at December 31, 1996.

      In addition to servicing  loans for others,  the Company is a  subservicer
      for  third-party   servicing   owners,   including  GNMA  and  FHLMC.  The
      subservicing  arrangements  are generally  for a fixed term  substantially
      shorter  than  the  related  loan   maturities.   In  some  cases,   these
      arrangements  can  be  terminated  at the  servicing  owner's  option  and
      sometimes without penalty for termination.  At December 31, 1996 and 1995,
      the  Company  subserviced  a total  of  10,700  loans  and  20,000  loans,
      respectively,  having an unpaid  principal  balance  of  $908,495,000  and
      $1,126,144,000, respectively.

<PAGE>

      Custodial escrow balances maintained in connection with the foregoing loan
      servicing  were  $102,339,000  and  $108,424,000  at December 31, 1996 and
      1995,  respectively,  of which $76,257,000 and $86,554,000 are included in
      deposits in the accompanying consolidated balance sheets.

      The Company  collects and processes  payments  made by  borrowers,  remits
      funds  to  investors,  taxing  authorities,  and  insurers,  and  acts  as
      fiduciary in  foreclosing  and  disposing  of  collateral  properties.  In
      connection with its fiduciary responsibilities, the Company advances funds
      that are repaid from sale proceeds by way of reimbursement  from investors
      or through claims submitted to private mortgage insurance  companies,  the
      FHA, or the VA.  These  advances  totaled  $5,675,000  and  $4,148,000  at
      December 31, 1996 and 1995, respectively, and are included in other assets
      in the accompanying consolidated balance sheets.

      Under certain circumstances,  and in the case of FHA/VA claims due largely
      to the contractual nature of the loan insurance/guarantee  contract, these
      reimbursement   requests  or  claims  cannot  be  collected  in  full.  In
      recognition  of  the  potential  for  current  advances  that  may  not be
      collected, as well as for possible future unrecoverable  foreclosure costs
      that may be  anticipated  from the total  population of loans serviced for
      others,  the Company  has  established  an  allowance  for  nonrecoverable
      foreclosure  costs with provisions for losses charged against income.  The
      allowance  is included in other  assets in the  accompanying  consolidated
      balance sheets.

      A summary of activity in the allowance account is as follows:

<TABLE>
<CAPTION>
                                               1996        1995        1994
                                                      (in thousands)
<S>                                          <C>         <C>         <C>
Balance, beginning of year                   $ 2,319     $ 2,246     $ 2,542
Provision charged to income                    2,395       1,516         213
Charge-offs                                   (2,699)     (1,443)       (104)
Transfer to allowance for loan losses                                   (405) 
                                             --------    --------    --------                               
Balance, end of year                         $ 2,015     $ 2,319     $ 2,246  
                                             ========    ========    ========                            
</TABLE>

Following is an analysis of the changes in the balance of MSRs:

<TABLE>
<CAPTION>
                                     1996           1995           1994
                                               (in thousands)
<S>                                <C>            <C>            <C>
Balance, beginning of year         $35,751        $24,511        $30,063
Additions                            9,265         17,631          2,430
Amortization                        (7,739)        (6,391)        (7,429)
Sales                                  (90)                         (553)
                                  ---------      ---------      ---------                                               
Balance, end of year               $37,187        $35,751        $24,511
                                  =========      =========      =========

</TABLE>

<PAGE>

7.    DEPOSITS

<TABLE>
<CAPTION>
                                                   1996                                 1995
                                    ----------------------------------   ----------------------------------

                                     Average                              Average
                                       Rate       Amount      Percent       Rate       Amount      Percent
                                              (in thousands)                       (in thousands)  
<S>                                  <C>        <C>            <C>         <C>      <C>             <C>
Non-interest bearing accounts                   $  112,129       6.22%              $  103,969        7.13%
Interest-bearing accounts:                      -----------    -------              -----------     ------- 
 Non-certificate accounts:                                                              
  Demand deposits                    3.83%         167,694       9.29      2.87%        76,965        5.28 
  Money market                       4.61%         199,282      11.05      4.87%       148,129       10.15 
  Passbook savings                   3.22%         134,815       7.47      3.09%       126,642        8.68 
                                                -----------    -------              -----------     -------         
   Total non-certificate accounts                  501,791      27.81                  351,736       24.11 
                                                -----------    -------              -----------     -------         
 Certificates of deposit:                                                               
  Less than 4.00%                    2.80%           1,697       0.09      3.91%        22,594        1.55 
  4.01% to 6.00%                     5.45%         870,383      48.25      5.46%       509,997       34.95 
  6.01% to 8.00%                     7.00%         297,717      16.50      6.84%       446,927       30.64 
  8.01% to 10.00%                    8.79%          20,286       1.13      8.89%        23,621        1.62 
  10.01% and above                                                        10.24%            17         .00 
                                                -----------    -------              -----------     -------        
   Total certificates of deposit                 1,190,083      65.97                1,003,156       68.76  
                                                -----------    -------              -----------     -------          
   Total interest-bearing accounts               1,691,874      93.78                1,354,892       92.87  
                                                -----------    -------              -----------     -------
Total deposits                                  $1,804,003     100.00%              $1,458,861      100.00%
                                                ===========    =======              ===========     =======

</TABLE>

The aggregate  amount of certificates of deposit with a minimum  denomination of
$100,000  was  $175,859,000  and  $109,449,000  at  December  31, 1996 and 1995,
respectively.

Contractual  maturities of  certificates  of deposit at December 31, 1996 are as
follows:

<TABLE>
<CAPTION>

                                                    Average
                                     Amount          Rate     Percent
                                                (in thousands)   
<S>                                 <C>              <C>       <C>
1997                                $  743,074       5.78%     62.44% 
1998                                   241,584       5.79%     20.30
1999                                    78,161       6.49%      6.57
2000                                    64,981       6.15%      5.46
2001                                    13,537       6.55%      1.14
Thereafter                              48,746       6.74%      4.09
                                   ------------               -------                         
Total certificates of deposit       $1,190,083                100.00%
                                   ============               =======

</TABLE>

<PAGE>

Interest expense on deposits is as follows:

<TABLE>
<CAPTION>
                                     1996          1995          1994
                                              (in thousands)
<S>                                <C>           <C>           <C>
Demand deposits                    $ 4,433       $ 1,479       $ 1,012
Money market                         8,343         6,047         3,428
Passbook savings                     4,181         4,103         4,813
Certificates of deposit             65,024        54,217        40,008  
                                   --------      --------      --------                                    
Total interest expense             $81,981       $65,846       $49,261  
                                   ========      ========      ========
 
</TABLE>

8.    BORROWED FUNDS

<TABLE>
<CAPTION>
                                                           1996                          1995
                                               ---------------------------   ---------------------------

                                                                  Weighted                      Weighted
                                                                   Average                       Average
                                                   Amount           Rate         Amount           Rate
                                                                  (dollars in thousands)
<S>                                              <C>               <C>         <C>               <C>
Short-term borrowings:
 Securities sold under agreements
  to repurchase                                  $  9,000          5.37%       $176,433          6.03%
 Advances from Federal Home Loan Bank             200,924          5.62%          2,150          6.14%
 Borrowings under lines of credit                  87,329          5.51%        116,875          5.27%
                                                 ---------                     ---------              
    Total short-term borrowings                   297,253                       295,458  
                                                 ---------                     ---------                 
Long-term borrowings from Federal                                                      
 Home Loan Bank:                                                                      
 Adjustable rate advances, interest based
  on LIBOR; 5.61% (1996) and 6.00% (1995)         150,000                       100,000
 Fixed rate advances, 6.27% (1996)                                                    
  and 6.29% (1995)                                298,561                       278,489
 Mortgage matched and other advances                                                  
  payable monthly through 2026 with                                                  
  interest rates from 3.88% to 8.05% (1996)
  and from 5.51% to 8.05% (1995)                   35,483                        40,262  
                                                 ---------                     ---------                  
    Total long-term borrowings                    484,044                       418,751  
                                                 ---------                     --------- 
Total borrowed funds                             $781,297                      $714,209  
                                                 =========                     ========= 

</TABLE>

<PAGE>

Information  concerning borrowings in 1996 and 1995 under  securities sold under
agreements to repurchase is summarized as follows:

<TABLE>

                                                    1996            1995
                                                   (dollars in thousands)
<S>                                               <C>             <C>
Average balance during the period                 $ 72,295        $147,651 
Average interest rate during the period               5.48%           6.02%
Maximum month-end balance during the period       $140,341        $240,750
Mortgage-backed securities underlying
 the agreements at end of period:
  Carrying value                                  $ 10,339        $176,973
  Fair value                                      $ 10,372        $182,234

</TABLE>

<PAGE>

      Mortgage-backed  securities  sold  under  agreements  to  repurchase  were
      delivered  to  the  broker-dealers  who  arranged  the  transactions.  The
      broker-dealers  may have  sold,  loaned,  or  otherwise  disposed  of such
      securities to other parties in the normal course of their  operations, and
      have agreed to resell the Company  substantially  identical  securities at
      the  maturities  of the  agreements.  The  agreements at December 31, 1996
      mature within one year.

      Advances from the Federal Home Loan Bank are  collateralized  by a blanket
      lien security  agreement on the residential  real estate loan portfolio in
      the  amount of $1,027,523,000  and $631,396,000  at December 31, 1996  and
      1995, respectively.

      Details of borrowings under lines of credit are as follows:

<TABLE>
<CAPTION>
                                                      1996                           1995
                                           ----------------------------   ----------------------------
                                             Line of                        Line of     
                                              Credit      Borrowings         Credit      Borrowings
                                                                  (in thousands)
<S>                                          <C>           <C>              <C>          <C>
Relocation loan funding line of credit       $150,000      $84,600          $100,000     $ 99,700
Other line of credit                           25,000        2,729            25,000       17,175  
                                             --------      -------          --------     --------                                 
Totals                                       $175,000      $87,329          $125,000     $116,875  
                                             ========      =======          ========     ========

</TABLE>

      Borrowings  under the  $150,000,000  line of credit  were used to  finance
      mortgage loans held for sale which were made to relocating  employees of a
      third  party.  The  interest  rate on this line of credit is  indexed to a
      certain short-term interest rate. Borrowings under this line of credit are
      guaranteed  by the third  party to whom the Company has granted a security
      interest in mortgage  loans that are held for sale.  Gains and losses,  if
      any, on the sale of such mortgage loans to permanent  investors  accrue to
      the account of the third-party guarantor.

      The interest rate on the other line of credit gives effect to, among other
      factors,  fluctuations  in  various  short-term  interest  rates  and cash
      balances  on  deposit  with  the  lending   institution.   Borrowings  are
      collateralized  by certain  rights  and  interests  in  various  servicing
      agreements.

Annual maturities of  the long-term  borrowings as  of December 31, 1996, are as
follows:

<TABLE>
<CAPTION>
                                        (in thousands)
<S>                                        <C>
1997                                       $277,294
1998                                         22,987                                                    
1999                                         69,461                                                    
2000                                         67,194                                                    
2001                                         25,670                                                    
Thereafter                                   21,438                                                                      
                                           ---------                                                          
Total long-term borrowings                 $484,044                      
                                           =========
</TABLE>

Interest expense on borrowed funds is as follows:

<TABLE>
<CAPTION>
                                               1996       1995       1994
                                                     (in thousands)
<S>                                          <C>        <C>        <C>
Short-term borrowings                        $13,141    $16,326    $ 5,396
Long-term borrowings                          28,295     15,916      6,463  
                                             -------    -------    -------                             
Total interest expense on borrowed funds     $41,436    $32,242    $11,859  
                                             =======    =======    =======
</TABLE>
 
<PAGE>
                                                           
9.    REGULATORY CAPITAL REQUIREMENTS

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

      Qualitative measures  established by regulation to ensure capital adequacy
      and to be classified  as "well capitalized" require  the Bank to  maintain
      minimum  amounts and ratios of Total, Tier 1, Core and Tangible capital as
      set  forth  in  the  following  table.  In  their  evaluation  of  capital
      adequacy, the regulators assess exposure to declines in the economic value
      of the Bank's capital  adequacy, as  well as  exposure to declines in  the
      economic value of capital due to changes in interest rates. As of December
      31, 1996, the most recent notification  from OTS  categorized  the Bank as
      "well capitalized"  under the regulatory  framework for prompt  corrective
      action.  There are no  conditions or events  since that notification  that
      management believes have  changed the Bank's category.

<TABLE>
<CAPTION>   
                                                                                             To Be Considered
                                                                                             Well Capitalized                      
                                                                        For Capital       Under Prompt Correction                  
                                                    Actual           Adequacy Purposes       Action Provisions
                                             -------------------     ------------------     -------------------
                                              Amount      Ratio       Amount      Ratio      Amount      Ratio 
As of December 31, 1996                                                (dollars in thousands)
<S>                                          <C>          <C>        <C>          <C>       <C>          <C> 
Total risk-based capital                     
  (to risk-weighted assets)                  $251,135     18.55%     $108,301     8.00%     $135,376     10.00%
Tier 1 capital (to risk-weighted assets)      237,862     17.57%         N/A       N/A        81,225      6.00%
Core capital (to adjusted tangible assets)    237,862      8.26%       86,461     3.00%      144,063      5.00%
Tangible capital (to tangible assets)         237,784      8.25%       43,218     1.50%         N/A        N/A
                                                                                  
As of December 31, 1995:
Total risk-based capital                                                          
  (to risk-weighted assets)                  $249,009     20.34%     $ 97,928     8.00%     $122,409     10.00%
Tier 1 capital (to risk-weighted assets)      239,706     19.58%         N/A       N/A        73,446      6.00%
Core capital (to adjusted tangible assets)    239,706      9.70%       74,162     3.00%      123,604      5.00%
Tangible capital (to tangible assets)         239,598      9.69%       37,080     1.50%         N/A        N/A

</TABLE>
                               
<PAGE>                                 

10.   STOCKHOLDERS' EQUITY

      In accordance  with federal  regulations,  at the time the Bank  converted
      from a federal  mutual  savings and loan  association  to a federal  stock
      savings  bank,  the Bank  restricted  a portion of  retained  earnings  by
      establishing a liquidation  account. The liquidation account is maintained
      for the benefit of eligible account holders who continue to maintain their
      accounts at the Bank. The liquidation  account is reduced  annually to the
      extent  that  eligible  account  holders  have  reduced  their  qualifying
      deposits.  Subsequent  increases  will not  restore  an  eligible  account
      holder's interest in the liquidation  account.  Only in the unlikely event
      of a complete liquidation,  each eligible account holder would be entitled
      to  receive  a  distribution  from the  liquidation  account  in an amount
      proportionate  to the current  adjusted  qualifying  balances for accounts
      then held.

      Under current  regulations,  the Bank is not permitted to pay dividends to
      the Parent  Company on its stock after the  conversion  if its  regulatory
      capital  would  thereby be reduced  below (i) the amount then required for
      the  aforementioned  liquidation  account  or (ii) the  Bank's  regulatory
      capital  requirements.  As a "Tier 1"  institution  (an  institution  with
      capital in excess of its capital requirements, both immediately before the
      proposed capital distribution and on a pro forma basis after giving effect
      to such distribution), the Bank may make capital distributions without the
      prior  consent of the OTS in any  calendar  year up to the  greater of (i)
      100% of net earnings to date during such  calendar  year,  plus the amount
      that would reduce by one-half the capital  surplus  ratio at the beginning
      of such  calendar  year, or (ii) 75% of its net income for the most recent
      four quarters. At December 31, 1996, the Bank would be permitted to pay up
      to $70,827,000 in dividends to the Parent Company under these regulations.

11.   INCOME TAXES

      The Company files a consolidated  federal  income tax return.  The Bank is
      permitted  under  the Internal  Revenue  Code (Code) to  deduct an  annual
      addition to a reserve for bad debts in determining taxable income, subject
      to certain limitations.  This addition differs from the provision for loan
      losses recorded  for  financial accounting  purposes.  For years  prior to
      1996, the Bank's deduction was based on  the percentage of taxable  income
      method as defined by the Code.  Tax bad debt deductions for years prior to
      1988 are included in taxable income of later years  only if the reserve is
      used  subsequently  for  purposes  other  than  to absorb bad debt losses.
      Because the  Bank does not intend to  use the  reserve for purposes  other
      than to absorb such losses, no deferred income taxes have been provided on
      such bad debt deductions prior to  January 1, 1988.  Retained earnings  at
      December  31, 1996, includes  approximately  $43,077,000 representing  bad
      debt deductions for which no deferred income taxes have been provided.

      In August 1996, legislation was  passed by Congress that (i) repealed  the
      percentage  of  taxable  income  bad  debt  deduction  and  (ii)  requires
      recapture of the excess of  bad debt reserves over  the base year reserves
      (December 31, 1987).  These changes were effective for calendar year 1996.
      For years subsequent to the base  year, a deferred tax liability  has been
      recorded; thus no additional tax liability is required as a result of this
      legislation.

      
<PAGE>

The tax effects of  temporary differences that give rise to significant portions
of the deferred tax assets and  deferred  tax  liabilities  at December 31, 1996
and 1995, are as follows:

<TABLE>
<CAPTION>
                                                        1996          1995
                                                          (in thousands)
<S>                                                    <C>          <C>
Deferred tax assets:
 Mortgage loans, primarily due to allowance  
  for losses and deferred loan fees                    $ 2,561      $ 2,093
 Mortgage servicing rights                                              835
 Allowance for nonrecoverable foreclosures  
  costs                                                    855          873
 Purchase price adjustments on deposits acquired                        368
 Accrued compensation and benefits                       1,446        1,104
 Other                                                     680          582  
                                                       -------      -------                                          
   Total gross deferred tax assets                       5,542        5,855  
                                                       -------      -------                                          
Deferred tax liabiliites:                                                                        
 Net unrealized gains on available-for-sale 
  securities                                             1,565        3,889
 Mortgage servicing rights                                 359             
 Federal Home Loan Bank stock                            3,564        2,516
 Purchase price adjustments on assets acquired             176          676  
 Purchase price adjustments on deposits acquired           225 
 Other                                                     946          818
                                                       -------      -------
     Total gross deferred tax liabilities                6,835        7,899  
                                                       -------      -------                             
Net deferred tax liability (included in other 
 liabilities)                                          $(1,293)     $(2,044) 
                                                       =======      =======
       
</TABLE>

The significant components of income tax expense are as follows:

<TABLE>
<CAPTION>
                                         1996         1995         1994
                                                 (in thousands)
<S>                                    <C>          <C>          <C>
Current income tax expense             $ 9,774      $ 9,975      $ 8,525
Deferred income tax expense              1,183        2,236        2,879  
                                       -------      -------      -------                       
Total income tax expense               $10,957      $12,211      $11,404  
                                       =======      =======      ======= 

</TABLE>

Income  tax  expense attributable  to  investment securities  gains was $297,000
and $77,000 for 1996 and 1995, respectively. There were no investment securities
gains or losses in 1994.

A  reconciliation of the Company's effective tax rate with the federal statutory
tax rate follows:

<TABLE>
<CAPTION>

                                                 1996       1995      1994
<S>                                              <C>        <C>       <C>
Federal statutory tax rate                       35%        35%       35%
Tax-exempt income                                (1)                  (1)
State and local taxes, net of federal 
 income tax benefit                                          1         2
Nondeductible compensation and benefits           2
Tax credits                                      (1) 
Other                                             1
                                                 ----       ----      ----      
Company's effective tax rate                     36%        36%       36%
                                                 ====       ====      ====

</TABLE>

<PAGE>

12.   EMPLOYEE BENEFIT PLANS

      Effective March 30, 1994, the Company established an internally  leveraged
      ESOP that covers substantially all full-time employees.  The Company makes
      annual  contributions  to the ESOP equal to the ESOP's debt  service  less
      dividends,  if any,  received  by the ESOP  and  used  for  debt  service.
      Dividends received by the ESOP on shares held as collateral may be used to
      pay debt  service;  dividends  on  allocated  shares  may be  credited  to
      participants' accounts.  Dividends of $520,000, $471,000 and $106,000 were
      used in 1996, 1995, and 1994, respectively,  to pay ESOP debt service. The
      ESOP shares are pledged as  collateral on the debt. As the debt is repaid,
      shares are released from  collateral and allocated to active  participants
      based on a formula specified in the ESOP agreement.

      ESOP  compensation  was  $2,929,000,  $2,149,000  and $1,353,000 for 1996,
      1995, and 1994,  respectively.  Shares  released from  collateral in 1996,
      1995 and 1994,  were 110,208  shares,  110,208  shares and 82,864  shares,
      respectively.  At December 31, 1996, there were 1,019,220  unreleased ESOP
      shares having a fair value of $29,685,000.

      Effective  March 30,  1994,  the Company  established  stock  compensation
      plans.  Stock awards  totaling  16,175 and 639,054 shares were  granted to
      directors  and  officers  during  the  years ended  December 31, 1995  and
      1994,  respectively. There were  no  shares  granted or  awarded  in 1996.
      The shares vest  generally over a five-year period.  Of the shares awarded
      under  the plans, 237,205 and 119,203 were vested at December 31, 1996 and
      1995, respectively;  none  of the shares were vested at December 31, 1994.
      Compensation  expense   attributable  to   these  plans   was  $1,301,000,
      $1,297,000 and $957,000 in 1996, 1995 and 1994, respectively.

      The Company participates in the Financial Institutions  Retirement Fund, a
      multi-employer  noncontributory  trusteed defined benefit  retirement plan
      covering  all  full-time  employees  having at least one year of  service.
      Pension expense for  this funded  plan was $57,000 for 1994. There was  no
      expense for the plan in 1996 and 1995.

      Pension  expense  for unfunded plans covering senior  management and board
      members and informal retirement arrangements with retired  senior officers
      was   $353,000,   $422,000   and   $486,000  for  1996,  1995,  and  1994,
      respectively.   Accrued   pension  expense  related   to  these  plans  of
      $2,543,000  and  $2,283,000  is  included  in  other  liabilities  in  the
      accompanying  consolidated  balance sheets  at December 31, 1996 and 1995,
      respectively.

      The  Company  has an  Employee  Savings  Plan  that  allows  participating
      employees to make tax-deferred  contributions  under Internal Revenue Code
      Section  401(k) to  various  trusteed  savings  funds.  The  Company  made
      contributions  to the Plan  totaling  $258,000,  $234,000 and $474,000 for
      1996, 1995 and 1994, respectively.

13.   STOCK OPTION PLANS

      The Company  adopted  stock  option  plans  in  1994 for  the  benefit  of
      directors, officers, and  other key  employees.  These fixed option  plans
      authorize the  granting of  options  to purchase 1,783,125  shares of  the
      Company's  common  stock.  The   Company  applies  APB   Opinion  No.  25,
      "Accounting for Stock Issued to Employees," and related Interpretations in
      accounting  for  its  plans.  Accordingly, no compensation  cost has  been
      recognized for its plans.  Had compensation cost  for the Company's  stock
      option compensation plans been determined based  on the fair value  at the
      grant dates  for  awards under those  plans consistent with the  method of
      SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
      income and  earnings per  share would have been  reduced to  the pro forma
      amounts indicated below:

<PAGE>

<TABLE>
<CAPTION>
                                                               1996           1995
                                                              (in thousands, except 
                                                                per share amounts)
<S>                                     <C>                  <C>            <C>
Net Income                              As reported          $19,507        $21,690
                                        Pro forma             19,412         21,654 

Primary earnings per share              As reported            $1.36          $1.46
                                        Pro forma               1.36           1.45

Fully diluted earnings per share        As reported            $1.36          $1.44
                                        Pro forma               1.35           1.44

</TABLE>
<PAGE>

A summary of the status of the  Company's stock option  plans as of December 31,
1996, 1995, and  1994,  and changes  during the  years ended on  those  dates is
presented below:

<TABLE>
<CAPTION>

                                       1996                             1995                             1994
                             ----------------------------    -----------------------------    -----------------------------
                                             Weighted                         Weighted                         Weighted 
                             Number of        Average        Number of         Average        Number of         Average
                              Options      Exercise Price     Options       Exercise Price     Options       Exercise Price
                             ----------    --------------    ---------      --------------    ---------      --------------
<S>                          <C>              <C>            <C>               <C>            <C>               <C> 
Outstanding at beginning
 of year                     1,657,114        $10.60         1,623,288         $10.27         
Granted                         71,000         27.92            62,471          18.95         1,623,288         $10.27
Exercised                       (6,837)        14.63            (2,645)         10.00       
Forfeited                      (14,250)        18.63           (26,000)         10.00        
                             ---------                       ---------                        ---------
Outstanding at end of year   1,707,027         11.24         1,657,114          10.60         1,623,288          10.27
                             =========                       =========                        =========      
Options exercisable at 
 year-end                      527,898                         254,798
Weighted-average fair value
 of options granted during
 the year                       $12.74                           $7.79            

</TABLE>

The following  table summarizes  information about stock  options outstanding at
December 31, 1996:

<TABLE>
<CAPTION>
                                 Options Outstanding                                    Options Exercisable
                    ----------------------------------------------------        -----------------------------------
                                   Weighted Average
   Range of            Number         Remaining         Weighted Average          Number           Weighted Average
Exercise Prices     Outstanding    Contractual Life      Exercise Price         Exercisable         Exercise Price
<S>                  <C>                <C>                   <C>                 <C>                    <C>        
$10.00               1,511,393          7.2 years             $10.00              512,241                $10.00
 14.63 to 17.25        111,634          7.9                    16.06               10,657                 16.47
 20.25 to 23.38         28,000          9.0                    22.91                5,000                 21.50
 28.06 to 29.50         56,000          9.9                    29.20
                     ---------                                                   ---------
                     1,707,027          7.4                    11.24              527,898                 10.24
                     =========                                                   =========

</TABLE>
    
14.   COMMITMENTS AND CONTINGENCIES

      In the ordinary  course of business,  the Company has various  outstanding
      commitments  and  contingent  liabilities  that are not  reflected  in the
      accompanying consolidated financial statements.  These include commitments
      to  extend  credit,  recourse  arrangements  on  loans  sold  and  forward
      commitments to sell loans or mortgage-backed securities.

      A regular  compliance  examination by  the OTS raised  questions about the
      accuracy  of the  Bank's  Truth-in-Lending  (TIL)  disclosures  on certain
      adjustable  rate  mortgages. It  was  determined that  the TIL  disclosure
      errors were the result of problems incurred in the use of certain computer
      programs for the calculation of the disclosures.  The Bank estimated that
      the  most  probable  restitution in  the event  defenses are  unsuccessful
      (along  with  related  attorney  fees) is $1,450,000.  A  charge for  this
      amount was  accrued in the  third quarter of  1996.  Management intends to
      aggressively  assert available defenses to this proceeding and to  attempt
      to  minimize  any  damage  award.  In addition, the  Bank  would  also  be
      responsible, in  certain  circumstances,  for  reducing  future   mortgage
      interest  payments on  affected loans, a result of which would  be reduced
      earnings for  the Bank.  Management does not believe  that future interest
      payment reductions would have  a material adverse  effect on the financial
      condition or results of operations of the Bank or Company.

<PAGE>

      Except as discussed above, the Company and its subsidiary are not involved
      in any pending  legal  proceedings  other than routine  legal  proceedings
      occurring  in  the  ordinary  course  of  business.   Such  routine  legal
      proceedings  in the  aggregate are believed by management to be immaterial
      to the Company's financial condition or results of operations.

15.   ACQUISITIONS

      On July 14, 1995, the Company completed its acquisition of First Financial
      Shares,  Inc. (FFS), the holding company for First Federal Savings Bank of
      Richmond (Kentucky) (FFSB). Under terms of the agreement, the Company paid
      $17,600,000  for all  outstanding  shares of FFS. The acquisition has been
      accounted for as a purchase. On August 9, 1995, FFS was dissolved, leaving
      FFSB as a  wholly-owned  subsidiary of Great  Financial  Corporation.  The
      accompanying financial statements include the results of FFSB's operations
      since   July  14,  1995.  Goodwill  arising   from  this  transaction  was
      $4,572,000.  The  pro forma  effects of  the FFS  acquisition on  interest
      income,  net  income  and  earnings per share  were  not  material  to the
      consolidated financial statements.  In July 1996, the Company  merged FFSB
      with the Bank.

      On June 7, 1996, the  Company  completed the  acquisition of LFS  Bancorp,
      Inc. (LFS),  parent  company of  Lexington  Federal  Savings Bank  (LFSB).
      Under terms  of  the  agreement, the  Company  paid  $75,760,000  for  all
      outstanding shares of LFS.  LFS was dissolved as  of the  acquisition date
      and  LFSB  merged  with the  Bank upon  acquisition.  The  acquisition was
      accounted for as a purchase, and accordingly, the results of operations of
      LFSB  prior  to  the acquisition  date  have  not  been  included  in  the
      consolidated statements of income.  Goodwill arising from this transaction
      was $6,867,000.  The pro forma effects of the LFSB acquisition on interest
      income, net  income  and  earnings  per  share  were not  material  to the
      consolidated financial statements.

<PAGE>

16.   FINANCIAL INSTRUMENTS

      The Company is a party to financial  instruments  with  off-balance  sheet
      risk  of  loss  as part of its  normal  business  operations  to meet  the
      financing  needs  of its  customers  and to  reduce  its own  exposure  to
      fluctuations in interest rates.  The Company has no financial  instruments
      held for trading  purposes.  Financial  instruments held or issued include
      commitments  to extend  credit,  and  forward  commitments  to sell  loans
      or  mortgage-backed  securities.  The  instruments  involve,  to   varying
      degrees, elements of credit and interest rate risk in excess of the amount
      recognized  in the balance  sheet.  The  contract or  notional  amounts of
      those  instruments  reflect the extent of involvement  the Company has  in
      particular classes of financial instruments.

      The Company extends binding commitments to prospective borrowers generally
      without a fee to the  customer.  Such  commitments  assure the borrower of
      financing for a specified  period of time at a specified rate. The risk to
      the  Company  under such loan  commitments  is limited by the terms of the
      contract.  For example,  the Company may not be obligated to advance funds
      if the  customer's  financial  condition  deteriorates  or if the customer
      fails  to  meet  specific  covenants.   An  approved,  but  undrawn,  loan
      commitment  represents a potential credit risk once the funds are advanced
      to the customer,  a liquidity risk since the customer may demand immediate
      cash that would require a funding  source,  and a interest rate risk since
      interest  rates may rise above the rate  committed  to the  customer.  The
      Company's current liquidity position continues to meet its need for funds.
      In addition,  since a portion of these loan  commitments  normally  expire
      unused, total amount of outstanding  commitments at any point in time will
      not  require a funding  source.  As of  December  31,  1996 and 1995,  the
      Company   had   outstanding  commitments   to  originate   loans  totaling
      $93,054,000 and $76,028,000, respectively.

      The Company had forward  commitments to deliver loans to certain investors
      or primary  security  dealers  totaling  $93,168,000  and $178,762,000 at
      December 31, 1996 and 1995, respectively. The commitments are for delivery
      at a specified price on a specified  future date, but typically within 120
      days. The risk  associated  with these  instruments  relates  primarily to
      loans not closing in sufficient  volume or at  appropriate  yields to meet
      mandatory  obligations and subjects the Company to interest rate risk in a
      decreasing  rate  environment.  No material  losses are  anticipated  with
      regard to these commitments.

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

<PAGE>

<TABLE>
<CAPTION>
                                                    1996                                       1995
                                  ----------------------------------------   ---------------------------------------

                                     Notional     Carrying       Fair           Notional     Carrying      Fair
                                      Amount       Amount        Value           Amount       Amount       Value
                                               (in thousands)                             (in thousands)
<S>                                 <C>          <C>            <C>            <C>         <C>           <C>
Assets:
 Cash and cash equivalents                       $  126,323     $  126,323                 $   84,167    $   84,167
 Available-for-sale securities                      667,542        667,542                    461,330       461,330
 Mortgage loans held for sale                        65,546         65,631                    144,163       144,179
 Loans receivable                                 1,867,511      1,869,980                  1,667,363     1,695,490
 Federal Home Loan Bank stock                        34,816         34,816                     21,917        21,917
 Mortgage servicing rights                           37,187         54,212                     35,751        45,880
                                                            
Liabilities:                                                                                     
 Deposits                                         1,804,003      1,812,712                  1,458,861     1,487,507
 Borrowed funds                                     781,297        781,878                    714,209       717,696
                                                                                                 
Off-balance sheet:                                                                               
 Commitments to extend credit       $93,054              (3)           315     $ 76,028            (5)          324
 Commitments to sell                 93,168              87           (453)     178,762           175            98

</TABLE>

The fair  value estimates  presented  herein are based on pertinent  information
available to management as of December 31, 1996 and 1995.  Such amounts have not
been comprehensively  revalued for purposes of  financial statements since  both
dates.

<PAGE>

17.   SEGMENT INFORMATION

      The Company's  operations  include two  reportable  segments:  banking and
      mortgage  banking  businesses.  The  banking  segment is composed of those
      operations  involved in making  loans held for  investment,  primarily  on
      single family residences; investing in government and government agencies'
      securities and receiving  deposits from  customers.  The mortgage  banking
      segment  is  made up of  those  operations  involved  in  originating  and
      purchasing residential mortgage loans for resale in the secondary mortgage
      market and in servicing and subservicing loans for others.

      The  Company's  operations involved  in purchasing  delinquent FHA and VA 
      loans have previously  been classified within  the banking segment.  Since
      these loans are  primarily purchased from GNMA pools the  Company services
      in  its  mortgage  banking  business  and  due  to  the  unique  servicing
      requirements of these loans, the  Company determined that these operations
      are more properly  classified within the mortgage  banking segment and has
      so classified the applicable assets, income and expense for the year ended
      December 31, 1996, in the schedule which follows.  The assets, income and
      expense applicable to these  operations  for the years ended  December 31,
      1995 and 1994, have  been reclassified to the  mortgage banking segment in
      the respective schedules which follow.

      The banking  segment's 1996 income before income taxes was affected by the
      Deposit Insurance Fund Act of 1996. This legislation  included  provisions
      to recapitalize the Savings Association Insurance Fund (SAIF) and required
      all insured savings institutions to pay a special assessment of 65.7 cents
      for every $100 (0.657%) of applicable  deposits held as of March 31, 1995.
      Non-interest  expense includes  a one-time charge of $9,699,000, for  this
      special assessment. As a result of the recapitalization of SAIF, insurance
      rates were  reduced  by the FDIC  effective  January  1,  1997.  This rate
      reduction will favorably impact future earnings of the banking segment.

      In 1996,  intersegment  interest income and expense represent (i) interest
      on advances from the banking  segment to the mortgage  banking  segment to
      fund the  origination  of loans  computed  at a rate tied to a  short-term
      index and to fund the  investment  in  MSRs computed at  a rate tied  to a
      medium-term index, (ii) interest on  custodial  balances  of the  mortgage
      banking  segment on  deposit with  the banking  segment computed at a rate
      tied to a  medium-term  index, (iii) interest on advances  from the Parent
      Company  (in  "other" segment)  to the banking segment  computed at a rate
      tied  to a  short-term  index, and (iv) interest expense  incurred  by the
      banking segment on a loan from the Parent Company to the ESOP computed  at
      6%. In 1995,  intersegment  interest  income  and  expense  represent  (i)
      interest on  intersegment loans  and advances from the  banking segment to
      the  mortgage  banking  segment  computed  at  prime,  less a  credit  for
      custodial  balances of  the mortgage  banking  segment on deposit with the
      banking  segment,  and (ii)  interest on  advances from the Parent Company
      to the banking segment computed at prime. The changes  implemented  by the
      Company  from 1995 to 1996 to price  intersegment  interest did not have a
      material effect on income before income taxes of the reportable segments.

<PAGE>

<TABLE>
<CAPTION>
                                                          Year Ended December 31, 1996
                                      ------------------------------------------------------------------

                                                      Mortgage
(in thousands)                           Banking      Banking      Other    Eliminations    Consolidated
<S>                                     <C>          <C>          <C>       <C>             <C>
Interest income:
 Unaffiliated customers                 $  174,364   $ 24,880     $    11                   $  199,255
 Intersegment                               12,627      7,336       1,511   $ (21,474)                        
                                        -----------  ---------    --------  ----------      ------------
    Total interest income                  186,991     32,216       1,522     (21,474)         199,255           
                                        -----------  ---------    --------  ----------      ------------
Interest expense:                                                                                  
 Unaffiliated customers                    115,866      7,551                                  123,417
 Intersegment                                8,847     12,626           1     (21,474)                                 
                                        -----------  ---------    --------  ----------      ------------ 
    Total interest expense                 124,713     20,177           1     (21,474)         123,417           
                                        -----------  ---------    --------  ----------      ------------
Net interest income                         62,278     12,039       1,521                       75,838
Provision for loan losses                   (2,586)                                             (2,586)
Non-interest income                          5,728     37,981       1,498      (9,369)          35,838
Non-interest expense                       (49,647)   (35,446)     (2,902)      9,369          (78,626)                
                                        -----------  ---------    --------  ----------      ------------
Income before income taxes              $   15,773   $ 14,574     $   117                   $   30,464      
                                        ===========  =========    ========  ==========      ============
                                                                                                   
Identifiable assets                     $2,588,983   $368,264     $261,009  $(321,094)      $2,897,162      
                                        ===========  =========    ========  ==========      ============
Depreciation and amortization of                                                                   
 property and equipment                 $    2,149   $  1,309     $     26                  $    3,484     
                                        ===========  =========    ========  ==========      ============

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                          Year Ended December 31, 1995
                                      ------------------------------------------------------------------
                                                    Mortgage
(in thousands)                           Banking    Banking      Other    Eliminations    Consolidated
<S>                                    <C>          <C>        <C>        <C>              <C>         
Interest income:
  Unaffiliated customers               $  139,626   $ 20,993   $     13                    $  160,632
  Intersegment                             11,026      5,767      2,236   $  (19,029)                      
                                       ----------   --------   --------   -----------      ----------- 
           Total interest income          150,652     26,760      2,249      (19,029)         160,632  
                                       ----------   --------   --------   -----------      ----------- 
Interest expense:                                                                                  
  Unaffiliated customers                   92,152      5,936                                   98,088
  Intersegment                              8,003     11,026                 (19,029)                      
                                       ----------   --------   --------   -----------      ----------- 
           Total interest expense         100,155     16,962                 (19,029)          98,088  
                                       ----------   --------   --------   -----------      ----------- 
Net interest income                        50,497      9,798      2,249                        62,544
Provision for loan losses                  (1,880)      (403)                                  (2,283)
Non-interest income                         4,801     32,749        421       (8,538)          29,433
Non-interest expense                      (33,789)   (28,127)    (2,415)       8,538          (55,793) 
                                       ----------   --------   --------   -----------      -----------
Income before income taxes             $   19,629   $ 14,017   $    255   $                $   33,901  
                                       ==========   ========   ========   ===========      =========== 
Identifiable assets                    $2,058,829   $458,165   $258,847   $ (289,585)      $2,486,256  
                                       ==========   ========   ========   ===========      =========== 
Depreciation and amortization of                                                                   
  property and equipment               $    1,715   $  1,189                               $    2,904  
                                       ==========   ========   ========   ===========      ===========
 
</TABLE>

<TABLE>
                                                          Year Ended December 31, 1994
                                      ------------------------------------------------------------------

                                                    Mortgage
(in thousands)                           Banking    Banking      Other    Eliminations    Consolidated
<S>                                    <C>          <C>        <C>        <C>              <C>         
Interest income:
  Unaffiliated customers               $  100,451   $ 19,002   $     13                    $  119,466
  Intersegment                                979                 2,410    $  (3,389)                      
                                       ----------   --------   --------   -----------      ----------- 
           Total interest income          101,430     19,002      2,423       (3,389)         119,466  
                                       ----------   --------   --------   -----------      ----------- 
Interest expense:                                                                                  
  Unaffiliated customers                   55,921      5,199                                   61,120
  Intersegment                              2,201      1,186          2       (3,389)                      
                                       ----------   --------   --------   -----------      ----------- 
           Total interest expense          58,122      6,385          2       (3,389)          61,120  
                                       ----------   --------   --------   -----------      -----------
Net interest income                        43,308     12,617      2,421                        58,346
Provision for loan losses                    (750)    (1,036)                                  (1,786)
Non-interest income                         2,467     31,647        656         (786)          33,984
Non-interest expense                      (29,143)   (29,719)      (973)         786          (59,049) 
                                       ----------   --------   --------   -----------      ----------- 
Income before income taxes             $   15,882   $ 13,509   $  2,104    $               $   31,495  
                                       ==========   ========   ========   ===========      =========== 
Identifiable assets                    $1,715,318   $227,551   $285,179    $(315,551)      $1,912,497  
                                       ==========   ========   ========   ===========      =========== 
Depreciation and amortization of                                                                   
  property and equipment               $    1,674   $  1,167                               $    2,841  
                                       ==========   ========   ========   ===========      ===========
 
</TABLE>

<PAGE>
                                                       
18.   QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                Year Ended December 31, 1996
                               ---------------------------------------------------------------
                                            (in thousands, except per share data)

                                    First         Second            Third         Fourth
                                   Quarter        Quarter          Quarter        Quarter
<S>                                <C>            <C>              <C>            <C>
Total interest income              $45,346        $48,240          $52,288        $53,381
Net interest income                 17,878         18,942           19,524         19,494       
Provision for loan losses              620            616              675            675        
Net income (loss)                    6,431          6,561             (387)         6,902        
Earnings (loss) per share             0.44           0.46            (0.03)          0.49


                                                Year Ended December 31, 1995
                               ---------------------------------------------------------------
                                            (in thousands, except per share data)

                                    First         Second           Third          Fourth
                                   Quarter        Quarter         Quarter         Quarter
<S>                               <C>            <C>             <C>             <C>
Total interest income             $ 35,766       $ 38,211        $ 42,203        $ 44,452
Net interest income                 15,145         14,706          16,152          16,541
Provision for loan losses              628            475             575             605
Net income                           5,346          5,161           5,713           5,470
Earnings per share                    0.34           0.35            0.39            0.37

</TABLE>

<PAGE>

19.   GREAT FINANCIAL CORPORATION - PARENT COMPANY ONLY

The following condensed balance sheets as of December 31, 1996 and 1995, and the
condensed  statements of income and cash flows for the years ended  December 31,
1996,  1995 and for the period from March 30, 1994  (inception)  to December 31,
1994, for Great  Financial  Corporation  should be read in conjunction  with the
consolidated financial statements and notes thereto.

<TABLE>
<CAPTION>
                                            1996              1995
                                                (in thousands)

Balance Sheets
<S>                                      <C>               <C>
Assets:
 Cash                                     $    171          $    565
 Available-for-sale securities                 367             1,022
 Advances to subsidiaries                   26,313            32,476
 Investment in subsidiary                  251,842           251,470
 Other assets                                1,836             1,633  
                                         -----------       ----------                                         
Total assets                              $280,529          $287,166  
                                         ===========       ==========                                              
Liabilities                               $     75          $     56
                                         -----------       ----------                                                     
Stockholders' equity:                                                                         
 Common stock                                  165               165
 Additional paid-in-capital                162,279           159,786
 Retained earnings                         177,201           163,822
 Treasury stock                            (48,845)          (28,230)
 Unearned ESOP shares                      (10,194)          (11,296)
 Unearned compensation - stock 
  compensation plans                        (3,058)           (4,359)
 Net unrealized gains on          
  available-for-sale securities              2,906             7,222  
                                         -----------       ----------                                                     
     Total stockholders' equity            280,454           287,110  
                                         -----------       ----------                                                     
Total liabilities and stockholders' 
 equity                                   $280,529          $287,166  
                                         ===========       ==========

                                               Period ended December 31,
                                         -----------------------------------
                                           1996          1995           1994
Statements of Income                                (in thousands)                   
<S>                                      <C>           <C>           <C>        
Dividends received from 
 subsidiary                              $20,000       $20,000
Distribution in excess of 
 earnings of subsidiary                     (555)
Equity in undistributed earnings 
 of subsidiary                                           1,559       $19,240
Interest income on advances to 
 subsidiaries                              1,511         2,248         2,410
Gain on sale of investments                                 71
Other expenses                            (1,413)       (2,092)         (980)
Income tax expense                           (36)          (96)         (579)
                                         --------      --------      --------                                      
Net income                               $19,507       $21,690       $20,091
                                         ========      ========      ========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                           1996          1995          1994
                                                    (in thousands)
Statements of Cash Flows                                                                      
<S>                                      <C>           <C>           <C>         
Operating activities:                                                                         
 Net income                              $19,507       $21,690       $ 20,091
 Distributions in excess of earnings
  of subsidiary                              555
 Equity in undistributed earnings 
  of subsidiary                                         (1,559)       (19,240)
 Stock compensation                          119           119
 Gain on sale of securities                                (68)
 Changes in other assets and liabilities:                      
  Other assets                               728           130           (436)
  Liabilities                               (252)         (219)           115
                                         --------      --------      ---------                                               
     Net cash provided by operating 
      activities                          20,657        20,093            530
                                         --------      --------      ---------                                                     
Investing activities:                                                                         
 Proceeds from sale of securities          1,955         2,378
 Purchase of securities                   (1,163)       (1,015)        (2,310)
 Investment in subsidiary                   (520)      (17,827)       (93,766)
 Cash advances to subsidiary             (20,000)      (20,000)       (51,024)
 Payments received on advances to
  subsidiary                              25,420        50,499        
                                         --------      --------      ---------                             
     Net cash provided by (used in) 
      investing activities                 5,692        14,035       (147,100)
                                         --------      --------      ---------                         
Financing activities:  
 Net proceeds from issuance of 
  common stock                                                        147,849     
 Exercise of stock options                   100            27
 Dividends paid                           (6,095)       (5,376)        (1,216)
 Purchase of treasury stock              (20,748)      (28,277) 
                                         --------     ---------      ---------                                               
     Net cash provided by (used in) 
      financing activities               (26,743)      (33,626)       146,633
                                         --------     ---------      ---------                                               
Increase (decrease) in cash                 (394)          502             63
                                                                            
Cash at beginning of period                  565            63        
                                         --------     ---------      ---------                                               
Cash at end of period                    $   171      $    565       $     63
                                         ========     =========      =========

</TABLE>

                                
<PAGE>

                                                                          
ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

None.


<PAGE>

                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required by this Item,  other than the  information  set forth
above  under Part I,  "Executive  Officers  of  Registrant,"  is included in the
registrant's  definitive  proxy statement for the Annual Meeting of Stockholders
to  be  held  April 23, 1997 (Proxy  Statement) in  "Election  of  Directors" on
pages 3-4 and  "Section 16(a) Beneficial Ownership Reporting Compliance" on page
7 and is incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

The  information  required by this Item is included  in the Proxy  Statement  in
"Executive Compensation" on pages 7-13 and is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this Item is included  in the Proxy  Statement  in
"Principal  Shareholders"  on pages 2-3 and "Stock  Ownership of  Management" on
pages 5-7 and is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this Item is included  in the Proxy  Statement  in
"Transactions  with  Certain  Related  Persons" on  page 13 and is  incorporated
herein by reference.



<PAGE>                               
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)   FINANCIAL STATEMENTS FILED

         The following  documents are  filed as  part of this report in Part II,
         Item 8:       

         Independent Auditors' Report
         Consolidated Balance Sheets - December 31, 1996 and 1995
         Consolidated Statements of Income - Years ended December 31, 1996, 1995
           and 1994
         Consolidated Statements  of Stockholders' Equity - Years ended December
           31, 1996, 1995 and 1994
         Consolidated Statements of Cash Flows - Years ended  December 31, 1996,
           1995 and 1994
         Notes to Consolidated Financial Statements

(a)(2)   FINANCIAL STATEMENT SCHEDULES FILED

         All other schedules to the  consolidated financial statements  required
         by Article 9 of Regulation S-X and all other schedules to the financial
         statements of the  Corporation  required by Article 5 of Regulation S-X
         are not  required under the related  instructions  or are  inapplicable
         and therefore have been omitted. 

(a)(3)   LIST OF EXHIBITS

         3(i)      Articles of Incorporation*

         3(ii)     By-Laws of the Corporation ***

         4         Specimen common stock certificate*

         10.1      Great Financial Bank, F.S.B. Recognition  and Retention Plan
                   and Trust for Officers and Employees (1)***
         10.2      Great Financial  Bank, F.S.B. Recognition and  Retention Plan
                   and Trust for Outside Directors (1)***
         10.3      Great  Financial Corporation,  1994  Incentive  Stock  Option
                   Plan (1)*
         10.4      Great  Financial  Corporation  1994  Stock  Option  Plan  for
                   Outside Directors (1)*
         10.5      Great  Financial  Bank, F.S.B. Employee  Stock Ownership Plan
                   and Trust (1)*
         10.6      Employment  Agreements  between  Great Financial Corporation,
                   Great  Financial  Bank, F.S.B.  and  each of Paul  M.  Baker,
                   Arthur L.  Harreld,  Jack.  H.  Shipman, Richard  M. Klapheke
                   and James F. Statler (1)
         10.7      Great  Financial   Federal   401(k)  Savings  Plan  ("Savings
                   Plan") (1)*
         10.8      Great  Financial  Bank,  F.S.B. Employee Stock Ownership Plan
                   and Trust Loan Documents  ("ESOP Loan Documents") (1)*
         10.9      ESOP Loan Documents--Amendment to Loan and Security Agreement
                   (1)**
         10.11     Great   Financial   Bank,   F.S.B.   Supplemental   Executive
                   Retirement   Plan,   including  First Amendment (1)**
         10.12     Savings Plan, Amendments Nos. 1 & 2 (1)**
         10.13     Consulting Agreement with George L. Greenwell (1)
         10.14     Great Financial Bank, F.S.B. Severance Compensation Plan 

         11        Statement regarding computation of per share earnings.

         21        Subsidiaries of the Registrant

<PAGE>

         (1) Management contract or compensatory plan or arrangement.

         *   Incorporated by reference from exhibits included  with Registrant's
             Form S-1  Registration  Statement (No. 33-73238)  previously  filed
             with the Commission.

         **  Incorporated   by    reference   from   exhibits   included    with
             Registrant's 1994 Form 10-K previously filed with the Commission.

(b) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF 1996

    There  were no  reports on  Form 8-K  required to  be filed  during the last
    quarter of 1996.

(c) Exhibits

    All  exhibits to this report are attached or  incorporated  by  reference as
    stated above.

(d) Financial Statement Schedules

    None.

<PAGE>

                                   Signatures

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf the undersigned, thereunto duly authorized.

                                       GREAT FINANCIAL CORPORATION


March 19, 1997                         By:  /S/ Paul M. Baker
                                            ________________________
                                            Paul M. Baker, President


                                   Signatures

Pursuant to the requirement of the Securities  Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the Corporation and
in the capacities and on the date indicated.



March 19, 1997          Chairman of the Board        /S/ JACK E. HARTZ          
                                                     Jack E. Hartz


March 19, 1997          Vice Chairman of the         /S/ PAUL M. BAKER
                        Board, President and         Paul M. Baker
                        Chief Executive Officer
        
        
March 19, 1997          Treasurer and Secretary      /S/ RICHARD M. KLAPHEKE  
                        (Chief Financial and         Richard M. Klapheke
                        Accounting Officer)


March 19, 1997          Director                     /S/ GEORGE L. GREENWELL
                                                     George L. Greenwell


March 19, 1997          Director                     /S/ PRENTICE E. BROWN, JR.
                                                     Prentice E. Brown, Jr.


March 19, 1997          Director                     /S/ HUGH DONALD WETZEL
                                                     Hugh Donald Wetzel


March 19, 1997          Director                     /S/ HUGH G. HINES, JR.
                                                     Hugh G. Hines, Jr.


March 19, 1997          Director                     /S/ RICHARD L. FELTNER
                                                     Richard L. Feltner


March 19, 1997          Director                     /S/ MADELINE M. ABRAMSON
                                                     Madeline M. Abramson


March 19, 1997          Director                     /S/ ISHMON F. BURKS
                                                     Ishmon F. Burks


<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number     Description                      


10.6       Employment Agreements between Great
           Financial Corporation, Great Financial
           Bank, F.S.B. and each of Paul M. Baker,
           Arthur L. Harreld, Jack. H. Shipman,
           Richard M. Klapheke and James F. Statler

10.13      Consulting Agreement with George L. Greenwell

10.14      Great Financial Bank, F.S.B. Severance 
           Compensation Plan

11         Statement regarding computation of 
           per share earnings

21         Subsidiaries of the Registrant


<PAGE>

EXHIBIT 10.6     EMPLOYMENT  AGREEMENTS  BETWEEN  GREAT  FINANCIAL  CORPORATION,
                 GREAT FINANCIAL  BANK, F.S.B. AND EACH OF PAUL M. BAKER, ARTHUR
                 L. HARRELD, JACK  H. SHIPMAN, RICHARD M. KLAPHEKE AND  JAMES F.
                 STATLER                             
                                                         
                              EMPLOYMENT AGREEMENT

This is an Employment  Agreement (the  "Agreement")  dated as of January 1, 1997
(the  "Effective  Date"),  between  Great  Financial  Bank,  FSB ("GFB"),  Great
Financial  Corporation  ("Holding  Company")  and  Paul M.  Baker  ("Employee").

                                    RECITALS

A. GFB considers the  establishment  and  maintenance  of sound and vital senior
management  to be essential to protecting  and enhancing its best  interests and
therefore  GFB  desires  to enter  into an  agreement  governing  the  terms and
conditions of Employee's employment.

B. GFB is a  federally  chartered  Savings  Bank and is subject to the Office of
Thrift  Supervision  Regulation  Section  563.39,  which requires any agreements
between  GFB  and  its  employees  to be  in  writing  and  to  contain  certain
provisions.

C. The Board of Directors of GFB has considered and approved this Agreement with
respect to Employee's employment.

                                    AGREEMENT

The parties agree as follows:

                             Section 1 - Definitions

1.1 A "Change in Control" of GFB shall mean an event of a nature that:

(a)  during  any  period  of three  consecutive  years,  individuals  who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority  thereof  unless the election or nomination  for election of each new
Director was approved by a vote of at least two-thirds of the Board members then
still in office who were Board  members  at the  beginning  of the period or who
were similarly nominated;

(b) the  business of GFB or Holding  Company for which  Employee's  services are
principally  performed  is disposed of by GFB or Holding  Company  pursuant to a
partial or complete  liquidation of GFB or Holding Company,  a sale of assets of
GFB or Holding Company, or otherwise;

(c) GFB or  Holding  Company  consummates  the  transaction  contemplated  by an
agreement  which  results  in the  occurrence  of a Change in  Control of GFB or
Holding Company;

(d) the Board of GFB or Holding Company adopts a resolution to the effect that a
Change in Control of GFB or Holding  Company for purposes of this  Agreement has
occurred;

(e) an event of a nature  that would be  required  to be reported in response to
item  1(a) of the  current  report  on Form 8-K as in effect on the date of this
Agreement,  pursuant to Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 occurs;

(f) any  "person"  (as the  term is used in  Sections  13(d)  and  14(d)  of the
Securities  Exchange Act of 1934) is or becomes the  "beneficial  owner" (as the
term is defined in Rule  13d-3 of the  Securities  Exchange  Act),  directly  or
indirectly,  of securities of GFB or Holding Company  representing 20 percent or
more of  Holding  Company's  or  GFB's  outstanding  securities  except  for any
securities of GFB purchased by Holding Company in connection with the conversion
of GFB to stock form and any  securities  purchased by GFB's or Lincoln  Service
Mortgage Corporation's employee stock ownership plan and trust;

(g)  a  plan  of  reorganization,   merger,   consolidation,   sale  of  all  or
substantially  all  assets of GFB or Holding  Company  or a similar  transaction
occurs in which GFB or Holding Company is not the resulting entity; or

(h) change of  control  shall  have  occurred  as  described  in 12 CFR  Section
574.4(a) or successor regulations.

<PAGE>

1.2 "Date of Termination" shall mean:

(a) If Employee's  employment is  automatically  terminated under Section 7.1 of
this  Agreement,  the date on which the event  which  triggered  that  automatic
termination occurred;

(b) If Employee's  employment is terminated for Good Reason under Section 7.3 of
this  Agreement  or by GFB  under  Section  7.2(a) of this  Agreement,  the date
specified in the Notice of Termination.

(c) If  Employee's  employment  is terminated  under  Section  7.2(b),  the date
specified in Section 7.2(b).

(d) If  Employee's  employment  is  terminated  at the  end of the  Term of this
Agreement, the last day of such Term.

1.3 "Disability" shall mean Employee's inability, due to accident or physical or
mental  illness,  to  adequately  and fully  perform  the duties  required by an
employee in  Employee's  profession;  provided,  however,  that  Disability  for
purposes of this Agreement  shall not include any Disability  which results from
Employee's  engaging  in a  criminal  enterprise  or  from  Employee's  habitual
drunkenness, addiction to narcotics or intentionally inflicted injury. If at any
time  during  the Term the GFB  Board  makes a  determination  with  respect  to
Employee's  Disability,  that  determination  shall be  final,  conclusive,  and
binding upon GFB,  Employee,  and their successors in interest,  so long as that
determination has a reasonable basis.

1.4 "Good Reason" shall be deemed to exist if:

(a) within  three  years  after a Change in  Control of GFB or Holding  Company,
without  Employee's  express  written  consent,  Employee is assigned any duties
inconsistent with Employee's positions, duties, responsibilities and status with
GFB or  Holding  Company  immediately  prior to a Change  of  Control  of GFB or
Holding Company; Employee's actual job responsibilities as in effect immediately
prior to a Change of Control of GFB or Holding  Company are materially  changed;
or  Employee  is removed  from or is not  re-elected  to any of such  positions,
except in connection  with the  termination  of Employee's  employment:  (1) for
Cause; (2) on account of Retirement; (3) as a result of Employee's death; or (4)
by Employee other than for Good Reason; provided that the GFB Board's failure to
extend this Agreement for an additional year under Section 2.2 of this Agreement
shall not entitle Employee to terminate this Agreement for Good Reason;

(b) within three years of a Change in Control of GFB or Holding  Company,  GFB's
or Holding  Company's  principal  executive  offices are relocated to a location
more than 30 miles from its current location; or GFB or Holding Company requires
Employee to be based in any location which is more than 30 miles from Employee's
current base location,  except for required travel on GFB's or Holding Company's
business  to  an  extent   substantially   consistent  with  similarly  situated
executives' business travel obligations;

(c) within three years after a Change of Control of GFB or Holding Company,  GFB
fails to continue in effect any benefit or compensation plan, pension plan, life
insurance plan, health and accident plan or disability plan (including,  but not
limited to, GFB's participation in the Financial  Institutions  Retirement Fund)
in which Employee is  participating at the time of a Change of Control (or plans
providing Employee with substantially similar benefits),  such that there occurs
a material reduction in benefits before  termination,  or GFB or Holding Company
takes any action which would adversely  affect  Employee's  participation  in or
materially reduce  Employee's  benefits under any benefit plan maintained by GFB
or Holding Company or deprive Employee of any material fringe benefits;

(d) GFB fails to obtain the assumption of all  obligations  under this Agreement
by any successor as contemplated in Section 8.7 of this Agreement; or

(e) Employee's employment is purported to be terminated in a manner which is not
pursuant to a Notice of Termination  satisfying the  requirements of Section 7.4
of this  Agreement;  and,  for  purposes of this  Agreement,  no such  purported
termination shall be effective.

1.5 The "GFB Board" shall mean the Board of Directors of GFB.

1.6  "Notice of  Termination"  shall mean a notice,  from GFB or from  Employee,
which shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Employee's  employment under the provision
so indicated, and shall state the effective date of the termination.

<PAGE>

1.7  "Permanent   Disability"  shall  mean  total  disability  arising  from  an
occupational  or  non-occupational  medically  determinable  physical  or mental
impairment which prevents the Employee from engaging in any substantial  gainful
activity and which is  determined  on a reasonable  basis by GFB to be permanent
and continuous for the remainder of the Employee's life.

1.8 "Retirement"  shall mean  termination of Employee's  employment by reason of
Employee attaining age 65.

1.9  "Secret  or   Confidential   Information"   means  secret  or  confidential
information  of GFB  (including  secret  or  confidential  information  of GFB's
subsidiaries and  affiliates),  including but not limited to lists of customers;
identity  of  customers;  identity of  prospective  customers;  contract  terms;
bidding information and strategies; pricing methods; computer software; computer
software methods and documentation; hardware; salary information with respect to
GFB  employees;  financial  product  design  information;  GFB's  business plan;
methods  of  operation  of GFB or its  affiliates;  the  procedures,  forms  and
techniques used in servicing accounts;  and other documents or information which
are required to be maintained in confidence for the continued success of GFB and
its business.

1.10  Termination  for  "Cause"  by  GFB of  Employee's  employment  under  this
Agreement shall have the same meaning as it does in 12 C.F.R.  563.39, and shall
include termination because of:

(a) The intentional and  substantial  failure by Employee to perform  Employee's
duties with GFB (other than any such failure  resulting  from  incapacity due to
physical or mental illness); or

(b) Employee's personal dishonesty,  incompetence, willful misconduct, breach of
a fiduciary duty involving  personal profit,  willful violation of any law, rule
or  regulation   (other  than  traffic   violations  or  similar   offenses)  or
cease-and-desist order, or material breach of any provision of this Agreement.

Notwithstanding  the  foregoing,  Employee  shall  not be  deemed  to have  been
terminated  for Cause  unless  and until  there  shall  have been  delivered  to
Employee a copy of a  resolution  duly  adopted by the GFB Board at a meeting of
the GFB Board called and held for that  purpose,  finding that in the good faith
opinion of the GFB Board, GFB has cause for terminating  Employee and specifying
the particulars thereof in detail.

                         Section 2 - Employment and Term

2.1  Employment.  GFB agrees to employ  Employee and Employee agrees to serve as
Chief Executive  Officer/Chairman of the Board of GFB. Employee agrees to accept
Employment on the terms and conditions set forth in this Agreement.

2.2 Term.  Subject to  extension  in  accordance  with this Section 2 and unless
sooner  terminated  as  provided in Section 7, the term of this  Agreement  (the
"Term") shall be the period beginning on January 1, 1997 (the "Effective  Date")
and ending April 15,  1999,  or such earlier time as provided by Section 7.1. On
or before  December 31,  1997,  December 31, 1998 and April 14, 1999 and each 12
month anniversary thereafter,  the GFB Board shall review Employee's performance
under this  Agreement to determine  whether GFB desires that the  then-remaining
Term be extended.  If the GFB Board  recommends  and  Employee  consents to such
extensions,  then the then-remaining  Term shall be extended by no more than one
year.

                         Section 3 - Duties of Employee

3.1 Time Devoted;  Duties.  Employee shall devote his entire time, attention and
energies to the  business of GFB and he shall  render  such  administrative  and
management services to GFB as are customarily performed by persons situated in a
similar  executive  capacity,  including those services  prescribed from time to
time  by the GFB  Board.  Employee  shall  also  promote,  by  entertainment  or
otherwise,  as and to the extent permitted by law, the business of GFB. Employee
shall perform his duties under this Agreement in accordance with such reasonable
standards  expected  of  employees  with  comparable   positions  in  comparable
organizations  and as may be  established  from  time to time by the GFB  Board.
Employee  shall also  conduct  his  personal  affairs,  including  his  personal
financial affairs, in a manner appropriate for his position.

3.2 No Conflicting  Activities.  During the term of Employee's  employment under
this Agreement,  Employee shall not engage in any business or activity  contrary
to the business affairs or interests of GFB.  Nothing  contained in this Section
3.2 shall be deemed to prevent or limit the right of  Employee  to invest in the
capital stock or other securities of any business.

<PAGE>
                            Section 4 - Compensation

4.1 Base  Compensation.  Employee  shall  receive for his services the following
Base Compensation:

(a) GFB shall pay  Employee  an annual  salary of  $257,500  payable in 26 equal
bi-weekly installments.

(b) Any  increase  in  Employee's  Base  Compensation  shall be left to the sole
discretion  of the GFB Board.  The  Employee's  Base  Compensation  shall not be
subject to  reduction  during  the Term of this  Agreement  except as  otherwise
provided in this Agreement.

4.2 Bonus Compensation.  GFB shall pay Employee Bonus Compensation as determined
by the GFB Board in its discretion.

4.3  Additional   Compensation.   As  further   compensation   (the  "Additional
Compensation")  GFB shall make available the benefits provided to Employee under
GFB's Recognition and Retention Plan for Officers and Employees  effective March
30,  1994 and shall  make  available  the stock  options  provided  to  Employee
pursuant to Holding  Company's 1994 Incentive Stock Option Plan for Officers and
Employees effective March 30, 1994, as amended.

4.4 Source of Payments.  All payments  provided for in this  Agreement  shall be
timely paid by GFB. However, Holding Company unconditionally  guarantees payment
and provision of all amounts and benefits due hereunder to Employee and, if such
amounts and benefits  due from GFB are not timely paid or provided by GFB,  such
amounts and benefits shall be paid or provided by Holding Company.

                          Section 5 - Employee Benefits

5.1  Vacations.  During each  calendar year during the Term,  Employee  shall be
entitled to a vacation of three  weeks,  during  which  Employee's  compensation
shall be paid in full.  At least  one week  must be taken in  consecutive  days.
Unused  vacation for any year during the Term may not be carried forward for use
in the next  following  year.  Upon any  termination  of  Employee's  employment
hereunder,  Employee  shall be  entitled  to pro rata  compensation  for  unused
vacation  time earned during the year of  termination,  based upon the number of
months Employee was employed during that year.

5.2 Business  Expenses.  GFB shall reimburse Employee for ordinary and necessary
business expenses incurred by Employee in performing his duties pursuant to this
Agreement,  including but not limited to reasonable  travel,  entertainment  and
similar expenses that Employee incurs in promoting GFB's business; provided that
GFB shall not reimburse any such expense which, prior to its being incurred, GFB
directed  Employee  not  to  incur.  The   reimbursement   shall  be  made  upon
presentation  to GFB by  Employee,  from  time to time,  of an  account  of such
expenses in such form and in such detail as GFB may request.

5.3 Fringe  Benefits.  In addition to benefits  specifically  described  herein;
Employee  shall be entitled to receive  from GFB the fringe  benefits  generally
available to full-time senior management employees of GFB, as those benefits may
be changed from time to time.
 
5.4  Disability  Insurance.  Throughout  the Term of this  Agreement,  GFB shall
provide  Employee with long term disability  coverage of 60% of Employee's total
pay from the previous year, which benefit begins no later than 90 days after the
Disability occurs.

                         Section 6 - Confidentiality and
                             Covenant Not to Compete

6.1 Covenant Not to Compete. In consideration of the GFB's continued  employment
of  Employee  pursuant to this  Agreement,  Employee  covenants  and agrees that
Employee  shall  not  during  the  one-year  period  immediately  following  the
termination of his employment  under this  Agreement,  if (1) GFB terminated the
employment and severance compensation is payable pursuant to Section 8.4 or 8.5,
or (2) Employee has retired, become disabled or voluntarily terminated:

(a) without the prior written consent of GFB, engage or become interested in any
capacity, directly or indirectly (whether as proprietor,  stockholder, director,
partner,  employee,  trustee,  beneficiary,  or in any  other  capacity)  in any
business selling,  providing or developing products or services competitive with
products or services sold or  maintained  by GFB within a 50-mile  radius of the
Louisville Metropolitan Area; or

(b) recruit or solicit for employment  any current or future  employee of GFB or
any of its respective successors or any entities related to it.

<PAGE>

6.2  Confidential   Information.   Employee  acknowledges  that  all  Secret  or
Confidential  Information is the exclusive  property of GFB.  Employee shall not
during the period of his employment by GFB or at any time  thereafter,  disclose
to any person,  firm or  corporation,  or publish,  or use for any purpose,  any
Secret or Confidential  Information  except as properly required in the ordinary
course  of  business  of GFB or as  directed  and  authorized  by GFB.  Upon the
termination  of his  employment  with GFB, for any reason  whatsoever,  Employee
shall  return  and  deliver  to GFB  within  7 days any and all  papers,  books,
records,  documents,  memoranda  and  manuals,  including  all  copies  thereof,
belonging to GFB or relating to its business, in Employee's possession,  whether
prepared  by  Employee  or  others.  If at any time  after  the  termination  of
employment,   Employee  determines  that  he  has  any  Secret  or  Confidential
Information in his possession or control,  Employee shall immediately return all
such Secret or Confidential Information to GFB including all copies and portions
thereof.

6.3 Disclosure and Survival of Covenants.  If Employee,  in the future, seeks or
is offered employment by any other company,  firm, or person, he shall provide a
copy of this Agreement to the prospective employer prior to accepting employment
with that  prospective  employer.  The  provisions of Sections 6.1 and 6.2 shall
survive any termination of this Agreement.

                             Section 7 - Termination

7.1 Automatic  Termination.  Employment  under this Agreement shall terminate on
the death or Permanent  Disability of Employee or by the Employee  attaining age
65 during the Term of this Agreement.

7.2 Involuntary Termination.

(a) Termination by the Board.  The GFB Board may terminate this Agreement at any
time.

(b) Termination or Suspension by the Office of Thrift Supervision.

(i) If Employee is suspended and/or  temporarily  prohibited from performing his
duties under this  Agreement by a notice served under Section  8(e)(3) or (g)(1)
of the Federal  Deposit  Insurance Act (12 U.S.C.  1818(e)(3) and (g)(1)),  then
GFB's  obligations  under this  Agreement  shall be  suspended as of the date of
service of such notice unless stayed by appropriate proceedings.  If the charges
in the notice are dismissed, GFB may, in its discretion, (a) pay Employee all or
part of the compensation  withheld while  obligations  under this Agreement were
suspended and (b) reinstate (in whole or in part) any of its  obligations  which
were suspended.

(ii) If Employee is removed and/or permanently  prohibited from participating in
the conduct of GFB's affairs by an order issued under section  8(e)(4) or (g)(1)
of the Federal  Deposit  Insurance  Act (12 U.S.C.  1818(e)(4)  or (g)(1)),  all
obligations of GFB under this Agreement shall terminate as of the effective date
of the order, but vested rights of Employee shall not be affected.

(iii) If GFB is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all  obligations  under this Agreement shall terminate as of the
date of default, but vested rights of Employee shall not be affected.

(iv) All obligations under this Agreement shall terminate,  except to the extent
determined  that  continuation  of the contract is necessary  for the  continued
operation  of GFB  (a) by  action  of the  Director  of  the  Office  of  Thrift
Supervision  (the  "Director")  or his or her designee,  at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement  to  provide  assistance  to or on behalf  of GFB under the  authority
contained in section 13(c) of the Federal  Deposit  Insurance Act; or (b) by the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of GFB or
when GFB is determined by the Director to be in an unsafe or unsound  condition.
Any rights of Employee that have already vested,  however, shall not be affected
by such action.

7.3 Voluntary Termination. Employee may terminate his employment for Good Reason
by giving Notice of Termination in accordance with Section 7.4 below.

7.4 Notice of Termination.  Any  termination by GFB or by Employee,  pursuant to
this  Agreement,  shall be  communicated by written Notice of Termination to the
other party hereto.

7.5 Conflicts with Federal Law. If any of the termination  provisions  contained
in this Agreement conflict with Office of  Thrift Supervision  regulation 12 CFR
563.39(b), or any successor regulation, the latter shall prevail.

<PAGE>
                     Section 8 - Compensation on Termination

8.1 Compensation Upon Death. If Employee's  employment is terminated  because of
the death of Employee, GFB shall pay Employee's executors or administrators:  a)
within 30 days of death the  unpaid  balance  of  Employee's  Base  Compensation
through the end of the month in which Employee's death occurred,  at the rate in
effect on the date of Employee's  death and b) as soon as such Employee's  bonus
is calculated,  an amount equal to Employee's Bonus Compensation for the current
year (if any was paid) multiplied by the fractional  portion of the year between
the first day of the year in which  Employee died and the date of the Employee's
death; and shall have no further obligations under this Agreement.

8.2 Compensation  Upon Disability.  If Employee's  active work ceases because of
Disability,  GFB  shall  continue,  as  and  when  scheduled,  to  pay  Employee
Employee's Base Compensation through the date he ceased work, plus three months'
additional Base Compensation, at 100% of the rate in effect on the date Employee
became  Disabled,  and thereafter GFB shall have no further  obligation for cash
compensation unless and until Employee returns to work.

8.3 Compensation  Upon Termination for Cause. If Employee's  employment shall be
terminated  by GFB for  Cause,  GFB shall  pay  Employee  his Base  Compensation
through the Date of Termination,  and GFB shall not have any further obligations
to Employee under this Agreement.

8.4  Compensation  Upon  Termination by GFB Other Than For Cause.  If Employee's
employment  is  terminated  by GFB  other  than  for  Cause,  then  unless  such
termination  occurs  simultaneous with or within two years following a Change in
Control  of GFB or Holding  Company,  then  Employee  shall be  entitled  to the
compensation  Employee  would have been entitled to under this  Agreement as and
when payable hereunder for the remainder of the Term,  provided that Employee in
good faith actively seeks  employment  similar to employee's  position with GFB,
and  that  any  payments  under  this  Section  8.4  shall  be  reduced  by  any
compensation Employee receives from other employment thereafter accepted.

8.5  Compensation  Upon  Termination  For Good  Reason  or  Following  Change of
Control.

(a) If (1) Employee  terminates  employment under Section 7.3 for Good Reason or
(2) any of the events constituting a Change of Control of GFB or Holding Company
shall have occurred and Employee's  employment is terminated by GFB within three
years thereafter other than by reason of (a) Employee's death or disability,  or
(b)  termination  by GFB for Cause,  then GFB shall pay to Employee as severance
compensation  in a lump sum (discounted to present value using the interest rate
then applicable to newly issued fixed rate three-year certificates of deposit at
GFB, Louisville, Kentucky) on the 30th day following the Date of Termination:

(i) the unpaid balance of Employee's full Base Compensation  through the Date of
Termination  at the rate in effect at the time Notice of  Termination  is given;
plus

(ii) an amount equal to Employee's full Base  Compensation  for two years at the
rate in effect as of the Date of Termination; plus

(iii) Employer shall make available to Employee the Additional  Compensation  to
which Employee would be entitled during the Term; plus

(iv) an amount equal to Employee's Bonus  Compensation for the previous year (if
any was paid), multiplied by two.

In addition to the  severance  benefits set forth in (i),  (ii),  (iii) and (iv)
above,  GFB  shall:  (a) to the  extent  not  prohibited  by  Office  of  Thrift
Supervision  pronouncements pay all legal fees and expenses incurred by Employee
resulting  from  termination  (including  all such  fees and  expenses,  if any,
incurred in contesting  any such  termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and (b) maintain in full force
and effect,  for the  continued  benefit of Employee for a two year period after
the Date of Termination, all employee benefit plans and programs or arrangements
in which  Employee  was  entitled to  participate  immediately  prior to Date of
Termination;  provided,  however,  that Employee's  continued  participation  is
possible under the general terms and  provisions of such plans and programs.  If
Employee's  participation  in any such  plan or  program  is  barred,  GFB shall
arrange to provide Employee with benefits  substantially  similar or, if that is
not  possible,  of equal  value to those  which  Employee is entitled to receive
under such plans and  programs.  At the end of the period of coverage,  Employee
shall  have  the  option  to  have  assigned  to  him at no  cost  and  with  no
apportionment of prepaid premiums,  any assignable  insurance  policies owned by
GFB relating specifically to Employee.

<PAGE>

Notwithstanding  any of the foregoing,  if Employee is within three years of age
65 on the Date of  Termination,  then (a) GFB shall reduce the amount payable to
Employee  under  paragraphs  (ii) and (iii) above to reflect  only the number of
months  between  the  Date of  Termination  and the  date  Employee  is or would
otherwise attain age 65, and (b) GFB shall have no obligations to Employee after
Employee attains age 65.

(b)  Employee  shall not be  required  to  mitigate  the  amount of any  payment
provided for in this Section 8.5 by seeking other  employment or otherwise,  nor
shall the amount of any payment  provided  for in this Section 8.5 be reduced by
any  compensation  earned by  Employee  as the result of  employment  by another
employer after the Date of Termination, or otherwise.

8.6 Compensation Upon Retirement. If Employee terminates employment in the month
of his 65th  birthday,  then Employee shall be paid within 30 days from the date
of his retirement the unpaid balance of Employee's Base Compensation through the
date of his  retirement and shall be paid, as soon as such  Employee's  bonus is
calculated,  an amount equal to Employee's  Bonus  Compensation  for the current
year (if any was paid), multiplied by the fractional portion of the year between
the first day of the year in which  Employee  retired and the date of Employee's
retirement.

8.7  Successors  of GFB.  GFB will  require  any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially all of the business and/or assets of GFB, by agreement in form and
substance  satisfactory  to  Employee,  expressly to assume and agree to perform
this  Agreement  in the same  manner  and to the same  extent  that GFB would be
required to perform it if no such succession had taken place.  Failure of GFB to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach  of this  Agreement  and  shall  entitle  Employee  to  terminate  this
agreement for Good Reason under paragraph 7.3 of this Agreement. As used in this
Agreement, "GFB" shall mean GFB as hereinbefore defined and any successor to its
business and/or assets as aforesaid or which otherwise  becomes bound by all the
terms and provisions of this Agreement by operation of law.

8.8 Reduction of Amounts Payable.

(a) In no event shall any amount  payable under any provision of this  Agreement
equal or exceed an amount which would (i) cause GFB to forfeit (as determined by
the Certified Public Accountants or legal counsel employed by GFB),  pursuant to
Section 280G(a) of the Internal Revenue Code of 1986, as amended,  its deduction
for any or all such amounts payable,  or (ii) exceed maximum amounts  determined
by the Office of Thrift  Supervision  to  constitute a safe and sound  practice.
Pursuant to this Section  8.8,  the GFB Board has the power to reduce  severance
benefits payable under this Agreement,  if such benefits alone or in conjunction
with termination benefits provided under any other severance pay plan maintained
by GFB or any other plan or agreement  between Employee and GFB, would cause GFB
to forfeit  otherwise  deductible  payments or would exceed the Office of Thrift
Supervision  maximums;  provided,  however that no benefits  payable  under this
Agreement shall be reduced pursuant to this Section 8.8 to less than $1.00 below
the amount of benefits (i) which GFB can properly  deduct under Section  280G(a)
of the Internal Revenue Code of 1986, as amended, or (ii) which equal the amount
the Office of Thrift  Supervision  considers  the  maximum  safely  and  soundly
payable.

(b) Any payments made to the Employee pursuant to this Agreement,  or otherwise,
are subject to and conditioned  upon their  compliance  with  12 U.S.C.  1828(k)
and any regulation promulgated thereunder.

                            Section 9 - Miscellaneous

9.1 Notice.  Any notice or request  required or permitted to be given under this
Agreement  shall be in writing  and shall be deemed  sufficiently  given for all
purposes  if mailed by  certified  mail,  postage  prepaid  and  return  receipt
requested,  addressed to the intended  recipient at the following address (or at
such other  address as either party may  designate in writing to the other party
by certified mail as described above):

If to GFB:
Great Financial Bank, FSB
One Financial Square
Louisville, Kentucky 40202

<PAGE>

All notices to GFB shall be directed to the  attention  of the  President of GFB
with a copy to the Treasurer of GFB.

If to Employee:
Paul M. Baker
815 Rugby Place
Louisville, Kentucky 40222

9.2 Headings.  The headings used in this Agreement have been included solely for
ease of  reference  and are not to be construed  in any  interpretation  of this
Agreement.

9.3 Entire Agreement.  This instrument contains the entire agreement between the
parties with respect to the subject matter hereof, and shall supersede all prior
understanding  with  respect  to the  subject  matter  hereof,  except  that the
Indemnity  Agreement  dated  October  25,  1991 and the  Supplemental  Executive
Retirement Plan dated as of January 1, 1992 between  Employee and GFB shall also
continue to be effective.  No agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either  party  which  are  not  set  forth  expressly  in  this  Agreement.   No
modification  or  addition  to this  Agreement  shall be  enforceable  unless in
writing and signed by the party against whom enforcement is sought.

9.4  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the Commonwealth of Kentucky.

9.5 Arbitration.  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration,  conducted before a
panel of three arbitrators  sitting in a home office selected by Employee within
fifty (50) miles from the location of GFB, in  accordance  with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Employee shall be entitled to seek specific  performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or  controversy  arising  under or in  connection  with
Employee's  termination  is resolved in favor of Employee,  whether by judgment,
arbitration  or  settlement,  Employee  shall be  entitled to the payment of all
back-pay,  including  salary,  bonuses and any other cash  compensation,  fringe
benefits and any compensation and benefits due Employee under this Agreement.

9.6 Benefit.  This Agreement  shall inure to the benefit of and shall be binding
upon GFB, its successors and assigns, and this Agreement shall not be assignable
by Employee.

9.7  Remedies.  Employee  and GFB  acknowledge  that the services to be rendered
under this  Agreement are special,  unique and of  extraordinary  character.  If
Employee  breaches any  covenants,  terms and conditions of this Agreement to be
performed by him, GFB will suffer  irreparable  damage and it will be impossible
to estimate or determine GFB's damages. Therefore, GFB shall, upon proof of such
breach,  be  entitled as a matter of course to an  injunction  from any court of
competent  jurisdiction  restraining any further  violation of such covenants by
Employee, his employers, employees, partners, agents or other associates, or any
of them,  such right to an injunction  to be  cumulative  and in addition to any
other  remedies GFB may have,  either in law or in equity.  In any proceeding to
enforce  any  provision  of  this  Agreement,  Employee  shall  not  assert  any
contention  that  there is an  adequate  remedy at law for the breach or default
upon  which  such  proceeding  is  based.  Nothing  in this  paragraph  shall be
construed  to prevent  such remedy in the  courts,  in the case of any breach of
this Agreement by Employee, as GFB may elect or invoke.

9.8 Severability.  If any of the provisions of Section 6.1 of this Agreement are
held  to be  unenforceable  because  of  the  scope,  duration  or  area  of its
applicability,  the court  making  such  determination  shall  have the power to
modify such scope duration or area or all of them, and such provision shall then
be applicable in such modified  form. If any provision of this Agreement is held
to be invalid,  illegal or  unenforceable  in any  respect,  the  validity,  and
enforceability  of all other  applications  of that  provision  and of all other
provisions and applications hereof shall not in any way be affected or impaired.

<PAGE>

9.9  Waiver.  No  provisions  of  this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically designated by the
Board of  Directors  of GFB. The failure of GFB or Employee at any time or times
to enforce its rights under the Agreement  strictly in accordance  with the same
shall not be construed as having created a custom in any way or manner  contrary
to the specific  provisions of this  Agreement or as having in any way or manner
modified or waived the same. No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of similar or  dissimilar  provisions  or conditions at the same or any
prior or subsequent time.

9.10  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.


IN WITNESS  WHEREOF the parties hereto have executed this  Agreement,  as of the
day and year first above written but actually on the dates set forth below.

GREAT FINANCIAL BANK, FSB

By:________________________________

Title:_____________________________

Date:______________________________



GREAT FINANCIAL CORPORATION
(GUARANTOR)

By:________________________________

Title:_____________________________

Date:______________________________

EMPLOYEE:__________________________
 
Date:______________________________

<PAGE>
                              EMPLOYMENT AGREEMENT

This is an Employment  Agreement (the  "Agreement")  dated as of January 1, 1997
(the  "Effective  Date"),  between  Great  Financial  Bank,  FSB ("GFB"),  Great
Financial Corporation ("Holding Company") and Arthur L. Harreld ("Employee").

                                    RECITALS

A. GFB considers the  establishment  and  maintenance  of sound and vital senior
management  to be essential to protecting  and enhancing its best  interests and
therefore  GFB  desires  to enter  into an  agreement  governing  the  terms and
conditions of Employee's employment.

B. GFB is a  federally  chartered  Savings  Bank and is subject to the Office of
Thrift  Supervision  Regulation  Section  563.39,  which requires any agreements
between  GFB  and  its  employees  to be  in  writing  and  to  contain  certain
provisions.

C. The Board of Directors of GFB has considered and approved this Agreement with
respect to Employee's employment.

                                    AGREEMENT

The parties agree as follows:

                             Section 1 - Definitions

1.1 A "Change in Control" of GFB shall mean an event of a nature that:

(a)  during  any  period  of three  consecutive  years,  individuals  who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority  thereof  unless the election or nomination  for election of each new
Director was approved by a vote of at least two-thirds of the Board members then
still in office who were Board  members  at the  beginning  of the period or who
were similarly nominated;

(b) the  business of GFB or Holding  Company for which  Employee's  services are
principally  performed  is disposed of by GFB or Holding  Company  pursuant to a
partial or complete  liquidation of GFB or Holding Company,  a sale of assets of
GFB or Holding Company, or otherwise;

(c) GFB or  Holding  Company  consummates  the  transaction  contemplated  by an
agreement  which  results  in the  occurrence  of a Change in  Control of GFB or
Holding Company;

(d) the Board of GFB or Holding Company adopts a resolution to the effect that a
Change in Control of GFB or Holding  Company for purposes of this  Agreement has
occurred;

(e) an event of a nature  that would be  required  to be reported in response to
item  1(a) of the  current  report  on Form 8-K as in effect on the date of this
Agreement,  pursuant to Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 occurs;

(f) any  "person"  (as the  term is used in  Sections  13(d)  and  14(d)  of the
Securities  Exchange Act of 1934) is or becomes the  "beneficial  owner" (as the
term is defined in Rule  13d-3 of the  Securities  Exchange  Act),  directly  or
indirectly,  of securities of GFB or Holding Company  representing 20 percent or
more of  Holding  Company's  or  GFB's  outstanding  securities  except  for any
securities of GFB purchased by Holding Company in connection with the conversion
of GFB to stock form and any  securities  purchased by GFB's or Lincoln  Service
Mortgage Corporation's employee stock ownership plan and trust;

(g)  a  plan  of  reorganization,   merger,   consolidation,   sale  of  all  or
substantially  all  assets of GFB or Holding  Company  or a similar  transaction
occurs in which GFB or Holding Company is not the resulting entity; or

(h) change of  control  shall  have  occurred  as  described  in 12 CFR  Section
574.4(a) or successor regulations.

1.2 "Date of Termination" shall mean:

(a) If Employee's  employment is  automatically  terminated under Section 7.1 of
this  Agreement,  the date on which the event  which  triggered  that  automatic
termination occurred;

(b) If Employee's  employment is terminated for Good Reason under Section 7.3 of
this  Agreement  or by GFB  under  Section  7.2(a) of this  Agreement,  the date
specified in the Notice of Termination.

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(c) If  Employee's  employment  is terminated  under  Section  7.2(b),  the date
specified in Section 7.2(b).

(d) If  Employee's  employment  is  terminated  at the  end of the  Term of this
Agreement, the last day of such Term.

1.3 "Disability" shall mean Employee's inability, due to accident or physical or
mental  illness,  to  adequately  and fully  perform  the duties  required by an
employee in  Employee's  profession;  provided,  however,  that  Disability  for
purposes of this Agreement  shall not include any Disability  which results from
Employee's  engaging  in a  criminal  enterprise  or  from  Employee's  habitual
drunkenness, addiction to narcotics or intentionally inflicted injury. If at any
time  during  the Term the GFB  Board  makes a  determination  with  respect  to
Employee's  Disability,  that  determination  shall be  final,  conclusive,  and
binding upon GFB,  Employee,  and their successors in interest,  so long as that
determination has a reasonable basis.

1.4 "Good Reason" shall be deemed to exist if:

(a) within  three  years  after a Change in  Control of GFB or Holding  Company,
without  Employee's  express  written  consent,  Employee is assigned any duties
inconsistent with Employee's positions, duties, responsibilities and status with
GFB or  Holding  Company  immediately  prior to a Change  of  Control  of GFB or
Holding Company; Employee's actual job responsibilities as in effect immediately
prior to a Change of Control of GFB or Holding  Company are materially  changed;
or  Employee  is removed  from or is not  re-elected  to any of such  positions,
except in connection  with the  termination  of Employee's  employment:  (1) for
Cause; (2) on account of Retirement; (3) as a result of Employee's death; or (4)
by Employee other than for Good Reason; provided that the GFB Board's failure to
extend this Agreement for an additional year under Section 2.2 of this Agreement
shall not entitle Employee to terminate this Agreement for Good Reason;

(b) within three years of a Change in Control of GFB or Holding  Company,  GFB's
or Holding  Company's  principal  executive  offices are relocated to a location
more than 30 miles from its current location; or GFB or Holding Company requires
Employee to be based in any location which is more than 30 miles from Employee's
current base location,  except for required travel on GFB's or Holding Company's
business  to  an  extent   substantially   consistent  with  similarly  situated
executives' business travel obligations;

(c) within three years after a Change of Control of GFB or Holding Company,  GFB
fails to continue in effect any benefit or compensation plan, pension plan, life
insurance plan, health and accident plan or disability plan (including,  but not
limited to, GFB's participation in the Financial  Institutions  Retirement Fund)
in which Employee is  participating at the time of a Change of Control (or plans
providing Employee with substantially similar benefits),  such that there occurs
a material reduction in benefits before  termination,  or GFB or Holding Company
takes any action which would adversely  affect  Employee's  participation  in or
materially reduce  Employee's  benefits under any benefit plan maintained by GFB
or Holding Company or deprive Employee of any material fringe benefits;

(d) GFB fails to obtain the assumption of all  obligations  under this Agreement
by any successor as contemplated in Section 8.7 of this Agreement; or

(e) Employee's employment is purported to be terminated in a manner which is not
pursuant to a Notice of Termination  satisfying the  requirements of Section 7.4
of this  Agreement;  and,  for  purposes of this  Agreement,  no such  purported
termination shall be effective.

1.5 The "GFB Board" shall mean the Board of Directors of GFB.

1.6  "Notice of  Termination"  shall mean a notice,  from GFB or from  Employee,
which shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Employee's  employment under the provision
so indicated, and shall state the effective date of the termination.

1.7  "Permanent   Disability"  shall  mean  total  disability  arising  from  an
occupational  or  non-occupational  medically  determinable  physical  or mental
impairment which prevents the Employee from engaging in any substantial  gainful
activity and which is  determined  on a reasonable  basis by GFB to be permanent
and continuous for the remainder of the Employee's life.

1.8 "Retirement"  shall mean  termination of Employee's  employment by reason of
Employee attaining age 65.

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1.9  "Secret  or   Confidential   Information"   means  secret  or  confidential
information  of GFB  (including  secret  or  confidential  information  of GFB's
subsidiaries and  affiliates),  including but not limited to lists of customers;
identity  of  customers;  identity of  prospective  customers;  contract  terms;
bidding information and strategies; pricing methods; computer software; computer
software methods and documentation; hardware; salary information with respect to
GFB  employees;  financial  product  design  information;  GFB's  business plan;
methods  of  operation  of GFB or its  affiliates;  the  procedures,  forms  and
techniques used in servicing accounts;  and other documents or information which
are required to be maintained in confidence for the continued success of GFB and
its business.

1.10  Termination  for  "Cause"  by  GFB of  Employee's  employment  under  this
Agreement shall have the same meaning as it does in 12 C.F.R.  563.39, and shall
include termination because of:

(a) The intentional and  substantial  failure by Employee to perform  Employee's
duties with GFB (other than any such failure  resulting  from  incapacity due to
physical or mental illness); or

(b) Employee's personal dishonesty,  incompetence, willful misconduct, breach of
a fiduciary duty involving  personal profit,  willful violation of any law, rule
or  regulation   (other  than  traffic   violations  or  similar   offenses)  or
cease-and-desist order, or material breach of any provision of this Agreement.

Notwithstanding  the  foregoing,  Employee  shall  not be  deemed  to have  been
terminated  for Cause  unless  and until  there  shall  have been  delivered  to
Employee a copy of a  resolution  duly  adopted by the GFB Board at a meeting of
the GFB Board called and held for that  purpose,  finding that in the good faith
opinion of the GFB Board, GFB has cause for terminating  Employee and specifying
the particulars thereof in detail.

                         Section 2 - Employment and Term

2.1  Employment.  GFB agrees to employ  Employee and Employee agrees to serve as
Executive  Vice  President-Residential  Lending of GFB and  President  and Chief
Operating  Officer  of Great  Financial  Mortgage.  Employee  agrees  to  accept
Employment on the terms and conditions set forth in this Agreement.

2.2 Term.  Subject to  extension  in  accordance  with this Section 2 and unless
sooner  terminated  as  provided in Section 7, the term of this  Agreement  (the
"Term") shall be the period beginning on January 1, 1997 (the "Effective  Date")
and ending April 15,  1999,  or such earlier time as provided by Section 7.1. On
or before  December 31,  1997,  December 31, 1998 and April 14, 1999 and each 12
month anniversary thereafter,  the GFB Board shall review Employee's performance
under this  Agreement to determine  whether GFB desires that the  then-remaining
Term be extended.  If the GFB Board  recommends  and  Employee  consents to such
extensions,  then the then-remaining  Term shall be extended by no more than one
year.
                         Section 3 - Duties of Employee

3.1 Time Devoted;  Duties.  Employee shall devote his entire time, attention and
energies to the  business of GFB and he shall  render  such  administrative  and
management services to GFB as are customarily performed by persons situated in a
similar  executive  capacity,  including those services  prescribed from time to
time  by the GFB  Board.  Employee  shall  also  promote,  by  entertainment  or
otherwise,  as and to the extent permitted by law, the business of GFB. Employee
shall perform his duties under this Agreement in accordance with such reasonable
standards  expected  of  employees  with  comparable   positions  in  comparable
organizations  and as may be  established  from  time to time by the GFB  Board.
Employee  shall also  conduct  his  personal  affairs,  including  his  personal
financial affairs, in a manner appropriate for his position.

3.2 No Conflicting  Activities.  During the term of Employee's  employment under
this Agreement,  Employee shall not engage in any business or activity  contrary
to the business affairs or interests of GFB.  Nothing  contained in this Section
3.2 shall be deemed to prevent or limit the right of  Employee  to invest in the
capital stock or other securities of any business.

                            Section 4 - Compensation

4.1 Base  Compensation.  Employee  shall  receive for his services the following
Base Compensation:

(a) GFB shall pay  Employee  an annual  salary of  $220,500  payable in 26 equal
bi-weekly installments.

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(b) Any  increase  in  Employee's  Base  Compensation  shall be left to the sole
discretion  of the GFB Board.  The  Employee's  Base  Compensation  shall not be
subject to  reduction  during  the Term of this  Agreement  except as  otherwise
provided in this Agreement.

4.2 Bonus Compensation.  GFB shall pay Employee Bonus Compensation as determined
by the GFB Board in its discretion.

4.3  Additional   Compensation.   As  further   compensation   (the  "Additional
Compensation")  GFB shall make available the benefits provided to Employee under
GFB's Recognition and Retention Plan for Officers and Employees  effective March
30,  1994 and shall  make  available  the stock  options  provided  to  Employee
pursuant to Holding  Company's 1994 Incentive Stock Option Plan for Officers and
Employees effective March 30, 1994, as amended.

4.4 Source of Payments.  All payments  provided for in this  Agreement  shall be
timely paid by GFB. However, Holding Company unconditionally  guarantees payment
and provision of all amounts and benefits due hereunder to Employee and, if such
amounts and benefits  due from GFB are not timely paid or provided by GFB,  such
amounts and benefits shall be paid or provided by Holding Company.

                          Section 5 - Employee Benefits

5.1  Vacations.  During each  calendar year during the Term,  Employee  shall be
entitled to a vacation of three  weeks,  during  which  Employee's  compensation
shall be paid in full.  At least  one week  must be taken in  consecutive  days.
Unused  vacation for any year during the Term may not be carried forward for use
in the next  following  year.  Upon any  termination  of  Employee's  employment
hereunder,  Employee  shall be  entitled  to pro rata  compensation  for  unused
vacation  time earned during the year of  termination,  based upon the number of
months Employee was employed during that year.

5.2 Business  Expenses.  GFB shall reimburse Employee for ordinary and necessary
business expenses incurred by Employee in performing his duties pursuant to this
Agreement,  including but not limited to reasonable  travel,  entertainment  and
similar expenses that Employee incurs in promoting GFB's business; provided that
GFB shall not reimburse any such expense which, prior to its being incurred, GFB
directed  Employee  not  to  incur.  The   reimbursement   shall  be  made  upon
presentation  to GFB by  Employee,  from  time to time,  of an  account  of such
expenses in such form and in such detail as GFB may request.

5.3 Fringe  Benefits.  In addition to benefits  specifically  described  herein;
Employee  shall be entitled to receive  from GFB the fringe  benefits  generally
available to full-time senior management employees of GFB, as those benefits may
be changed from time to time.

5.4  Disability  Insurance.  Throughout  the Term of this  Agreement,  GFB shall
provide  Employee with long term disability  coverage of 60% of Employee's total
pay from the previous year, which benefit begins no later than 90 days after the
Disability occurs.

                         Section 6 - Confidentiality and
                             Covenant Not to Compete

6.1 Covenant Not to Compete. In consideration of the GFB's continued  employment
of  Employee  pursuant to this  Agreement,  Employee  covenants  and agrees that
Employee  shall  not  during  the  one-year  period  immediately  following  the
termination of his employment  under this  Agreement,  if (1) GFB terminated the
employment and severance compensation is payable pursuant to Section 8.4 or 8.5,
or (2) Employee has retired, become disabled or voluntarily terminated:

(a) without the prior written consent of GFB, engage or become interested in any
capacity, directly or indirectly (whether as proprietor,  stockholder, director,
partner,  employee,  trustee,  beneficiary,  or in any  other  capacity)  in any
business selling,  providing or developing products or services competitive with
products or services sold or  maintained  by GFB within a 50-mile  radius of the
Louisville Metropolitan Area; or

(b) recruit or solicit for employment  any current or future  employee of GFB or
any of its respective successors or any entities related to it.

<PAGE>

6.2  Confidential   Information.   Employee  acknowledges  that  all  Secret  or
Confidential  Information is the exclusive  property of GFB.  Employee shall not
during the period of his employment by GFB or at any time  thereafter,  disclose
to any person,  firm or  corporation,  or publish,  or use for any purpose,  any
Secret or Confidential  Information  except as properly required in the ordinary
course  of  business  of GFB or as  directed  and  authorized  by GFB.  Upon the
termination  of his  employment  with GFB, for any reason  whatsoever,  Employee
shall  return  and  deliver  to GFB  within  7 days any and all  papers,  books,
records,  documents,  memoranda  and  manuals,  including  all  copies  thereof,
belonging to GFB or relating to its business, in Employee's possession,  whether
prepared  by  Employee  or  others.  If at any time  after  the  termination  of
employment,   Employee  determines  that  he  has  any  Secret  or  Confidential
Information in his possession or control,  Employee shall immediately return all
such Secret or Confidential Information to GFB including all copies and portions
thereof.

6.3 Disclosure and Survival of Covenants.  If Employee,  in the future, seeks or
is offered employment by any other company,  firm, or person, he shall provide a
copy of this Agreement to the prospective employer prior to accepting employment
with that  prospective  employer.  The  provisions of Sections 6.1 and 6.2 shall
survive any termination of this Agreement.

                             Section 7 - Termination

7.1 Automatic  Termination.  Employment  under this Agreement shall terminate on
the death or Permanent  Disability of Employee or by the Employee  attaining age
65 during the Term of this Agreement.

7.2 Involuntary Termination.

(a) Termination by the Board.  The GFB Board may terminate this Agreement at any
time.

(b) Termination or Suspension by the Office of Thrift Supervision.

(i) If Employee is suspended and/or  temporarily  prohibited from performing his
duties under this  Agreement by a notice served under Section  8(e)(3) or (g)(1)
of the Federal  Deposit  Insurance Act (12 U.S.C.  1818(e)(3) and (g)(1)),  then
GFB's  obligations  under this  Agreement  shall be  suspended as of the date of
service of such notice unless stayed by appropriate proceedings.  If the charges
in the notice are dismissed, GFB may, in its discretion, (a) pay Employee all or
part of the compensation  withheld while  obligations  under this Agreement were
suspended and (b) reinstate (in whole or in part) any of its  obligations  which
were suspended.

(ii) If Employee is removed and/or permanently  prohibited from participating in
the conduct of GFB's affairs by an order issued under section  8(e)(4) or (g)(1)
of the Federal  Deposit  Insurance  Act (12 U.S.C.  1818(e)(4)  or (g)(1)),  all
obligations of GFB under this Agreement shall terminate as of the effective date
of the order, but vested rights of Employee shall not be affected.

(iii) If GFB is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all  obligations  under this Agreement shall terminate as of the
date of default, but vested rights of Employee shall not be affected.

(iv) All obligations under this Agreement shall terminate,  except to the extent
determined  that  continuation  of the contract is necessary  for the  continued
operation  of GFB  (a) by  action  of the  Director  of  the  Office  of  Thrift
Supervision  (the  "Director")  or his or her designee,  at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement  to  provide  assistance  to or on behalf  of GFB under the  authority
contained in section 13(c) of the Federal  Deposit  Insurance Act; or (b) by the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of GFB or
when GFB is determined by the Director to be in an unsafe or unsound  condition.
Any rights of Employee that have already vested,  however, shall not be affected
by such action.

7.3 Voluntary Termination. Employee may terminate his employment for Good Reason
by giving Notice of Termination in accordance with Section 7.4 below.

7.4 Notice of Termination.  Any  termination by GFB or by Employee,  pursuant to
this  Agreement,  shall be  communicated by written Notice of Termination to the
other party hereto.

7.5 Conflicts with Federal Law. If any of the termination  provisions  contained
in this Agreement conflict  with Office of Thrift  Supervision regulation 12 CFR
563.39(b), or any successor regulation, the latter shall prevail.

<PAGE>
                     Section 8 - Compensation on Termination

8.1 Compensation Upon Death. If Employee's  employment is terminated  because of
the death of Employee, GFB shall pay Employee's executors or administrators:  a)
within 30 days of death the  unpaid  balance  of  Employee's  Base  Compensation
through the end of the month in which Employee's death occurred,  at the rate in
effect on the date of Employee's  death and b) as soon as such Employee's  bonus
is calculated,  an amount equal to Employee's Bonus Compensation for the current
year (if any was paid) multiplied by the fractional  portion of the year between
the first day of the year in which  Employee died and the date of the Employee's
death; and shall have no further obligations under this Agreement.

8.2 Compensation  Upon Disability.  If Employee's  active work ceases because of
Disability,  GFB  shall  continue,  as  and  when  scheduled,  to  pay  Employee
Employee's Base Compensation through the date he ceased work, plus three months'
additional Base Compensation, at 100% of the rate in effect on the date Employee
became  Disabled,  and thereafter GFB shall have no further  obligation for cash
compensation unless and until Employee returns to work.

8.3 Compensation  Upon Termination for Cause. If Employee's  employment shall be
terminated  by GFB for  Cause,  GFB shall  pay  Employee  his Base  Compensation
through the Date of Termination,  and GFB shall not have any further obligations
to Employee under this Agreement.

8.4  Compensation  Upon  Termination by GFB Other Than For Cause.  If Employee's
employment  is  terminated  by GFB  other  than  for  Cause,  then  unless  such
termination  occurs  simultaneous with or within two years following a Change in
Control  of GFB or Holding  Company,  then  Employee  shall be  entitled  to the
compensation  Employee  would have been entitled to under this  Agreement as and
when payable hereunder for the remainder of the Term,  provided that Employee in
good faith actively seeks  employment  similar to employee's  position with GFB,
and  that  any  payments  under  this  Section  8.4  shall  be  reduced  by  any
compensation Employee receives from other employment thereafter accepted.

8.5  Compensation  Upon  Termination  For Good  Reason  or  Following  Change of
Control.

(a) If (1) Employee  terminates  employment under Section 7.3 for Good Reason or
(2) any of the events constituting a Change of Control of GFB or Holding Company
shall have occurred and Employee's  employment is terminated by GFB within three
years thereafter other than by reason of (a) Employee's death or disability,  or

(b)  termination  by GFB for Cause,  then GFB shall pay to Employee as severance
compensation  in a lump sum (discounted to present value using the interest rate
then applicable to newly issued fixed rate three-year certificates of deposit at
GFB, Louisville, Kentucky) on the 30th day following the Date of Termination:

(i) the unpaid balance of Employee's full Base Compensation  through the Date of
Termination  at the rate in effect at the time Notice of  Termination  is given;
plus

(ii) an amount equal to Employee's full Base  Compensation  for two years at the
rate in effect as of the Date of Termination; plus

(iii) Employer shall make available to Employee the Additional  Compensation  to
which Employee would be entitled during the Term; plus

(iv) an amount equal to Employee's Bonus  Compensation for the previous year (if
any was paid), multiplied by two.

In addition to the  severance  benefits set forth in (i),  (ii),  (iii) and (iv)
above,  GFB  shall:  (a) to the  extent  not  prohibited  by  Office  of  Thrift
Supervision  pronouncements pay all legal fees and expenses incurred by Employee
resulting  from  termination  (including  all such  fees and  expenses,  if any,
incurred in contesting  any such  termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and (b) maintain in full force
and effect,  for the  continued  benefit of Employee for a two year period after
the Date of Termination, all employee benefit plans and programs or arrangements
in which  Employee  was  entitled to  participate  immediately  prior to Date of
Termination;  provided,  however,  that Employee's  continued  participation  is
possible under the general terms and  provisions of such plans and programs.  If
Employee's  participation  in any such  plan or  program  is  barred,  GFB shall
arrange to provide Employee with benefits  substantially  similar or, if that is
not  possible,  of equal  value to those  which  Employee is entitled to receive
under such plans and  programs.  At the end of the period of coverage,  Employee
shall  have  the  option  to  have  assigned  to  him at no  cost  and  with  no
apportionment of prepaid premiums,  any assignable  insurance  policies owned by
GFB relating specifically to Employee.

<PAGE>

Notwithstanding  any of the foregoing,  if Employee is within three years of age
65 on the Date of  Termination,  then (a) GFB shall reduce the amount payable to
Employee  under  paragraphs  (ii) and (iii) above to reflect  only the number of
months  between  the  Date of  Termination  and the  date  Employee  is or would
otherwise attain age 65, and (b) GFB shall have no obligations to Employee after
Employee attains age 65.

(b)  Employee  shall not be  required  to  mitigate  the  amount of any  payment
provided for in this Section 8.5 by seeking other  employment or otherwise,  nor
shall the amount of any payment  provided  for in this Section 8.5 be reduced by
any  compensation  earned by  Employee  as the result of  employment  by another
employer after the Date of Termination, or otherwise.

8.6 Compensation Upon Retirement. If Employee terminates employment in the month
of his 65th  birthday,  then Employee shall be paid within 30 days from the date
of his retirement the unpaid balance of Employee's Base Compensation through the
date of his  retirement and shall be paid, as soon as such  Employee's  bonus is
calculated,  an amount equal to Employee's  Bonus  Compensation  for the current
year (if any was paid), multiplied by the fractional portion of the year between
the first day of the year in which  Employee  retired and the date of Employee's
retirement.

8.7  Successors  of GFB.  GFB will  require  any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially all of the business and/or assets of GFB, by agreement in form and
substance  satisfactory  to  Employee,  expressly to assume and agree to perform
this  Agreement  in the same  manner  and to the same  extent  that GFB would be
required to perform it if no such succession had taken place.  Failure of GFB to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach  of this  Agreement  and  shall  entitle  Employee  to  terminate  this
agreement for Good Reason under paragraph 7.3 of this Agreement. As used in this
Agreement, "GFB" shall mean GFB as hereinbefore defined and any successor to its
business and/or assets as aforesaid or which otherwise  becomes bound by all the
terms and provisions of this Agreement by operation of law.

8.8 Reduction of Amounts Payable.

(a) In no event shall any amount  payable under any provision of this  Agreement
equal or exceed an amount which would (i) cause GFB to forfeit (as determined by
the Certified Public Accountants or legal counsel employed by GFB),  pursuant to
Section 280G(a) of the Internal Revenue Code of 1986, as amended,  its deduction
for any or all such amounts payable,  or (ii) exceed maximum amounts  determined
by the Office of Thrift  Supervision  to  constitute a safe and sound  practice.
Pursuant to this Section  8.8,  the GFB Board has the power to reduce  severance
benefits payable under this Agreement,  if such benefits alone or in conjunction
with termination benefits provided under any other severance pay plan maintained
by GFB or any other plan or agreement  between Employee and GFB, would cause GFB
to forfeit  otherwise  deductible  payments or would exceed the Office of Thrift
Supervision  maximums;  provided,  however that no benefits  payable  under this
Agreement shall be reduced pursuant to this Section 8.8 to less than $1.00 below
the amount of benefits (i) which GFB can properly  deduct under Section  280G(a)
of the Internal Revenue Code of 1986, as amended, or (ii) which equal the amount
the Office of Thrift  Supervision  considers  the  maximum  safely  and  soundly
payable.

(b) Any payments made to the Employee pursuant to this Agreement,  or otherwise,
are subject to and conditioned  upon  their  compliance  with  12 U.S.C. 1828(k)
and any regulation promulgated thereunder.

                            Section 9 - Miscellaneous

9.1 Notice.  Any notice or request  required or permitted to be given under this
Agreement  shall be in writing  and shall be deemed  sufficiently  given for all
purposes  if mailed by  certified  mail,  postage  prepaid  and  return  receipt
requested,  addressed to the intended  recipient at the following address (or at
such other  address as either party may  designate in writing to the other party
by certified mail as described above):

If to GFB:
Great Financial Bank, FSB
One Financial Square
Louisville, Kentucky 40202

<PAGE>

All notices to GFB shall be directed to the  attention  of the  President of GFB
with a copy to the Treasurer of GFB.

If to Employee:
Arthur L. Harreld
4112 Hunting Creek Drive
Owensboro, KY  42301

9.2 Headings.  The headings used in this Agreement have been included solely for
ease of  reference  and are not to be construed  in any  interpretation  of this
Agreement.

9.3 Entire Agreement.  This instrument contains the entire agreement between the
parties with respect to the subject matter hereof, and shall supersede all prior
understanding  with  respect  to the  subject  matter  hereof,  except  that the
Indemnity  Agreement  dated  October  25,  1991 and the  Supplemental  Executive
Retirement Plan dated as of January 1, 1992 between  Employee and GFB shall also
continue to be effective.  No agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either  party  which  are  not  set  forth  expressly  in  this  Agreement.   No
modification  or  addition  to this  Agreement  shall be  enforceable  unless in
writing and signed by the party against whom enforcement is sought.

9.4  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the Commonwealth of Kentucky.

9.5 Arbitration.  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration,  conducted before a
panel of three arbitrators  sitting in a home office selected by Employee within
fifty (50) miles from the location of GFB, in  accordance  with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Employee shall be entitled to seek specific  performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or  controversy  arising  under or in  connection  with
Employee's  termination  is resolved in favor of Employee,  whether by judgment,
arbitration  or  settlement,  Employee  shall be  entitled to the payment of all
back-pay,  including  salary,  bonuses and any other cash  compensation,  fringe
benefits and any compensation and benefits due Employee under this Agreement.

9.6 Benefit.  This Agreement  shall inure to the benefit of and shall be binding
upon GFB, its successors and assigns, and this Agreement shall not be assignable
by Employee.

9.7  Remedies.  Employee  and GFB  acknowledge  that the services to be rendered
under this  Agreement are special,  unique and of  extraordinary  character.  If
Employee  breaches any  covenants,  terms and conditions of this Agreement to be
performed by him, GFB will suffer  irreparable  damage and it will be impossible
to estimate or determine GFB's damages. Therefore, GFB shall, upon proof of such
breach,  be  entitled as a matter of course to an  injunction  from any court of
competent  jurisdiction  restraining any further  violation of such covenants by
Employee, his employers, employees, partners, agents or other associates, or any
of them,  such right to an injunction  to be  cumulative  and in addition to any
other  remedies GFB may have,  either in law or in equity.  In any proceeding to
enforce  any  provision  of  this  Agreement,  Employee  shall  not  assert  any
contention  that  there is an  adequate  remedy at law for the breach or default
upon  which  such  proceeding  is  based.  Nothing  in this  paragraph  shall be
construed  to prevent  such remedy in the  courts,  in the case of any breach of
this Agreement by Employee, as GFB may elect or invoke.

9.8 Severability.  If any of the provisions of Section 6.1 of this Agreement are
held  to be  unenforceable  because  of  the  scope,  duration  or  area  of its
applicability,  the court  making  such  determination  shall  have the power to
modify such scope duration or area or all of them, and such provision shall then
be applicable in such modified  form. If any provision of this Agreement is held
to be invalid,  illegal or  unenforceable  in any  respect,  the  validity,  and
enforceability  of all other  applications  of that  provision  and of all other
provisions and applications hereof shall not in any way be affected or impaired.

<PAGE>

9.9  Waiver.  No  provisions  of  this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically designated by the
Board of  Directors  of GFB. The failure of GFB or Employee at any time or times
to enforce its rights under the Agreement  strictly in accordance  with the same
shall not be construed as having created a custom in any way or manner  contrary
to the specific  provisions of this  Agreement or as having in any way or manner
modified or waived the same. No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of similar or  dissimilar  provisions  or conditions at the same or any
prior or subsequent time.

9.10  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.


IN WITNESS  WHEREOF the parties hereto have executed this  Agreement,  as of the
day and year first above written but actually on the dates set forth below.

GREAT FINANCIAL BANK, FSB


By:________________________________

Title:_____________________________

Date:______________________________



GREAT FINANCIAL CORPORATION
(GUARANTOR)

By:________________________________

Title:_____________________________

Date:______________________________

EMPLOYEE:__________________________
 
Date:______________________________


<PAGE>

                              EMPLOYMENT AGREEMENT

This is an Employment  Agreement (the  "Agreement")  dated as of January 1, 1997
(the  "Effective  Date"),  between  Great  Financial  Bank,  FSB ("GFB"),  Great
Financial Corporation ("Holding Company") and Richard Klapheke ("Employee").

                                    RECITALS

A. GFB considers the  establishment  and  maintenance  of sound and vital senior
management  to be essential to protecting  and enhancing its best  interests and
therefore  GFB  desires  to enter  into an  agreement  governing  the  terms and
conditions of Employee's employment.

B. GFB is a  federally  chartered  Savings  Bank and is subject to the Office of
Thrift  Supervision  Regulation  Section  563.39,  which requires any agreements
between  GFB  and  its  employees  to be  in  writing  and  to  contain  certain
provisions.

C. The Board of Directors of GFB has considered and approved this Agreement with
respect to Employee's employment.

                                    AGREEMENT

The parties agree as follows:

                             Section 1 - Definitions

1.1 A "Change in Control" of GFB shall mean an event of a nature that:

(a)  during  any  period  of three  consecutive  years,  individuals  who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority  thereof  unless the election or nomination  for election of each new
Director was approved by a vote of at least two-thirds of the Board members then
still in office who were Board  members  at the  beginning  of the period or who
were similarly nominated;

(b) the  business of GFB or Holding  Company for which  Employee's  services are
principally  performed  is disposed of by GFB or Holding  Company  pursuant to a
partial or complete  liquidation of GFB or Holding Company,  a sale of assets of
GFB or Holding Company, or otherwise;

(c) GFB or  Holding  Company  consummates  the  transaction  contemplated  by an
agreement  which  results  in the  occurrence  of a Change in  Control of GFB or
Holding Company;

(d) the Board of GFB or Holding Company adopts a resolution to the effect that a
Change in Control of GFB or Holding  Company for purposes of this  Agreement has
occurred;

(e) an event of a nature  that would be  required  to be reported in response to
item  1(a) of the  current  report  on Form 8-K as in effect on the date of this
Agreement,  pursuant to Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 occurs;

(f) any  "person"  (as the  term is used in  Sections  13(d)  and  14(d)  of the
Securities  Exchange Act of 1934) is or becomes the  "beneficial  owner" (as the
term is defined in Rule  13d-3 of the  Securities  Exchange  Act),  directly  or
indirectly,  of securities of GFB or Holding Company  representing 20 percent or
more of  Holding  Company's  or  GFB's  outstanding  securities  except  for any
securities of GFB purchased by Holding Company in connection with the conversion
of GFB to stock form and any  securities  purchased by GFB's or Lincoln  Service
Mortgage Corporation's employee stock ownership plan and trust;

(g)  a  plan  of  reorganization,   merger,   consolidation,   sale  of  all  or
substantially  all  assets of GFB or Holding  Company  or a similar  transaction
occurs in which GFB or Holding Company is not the resulting entity; or

(h) change of  control  shall  have  occurred  as  described  in 12 CFR  Section
574.4(a) or successor regulations.

1.2 "Date of Termination" shall mean:

(a) If Employee's  employment is  automatically  terminated under Section 7.1 of
this  Agreement,  the date on which the event  which  triggered  that  automatic
termination occurred;

<PAGE>

(b) If Employee's  employment is terminated for Good Reason under Section 7.3 of
this  Agreement  or by GFB  under  Section  7.2(a) of this  Agreement,  the date
specified in the Notice of Termination.

(c) If  Employee's  employment  is terminated  under  Section  7.2(b),  the date
specified in Section 7.2(b).

(d) If  Employee's  employment  is  terminated  at the  end of the  Term of this
Agreement, the last day of such Term.

1.3 "Disability" shall mean Employee's inability, due to accident or physical or
mental  illness,  to  adequately  and fully  perform  the duties  required by an
employee in  Employee's  profession;  provided,  however,  that  Disability  for
purposes of this Agreement  shall not include any Disability  which results from
Employee's  engaging  in a  criminal  enterprise  or  from  Employee's  habitual
drunkenness, addiction to narcotics or intentionally inflicted injury. If at any
time  during  the Term the GFB  Board  makes a  determination  with  respect  to
Employee's  Disability,  that  determination  shall be  final,  conclusive,  and
binding upon GFB,  Employee,  and their successors in interest,  so long as that
determination has a reasonable basis.

1.4 "Good Reason" shall be deemed to exist if:

(a) within  three  years  after a Change in  Control of GFB or Holding  Company,
without  Employee's  express  written  consent,  Employee is assigned any duties
inconsistent with Employee's positions, duties, responsibilities and status with
GFB or  Holding  Company  immediately  prior to a Change  of  Control  of GFB or
Holding Company; Employee's actual job responsibilities as in effect immediately
prior to a Change of Control of GFB or Holding  Company are materially  changed;
or  Employee  is removed  from or is not  re-elected  to any of such  positions,
except in connection  with the  termination  of Employee's  employment:  (1) for
Cause; (2) on account of Retirement; (3) as a result of Employee's death; or (4)
by Employee other than for Good Reason; provided that the GFB Board's failure to
extend this Agreement for an additional year under Section 2.2 of this Agreement
shall not entitle Employee to terminate this Agreement for Good Reason;

(b) within three years of a Change in Control of GFB or Holding  Company,  GFB's
or Holding  Company's  principal  executive  offices are relocated to a location
more than 30 miles from its current location; or GFB or Holding Company requires
Employee to be based in any location which is more than 30 miles from Employee's
current base location,  except for required travel on GFB's or Holding Company's
business  to  an  extent   substantially   consistent  with  similarly  situated
executives' business travel obligations;

(c) within three years after a Change of Control of GFB or Holding Company,  GFB
fails to continue in effect any benefit or compensation plan, pension plan, life
insurance plan, health and accident plan or disability plan (including,  but not
limited to, GFB's participation in the Financial  Institutions  Retirement Fund)
in which Employee is  participating at the time of a Change of Control (or plans
providing Employee with substantially similar benefits),  such that there occurs
a material reduction in benefits before  termination,  or GFB or Holding Company
takes any action which would adversely  affect  Employee's  participation  in or
materially reduce  Employee's  benefits under any benefit plan maintained by GFB
or Holding Company or deprive Employee of any material fringe benefits;

(d) GFB fails to obtain the assumption of all  obligations  under this Agreement
by any successor as contemplated in Section 8.7 of this Agreement; or

(e) Employee's employment is purported to be terminated in a manner which is not
pursuant to a Notice of Termination  satisfying the  requirements of Section 7.4
of this  Agreement;  and,  for  purposes of this  Agreement,  no such  purported
termination shall be effective.

1.5 The "GFB Board" shall mean the Board of Directors of GFB.

1.6  "Notice of  Termination"  shall mean a notice,  from GFB or from  Employee,
which shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Employee's  employment under the provision
so indicated, and shall state the effective date of the termination.

1.7  "Permanent   Disability"  shall  mean  total  disability  arising  from  an
occupational  or  non-occupational  medically  determinable  physical  or mental
impairment which prevents the Employee from engaging in any substantial  gainful
activity and which is  determined  on a reasonable  basis by GFB to be permanent
and continuous for the remainder of the Employee's life.

<PAGE>

1.8 "Retirement"  shall mean  termination of Employee's  employment by reason of
Employee attaining age 65.

1.9  "Secret  or   Confidential   Information"   means  secret  or  confidential
information  of GFB  (including  secret  or  confidential  information  of GFB's
subsidiaries and  affiliates),  including but not limited to lists of customers;
identity  of  customers;  identity of  prospective  customers;  contract  terms;
bidding information and strategies; pricing methods; computer software; computer
software methods and documentation; hardware; salary information with respect to
GFB  employees;  financial  product  design  information;  GFB's  business plan;
methods  of  operation  of GFB or its  affiliates;  the  procedures,  forms  and
techniques used in servicing accounts;  and other documents or information which
are required to be maintained in confidence for the continued success of GFB and
its business.

1.10  Termination  for  "Cause"  by  GFB of  Employee's  employment  under  this
Agreement shall have the same meaning as it does in 12 C.F.R.  563.39, and shall
include termination because of:

(a) The intentional and  substantial  failure by Employee to perform  Employee's
duties with GFB (other than any such failure  resulting  from  incapacity due to
physical or mental illness); or

(b) Employee's personal dishonesty,  incompetence, willful misconduct, breach of
a fiduciary duty involving  personal profit,  willful violation of any law, rule
or  regulation   (other  than  traffic   violations  or  similar   offenses)  or
cease-and-desist order, or material breach of any provision of this Agreement.

Notwithstanding  the  foregoing,  Employee  shall  not be  deemed  to have  been
terminated  for Cause  unless  and until  there  shall  have been  delivered  to
Employee a copy of a  resolution  duly  adopted by the GFB Board at a meeting of
the GFB Board called and held for that  purpose,  finding that in the good faith
opinion of the GFB Board, GFB has cause for terminating  Employee and specifying
the particulars thereof in detail.

                         Section 2 - Employment and Term

2.1  Employment.  GFB agrees to employ  Employee and Employee agrees to serve as
Executive Vice  President-Chief  Financial  Officer of GFB.  Employee  agrees to
accept Employment on the terms and conditions set forth in this Agreement.

2.2 Term.  Subject to  extension  in  accordance  with this Section 2 and unless
sooner  terminated  as  provided in Section 7, the term of this  Agreement  (the
"Term") shall be the period beginning on January 1, 1997 (the "Effective  Date")
and ending April 15,  1999,  or such earlier time as provided by Section 7.1. On
or before  December 31,  1997,  December 31, 1998 and April 14, 1999 and each 12
month anniversary thereafter,  the GFB Board shall review Employee's performance
under this  Agreement to determine  whether GFB desires that the  then-remaining
Term be extended.  If the GFB Board  recommends  and  Employee  consents to such
extensions,  then the then-remaining  Term shall be extended by no more than one
year.

                         Section 3 - Duties of Employee

3.1 Time Devoted;  Duties.  Employee shall devote his entire time, attention and
energies to the  business of GFB and he shall  render  such  administrative  and
management services to GFB as are customarily performed by persons situated in a
similar  executive  capacity,  including those services  prescribed from time to
time  by the GFB  Board.  Employee  shall  also  promote,  by  entertainment  or
otherwise,  as and to the extent permitted by law, the business of GFB. Employee
shall perform his duties under this Agreement in accordance with such reasonable
standards  expected  of  employees  with  comparable   positions  in  comparable
organizations  and as may be  established  from  time to time by the GFB  Board.
Employee  shall also  conduct  his  personal  affairs,  including  his  personal
financial affairs, in a manner appropriate for his position.

3.2 No Conflicting  Activities.  During the term of Employee's  employment under
this Agreement,  Employee shall not engage in any business or activity  contrary
to the business affairs or interests of GFB.  Nothing  contained in this Section
3.2 shall be deemed to prevent or limit the right of  Employee  to invest in the
capital stock or other securities of any business.

<PAGE>
                            Section 4 - Compensation

4.1 Base  Compensation.  Employee  shall  receive for his services the following
Base Compensation:

(a) GFB shall pay  Employee  an annual  salary of  $161,250  payable in 26 equal
bi-weekly installments.

(b) Any  increase  in  Employee's  Base  Compensation  shall be left to the sole
discretion  of the GFB Board.  The  Employee's  Base  Compensation  shall not be
subject to  reduction  during  the Term of this  Agreement  except as  otherwise
provided in this Agreement.

4.2 Bonus Compensation.  GFB shall pay Employee Bonus Compensation as determined
by the GFB Board in its discretion.

4.3  Additional   Compensation.   As  further   compensation   (the  "Additional
Compensation")  GFB shall make available the benefits provided to Employee under
GFB's Recognition and Retention Plan for Officers and Employees  effective March
30,  1994 and shall  make  available  the stock  options  provided  to  Employee
pursuant to Holding  Company's 1994 Incentive Stock Option Plan for Officers and
Employees effective March 30, 1994, as amended.

4.4 Source of Payments.  All payments  provided for in this  Agreement  shall be
timely paid by GFB. However, Holding Company unconditionally  guarantees payment
and provision of all amounts and benefits due hereunder to Employee and, if such
amounts and benefits  due from GFB are not timely paid or provided by GFB,  such
amounts and benefits shall be paid or provided by Holding Company.

                          Section 5 - Employee Benefits

5.1  Vacations.  During each  calendar year during the Term,  Employee  shall be
entitled to a vacation of three  weeks,  during  which  Employee's  compensation
shall be paid in full.  At least  one week  must be taken in  consecutive  days.
Unused  vacation for any year during the Term may not be carried forward for use
in the next  following  year.  Upon any  termination  of  Employee's  employment
hereunder,  Employee  shall be  entitled  to pro rata  compensation  for  unused
vacation  time earned during the year of  termination,  based upon the number of
months Employee was employed during that year.

5.2 Business  Expenses.  GFB shall reimburse Employee for ordinary and necessary
business expenses incurred by Employee in performing his duties pursuant to this
Agreement,  including but not limited to reasonable  travel,  entertainment  and
similar expenses that Employee incurs in promoting GFB's business; provided that
GFB shall not reimburse any such expense which, prior to its being incurred, GFB
directed  Employee  not  to  incur.  The   reimbursement   shall  be  made  upon
presentation  to GFB by  Employee,  from  time to time,  of an  account  of such
expenses in such form and in such detail as GFB may request.

5.3 Fringe  Benefits.  In addition to benefits  specifically  described  herein;
Employee  shall be entitled to receive  from GFB the fringe  benefits  generally
available to full-time senior management employees of GFB, as those benefits may
be changed from time to time.
 
5.4  Disability  Insurance.  Throughout  the Term of this  Agreement,  GFB shall
provide  Employee with long term disability  coverage of 60% of Employee's total
pay from the previous year, which benefit begins no later than 90 days after the
Disability occurs.

                         Section 6 - Confidentiality and
                             Covenant Not to Compete

6.1 Covenant Not to Compete. In consideration of the GFB's continued  employment
of  Employee  pursuant to this  Agreement,  Employee  covenants  and agrees that
Employee  shall  not  during  the  one-year  period  immediately  following  the
termination of his employment  under this  Agreement,  if (1) GFB terminated the
employment and severance compensation is payable pursuant to Section 8.4 or 8.5,
or (2) Employee has retired, become disabled or voluntarily terminated:

(a) without the prior written consent of GFB, engage or become interested in any
capacity, directly or indirectly (whether as proprietor,  stockholder, director,
partner,  employee,  trustee,  beneficiary,  or in any  other  capacity)  in any
business selling,  providing or developing products or services competitive with
products or services sold or  maintained  by GFB within a 50-mile  radius of the
Louisville Metropolitan Area; or

(b) recruit or solicit for employment  any current or future  employee of GFB or
any of its respective successors or any entities related to it.

<PAGE>

6.2  Confidential   Information.   Employee  acknowledges  that  all  Secret  or
Confidential  Information is the exclusive  property of GFB.  Employee shall not
during the period of his employment by GFB or at any time  thereafter,  disclose
to any person,  firm or  corporation,  or publish,  or use for any purpose,  any
Secret or Confidential  Information  except as properly required in the ordinary
course  of  business  of GFB or as  directed  and  authorized  by GFB.  Upon the
termination  of his  employment  with GFB, for any reason  whatsoever,  Employee
shall  return  and  deliver  to GFB  within  7 days any and all  papers,  books,
records,  documents,  memoranda  and  manuals,  including  all  copies  thereof,
belonging to GFB or relating to its business, in Employee's possession,  whether
prepared  by  Employee  or  others.  If at any time  after  the  termination  of
employment,   Employee  determines  that  he  has  any  Secret  or  Confidential
Information in his possession or control,  Employee shall immediately return all
such Secret or Confidential Information to GFB including all copies and portions
thereof.

6.3 Disclosure and Survival of Covenants.  If Employee,  in the future, seeks or
is offered employment by any other company,  firm, or person, he shall provide a
copy of this Agreement to the prospective employer prior to accepting employment
with that  prospective  employer.  The  provisions of Sections 6.1 and 6.2 shall
survive any termination of this Agreement.

                             Section 7 - Termination

7.1 Automatic  Termination.  Employment  under this Agreement shall terminate on
the death or Permanent  Disability of Employee or by the Employee  attaining age
65 during the Term of this Agreement.

7.2 Involuntary Termination.

(a) Termination by the Board.  The GFB Board may terminate this Agreement at any
time.

(b) Termination or Suspension by the Office of Thrift Supervision.

(i) If Employee is suspended and/or  temporarily  prohibited from performing his
duties under this  Agreement by a notice served under Section  8(e)(3) or (g)(1)
of the Federal  Deposit  Insurance Act (12 U.S.C.  1818(e)(3) and (g)(1)),  then
GFB's  obligations  under this  Agreement  shall be  suspended as of the date of
service of such notice unless stayed by appropriate proceedings.  If the charges
in the notice are dismissed, GFB may, in its discretion, (a) pay Employee all or
part of the compensation  withheld while  obligations  under this Agreement were
suspended and (b) reinstate (in whole or in part) any of its  obligations  which
were suspended.

(ii) If Employee is removed and/or permanently  prohibited from participating in
the conduct of GFB's affairs by an order issued under section  8(e)(4) or (g)(1)
of the Federal  Deposit  Insurance  Act (12 U.S.C.  1818(e)(4)  or (g)(1)),  all
obligations of GFB under this Agreement shall terminate as of the effective date
of the order, but vested rights of Employee shall not be affected.

(iii) If GFB is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all  obligations  under this Agreement shall terminate as of the
date of default, but vested rights of Employee shall not be affected.

(iv) All obligations under this Agreement shall terminate,  except to the extent
determined  that  continuation  of the contract is necessary  for the  continued
operation  of GFB  (a) by  action  of the  Director  of  the  Office  of  Thrift
Supervision  (the  "Director")  or his or her designee,  at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement  to  provide  assistance  to or on behalf  of GFB under the  authority
contained in section 13(c) of the Federal  Deposit  Insurance Act; or (b) by the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of GFB or
when GFB is determined by the Director to be in an unsafe or unsound  condition.
Any rights of Employee that have already vested,  however, shall not be affected
by such action.

7.3 Voluntary Termination. Employee may terminate his employment for Good Reason
by giving Notice of Termination in accordance with Section 7.4 below.

7.4 Notice of Termination.  Any  termination by GFB or by Employee,  pursuant to
this  Agreement,  shall be  communicated by written Notice of Termination to the
other party hereto.

7.5 Conflicts with Federal Law. If any of the termination  provisions  contained
in this Agreement  conflict with Office of Thrift Supervision  regulation 12 CFR
563.39(b), or any successor regulation, the latter shall prevail.

<PAGE>
                     Section 8 - Compensation on Termination

8.1 Compensation Upon Death. If Employee's  employment is terminated  because of
the death of Employee, GFB shall pay Employee's executors or administrators:  a)
within 30 days of death the  unpaid  balance  of  Employee's  Base  Compensation
through the end of the month in which Employee's death occurred,  at the rate in
effect on the date of Employee's  death and b) as soon as such Employee's  bonus
is calculated,  an amount equal to Employee's Bonus Compensation for the current
year (if any was paid) multiplied by the fractional  portion of the year between
the first day of the year in which  Employee died and the date of the Employee's
death; and shall have no further obligations under this Agreement.

8.2 Compensation  Upon Disability.  If Employee's  active work ceases because of
Disability,  GFB  shall  continue,  as  and  when  scheduled,  to  pay  Employee
Employee's Base Compensation through the date he ceased work, plus three months'
additional Base Compensation, at 100% of the rate in effect on the date Employee
became  Disabled,  and thereafter GFB shall have no further  obligation for cash
compensation unless and until Employee returns to work.

8.3 Compensation  Upon Termination for Cause. If Employee's  employment shall be
terminated  by GFB for  Cause,  GFB shall  pay  Employee  his Base  Compensation
through the Date of Termination,  and GFB shall not have any further obligations
to Employee under this Agreement.

8.4  Compensation  Upon  Termination by GFB Other Than For Cause.  If Employee's
employment  is  terminated  by GFB  other  than  for  Cause,  then  unless  such
termination  occurs  simultaneous with or within two years following a Change in
Control  of GFB or Holding  Company,  then  Employee  shall be  entitled  to the
compensation  Employee  would have been entitled to under this  Agreement as and
when payable hereunder for the remainder of the Term,  provided that Employee in
good faith actively seeks  employment  similar to employee's  position with GFB,
and  that  any  payments  under  this  Section  8.4  shall  be  reduced  by  any
compensation Employee receives from other employment thereafter accepted.

8.5  Compensation  Upon  Termination  For Good  Reason  or  Following  Change of
Control.

(a) If (1) Employee  terminates  employment under Section 7.3 for Good Reason or
(2) any of the events constituting a Change of Control of GFB or Holding Company
shall have occurred and Employee's  employment is terminated by GFB within three
years thereafter other than by reason of (a) Employee's death or disability,  or

(b)  termination  by GFB for Cause,  then GFB shall pay to Employee as severance
compensation  in a lump sum (discounted to present value using the interest rate
then applicable to newly issued fixed rate three-year certificates of deposit at
GFB, Louisville, Kentucky) on the 30th day following the Date of Termination:

(i) the unpaid balance of Employee's full Base Compensation  through the Date of
Termination  at the rate in effect at the time Notice of  Termination  is given;
plus

(ii) an amount equal to Employee's full Base  Compensation  for two years at the
rate in effect as of the Date of Termination; plus

(iii) Employer shall make available to Employee the Additional  Compensation  to
which Employee would be entitled during the Term; plus

(iv) an amount equal to Employee's Bonus  Compensation for the previous year (if
any was paid), multiplied by two.

In addition to the  severance  benefits set forth in (i),  (ii),  (iii) and (iv)
above,  GFB  shall:  (a) to the  extent  not  prohibited  by  Office  of  Thrift
Supervision  pronouncements pay all legal fees and expenses incurred by Employee
resulting  from  termination  (including  all such  fees and  expenses,  if any,
incurred in contesting  any such  termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and (b) maintain in full force
and effect,  for the  continued  benefit of Employee for a two year period after
the Date of Termination, all employee benefit plans and programs or arrangements
in which  Employee  was  entitled to  participate  immediately  prior to Date of
Termination;  provided,  however,  that Employee's  continued  participation  is
possible under the general terms and  provisions of such plans and programs.  If
Employee's  participation  in any such  plan or  program  is  barred,  GFB shall
arrange to provide Employee with benefits  substantially  similar or, if that is
not  possible,  of equal  value to those  which  Employee is entitled to receive
under such plans and  programs.  At the end of the period of coverage,  Employee
shall  have  the  option  to  have  assigned  to  him at no  cost  and  with  no
apportionment of prepaid premiums,  any assignable  insurance  policies owned by
GFB relating specifically to Employee.

<PAGE>

Notwithstanding  any of the foregoing,  if Employee is within three years of age
65 on the Date of  Termination,  then (a) GFB shall reduce the amount payable to
Employee  under  paragraphs  (ii) and (iii) above to reflect  only the number of
months  between  the  Date of  Termination  and the  date  Employee  is or would
otherwise attain age 65, and (b) GFB shall have no obligations to Employee after
Employee attains age 65.

(b)  Employee  shall not be  required  to  mitigate  the  amount of any  payment
provided for in this Section 8.5 by seeking other  employment or otherwise,  nor
shall the amount of any payment  provided  for in this Section 8.5 be reduced by
any  compensation  earned by  Employee  as the result of  employment  by another
employer after the Date of Termination, or otherwise.

8.6 Compensation Upon Retirement. If Employee terminates employment in the month
of his 65th  birthday,  then Employee shall be paid within 30 days from the date
of his retirement the unpaid balance of Employee's Base Compensation through the
date of his  retirement and shall be paid, as soon as such  Employee's  bonus is
calculated,  an amount equal to Employee's  Bonus  Compensation  for the current
year (if any was paid), multiplied by the fractional portion of the year between
the first day of the year in which  Employee  retired and the date of Employee's
retirement.

8.7  Successors  of GFB.  GFB will  require  any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially all of the business and/or assets of GFB, by agreement in form and
substance  satisfactory  to  Employee,  expressly to assume and agree to perform
this  Agreement  in the same  manner  and to the same  extent  that GFB would be
required to perform it if no such succession had taken place.  Failure of GFB to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach  of this  Agreement  and  shall  entitle  Employee  to  terminate  this
agreement for Good Reason under paragraph 7.3 of this Agreement. As used in this
Agreement, "GFB" shall mean GFB as hereinbefore defined and any successor to its
business and/or assets as aforesaid or which otherwise  becomes bound by all the
terms and provisions of this Agreement by operation of law.

8.8 Reduction of Amounts Payable.

(a) In no event shall any amount  payable under any provision of this  Agreement
equal or exceed an amount which would (i) cause GFB to forfeit (as determined by
the Certified Public Accountants or legal counsel employed by GFB),  pursuant to
Section 280G(a) of the Internal Revenue Code of 1986, as amended,  its deduction
for any or all such amounts payable,  or (ii) exceed maximum amounts  determined
by the Office of Thrift  Supervision  to  constitute a safe and sound  practice.
Pursuant to this Section  8.8,  the GFB Board has the power to reduce  severance
benefits payable under this Agreement,  if such benefits alone or in conjunction
with termination benefits provided under any other severance pay plan maintained
by GFB or any other plan or agreement  between Employee and GFB, would cause GFB
to forfeit  otherwise  deductible  payments or would exceed the Office of Thrift
Supervision  maximums;  provided,  however that no benefits  payable  under this
Agreement shall be reduced pursuant to this Section 8.8 to less than $1.00 below
the amount of benefits (i) which GFB can properly  deduct under Section  280G(a)
of the Internal Revenue Code of 1986, as amended, or (ii) which equal the amount
the Office of Thrift  Supervision  considers  the  maximum  safely  and  soundly
payable.

(b) Any payments made to the Employee pursuant to this Agreement,  or otherwise,
are subject to and conditioned  upon  their  compliance  with 12 U.S.C.  1828(k)
and any regulation promulgated thereunder.

                            Section 9 - Miscellaneous

9.1 Notice.  Any notice or request  required or permitted to be given under this
Agreement  shall be in writing  and shall be deemed  sufficiently  given for all
purposes  if mailed by  certified  mail,  postage  prepaid  and  return  receipt
requested,  addressed to the intended  recipient at the following address (or at
such other  address as either party may  designate in writing to the other party
by certified mail as described above):

If to GFB:
Great Financial Bank, FSB
One Financial Square
Louisville, Kentucky 40202

<PAGE>

All notices to GFB shall be directed to the  attention  of the  President of GFB
with a copy to the Treasurer of GFB.

If to Employee:
Richard Klapheke
1215 Carpenter Drive
Crestwood, KY  40014

9.2 Headings.  The headings used in this Agreement have been included solely for
ease of  reference  and are not to be construed  in any  interpretation  of this
Agreement.

9.3 Entire Agreement.  This instrument contains the entire agreement between the
parties with respect to the subject matter hereof, and shall supersede all prior
understanding  with  respect  to the  subject  matter  hereof,  except  that the
Indemnity  Agreement  dated  October  25,  1991 and the  Supplemental  Executive
Retirement Plan dated as of January 1, 1992 between  Employee and GFB shall also
continue to be effective.  No agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either  party  which  are  not  set  forth  expressly  in  this  Agreement.   No
modification  or  addition  to this  Agreement  shall be  enforceable  unless in
writing and signed by the party against whom enforcement is sought.

9.4  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the Commonwealth of Kentucky.

9.5 Arbitration.  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration,  conducted before a
panel of three arbitrators  sitting in a home office selected by Employee within
fifty (50) miles from the location of GFB, in  accordance  with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Employee shall be entitled to seek specific  performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or  controversy  arising  under or in  connection  with
Employee's  termination  is resolved in favor of Employee,  whether by judgment,
arbitration  or  settlement,  Employee  shall be  entitled to the payment of all
back-pay,  including  salary,  bonuses and any other cash  compensation,  fringe
benefits and any compensation and benefits due Employee under this Agreement.

9.6 Benefit.  This Agreement  shall inure to the benefit of and shall be binding
upon GFB, its successors and assigns, and this Agreement shall not be assignable
by Employee.

9.7  Remedies.  Employee  and GFB  acknowledge  that the services to be rendered
under this  Agreement are special,  unique and of  extraordinary  character.  If
Employee  breaches any  covenants,  terms and conditions of this Agreement to be
performed by him, GFB will suffer  irreparable  damage and it will be impossible
to estimate or determine GFB's damages. Therefore, GFB shall, upon proof of such
breach,  be  entitled as a matter of course to an  injunction  from any court of
competent  jurisdiction  restraining any further  violation of such covenants by
Employee, his employers, employees, partners, agents or other associates, or any
of them,  such right to an injunction  to be  cumulative  and in addition to any
other  remedies GFB may have,  either in law or in equity.  In any proceeding to
enforce  any  provision  of  this  Agreement,  Employee  shall  not  assert  any
contention  that  there is an  adequate  remedy at law for the breach or default
upon  which  such  proceeding  is  based.  Nothing  in this  paragraph  shall be
construed  to prevent  such remedy in the  courts,  in the case of any breach of
this Agreement by Employee, as GFB may elect or invoke.

9.8 Severability.  If any of the provisions of Section 6.1 of this Agreement are
held  to be  unenforceable  because  of  the  scope,  duration  or  area  of its
applicability,  the court  making  such  determination  shall  have the power to
modify such scope duration or area or all of them, and such provision shall then
be applicable in such modified  form. If any provision of this Agreement is held
to be invalid,  illegal or  unenforceable  in any  respect,  the  validity,  and
enforceability  of all other  applications  of that  provision  and of all other
provisions and applications hereof shall not in any way be affected or impaired.

<PAGE>

9.9  Waiver.  No  provisions  of  this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically designated by the
Board of  Directors  of GFB. The failure of GFB or Employee at any time or times
to enforce its rights under the Agreement  strictly in accordance  with the same
shall not be construed as having created a custom in any way or manner  contrary
to the specific  provisions of this  Agreement or as having in any way or manner
modified or waived the same. No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of similar or  dissimilar  provisions  or conditions at the same or any
prior or subsequent time.

9.10  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.


IN WITNESS  WHEREOF the parties hereto have executed this  Agreement,  as of the
day and year first above written but actually on the dates set forth below.

GREAT FINANCIAL BANK, FSB


By:________________________________

Title:_____________________________

Date:______________________________




GREAT FINANCIAL CORPORATION
(GUARANTOR)

By:________________________________

Title:_____________________________

Date:______________________________

EMPLOYEE:__________________________
 
Date:______________________________


<PAGE>

                              EMPLOYMENT AGREEMENT

This is an Employment  Agreement (the  "Agreement")  dated as of January 1, 1997
(the  "Effective  Date"),  between  Great  Financial  Bank,  FSB ("GFB"),  Great
Financial Corporation ("Holding Company") and Jack H. Shipman ("Employee").

                                    RECITALS

A. GFB considers the  establishment  and  maintenance  of sound and vital senior
management  to be essential to protecting  and enhancing its best  interests and
therefore  GFB  desires  to enter  into an  agreement  governing  the  terms and
conditions of Employee's employment.

B. GFB is a  federally  chartered  Savings  Bank and is subject to the Office of
Thrift  Supervision  Regulation  Section  563.39,  which requires any agreements
between  GFB  and  its  employees  to be  in  writing  and  to  contain  certain
provisions.

C. The Board of Directors of GFB has considered and approved this Agreement with
respect to Employee's employment.

                                    AGREEMENT

The parties agree as follows:

                             Section 1 - Definitions

1.1 A "Change in Control" of GFB shall mean an event of a nature that:

(a)  during  any  period  of three  consecutive  years,  individuals  who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority  thereof  unless the election or nomination  for election of each new
Director was approved by a vote of at least two-thirds of the Board members then
still in office who were Board  members  at the  beginning  of the period or who
were similarly nominated;

(b) the  business of GFB or Holding  Company for which  Employee's  services are
principally  performed  is disposed of by GFB or Holding  Company  pursuant to a
partial or complete  liquidation of GFB or Holding Company,  a sale of assets of
GFB or Holding Company, or otherwise;

(c) GFB or  Holding  Company  consummates  the  transaction  contemplated  by an
agreement  which  results  in the  occurrence  of a Change in  Control of GFB or
Holding Company;

(d) the Board of GFB or Holding Company adopts a resolution to the effect that a
Change in Control of GFB or Holding  Company for purposes of this  Agreement has
occurred;

(e) an event of a nature  that would be  required  to be reported in response to
item  1(a) of the  current  report  on Form 8-K as in effect on the date of this
Agreement,  pursuant to Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 occurs;

(f) any  "person"  (as the  term is used in  Sections  13(d)  and  14(d)  of the
Securities  Exchange Act of 1934) is or becomes the  "beneficial  owner" (as the
term is defined in Rule  13d-3 of the  Securities  Exchange  Act),  directly  or
indirectly,  of securities of GFB or Holding Company  representing 20 percent or
more of  Holding  Company's  or  GFB's  outstanding  securities  except  for any
securities of GFB purchased by Holding Company in connection with the conversion
of GFB to stock form and any  securities  purchased by GFB's or Lincoln  Service
Mortgage Corporation's employee stock ownership plan and trust;

(g)  a  plan  of  reorganization,   merger,   consolidation,   sale  of  all  or
substantially  all  assets of GFB or Holding  Company  or a similar  transaction
occurs in which GFB or Holding Company is not the resulting entity; or

(h) change of  control  shall  have  occurred  as  described  in 12 CFR  Section
574.4(a) or successor regulations.

1.2 "Date of Termination" shall mean:

(a) If Employee's  employment is  automatically  terminated under Section 7.1 of
this  Agreement,  the date on which the event  which  triggered  that  automatic
termination occurred;

<PAGE>

(b) If Employee's  employment is terminated for Good Reason under Section 7.3 of
this  Agreement  or by GFB  under  Section  7.2(a) of this  Agreement,  the date
specified in the Notice of Termination.

(c) If  Employee's  employment  is terminated  under  Section  7.2(b),  the date
specified in Section 7.2(b).

(d) If  Employee's  employment  is  terminated  at the  end of the  Term of this
Agreement, the last day of such Term.

1.3 "Disability" shall mean Employee's inability, due to accident or physical or
mental  illness,  to  adequately  and fully  perform  the duties  required by an
employee in  Employee's  profession;  provided,  however,  that  Disability  for
purposes of this Agreement  shall not include any Disability  which results from
Employee's  engaging  in a  criminal  enterprise  or  from  Employee's  habitual
drunkenness, addiction to narcotics or intentionally inflicted injury. If at any
time  during  the Term the GFB  Board  makes a  determination  with  respect  to
Employee's  Disability,  that  determination  shall be  final,  conclusive,  and
binding upon GFB,  Employee,  and their successors in interest,  so long as that
determination has a reasonable basis.

1.4 "Good Reason" shall be deemed to exist if:

(a) within  three  years  after a Change in  Control of GFB or Holding  Company,
without  Employee's  express  written  consent,  Employee is assigned any duties
inconsistent with Employee's positions, duties, responsibilities and status with
GFB or  Holding  Company  immediately  prior to a Change  of  Control  of GFB or
Holding Company; Employee's actual job responsibilities as in effect immediately
prior to a Change of Control of GFB or Holding  Company are materially  changed;
or  Employee  is removed  from or is not  re-elected  to any of such  positions,
except in connection  with the  termination  of Employee's  employment:  (1) for
Cause; (2) on account of Retirement; (3) as a result of Employee's death; or (4)
by Employee other than for Good Reason; provided that the GFB Board's failure to
extend this Agreement for an additional year under Section 2.2 of this Agreement
shall not entitle Employee to terminate this Agreement for Good Reason;

(b) within three years of a Change in Control of GFB or Holding  Company,  GFB's
or Holding  Company's  principal  executive  offices are relocated to a location
more than 30 miles from its current location; or GFB or Holding Company requires
Employee to be based in any location which is more than 30 miles from Employee's
current base location,  except for required travel on GFB's or Holding Company's
business  to  an  extent   substantially   consistent  with  similarly  situated
executives' business travel obligations;

(c) within three years after a Change of Control of GFB or Holding Company,  GFB
fails to continue in effect any benefit or compensation plan, pension plan, life
insurance plan, health and accident plan or disability plan (including,  but not
limited to, GFB's participation in the Financial  Institutions  Retirement Fund)
in which Employee is  participating at the time of a Change of Control (or plans
providing Employee with substantially similar benefits),  such that there occurs
a material reduction in benefits before  termination,  or GFB or Holding Company
takes any action which would adversely  affect  Employee's  participation  in or
materially reduce  Employee's  benefits under any benefit plan maintained by GFB
or Holding Company or deprive Employee of any material fringe benefits;

(d) GFB fails to obtain the assumption of all  obligations  under this Agreement
by any successor as contemplated in Section 8.7 of this Agreement; or

(e) Employee's employment is purported to be terminated in a manner which is not
pursuant to a Notice of Termination  satisfying the  requirements of Section 7.4
of this  Agreement;  and,  for  purposes of this  Agreement,  no such  purported
termination shall be effective.

1.5 The "GFB Board" shall mean the Board of Directors of GFB.

1.6  "Notice of  Termination"  shall mean a notice,  from GFB or from  Employee,
which shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Employee's  employment under the provision
so indicated, and shall state the effective date of the termination.

1.7  "Permanent   Disability"  shall  mean  total  disability  arising  from  an
occupational  or  non-occupational  medically  determinable  physical  or mental
impairment which prevents the Employee from engaging in any substantial  gainful
activity and which is  determined  on a reasonable  basis by GFB to be permanent
and continuous for the remainder of the Employee's life.

<PAGE>

1.8 "Retirement"  shall mean  termination of Employee's  employment by reason of
Employee attaining age 65.

1.9  "Secret  or   Confidential   Information"   means  secret  or  confidential
information  of GFB  (including  secret  or  confidential  information  of GFB's
subsidiaries and  affiliates),  including but not limited to lists of customers;
identity  of  customers;  identity of  prospective  customers;  contract  terms;
bidding information and strategies; pricing methods; computer software; computer
software methods and documentation; hardware; salary information with respect to
GFB  employees;  financial  product  design  information;  GFB's  business plan;
methods  of  operation  of GFB or its  affiliates;  the  procedures,  forms  and
techniques used in servicing accounts;  and other documents or information which
are required to be maintained in confidence for the continued success of GFB and
its business.

1.10  Termination  for  "Cause"  by  GFB of  Employee's  employment  under  this
Agreement shall have the same meaning as it does in 12 C.F.R.  563.39, and shall
include termination because of:

(a) The intentional and  substantial  failure by Employee to perform  Employee's
duties with GFB (other than any such failure  resulting  from  incapacity due to
physical or mental illness); or

(b) Employee's personal dishonesty,  incompetence, willful misconduct, breach of
a fiduciary duty involving  personal profit,  willful violation of any law, rule
or  regulation   (other  than  traffic   violations  or  similar   offenses)  or
cease-and-desist order, or material breach of any provision of this Agreement.

Notwithstanding  the  foregoing,  Employee  shall  not be  deemed  to have  been
terminated  for Cause  unless  and until  there  shall  have been  delivered  to
Employee a copy of a  resolution  duly  adopted by the GFB Board at a meeting of
the GFB Board called and held for that  purpose,  finding that in the good faith
opinion of the GFB Board, GFB has cause for terminating  Employee and specifying
the particulars thereof in detail.

                         Section 2 - Employment and Term

2.1  Employment.  GFB agrees to employ  Employee and Employee agrees to serve as
President  and  Chief  Operating  Officer  of GFB.  Employee  agrees  to  accept
Employment on the terms and conditions set forth in this Agreement.

2.2 Term.  Subject to  extension  in  accordance  with this Section 2 and unless
sooner  terminated  as  provided in Section 7, the term of this  Agreement  (the
"Term") shall be the period beginning on January 1, 1997 (the "Effective  Date")
and ending April 15,  1999,  or such earlier time as provided by Section 7.1. On
or before  December 31,  1997,  December 31, 1998 and April 14, 1999 and each 12
month anniversary thereafter,  the GFB Board shall review Employee's performance
under this  Agreement to determine  whether GFB desires that the  then-remaining
Term be extended.  If the GFB Board  recommends  and  Employee  consents to such
extensions,  then the then-remaining  Term shall be extended by no more than one
year.

                         Section 3 - Duties of Employee

3.1 Time Devoted;  Duties.  Employee shall devote his entire time, attention and
energies to the  business of GFB and he shall  render  such  administrative  and
management services to GFB as are customarily performed by persons situated in a
similar  executive  capacity,  including those services  prescribed from time to
time by the GFB  Board;  provided,  however,  that  Employee  may  engage in the
activities  described in Exhibit A so long as they do not  interfere or conflict
with his duties with GFB and Holding  Company.  Employee shall also promote,  by
entertainment or otherwise,  as and to the extent permitted by law, the business
of GFB.  Employee  shall  perform his duties under this  Agreement in accordance
with such reasonable  standards expected of employees with comparable  positions
in comparable  organizations  and as may be established from time to time by the
GFB Board.  Employee  shall also conduct his  personal  affairs,  including  his
personal financial affairs, in a manner appropriate for his position.

3.2 No Conflicting  Activities.  During the term of Employee's  employment under
this Agreement,  Employee shall not engage in any business or activity  contrary
to the business affairs or interests of GFB.  Nothing  contained in this Section
3.2 shall be deemed to prevent or limit the right of  Employee  to invest in the
capital stock or other securities of any business.

<PAGE>
                            Section 4 - Compensation

4.1 Base  Compensation.  Employee  shall  receive for his services the following
Base Compensation:

(a) GFB shall pay  Employee  an annual  salary of  $235,000  payable in 26 equal
bi-weekly installments.

(b) Any  increase  in  Employee's  Base  Compensation  shall be left to the sole
discretion  of the GFB Board.  The  Employee's  Base  Compensation  shall not be
subject to  reduction  during  the Term of this  Agreement  except as  otherwise
provided in this Agreement.

4.2 Bonus Compensation.  GFB shall pay Employee Bonus Compensation as determined
by the GFB Board in its discretion.

4.3  Additional   Compensation.   As  further   compensation   (the  "Additional
Compensation")  GFB shall make available the benefits provided to Employee under
GFB's Recognition and Retention Plan for Officers and Employees  effective March
30,  1994 and shall  make  available  the stock  options  provided  to  Employee
pursuant to Holding  Company's 1994 Incentive Stock Option Plan for Officers and
Employees effective March 30, 1994, as amended.

4.4 Source of Payments.  All payments  provided for in this  Agreement  shall be
timely paid by GFB. However, Holding Company unconditionally  guarantees payment
and provision of all amounts and benefits due hereunder to Employee and, if such
amounts and benefits  due from GFB are not timely paid or provided by GFB,  such
amounts and benefits shall be paid or provided by Holding Company.

                          Section 5 - Employee Benefits

5.1  Vacations.  During each  calendar year during the Term,  Employee  shall be
entitled to a vacation of three  weeks,  during  which  Employee's  compensation
shall be paid in full.  At least  one week  must be taken in  consecutive  days.
Unused  vacation for any year during the Term may not be carried forward for use
in the next  following  year.  Upon any  termination  of  Employee's  employment
hereunder,  Employee  shall be  entitled  to pro rata  compensation  for  unused
vacation  time earned during the year of  termination,  based upon the number of
months Employee was employed during that year.

5.2 Business  Expenses.  GFB shall reimburse Employee for ordinary and necessary
business expenses incurred by Employee in performing his duties pursuant to this
Agreement,  including but not limited to reasonable  travel,  entertainment  and
similar expenses that Employee incurs in promoting GFB's business; provided that
GFB shall not reimburse any such expense which, prior to its being incurred, GFB
directed  Employee  not  to  incur.  The   reimbursement   shall  be  made  upon
presentation  to GFB by  Employee,  from  time to time,  of an  account  of such
expenses in such form and in such detail as GFB may request.

5.3 Fringe  Benefits.  In addition to benefits  specifically  described  herein;
Employee  shall be entitled to receive  from GFB the fringe  benefits  generally
available to full-time senior management employees of GFB, as those benefits may
be changed from time to time.
 
5.4  Disability  Insurance.  Throughout  the Term of this  Agreement,  GFB shall
provide  Employee with long term disability  coverage of 60% of Employee's total
pay from the previous year, which benefit begins no later than 90 days after the
Disability occurs.

                         Section 6 - Confidentiality and
                             Covenant Not to Compete

6.1 Covenant Not to Compete. In consideration of the GFB's continued  employment
of  Employee  pursuant to this  Agreement,  Employee  covenants  and agrees that
Employee  shall  not  during  the  one-year  period  immediately  following  the
termination of his employment  under this  Agreement,  if (1) GFB terminated the
employment and severance compensation is payable pursuant to Section 8.4 or 8.5,
or (2) Employee has retired, become disabled or voluntarily terminated:

(a) without the prior written consent of GFB, engage or become interested in any
capacity, directly or indirectly (whether as proprietor,  stockholder, director,
partner,  employee,  trustee,  beneficiary,  or in any  other  capacity)  in any
business selling,  providing or developing products or services competitive with
products or services sold or  maintained  by GFB within a 50-mile  radius of the
Louisville Metropolitan Area; or

(b) recruit or solicit for employment  any current or future  employee of GFB or
any of its respective successors or any entities related to it.

<PAGE>

6.2  Confidential   Information.   Employee  acknowledges  that  all  Secret  or
Confidential  Information is the exclusive  property of GFB.  Employee shall not
during the period of his employment by GFB or at any time  thereafter,  disclose
to any person,  firm or  corporation,  or publish,  or use for any purpose,  any
Secret or Confidential  Information  except as properly required in the ordinary
course  of  business  of GFB or as  directed  and  authorized  by GFB.  Upon the
termination  of his  employment  with GFB, for any reason  whatsoever,  Employee
shall  return  and  deliver  to GFB  within  7 days any and all  papers,  books,
records,  documents,  memoranda  and  manuals,  including  all  copies  thereof,
belonging to GFB or relating to its business, in Employee's possession,  whether
prepared  by  Employee  or  others.  If at any time  after  the  termination  of
employment,   Employee  determines  that  he  has  any  Secret  or  Confidential
Information in his possession or control,  Employee shall immediately return all
such Secret or Confidential Information to GFB including all copies and portions
thereof.

6.3 Disclosure and Survival of Covenants.  If Employee,  in the future, seeks or
is offered employment by any other company,  firm, or person, he shall provide a
copy of this Agreement to the prospective employer prior to accepting employment
with that  prospective  employer.  The  provisions of Sections 6.1 and 6.2 shall
survive any termination of this Agreement.

                             Section 7 - Termination

7.1 Automatic  Termination.  Employment  under this Agreement shall terminate on
the death or Permanent  Disability of Employee or by the Employee  attaining age
65 during the Term of this Agreement.

7.2 Involuntary Termination.

(a) Termination by the Board.  The GFB Board may terminate this Agreement at any
time.

(b) Termination or Suspension by the Office of Thrift Supervision.

(i) If Employee is suspended and/or  temporarily  prohibited from performing his
duties under this  Agreement by a notice served under Section  8(e)(3) or (g)(1)
of the Federal  Deposit  Insurance Act (12 U.S.C.  1818(e)(3) and (g)(1)),  then
GFB's  obligations  under this  Agreement  shall be  suspended as of the date of
service of such notice unless stayed by appropriate proceedings.  If the charges
in the notice are dismissed, GFB may, in its discretion, (a) pay Employee all or
part of the compensation  withheld while  obligations  under this Agreement were
suspended and (b) reinstate (in whole or in part) any of its  obligations  which
were suspended.

(ii) If Employee is removed and/or permanently  prohibited from participating in
the conduct of GFB's affairs by an order issued under section  8(e)(4) or (g)(1)
of the Federal  Deposit  Insurance  Act (12 U.S.C.  1818(e)(4)  or (g)(1)),  all
obligations of GFB under this Agreement shall terminate as of the effective date
of the order, but vested rights of Employee shall not be affected.

(iii) If GFB is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all  obligations  under this Agreement shall terminate as of the
date of default, but vested rights of Employee shall not be affected.

(iv) All obligations under this Agreement shall terminate,  except to the extent
determined  that  continuation  of the contract is necessary  for the  continued
operation  of GFB  (a) by  action  of the  Director  of  the  Office  of  Thrift
Supervision  (the  "Director")  or his or her designee,  at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement  to  provide  assistance  to or on behalf  of GFB under the  authority
contained in section 13(c) of the Federal  Deposit  Insurance Act; or (b) by the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of GFB or
when GFB is determined by the Director to be in an unsafe or unsound  condition.
Any rights of Employee that have already vested,  however, shall not be affected
by such action.

7.3 Voluntary Termination. Employee may terminate his employment for Good Reason
by giving Notice of Termination in accordance with Section 7.4 below.

7.4 Notice of Termination.  Any  termination by GFB or by Employee,  pursuant to
this  Agreement,  shall be  communicated by written Notice of Termination to the
other party hereto.

7.5 Conflicts with Federal Law. If any of the termination  provisions  contained
in this Agreement conflict  with Office of Thrift Supervision  regulation 12 CFR
563.39(b), or any successor regulation, the latter shall prevail.

<PAGE>
                     Section 8 - Compensation on Termination

8.1 Compensation Upon Death. If Employee's  employment is terminated  because of
the death of Employee, GFB shall pay Employee's executors or administrators:  a)
within 30 days of death the  unpaid  balance  of  Employee's  Base  Compensation
through the end of the month in which Employee's death occurred,  at the rate in
effect on the date of Employee's  death and b) as soon as such Employee's  bonus
is calculated,  an amount equal to Employee's Bonus Compensation for the current
year (if any was paid) multiplied by the fractional  portion of the year between
the first day of the year in which  Employee died and the date of the Employee's
death; and shall have no further obligations under this Agreement.

8.2 Compensation  Upon Disability.  If Employee's  active work ceases because of
Disability,  GFB  shall  continue,  as  and  when  scheduled,  to  pay  Employee
Employee's Base Compensation through the date he ceased work, plus three months'
additional Base Compensation, at 100% of the rate in effect on the date Employee
became  Disabled,  and thereafter GFB shall have no further  obligation for cash
compensation unless and until Employee returns to work.

8.3 Compensation  Upon Termination for Cause. If Employee's  employment shall be
terminated  by GFB for  Cause,  GFB shall  pay  Employee  his Base  Compensation
through the Date of Termination,  and GFB shall not have any further obligations
to Employee under this Agreement.

8.4  Compensation  Upon  Termination by GFB Other Than For Cause.  If Employee's
employment  is  terminated  by GFB  other  than  for  Cause,  then  unless  such
termination  occurs  simultaneous with or within two years following a Change in
Control  of GFB or Holding  Company,  then  Employee  shall be  entitled  to the
compensation  Employee  would have been entitled to under this  Agreement as and
when payable hereunder for the remainder of the Term,  provided that Employee in
good faith actively seeks  employment  similar to employee's  position with GFB,
and  that  any  payments  under  this  Section  8.4  shall  be  reduced  by  any
compensation Employee receives from other employment thereafter accepted.

8.5  Compensation  Upon  Termination  For Good  Reason  or  Following  Change of
Control.

(a) If (1) Employee  terminates  employment under Section 7.3 for Good Reason or
(2) any of the events constituting a Change of Control of GFB or Holding Company
shall have occurred and Employee's  employment is terminated by GFB within three
years thereafter other than by reason of (a) Employee's death or disability,  or
(b)  termination  by GFB for Cause,  then GFB shall pay to Employee as severance
compensation  in a lump sum (discounted to present value using the interest rate
then applicable to newly issued fixed rate three-year certificates of deposit at
GFB, Louisville, Kentucky) on the 30th day following the Date of Termination:

(i) the unpaid balance of Employee's full Base Compensation  through the Date of
Termination  at the rate in effect at the time Notice of  Termination  is given;
plus

(ii) an amount equal to Employee's full Base  Compensation  for two years at the
rate in effect as of the Date of Termination; plus

(iii) Employer shall make available to Employee the Additional  Compensation  to
which Employee would be entitled during the Term; plus

(iv) an amount equal to Employee's Bonus  Compensation for the previous year (if
any was paid), multiplied by two.

In addition to the  severance  benefits set forth in (i),  (ii),  (iii) and (iv)
above,  GFB  shall:  (a) to the  extent  not  prohibited  by  Office  of  Thrift
Supervision  pronouncements pay all legal fees and expenses incurred by Employee
resulting  from  termination  (including  all such  fees and  expenses,  if any,
incurred in contesting  any such  termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and (b) maintain in full force
and effect,  for the  continued  benefit of Employee for a two year period after
the Date of Termination, all employee benefit plans and programs or arrangements
in which  Employee  was  entitled to  participate  immediately  prior to Date of
Termination;  provided,  however,  that Employee's  continued  participation  is
possible under the general terms and  provisions of such plans and programs.  If
Employee's  participation  in any such  plan or  program  is  barred,  GFB shall
arrange to provide Employee with benefits  substantially  similar or, if that is
not  possible,  of equal  value to those  which  Employee is entitled to receive
under such plans and  programs.  At the end of the period of coverage,  Employee
shall  have  the  option  to  have  assigned  to  him at no  cost  and  with  no
apportionment of prepaid premiums,  any assignable  insurance  policies owned by
GFB relating specifically to Employee.

<PAGE>

Notwithstanding  any of the foregoing,  if Employee is within three years of age
65 on the Date of  Termination,  then (a) GFB shall reduce the amount payable to
Employee  under  paragraphs  (ii) and (iii) above to reflect  only the number of
months  between  the  Date of  Termination  and the  date  Employee  is or would
otherwise attain age 65, and (b) GFB shall have no obligations to Employee after
Employee attains age 65.

(b)  Employee  shall not be  required  to  mitigate  the  amount of any  payment
provided for in this Section 8.5 by seeking other  employment or otherwise,  nor
shall the amount of any payment  provided  for in this Section 8.5 be reduced by
any  compensation  earned by  Employee  as the result of  employment  by another
employer after the Date of Termination, or otherwise.

8.6 Compensation Upon Retirement. If Employee terminates employment in the month
of his 65th  birthday,  then Employee shall be paid within 30 days from the date
of his retirement the unpaid balance of Employee's Base Compensation through the
date of his  retirement and shall be paid, as soon as such  Employee's  bonus is
calculated,  an amount equal to Employee's  Bonus  Compensation  for the current
year (if any was paid), multiplied by the fractional portion of the year between
the first day of the year in which  Employee  retired and the date of Employee's
retirement.

8.7  Successors  of GFB.  GFB will  require  any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially all of the business and/or assets of GFB, by agreement in form and
substance  satisfactory  to  Employee,  expressly to assume and agree to perform
this  Agreement  in the same  manner  and to the same  extent  that GFB would be
required to perform it if no such succession had taken place.  Failure of GFB to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach  of this  Agreement  and  shall  entitle  Employee  to  terminate  this
agreement for Good Reason under paragraph 7.3 of this Agreement. As used in this
Agreement, "GFB" shall mean GFB as hereinbefore defined and any successor to its
business and/or assets as aforesaid or which otherwise  becomes bound by all the
terms and provisions of this Agreement by operation of law.

8.8 Reduction of Amounts Payable.

(a) In no event shall any amount  payable under any provision of this  Agreement
equal or exceed an amount which would (i) cause GFB to forfeit (as determined by
the Certified Public Accountants or legal counsel employed by GFB),  pursuant to
Section 280G(a) of the Internal Revenue Code of 1986, as amended,  its deduction
for any or all such amounts payable,  or (ii) exceed maximum amounts  determined
by the Office of Thrift  Supervision  to  constitute a safe and sound  practice.
Pursuant to this Section  8.8,  the GFB Board has the power to reduce  severance
benefits payable under this Agreement,  if such benefits alone or in conjunction
with termination benefits provided under any other severance pay plan maintained
by GFB or any other plan or agreement  between Employee and GFB, would cause GFB
to forfeit  otherwise  deductible  payments or would exceed the Office of Thrift
Supervision  maximums;  provided,  however that no benefits  payable  under this
Agreement shall be reduced pursuant to this Section 8.8 to less than $1.00 below
the amount of benefits (i) which GFB can properly  deduct under Section  280G(a)
of the Internal Revenue Code of 1986, as amended, or (ii) which equal the amount
the Office of Thrift  Supervision  considers  the  maximum  safely  and  soundly
payable.

(b) Any payments made to the Employee pursuant to this Agreement,  or otherwise,
are subject to and conditioned  upon  their  compliance with  12 U.S.C.  1828(k)
and any regulation promulgated thereunder.

                            Section 9 - Miscellaneous

9.1 Notice.  Any notice or request  required or permitted to be given under this
Agreement  shall be in writing  and shall be deemed  sufficiently  given for all
purposes  if mailed by  certified  mail,  postage  prepaid  and  return  receipt
requested,  addressed to the intended  recipient at the following address (or at
such other  address as either party may  designate in writing to the other party
by certified mail as described above):

If to GFB:
Great Financial Bank, FSB
One Financial Square
Louisville, Kentucky 40202

<PAGE>

All  notices to GFB shall be directed to the  attention  of the Chief  Executive
Officer of GFB with a copy to the Treasurer of GFB.

If to Employee:
Jack Shipman
8225 Highway 329
Crestwood, KY  40014

9.2 Headings.  The headings used in this Agreement have been included solely for
ease of  reference  and are not to be construed  in any  interpretation  of this
Agreement.

9.3 Entire Agreement.  This instrument contains the entire agreement between the
parties with respect to the subject matter hereof, and shall supersede all prior
understanding  with  respect  to the  subject  matter  hereof,  except  that the
Indemnity  Agreement  dated  October  25,  1991 and the  Supplemental  Executive
Retirement Plan dated as of January 1, 1992 between  Employee and GFB shall also
continue to be effective.  No agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either  party  which  are  not  set  forth  expressly  in  this  Agreement.   No
modification  or  addition  to this  Agreement  shall be  enforceable  unless in
writing and signed by the party against whom enforcement is sought.

9.4  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the Commonwealth of Kentucky.

9.5 Arbitration.  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration,  conducted before a
panel of three arbitrators  sitting in a home office selected by Employee within
fifty (50) miles from the location of GFB, in  accordance  with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Employee shall be entitled to seek specific  performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or  controversy  arising  under or in  connection  with
Employee's  termination  is resolved in favor of Employee,  whether by judgment,
arbitration  or  settlement,  Employee  shall be  entitled to the payment of all
back-pay,  including  salary,  bonuses and any other cash  compensation,  fringe
benefits and any compensation and benefits due Employee under this Agreement.

9.6 Benefit.  This Agreement  shall inure to the benefit of and shall be binding
upon GFB, its successors and assigns, and this Agreement shall not be assignable
by Employee.

9.7  Remedies.  Employee  and GFB  acknowledge  that the services to be rendered
under this  Agreement are special,  unique and of  extraordinary  character.  If
Employee  breaches any  covenants,  terms and conditions of this Agreement to be
performed by him, GFB will suffer  irreparable  damage and it will be impossible
to estimate or determine GFB's damages. Therefore, GFB shall, upon proof of such
breach,  be  entitled as a matter of course to an  injunction  from any court of
competent  jurisdiction  restraining any further  violation of such covenants by
Employee, his employers, employees, partners, agents or other associates, or any
of them,  such right to an injunction  to be  cumulative  and in addition to any
other  remedies GFB may have,  either in law or in equity.  In any proceeding to
enforce  any  provision  of  this  Agreement,  Employee  shall  not  assert  any
contention  that  there is an  adequate  remedy at law for the breach or default
upon  which  such  proceeding  is  based.  Nothing  in this  paragraph  shall be
construed  to prevent  such remedy in the  courts,  in the case of any breach of
this Agreement by Employee, as GFB may elect or invoke.

9.8 Severability.  If any of the provisions of Section 6.1 of this Agreement are
held  to be  unenforceable  because  of  the  scope,  duration  or  area  of its
applicability,  the court  making  such  determination  shall  have the power to
modify such scope duration or area or all of them, and such provision shall then
be applicable in such modified  form. If any provision of this Agreement is held
to be invalid,  illegal or  unenforceable  in any  respect,  the  validity,  and
enforceability  of all other  applications  of that  provision  and of all other
provisions and applications hereof shall not in any way be affected or impaired.

<PAGE>

9.9  Waiver.  No  provisions  of  this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically designated by the
Board of  Directors  of GFB. The failure of GFB or Employee at any time or times
to enforce its rights under the Agreement  strictly in accordance  with the same
shall not be construed as having created a custom in any way or manner  contrary
to the specific  provisions of this  Agreement or as having in any way or manner
modified or waived the same. No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of similar or  dissimilar  provisions  or conditions at the same or any
prior or subsequent time.

9.10  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.


IN WITNESS  WHEREOF the parties hereto have executed this  Agreement,  as of the
day and year first above written but actually on the dates set forth below.

GREAT FINANCIAL BANK, FSB


By:________________________________

Title:_____________________________

Date:______________________________




GREAT FINANCIAL CORPORATION
(GUARANTOR)

By:________________________________

Title:_____________________________

Date:______________________________

EMPLOYEE:__________________________
 
Date:______________________________

<PAGE>

                                    EXHIBIT A

Pursuant to paragraph 3.1 of the Employment  Agreement,  Employee may advise the
management and/or serve as a director of an automobile  acceptance company to be
established by Sam Swope,  as long as his duties in this regard do not interfere
with his duties with GFB and the Holding Company.

<PAGE>

                              EMPLOYMENT AGREEMENT

This is an Employment  Agreement (the  "Agreement")  dated as of January 1, 1997
(the  "Effective  Date"),  between  Great  Financial  Bank,  FSB ("GFB"),  Great
Financial Corporation ("Holding Company") and James Statler ("Employee").

                                    RECITALS

A. GFB considers the  establishment  and  maintenance  of sound and vital senior
management  to be essential to protecting  and enhancing its best  interests and
therefore  GFB  desires  to enter  into an  agreement  governing  the  terms and
conditions of Employee's employment.

B. GFB is a  federally  chartered  Savings  Bank and is subject to the Office of
Thrift  Supervision  Regulation  Section  563.39,  which requires any agreements
between  GFB  and  its  employees  to be  in  writing  and  to  contain  certain
provisions.

C. The Board of Directors of GFB has considered and approved this Agreement with
respect to Employee's employment.

                                    AGREEMENT

The parties agree as follows:

                             Section 1 - Definitions

1.1 A "Change in Control" of GFB shall mean an event of a nature that:

(a)  during  any  period  of three  consecutive  years,  individuals  who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority  thereof  unless the election or nomination  for election of each new
Director was approved by a vote of at least two-thirds of the Board members then
still in office who were Board  members  at the  beginning  of the period or who
were similarly nominated;

(b) the  business of GFB or Holding  Company for which  Employee's  services are
principally  performed  is disposed of by GFB or Holding  Company  pursuant to a
partial or complete  liquidation of GFB or Holding Company,  a sale of assets of
GFB or Holding Company, or otherwise;

(c) GFB or  Holding  Company  consummates  the  transaction  contemplated  by an
agreement  which  results  in the  occurrence  of a Change in  Control of GFB or
Holding Company;

(d) the Board of GFB or Holding Company adopts a resolution to the effect that a
Change in Control of GFB or Holding  Company for purposes of this  Agreement has
occurred;

(e) an event of a nature  that would be  required  to be reported in response to
item  1(a) of the  current  report  on Form 8-K as in effect on the date of this
Agreement,  pursuant to Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 occurs;

(f) any  "person"  (as the  term is used in  Sections  13(d)  and  14(d)  of the
Securities  Exchange Act of 1934) is or becomes the  "beneficial  owner" (as the
term is defined in Rule  13d-3 of the  Securities  Exchange  Act),  directly  or
indirectly,  of securities of GFB or Holding Company  representing 20 percent or
more of  Holding  Company's  or  GFB's  outstanding  securities  except  for any
securities of GFB purchased by Holding Company in connection with the conversion
of GFB to stock form and any  securities  purchased by GFB's or Lincoln  Service
Mortgage Corporation's employee stock ownership plan and trust;

(g)  a  plan  of  reorganization,   merger,   consolidation,   sale  of  all  or
substantially  all  assets of GFB or Holding  Company  or a similar  transaction
occurs in which GFB or Holding Company is not the resulting entity; or

(h) change of  control  shall  have  occurred  as  described  in 12 CFR  Section
574.4(a) or successor regulations.

1.2 "Date of Termination" shall mean:

(a) If Employee's  employment is  automatically  terminated under Section 7.1 of
this  Agreement,  the date on which the event  which  triggered  that  automatic
termination occurred;

<PAGE>

(b) If Employee's  employment is terminated for Good Reason under Section 7.3 of
this  Agreement  or by GFB  under  Section  7.2(a) of this  Agreement,  the date
specified in the Notice of Termination.

(c) If  Employee's  employment  is terminated  under  Section  7.2(b),  the date
specified in Section 7.2(b).

(d) If  Employee's  employment  is  terminated  at the  end of the  Term of this
Agreement, the last day of such Term.

1.3 "Disability" shall mean Employee's inability, due to accident or physical or
mental  illness,  to  adequately  and fully  perform  the duties  required by an
employee in  Employee's  profession;  provided,  however,  that  Disability  for
purposes of this Agreement  shall not include any Disability  which results from
Employee's  engaging  in a  criminal  enterprise  or  from  Employee's  habitual
drunkenness, addiction to narcotics or intentionally inflicted injury. If at any
time  during  the Term the GFB  Board  makes a  determination  with  respect  to
Employee's  Disability,  that  determination  shall be  final,  conclusive,  and
binding upon GFB,  Employee,  and their successors in interest,  so long as that
determination has a reasonable basis.

1.4 "Good Reason" shall be deemed to exist if:

(a) within  three  years  after a Change in  Control of GFB or Holding  Company,
without  Employee's  express  written  consent,  Employee is assigned any duties
inconsistent with Employee's positions, duties, responsibilities and status with
GFB or  Holding  Company  immediately  prior to a Change  of  Control  of GFB or
Holding Company; Employee's actual job responsibilities as in effect immediately
prior to a Change of Control of GFB or Holding  Company are materially  changed;
or  Employee  is removed  from or is not  re-elected  to any of such  positions,
except in connection  with the  termination  of Employee's  employment:  (1) for
Cause; (2) on account of Retirement; (3) as a result of Employee's death; or (4)
by Employee other than for Good Reason; provided that the GFB Board's failure to
extend this Agreement for an additional year under Section 2.2 of this Agreement
shall not entitle Employee to terminate this Agreement for Good Reason;

(b) within three years of a Change in Control of GFB or Holding  Company,  GFB's
or Holding  Company's  principal  executive  offices are relocated to a location
more than 30 miles from its current location; or GFB or Holding Company requires
Employee to be based in any location which is more than 30 miles from Employee's
current base location,  except for required travel on GFB's or Holding Company's
business  to  an  extent   substantially   consistent  with  similarly  situated
executives' business travel obligations;

(c) within three years after a Change of Control of GFB or Holding Company,  GFB
fails to continue in effect any benefit or compensation plan, pension plan, life
insurance plan, health and accident plan or disability plan (including,  but not
limited to, GFB's participation in the Financial  Institutions  Retirement Fund)
in which Employee is  participating at the time of a Change of Control (or plans
providing Employee with substantially similar benefits),  such that there occurs
a material reduction in benefits before  termination,  or GFB or Holding Company
takes any action which would adversely  affect  Employee's  participation  in or
materially reduce  Employee's  benefits under any benefit plan maintained by GFB
or Holding Company or deprive Employee of any material fringe benefits;

(d) GFB fails to obtain the assumption of all  obligations  under this Agreement
by any successor as contemplated in Section 8.7 of this Agreement; or

(e) Employee's employment is purported to be terminated in a manner which is not
pursuant to a Notice of Termination  satisfying the  requirements of Section 7.4
of this  Agreement;  and,  for  purposes of this  Agreement,  no such  purported
termination shall be effective.

1.5 The "GFB Board" shall mean the Board of Directors of GFB.

1.6  "Notice of  Termination"  shall mean a notice,  from GFB or from  Employee,
which shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and  circumstances  claimed
to provide a basis for termination of Employee's  employment under the provision
so indicated, and shall state the effective date of the termination.

1.7  "Permanent   Disability"  shall  mean  total  disability  arising  from  an
occupational  or  non-occupational  medically  determinable  physical  or mental
impairment which prevents the Employee from engaging in any substantial  gainful
activity and which is  determined  on a reasonable  basis by GFB to be permanent
and continuous for the remainder of the Employee's life.

<PAGE>

1.8 "Retirement"  shall mean  termination of Employee's  employment by reason of
Employee attaining age 65.

1.9  "Secret  or   Confidential   Information"   means  secret  or  confidential
information  of GFB  (including  secret  or  confidential  information  of GFB's
subsidiaries and  affiliates),  including but not limited to lists of customers;
identity  of  customers;  identity of  prospective  customers;  contract  terms;
bidding information and strategies; pricing methods; computer software; computer
software methods and documentation; hardware; salary information with respect to
GFB  employees;  financial  product  design  information;  GFB's  business plan;
methods  of  operation  of GFB or its  affiliates;  the  procedures,  forms  and
techniques used in servicing accounts;  and other documents or information which
are required to be maintained in confidence for the continued success of GFB and
its business.

1.10  Termination  for  "Cause"  by  GFB of  Employee's  employment  under  this
Agreement shall have the same meaning as it does in 12 C.F.R.  563.39, and shall
include termination because of:

(a) The intentional and  substantial  failure by Employee to perform  Employee's
duties with GFB (other than any such failure  resulting  from  incapacity due to
physical or mental illness); or

(b) Employee's personal dishonesty,  incompetence, willful misconduct, breach of
a fiduciary duty involving  personal profit,  willful violation of any law, rule
or  regulation   (other  than  traffic   violations  or  similar   offenses)  or
cease-and-desist order, or material breach of any provision of this Agreement.

Notwithstanding  the  foregoing,  Employee  shall  not be  deemed  to have  been
terminated  for Cause  unless  and until  there  shall  have been  delivered  to
Employee a copy of a  resolution  duly  adopted by the GFB Board at a meeting of
the GFB Board called and held for that  purpose,  finding that in the good faith
opinion of the GFB Board, GFB has cause for terminating  Employee and specifying
the particulars thereof in detail.

                         Section 2 - Employment and Term

2.1  Employment.  GFB agrees to employ  Employee and Employee agrees to serve as
Executive Vice President-Chief Administrative Officer of GFB. Employee agrees to
accept Employment on the terms and conditions set forth in this Agreement.

2.2 Term.  Subject to  extension  in  accordance  with this Section 2 and unless
sooner  terminated  as  provided in Section 7, the term of this  Agreement  (the
"Term") shall be the period beginning on January 1, 1997 (the "Effective  Date")
and ending April 15,  1999,  or such earlier time as provided by Section 7.1. On
or before  December 31,  1997,  December 31, 1998 and April 14, 1999 and each 12
month anniversary thereafter,  the GFB Board shall review Employee's performance
under this  Agreement to determine  whether GFB desires that the  then-remaining
Term be extended.  If the GFB Board  recommends  and  Employee  consents to such
extensions,  then the then-remaining  Term shall be extended by no more than one
year.

                         Section 3 - Duties of Employee

3.1 Time Devoted;  Duties.  Employee shall devote his entire time, attention and
energies to the  business of GFB and he shall  render  such  administrative  and
management services to GFB as are customarily performed by persons situated in a
similar  executive  capacity,  including those services  prescribed from time to
time  by the GFB  Board.  Employee  shall  also  promote,  by  entertainment  or
otherwise,  as and to the extent permitted by law, the business of GFB. Employee
shall perform his duties under this Agreement in accordance with such reasonable
standards  expected  of  employees  with  comparable   positions  in  comparable
organizations  and as may be  established  from  time to time by the GFB  Board.
Employee  shall also  conduct  his  personal  affairs,  including  his  personal
financial affairs, in a manner appropriate for his position.

3.2 No Conflicting  Activities.  During the term of Employee's  employment under
this Agreement,  Employee shall not engage in any business or activity  contrary
to the business affairs or interests of GFB.  Nothing  contained in this Section
3.2 shall be deemed to prevent or limit the right of  Employee  to invest in the
capital stock or other securities of any business.

<PAGE>

                            Section 4 - Compensation

4.1 Base  Compensation.  Employee  shall  receive for his services the following
Base Compensation:

(a) GFB shall pay  Employee  an annual  salary of  $161,250  payable in 26 equal
bi-weekly installments.

(b) Any  increase  in  Employee's  Base  Compensation  shall be left to the sole
discretion  of the GFB Board.  The  Employee's  Base  Compensation  shall not be
subject to  reduction  during  the Term of this  Agreement  except as  otherwise
provided in this Agreement.

4.2 Bonus Compensation.  GFB shall pay Employee Bonus Compensation as determined
by the GFB Board in its discretion.

4.3  Additional   Compensation.   As  further   compensation   (the  "Additional
Compensation")  GFB shall make available the benefits provided to Employee under
GFB's Recognition and Retention Plan for Officers and Employees  effective March
30,  1994 and shall  make  available  the stock  options  provided  to  Employee
pursuant to Holding  Company's 1994 Incentive Stock Option Plan for Officers and
Employees effective March 30, 1994, as amended.

4.4 Source of Payments.  All payments  provided for in this  Agreement  shall be
timely paid by GFB. However, Holding Company unconditionally  guarantees payment
and provision of all amounts and benefits due hereunder to Employee and, if such
amounts and benefits  due from GFB are not timely paid or provided by GFB,  such
amounts and benefits shall be paid or provided by Holding Company.

                          Section 5 - Employee Benefits

5.1  Vacations.  During each  calendar year during the Term,  Employee  shall be
entitled to a vacation of three  weeks,  during  which  Employee's  compensation
shall be paid in full.  At least  one week  must be taken in  consecutive  days.
Unused  vacation for any year during the Term may not be carried forward for use
in the next  following  year.  Upon any  termination  of  Employee's  employment
hereunder,  Employee  shall be  entitled  to pro rata  compensation  for  unused
vacation  time earned during the year of  termination,  based upon the number of
months Employee was employed during that year.

5.2 Business  Expenses.  GFB shall reimburse Employee for ordinary and necessary
business expenses incurred by Employee in performing his duties pursuant to this
Agreement,  including but not limited to reasonable  travel,  entertainment  and
similar expenses that Employee incurs in promoting GFB's business; provided that
GFB shall not reimburse any such expense which, prior to its being incurred, GFB
directed  Employee  not  to  incur.  The   reimbursement   shall  be  made  upon
presentation  to GFB by  Employee,  from  time to time,  of an  account  of such
expenses in such form and in such detail as GFB may request.

5.3 Fringe  Benefits.  In addition to benefits  specifically  described  herein;
Employee  shall be entitled to receive  from GFB the fringe  benefits  generally
available to full-time senior management employees of GFB, as those benefits may
be changed from time to time.
 
5.4  Disability  Insurance.  Throughout  the Term of this  Agreement,  GFB shall
provide  Employee with long term disability  coverage of 60% of Employee's total
pay from the previous year, which benefit begins no later than 90 days after the
Disability occurs.

                         Section 6 - Confidentiality and
                             Covenant Not to Compete

6.1 Covenant Not to Compete. In consideration of the GFB's continued  employment
of  Employee  pursuant to this  Agreement,  Employee  covenants  and agrees that
Employee  shall  not  during  the  one-year  period  immediately  following  the
termination of his employment  under this  Agreement,  if (1) GFB terminated the
employment and severance compensation is payable pursuant to Section 8.4 or 8.5,
or (2) Employee has retired, become disabled or voluntarily terminated:

(a) without the prior written consent of GFB, engage or become interested in any
capacity, directly or indirectly (whether as proprietor,  stockholder, director,
partner,  employee,  trustee,  beneficiary,  or in any  other  capacity)  in any
business selling,  providing or developing products or services competitive with
products or services sold or  maintained  by GFB within a 50-mile  radius of the
Louisville Metropolitan Area; or

(b) recruit or solicit for employment  any current or future  employee of GFB or
any of its respective successors or any entities related to it.

<PAGE>

6.2  Confidential   Information.   Employee  acknowledges  that  all  Secret  or
Confidential  Information is the exclusive  property of GFB.  Employee shall not
during the period of his employment by GFB or at any time  thereafter,  disclose
to any person,  firm or  corporation,  or publish,  or use for any purpose,  any
Secret or Confidential  Information  except as properly required in the ordinary
course  of  business  of GFB or as  directed  and  authorized  by GFB.  Upon the
termination  of his  employment  with GFB, for any reason  whatsoever,  Employee
shall  return  and  deliver  to GFB  within  7 days any and all  papers,  books,
records,  documents,  memoranda  and  manuals,  including  all  copies  thereof,
belonging to GFB or relating to its business, in Employee's possession,  whether
prepared  by  Employee  or  others.  If at any time  after  the  termination  of
employment,   Employee  determines  that  he  has  any  Secret  or  Confidential
Information in his possession or control,  Employee shall immediately return all
such Secret or Confidential Information to GFB including all copies and portions
thereof.

6.3 Disclosure and Survival of Covenants.  If Employee,  in the future, seeks or
is offered employment by any other company,  firm, or person, he shall provide a
copy of this Agreement to the prospective employer prior to accepting employment
with that  prospective  employer.  The  provisions of Sections 6.1 and 6.2 shall
survive any termination of this Agreement.

                            Section 7 - Termination

7.1 Automatic  Termination.  Employment  under this Agreement shall terminate on
the death or Permanent  Disability of Employee or by the Employee  attaining age
65 during the Term of this Agreement.

7.2 Involuntary Termination.

(a) Termination by the Board.  The GFB Board may terminate this Agreement at any
time.

(b) Termination or Suspension by the Office of Thrift Supervision.

(i) If Employee is suspended and/or  temporarily  prohibited from performing his
duties under this  Agreement by a notice served under Section  8(e)(3) or (g)(1)
of the Federal  Deposit  Insurance Act (12 U.S.C.  1818(e)(3) and (g)(1)),  then
GFB's  obligations  under this  Agreement  shall be  suspended as of the date of
service of such notice unless stayed by appropriate proceedings.  If the charges
in the notice are dismissed, GFB may, in its discretion, (a) pay Employee all or
part of the compensation  withheld while  obligations  under this Agreement were
suspended and (b) reinstate (in whole or in part) any of its  obligations  which
were suspended.

(ii) If Employee is removed and/or permanently  prohibited from participating in
the conduct of GFB's affairs by an order issued under section  8(e)(4) or (g)(1)
of the Federal  Deposit  Insurance  Act (12 U.S.C.  1818(e)(4)  or (g)(1)),  all
obligations of GFB under this Agreement shall terminate as of the effective date
of the order, but vested rights of Employee shall not be affected.

(iii) If GFB is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all  obligations  under this Agreement shall terminate as of the
date of default, but vested rights of Employee shall not be affected.

(iv) All obligations under this Agreement shall terminate,  except to the extent
determined  that  continuation  of the contract is necessary  for the  continued
operation  of GFB  (a) by  action  of the  Director  of  the  Office  of  Thrift
Supervision  (the  "Director")  or his or her designee,  at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement  to  provide  assistance  to or on behalf  of GFB under the  authority
contained in section 13(c) of the Federal  Deposit  Insurance Act; or (b) by the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of GFB or
when GFB is determined by the Director to be in an unsafe or unsound  condition.
Any rights of Employee that have already vested,  however, shall not be affected
by such action.

7.3 Voluntary Termination. Employee may terminate his employment for Good Reason
by giving Notice of Termination in accordance with Section 7.4 below.

7.4 Notice of Termination.  Any  termination by GFB or by Employee,  pursuant to
this  Agreement,  shall be  communicated by written Notice of Termination to the
other party hereto.

7.5 Conflicts with Federal Law. If any of the termination  provisions  contained
in this Agreement conflict  with Office of Thrift  Supervision regulation 12 CF 
563.39(b), or any successor regulation, the latter shall prevail.

<PAGE>

                     Section 8 - Compensation on Termination

8.1 Compensation Upon Death. If Employee's  employment is terminated  because of
the death of Employee, GFB shall pay Employee's executors or administrators:  a)
within 30 days of death the  unpaid  balance  of  Employee's  Base  Compensation
through the end of the month in which Employee's death occurred,  at the rate in
effect on the date of Employee's  death and b) as soon as such Employee's  bonus
is calculated,  an amount equal to Employee's Bonus Compensation for the current
year (if any was paid) multiplied by the fractional  portion of the year between
the first day of the year in which  Employee died and the date of the Employee's
death; and shall have no further obligations under this Agreement.

8.2 Compensation  Upon Disability.  If Employee's  active work ceases because of
Disability,  GFB  shall  continue,  as  and  when  scheduled,  to  pay  Employee
Employee's Base Compensation through the date he ceased work, plus three months'
additional Base Compensation, at 100% of the rate in effect on the date Employee
became  Disabled,  and thereafter GFB shall have no further  obligation for cash
compensation unless and until Employee returns to work.

8.3 Compensation  Upon Termination for Cause. If Employee's  employment shall be
terminated  by GFB for  Cause,  GFB shall  pay  Employee  his Base  Compensation
through the Date of Termination,  and GFB shall not have any further obligations
to Employee under this Agreement.

8.4  Compensation  Upon  Termination by GFB Other Than For Cause.  If Employee's
employment  is  terminated  by GFB  other  than  for  Cause,  then  unless  such
termination  occurs  simultaneous with or within two years following a Change in
Control  of GFB or Holding  Company,  then  Employee  shall be  entitled  to the
compensation  Employee  would have been entitled to under this  Agreement as and
when payable hereunder for the remainder of the Term,  provided that Employee in
good faith actively seeks  employment  similar to employee's  position with GFB,
and  that  any  payments  under  this  Section  8.4  shall  be  reduced  by  any
compensation Employee receives from other employment thereafter accepted.

8.5  Compensation  Upon  Termination  For Good  Reason  or  Following  Change of
Control.

(a) If (1) Employee  terminates  employment under Section 7.3 for Good Reason or
(2) any of the events constituting a Change of Control of GFB or Holding Company
shall have occurred and Employee's  employment is terminated by GFB within three
years thereafter other than by reason of (a) Employee's death or disability,  or
(b)  termination  by GFB for Cause,  then GFB shall pay to Employee as severance
compensation  in a lump sum (discounted to present value using the interest rate
then applicable to newly issued fixed rate three-year certificates of deposit at
GFB, Louisville, Kentucky) on the 30th day following the Date of Termination:

(i) the unpaid balance of Employee's full Base Compensation  through the Date of
Termination  at the rate in effect at the time Notice of  Termination  is given;
plus

(ii) an amount equal to Employee's full Base  Compensation  for two years at the
rate in effect as of the Date of Termination; plus

(iii) Employer shall make available to Employee the Additional  Compensation  to
which Employee would be entitled during the Term; plus

(iv) an amount equal to Employee's Bonus  Compensation for the previous year (if
any was paid), multiplied by two.

In addition to the  severance  benefits set forth in (i),  (ii),  (iii) and (iv)
above,  GFB  shall:  (a) to the  extent  not  prohibited  by  Office  of  Thrift
Supervision  pronouncements pay all legal fees and expenses incurred by Employee
resulting  from  termination  (including  all such  fees and  expenses,  if any,
incurred in contesting  any such  termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and (b) maintain in full force
and effect,  for the  continued  benefit of Employee for a two year period after
the Date of Termination, all employee benefit plans and programs or arrangements
in which  Employee  was  entitled to  participate  immediately  prior to Date of
Termination;  provided,  however,  that Employee's  continued  participation  is
possible under the general terms and  provisions of such plans and programs.  If
Employee's  participation  in any such  plan or  program  is  barred,  GFB shall
arrange to provide Employee with benefits  substantially  similar or, if that is
not  possible,  of equal  value to those  which  Employee is entitled to receive
under such plans and  programs.  At the end of the period of coverage,  Employee
shall  have  the  option  to  have  assigned  to  him at no  cost  and  with  no
apportionment of prepaid premiums,  any assignable  insurance  policies owned by
GFB relating specifically to Employee.

<PAGE>

Notwithstanding  any of the foregoing,  if Employee is within three years of age
65 on the Date of  Termination,  then (a) GFB shall reduce the amount payable to
Employee  under  paragraphs  (ii) and (iii) above to reflect  only the number of
months  between  the  Date of  Termination  and the  date  Employee  is or would
otherwise attain age 65, and (b) GFB shall have no obligations to Employee after
Employee attains age 65.

(b)  Employee  shall not be  required  to  mitigate  the  amount of any  payment
provided for in this Section 8.5 by seeking other  employment or otherwise,  nor
shall the amount of any payment  provided  for in this Section 8.5 be reduced by
any  compensation  earned by  Employee  as the result of  employment  by another
employer after the Date of Termination, or otherwise.

8.6 Compensation Upon Retirement. If Employee terminates employment in the month
of his 65th  birthday,  then Employee shall be paid within 30 days from the date
of his retirement the unpaid balance of Employee's Base Compensation through the
date of his  retirement and shall be paid, as soon as such  Employee's  bonus is
calculated,  an amount equal to Employee's  Bonus  Compensation  for the current
year (if any was paid), multiplied by the fractional portion of the year between
the first day of the year in which  Employee  retired and the date of Employee's
retirement.

8.7  Successors  of GFB.  GFB will  require  any  successor  (whether  direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially all of the business and/or assets of GFB, by agreement in form and
substance  satisfactory  to  Employee,  expressly to assume and agree to perform
this  Agreement  in the same  manner  and to the same  extent  that GFB would be
required to perform it if no such succession had taken place.  Failure of GFB to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach  of this  Agreement  and  shall  entitle  Employee  to  terminate  this
agreement for Good Reason under paragraph 7.3 of this Agreement. As used in this
Agreement, "GFB" shall mean GFB as hereinbefore defined and any successor to its
business and/or assets as aforesaid or which otherwise  becomes bound by all the
terms and provisions of this Agreement by operation of law.

8.8 Reduction of Amounts Payable.

(a) In no event shall any amount  payable under any provision of this  Agreement
equal or exceed an amount which would (i) cause GFB to forfeit (as determined by
the Certified Public Accountants or legal counsel employed by GFB),  pursuant to
Section 280G(a) of the Internal Revenue Code of 1986, as amended,  its deduction
for any or all such amounts payable,  or (ii) exceed maximum amounts  determined
by the Office of Thrift  Supervision  to  constitute a safe and sound  practice.
Pursuant to this Section  8.8,  the GFB Board has the power to reduce  severance
benefits payable under this Agreement,  if such benefits alone or in conjunction
with termination benefits provided under any other severance pay plan maintained
by GFB or any other plan or agreement  between Employee and GFB, would cause GFB
to forfeit  otherwise  deductible  payments or would exceed the Office of Thrift
Supervision  maximums;  provided,  however that no benefits  payable  under this
Agreement shall be reduced pursuant to this Section 8.8 to less than $1.00 below
the amount of benefits (i) which GFB can properly  deduct under Section  280G(a)
of the Internal Revenue Code of 1986, as amended, or (ii) which equal the amount
the Office of Thrift  Supervision  considers  the  maximum  safely  and  soundly
payable.

(b) Any payments made to the Employee pursuant to this Agreement,  or otherwise,
are subject to and  conditioned  upon  their  compliance  with 12 U.S.C. 1828(k)
and any regulation promulgated thereunder.

                            Section 9 - Miscellaneous

9.1 Notice.  Any notice or request  required or permitted to be given under this
Agreement  shall be in writing  and shall be deemed  sufficiently  given for all
purposes  if mailed by  certified  mail,  postage  prepaid  and  return  receipt
requested,  addressed to the intended  recipient at the following address (or at
such other  address as either party may  designate in writing to the other party
by certified mail as described above):

If to GFB:
Great Financial Bank, FSB
One Financial Square
Louisville, Kentucky 40202

<PAGE>

All notices to GFB shall be directed to the  attention  of the  President of GFB
with a copy to the Treasurer of GFB.

If to Employee:
James Statler
17206 Ash Hill Rd.
Louisville, KY 40245

9.2 Headings.  The headings used in this Agreement have been included solely for
ease of  reference  and are not to be construed  in any  interpretation  of this
Agreement.

9.3 Entire Agreement.  This instrument contains the entire agreement between the
parties with respect to the subject matter hereof, and shall supersede all prior
understanding  with  respect  to the  subject  matter  hereof,  except  that the
Indemnity  Agreement  dated  October  25,  1991 and the  Supplemental  Executive
Retirement Plan dated as of January 1, 1992 between  Employee and GFB shall also
continue to be effective.  No agreements or representations,  oral or otherwise,
express or implied,  with respect to the subject matter hereof have been made by
either  party  which  are  not  set  forth  expressly  in  this  Agreement.   No
modification  or  addition  to this  Agreement  shall be  enforceable  unless in
writing and signed by the party against whom enforcement is sought.

9.4  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the Commonwealth of Kentucky.

9.5 Arbitration.  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration,  conducted before a
panel of three arbitrators  sitting in a home office selected by Employee within
fifty (50) miles from the location of GFB, in  accordance  with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Employee shall be entitled to seek specific  performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or  controversy  arising  under or in  connection  with
Employee's  termination  is resolved in favor of Employee,  whether by judgment,
arbitration  or  settlement,  Employee  shall be  entitled to the payment of all
back-pay,  including  salary,  bonuses and any other cash  compensation,  fringe
benefits and any compensation and benefits due Employee under this Agreement.

9.6 Benefit.  This Agreement  shall inure to the benefit of and shall be binding
upon GFB, its successors and assigns, and this Agreement shall not be assignable
by Employee.

9.7  Remedies.  Employee  and GFB  acknowledge  that the services to be rendered
under this  Agreement are special,  unique and of  extraordinary  character.  If
Employee  breaches any  covenants,  terms and conditions of this Agreement to be
performed by him, GFB will suffer  irreparable  damage and it will be impossible
to estimate or determine GFB's damages. Therefore, GFB shall, upon proof of such
breach,  be  entitled as a matter of course to an  injunction  from any court of
competent  jurisdiction  restraining any further  violation of such covenants by
Employee, his employers, employees, partners, agents or other associates, or any
of them,  such right to an injunction  to be  cumulative  and in addition to any
other  remedies GFB may have,  either in law or in equity.  In any proceeding to
enforce  any  provision  of  this  Agreement,  Employee  shall  not  assert  any
contention  that  there is an  adequate  remedy at law for the breach or default
upon  which  such  proceeding  is  based.  Nothing  in this  paragraph  shall be
construed  to prevent  such remedy in the  courts,  in the case of any breach of
this Agreement by Employee, as GFB may elect or invoke.

9.8 Severability.  If any of the provisions of Section 6.1 of this Agreement are
held  to be  unenforceable  because  of  the  scope,  duration  or  area  of its
applicability,  the court  making  such  determination  shall  have the power to
modify such scope duration or area or all of them, and such provision shall then
be applicable in such modified  form. If any provision of this Agreement is held
to be invalid,  illegal or  unenforceable  in any  respect,  the  validity,  and
enforceability  of all other  applications  of that  provision  and of all other
provisions and applications hereof shall not in any way be affected or impaired.

<PAGE>

9.9  Waiver.  No  provisions  of  this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically designated by the
Board of  Directors  of GFB. The failure of GFB or Employee at any time or times
to enforce its rights under the Agreement  strictly in accordance  with the same
shall not be construed as having created a custom in any way or manner  contrary
to the specific  provisions of this  Agreement or as having in any way or manner
modified or waived the same. No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a waiver of similar or  dissimilar  provisions  or conditions at the same or any
prior or subsequent time.

9.10  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which  together  will
constitute one and the same instrument.


IN WITNESS  WHEREOF the parties hereto have executed this  Agreement,  as of the
day and year first above written but actually on the dates set forth below.

GREAT FINANCIAL BANK, FSB


 
By:________________________________

 
Title:_____________________________

 
Date:______________________________




GREAT FINANCIAL CORPORATION
(GUARANTOR)

 
By:________________________________

 
Title:_____________________________

 
Date:______________________________


EMPLOYEE:__________________________
 
 
Date:______________________________

<PAGE>
10.13      CONSULTING AGREEMENT WITH GEORGE L. GREENWELL

                              CONSULTING AGREEMENT

     This is a CONSULTING  AGREEMENT (the "Agreement")  entered into  the 31 day
of January,  1997 but  effective  as of January 1, 1997,  by and  between  GREAT
FINANCIAL  CORPORATION ("GFC"), a Kentucky  corporation,  with an address at One
Financial   Square,   Louisville,   Kentucky  40202,  and  GEORGE  L.  GREENWELL
("Greenwell"),  an  individual,  with an address of 4001 North Ocean  Boulevard,
Unit 1208-B, Boca Raton, Florida 33431.

                                    RECITALS

         WHEREAS, Greenwell and Lincoln Service Corporation  ("Lincoln") entered
into that certain Consulting Agreement, dated as of September 1, 1992 (the "1992
Agreement")  and as amended by that certain  Amendment to Consulting  Agreement,
executed on December 14, 1993 (the "First  Amendment")  and that certain  Second
Amendment  to  Consulting  Agreement  executed  on January  9, 1995 (the  Second
Amendment,  which together with the 1992  Agreement and the First  Amendment may
hereinafter collectively be referred to as the "Original Agreement"); and

         WHEREAS,  GFC has  determined  that it  is  beneficial to  enter into a
consulting  agreement with Greenwell in order to continue to engage Greenwell as
a  consultant  to  render  certain  limited  advisory  services  to GFC  and its
affiliates and subsidiaries on a stand-by basis; and

         WHEREAS,  Greenwell  desires  to aid and assist GFC  and its affiliates
and  subsidiaries by continuing to provide such services on a stand-by basis.

NOW  THEREFORE,  in  consideration  of the  above-premises  and  the  terms  and
conditions of this Agreement, the parties hereto agree as follows:

         1.  ENGAGEMENT OF CONSULTANT. Subject and pursuant to the terms of this
             Agreement:

             (a) GFC appoints and  engages Mr.  Greenwell as its  consultant and
                 advisor.

             (b) Mr. Greenwell hereby  accepts his appointment and engagement by
                 GFC as a consultant and advisor.

         2. TERM.  Subject to extension in  accordance  with this  Section 2 and
unless  sooner  terminated  as  provided  in Sections 9 and 10, the term of this
Agreement (the "Term") shall be the two-year period beginning on January 1, 1997
(the "Effective  Date"),  and ending on December 31, 1998. On or before December
31,  1997,  the GFC  Board  shall  review  Greenwell's  performance  under  this
Agreement  to  determine  whether GFC desires  that the  then-remaining  Term be
extended for an  additional  year.  If the GFC Board  recommends,  and Greenwell
consents  to such  one-year  extension,  then the  then-remaining  Term shall be
extended by one year.

         If Mr. Greenwell should die or become  totally  disabled  during any of
the first three months of a contract year during the term of this Agreement, Mr.
Greenwell or his designated  beneficiary,  as the case may be, shall be entitled
to receive  from GFC an amount  equal to a monthly  installment,  as provided in
paragraph 4 hereof,  times the  fraction,  the  numerator  of which shall be the
number  of  days  in  the  month  that  have  passed  immediately  prior  to Mr.
Greenwell's  death or total  disability and the  denominator  shall be the total
number of days in such month;  and,  thereafter  this Agreement  shall terminate
without any further liability or obligation on the part of GFC to Mr. Greenwell.
If Mr.  Greenwell  shall die or become  totally  disabled  at any time after the
first three months of a contract  year during the term of this  Agreement,  then
the monthly installment provided in paragraph 4 of this Agreement shall continue
to Mr.  Greenwell or his  designated  beneficiary,  as the case may be,  through
November  30 of  such  contract  year;  and,  thereafter  this  Agreement  shall
terminate  without  further  liability or  obligation  on the part of GFC to Mr.
Greenwell  or his  designated  beneficiary,  as the case may be. For purposes of
this  Agreement,  the term  "contract  year"  shall mean a  twelve-month  period
beginning December 1 of each year.

<PAGE>

         3. DUTIES.  During  the term  of this  Agreement,  Mr. Greenwell  shall
undertake,  at mutually  convenient  times,  to advise  GFC,  its  officers  and
directors,  by telephone or in person,  with respect to: (i) The business of GFC
through Great Financial  Mortgage ("GFM") as it exists on the date hereof,  (ii)
past matters or transactions of GFC of which Mr. Greenwell has actual knowledge;
and,  (iii)  matters  which he has  special  competence  by reason of his former
employment  with Lincoln.  In order to facilitate  the provision of advice under
this Agreement,  GFC shall make suitable office space available to Mr. Greenwell
at GFC's Owensboro office location.  Upon reasonable request and notice by GFC's
chief  executive   officer  and/or   directors,   Mr.   Greenwell  shall  attend
conventions,  conferences and seminars, and, perform special analysis,  projects
and tasks for GFC. Such special analysis,  projects and tasks are expected to be
performed in a reasonable and timely manner.

         4.  COMPENSATION.  Mr.  Greenwell's  entire and exclusive  compensation
for the consulting services provided by Mr. Greenwell to GFC through GFM and for
Mr.  Greenwell's  covenants  under this Agreement shall be a fee of $115,000 per
annum, payable in equal monthly installments, the first being due and payable on
February  1,  1997.  GFC shall  pay or  promptly  reimburse  Mr.  Greenwell  for
reasonable travel,  entertainment,  telephone or other expenses paid or incurred
by Mr.  Greenwell in connection  with the  performance  of his duties under this
Agreement upon presentation by Mr. Greenwell to GFC through GFM of appropriately
itemized expenses statements, vouchers or other evidence of expense.

         5.  DIRECTION OF WORK.  Under this  Agreement,  the  services and hours
Mr.  Greenwell is to perform and work on any given day shall be entirely  within
Mr. Greenwell's  discretion and control. Mr. Greenwell shall design, develop and
control  the  details  of all such  services.  GFC relies  upon Mr.  Greenwell's
expertise  and   experience  in  exclusively   controlling   and  directing  the
performance of this obligations under this Agreement. GFC shall not exercise any
supervision of Mr. Greenwell in the performance of his consulting services,  nor
will  GFC  require  Mr.   Greenwell's   compliance   with  detailed   orders  or
instructions.  The parties  hereto agree that there will be no set work schedule
expected  of Mr.  Greenwell  during  the term of this  Agreement  nor will it be
necessary for Mr. Greenwell to obtain GFC's permission to be absent from work.

         6. OTHER EMPLOYMENT.  During the term of this Agreement,  Mr. Greenwell
will not accept  employment  or  consulting  assignments  from any  person(s) or
organization(s)  engaged in the  business of  originating,  selling or servicing
mortgage loans, or which could be considered in competition with GFC without the
prior  written  approval of a three (3) person  committee  appointed by the Vice
Chairman of the Baord of Directors of GFC.

         7.  INDEPENDENT  CONTRACTOR   STATUS.  This   Agreement  requires   Mr.
Greenwell to perform the services of a consultant as an  independent  contractor
and the parties do not believe they are  creating,  nor do they intend to create
hereby, the relation of master and servant or employer and employee.

         8.  ASSIGNMENT  AND  SUCCESSORS.  This  Agreement  shall  inure to  the
benefit  of  and  be  binding  upon  GFC  and  Mr.  Greenwell  and  their  legal
representatives,  heirs,  and successors,  but shall not be assignable by either
party without the other's written consent.

         9. FEDERAL  REGULATIONS.  Although this  is a consulting  agreement and
not an  employment  agreement,  the  parties  hereto  agree  that the safety and
soundness  issues related to consulting  agreements are similar to those related
to  employment  agreements.   Therefore,  the  parties  hereby  incorporate  the
provisions  of 12 C.F.R.  563.39(b)  into this  Agreement  as if fully set forth
herein to be effective  as if this were an  employment  agreement  rather than a
consulting agreement.

         10. TERMINATION OF AGREEMENT.  This  Agreement shall terminate upon the
             occurrence of the earlier of the following events:

         (a)  December 31, 1998 (unless otherwise extended pursuant to the terms
              of Paragraph 2 herein above);
         (b)  The  date  of  Mr. Greenwell's death  as  provided in  paragraph 2
              hereof;
         (c)  The  date  of  Mr.  Greenwell's  total  disability as  provided in
              paragraph 2 hereof;
         (d)  Termination as provided in paragraph 9 hereof.

         For purposes of this Agreement, the term "total disability"  shall mean
sickness,  accident,   incapacity  or  disability  that  renders  Mr.  Greenwell
incapable of performing  his duties  hereunder,  or fulfilling  the purposes of,
this Agreement.

<PAGE>

         11. NOTICES. All notices,  requests,  demands  or other  communications
hereunder  must be given in writing  and shall be deemed to have been duly given
if mailed by certified  mail,  return receipt  requested,  postage and certified
mail fees prepaid, and addressed as follows:

         (a)  If to GFC:

               Great Financial Corporation
               One Financial Square
               Louisville, Kentucky 40202

         (b)  If to Mr. Greenwell:

               4001 North Ocean Boulevard
               Unit 1208-B
               Boca Raton, Florida 33431

Addresses may be changed by notice in writing signed by the addressee.

         12.  TERMINATION OF ORIGINAL  AGREEMENT.  Upon the Effective  Date, GFB
and  Greenwell  acknowledge  and  agree  that the  Original  Agreement  shall be
terminated and shall be of no further force and effect whatsoever.

         13.  MISCELLANEOUS.  This Agreement represents the entire understanding
of the parties hereto,  supersedes any prior agreements  between the parties and
the terms and  provisions  of this  Agreement  may not be  modified  or amended,
except  in  writing.  Any  failure  or  delay  on the  part of  either  party in
exercising any power or right  hereunder  shall not operate as a waiver thereof,
nor shall any single or partial  exercise  thereof or the  exercise of any other
right or power preclude any other or further exercise thereof or the exercise of
any other  right or power  hereunder.  The  headings in this  Agreement  are for
convenience  or  reference  only and  shall  not be  considered  as part of this
Agreement nor limit or otherwise  affect the meaning hereof.  This Agreement has
been  executed in  Owensboro,  Kentucky,  and shall be governed  and enforced in
accordance with and governed by the laws of the Commonwealth of Kentucky.

         IN  TESTIMONY  WHEREOF, the  parties  hereto  have  entered  into  this
 Agreement on the date first written above.

                                  GREAT FINANCIAL CORPORATION

                                  By:  _____________________________
                                  Its: _____________________________
                                       _____________________________
                                              George L. Greenwell

<PAGE>

EXHIBIT 10.14     GREAT FINANCIAL BANK, F.S.B. SEVERANCE COMPENSATION PLAN

                                  PLAN PURPOSE

The purpose of the Great  Financial Bank, FSB Severance  Compensation  Plan (the
"Plan") is to assure Great Financial Bank, FSB ("Savings  Bank") of the services
of certain Officers of Savings Bank in the event of a Change in Control of Great
Financial   Corporation  ("Holding  Company")  or  Savings  Bank.  The  benefits
contemplated by the Plan recognize the value to Savings Bank of the services and
contributions  of certain  Officers of Savings  Bank and the effect upon Savings
Bank resulting from the uncertainties of continued employment,  reduced employee
benefits,  management  changes and relocations  that may arise in the event of a
Change in Control of Savings Bank or Holding Company. Savings Bank's and Holding
Company's  Boards  of  Directors  believe  that it is in the best  interests  of
Savings  Bank and Holding  Company to provide  certain  Officers of Savings Bank
with such  benefits in order to defray the costs and changes in employee  status
that could follow a Change in Control. The Boards of Directors believes that the
Plan will also aid Savings Bank in  attracting  and retaining  highly  qualified
individuals  who are  essential to its success and the Plan's  assurance of fair
treatment of Savings  Bank's  Officers  will reduce the  distractions  and other
adverse effects on Officers' performance in the event of a Change in Control.

                                    ARTICLE I

                                 DEFINITIONS AND
                                  CONSTRUCTION

1.1          Definitions

Whenever used in the Plan, the following terms shall have the meanings set forth
below.

(a) "Annual Compensation" of a Participant means and includes all wages, salary,
bonus, and incentive  compensation,  if any, paid (including accrued amounts) by
an Employer as consideration for the Participant's  service during the 12 months
ending the date as of which Annual  Compensation is to be determined,  which are
or would be includable in the gross income of the Participant receiving the same
for federal income tax purposes.

(b) "Change in Control" shall mean an event of a nature that:

(i) during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board of Holding Company or Savings Bank cease for
any reason to constitute a majority  thereof,  unless the election or nomination
for election of each new Director was approved by a vote of at least  two-thirds
of the  Board  members  then  still in  office  who were  Board  members  at the
beginning of the period or who were similarly nominated;

(ii) the business of Holding  Company or Savings Bank for which a  Participant's
services are principally  performed is disposed of by Holding Company or Savings
Bank pursuant to a partial or complete liquidation of Holding Company or Savings
Bank, a sale of assets of Holding Company or Savings Bank, or otherwise;

(iii) Holding Company or Savings Bank  consummates the transaction  contemplated
by an  agreement  which  results  in the  occurrence  of a Change in  Control of
Holding Company or Savings Bank;

(iv) the Board  adopts a  resolution  to the effect  that a Change in Control of
Holding Company or Savings Bank for purposes of this Plan has occurred;

(v) such event  would be required to be reported in response to item 1(a) of the
current report on Form 8-K as in effect on the date of this Agreement,  pursuant
to  Section  13 or 15(d) of the  Securities  Exchange  Act of 1934,  as  amended
("Exchange Act") occurs;

(vi)  any  "person"  (as the term is used in  Sections  13(d)  and  14(d) of the
Exchange  Act) is or becomes the  "beneficial  owner") as the term is defined in
Rule 13d-3 of the  Exchange  Act),  directly or  indirectly,  of  securities  of
Holding  Company  or  Savings  Bank  representing  20 percent or more of Holding
Company's or Savings Bank's outstanding  securities except for any securities of
Savings Bank purchased by Holding  Company in connection  with the conversion of
Savings Bank to stock form and any  securities  purchased by Savings  Bank's and
Lincoln  Service  Mortgage  Corporation's  employee  stock  ownership  plans and
trusts;

<PAGE>

(vii)  a plan of  reorganization,  merger,  consolidation,  or  sale,  of all or
substantially  all  assets  of  Holding  Company  or  Savings  Bank or a similar
transaction,  occurs  in  which  Holding  Company  or  Savings  Bank  is not the
resulting entity; or

(viii) a change of control  shall have  occurred as  described in 12 CFR Section
574.4(a) or successor regulations.

(c)  "Effective  Date"  means  the  date the Plan is  approved  by the  Board of
Directors of Savings  Bank,  or such other date as the Board shall  designate in
its resolution approving the Plan.

(d) "Expiration Date" means a date ten (10) years from the Effective Date unless
earlier terminated pursuant to Section 7.2 or extended pursuant to Section 7.1.

(e) "Employer" means Savings Bank, or Holding Company or a subsidiary of Savings
Bank which has adopted the Plan pursuant to Article VI hereof.

(f) "Just Cause" with respect to termination of employment  means an act or acts
of  personal  dishonesty,   incompetence,  willful  misconduct,  any  breach  of
fiduciary duty involving personal profit,  intentional failure to perform stated
duties,  willful  violation of any law, rule, or regulation  (other than traffic
violations or similar offenses ) or final cease-and-desist order. In determining
incompetence,  the  acts  or  omissions  shall  be  measured  against  standards
generally prevailing in the savings institution industry.

(g)  "Officer"  means an officer  or  employee  employed  by the  Employer  on a
full-time basis as determined by the Board of Directors provided,  however, that
any  officer or employee  who is covered or  hereinafter  becomes  covered by an
employment contract or a change in control agreement with the Employer shall not
be considered to be an Officer for purposes of this Plan.

(h) "Payment" means the payment of severance compensation as provided in Article
III hereof.

(i)  "Participant"  means an Officer who meets the  eligibility  requirements of
Article III.

(j)  "Subsidiary"  means any  corporation  in which  Savings  Bank,  directly or
indirectly,  holds a majority of the voting power of its  outstanding  shares of
capital stock.


1.2          Applicable Law

The laws of the  Commonwealth  of Kentucky shall be the  controlling  law in all
matters relating to the Plan, to the extent not preempted by Federal law.

1.3          Severability

If a provision of this Plan shall be held illegal or invalid,  the illegality or
invalidity  shall not affect the remaining  parts of the Plan and the Plan shall
be construed  and enforced as if the illegal or invalid  provision  had not been
included.

                                   ARTICLE II

                              ESTABLISHMENT OF PLAN

2.1          Establishment of Plan

As of the  Effective  Date of the Plan, as defined  herein,  Savings Bank hereby
establishes this Plan, the purposes of which are as set forth above.

2.2          Applicability of Plan

The benefits provided by this Plan shall be available to all Officers of Holding
Company or Savings Bank, at the time of any termination  pursuant to Section 3.2
herein,  except for those  Officers who have entered  into, or who enter into in
the future,  and  continue to be subject to an  employment  or change in control
agreement with the Employer.

A Participant  shall cease to be a Participant in the Plan when the  Participant
ceases to be an Officer of the Employer,  unless such Participant is entitled to
a Payment  as  provided  in the Plan.  A  Participant  entitled  to receipt of a
Payment  shall remain a  Participant  in this Plan until the full amount of such
Payment has been paid to the Participant.

<PAGE>

2.3          Contractual Right to Benefits

This Plan establishes and vests in each  Participant a contractual  right to the
benefits to which each  Participant  is entitled  hereunder,  enforceable by the
Participant against the Employer, Savings Bank, or both.

                                   ARTICLE III

                                    PAYMENTS

3.1          Right to Payment

A  Participant  shall be  entitled  to receive  from its  respective  Employer a
Payment in the  amount  provided  in  Section  3.3 if there has been a Change in
Control  of  Savings  Bank or  Holding  Company  and  if,  within  one (1)  year
thereafter,  the Participant's employment by an Employer shall terminate for any
reason  specified  in Section  3.2,  whether the  termination  is  voluntary  or
involuntary.

3.2         Reasons for Termination

Following a Change in Control,  a Participant  shall be entitled to a Payment if
employment by Employer is terminated,  voluntarily or involuntarily, for any one
or more of the following reasons:

(a) The Employer reduces the  Participant's  base salary or rate of compensation
as in effect immediately prior to the Change in Control, or as the same may have
been increased thereafter.

(b)  The  Employer  materially  changes   Participant's   function,   duties  or
responsibilities  which would cause  Participant's  position to be one of lesser
responsibility,  importance or scope with Employer than immediately prior to the
Change in Control.

(c) The  Employer  requires  the  Participant  to  change  the  location  of the
Participant's  job or  office,  so that  such  Participant  will be  based  at a
location more than thirty (30) miles from the location of the  Participant's job
or office  immediately  prior to the  Change in Control  provided  that such new
location is not closer to Participant's home.

(d) The Employer  materially  reduces the benefits and perquisites  available to
the Participant immediately prior to the Change in Control,  provided,  however,
that a material reduction in benefits and perquisites  generally provided to all
employees  of Savings  Bank on a  nondiscriminatory  basis  would not  trigger a
payment pursuant to this Plan.

(e) A successor  Employer fails or refuses to assume the Employer's  obligations
under this Plan, as required by Article VI.

(f) The Employer or any successor  company breaches any other provisions of this
Plan.

(g) The Employer terminates the employment of a Participant at or after a Change
in Control other than for Just Cause.

3.3          Amount of Payment

Each Participant  entitled to a Payment under this Plan shall receive a lump sum
cash payment, in an amount determined as follows:

(a) Each  Officer  with the  title of Vice  President  or above and five or more
years of service with the Employer  shall receive a payment equal to one hundred
percent (100%) of such Officer's Annual Compensation paid during the twelve (12)
months ended on the date of  termination  pursuant to Section 3.2.  Each Officer
with the title of Vice  President  or above and less than five  years of service
with the Employer  shall  receive a payment equal to fifty percent (50%) of such
Officer's  Annual  Compensation  paid during the twelve (12) months ended on the
date of termination pursuant to Section 3.2.

(b)  Notwithstanding  the provisions of (a) above, if a Payment to a Participant
who is a Disqualified  Individual shall be in an amount which includes an Excess
Parachute Payment, the Payment hereunder to that Participant shall be reduced to
the maximum amount which does not include an Excess Parachute Payment. The terms
"Disqualified  Individual"  and "Excess  Parachute  Payment" shall have the same
meaning as defined in Section  280G of the  Internal  Revenue  Code of 1986,  as
amended, or any successor section of similar import.

<PAGE>

The Participant  shall not be required to mitigate  damages on the amount of the
Payment by seeking other  employment or otherwise,  nor shall the amount of such
Payment be reduced by any compensation  earned by the Participant as a result of
employment after termination of employment hereunder.

3.4          Time of Payment

The Payment to which a Participant is entitled shall be paid to the  Participant
by the Employer or the successor of the Employer, in cash and in full, not later
than  fourteen (14) business  days after the  termination  of the  Participant's
employment.  If any Participant  should die after  termination of the employment
but before all amounts have been paid,  such unpaid amounts shall be paid to the
Participant's   named  beneficiary,   if  living,   otherwise  to  the  personal
representative on behalf of or for the benefit of the Participant's estate.

3.5          Suspension of Payment

Notwithstanding  the  foregoing,  no Payments or portions  thereof shall be made
under this Plan, if such Payment or portion would result in Savings Bank failing
to meet its minimum  regulatory  capital  requirements  as required by 12 C.F.R.
Section 567.2 of the Office of Thrift Supervision  Regulations.  Any Payments or
portions  thereof not paid shall be suspended  until such time as their  payment
would not result in a failure to meet Savings Bank's minimum  regulatory capital
requirements. Any portion of benefit payments which have not been suspended will
be paid on an equitable basis, pro rata based upon amounts due each Participant,
among all eligible Participants.

                                   ARTICLE IV

                                OTHER RIGHTS AND
                             BENEFITS NOT AFFECTED

4.1          Other Benefits

Neither the provisions of this Plan nor the Payment provided for hereunder shall
reduce any amounts otherwise  payable,  or in any way diminish the Participant's
rights as an Officer of an Employer,  whether  existing now or hereafter,  under
any benefit, incentive,  retirement,  stock option, stock bonus, stock ownership
or any employment agreement or other plan or arrangement.

4.2          Employment Status

This  Plan  does not  constitute  a  contract  of  employment  or  impose on the
Participant  or  the  Participant's   Employer  any  obligation  to  retain  the
Participant as an Officer, to change the status of the Participant's employment,
or to change the Employer's policies regarding termination of employment.

                                    ARTICLE V

                             PARTICIPATING EMPLOYERS

5.1 Upon  approval by the Board of Directors of Savings  Bank,  this Plan may be
adopted by any  Subsidiary or Parent of Savings Bank.  Upon such  adoption,  the
Subsidiary or Parent shall become an Employer  hereunder  and the  provisions of
the Plan shall be fully applicable to the Officers of that Subsidiary or Parent.

                                   ARTICLE VI

                              SUCCESSOR TO EMPLOYER

6.1 The Employer  shall  require any  successor or assignee,  whether  direct or
indirect,  by  purchase,   merger,   consolidation  or  otherwise,   to  all  or
substantially   all  the   business  or  assets  of  Employer,   expressly   and
unconditionally to assume and agree to perform the Employer's  obligations under
this plan,  in the same  manner and to the same extent  that  Employer  would be
required to perform if no such succession or assignment had taken place.

                                   ARTICLE VII

                             DURATION, AMENDMENT AND
                                  TERMINATION

7.1          Duration

If a Change  in  Control  has not  occurred,  this Plan  shall  expire as of the
Expiration Date,  unless sooner terminated as provided in Section 7.2, or unless
extended for an additional period or periods by resolution  adopted by the Board
of Directors of the Employer.

<PAGE>

Notwithstanding  the  foregoing,  if a Change in Control  occurs this Plan shall
continue in full force and effect,  and shall not terminate or expire until such
date as all  Participants  who become entitled to Payments  hereunder shall have
received such Payments in full.

7.2          Amendment and Termination

The Plan may be terminated or amended in any respect by resolution  adopted by a
majority of the Board of Directors of the  Employer,  unless a Change in Control
has previously occurred. If a Change in Control occurs, the Plan no longer shall
be  subject  to  amendment,  change,  substitution,   deletion,   revocation  or
termination in any respect whatsoever.

7.3          Form of Amendment

The form of any proper  amendment or  termination of the Plan shall be a written
instrument  signed by a duly  authorized  Officer or Officers  of the  Employer,
certifying  that the amendment or termination  has been approved by the Board of
Directors.  Subject to Sections 7.1 and 7.2 above,  proper amendment of the Plan
automatically  shall  effect a  corresponding  amendment  to each  Participant's
rights hereunder and a proper termination of the Plan automatically shall effect
a termination of all Participants' rights and benefits hereunder.

                                  ARTICLE VIII

                                   ARBITRATION

8.1 Any dispute or  controversy  arising  under or in  connection  with the Plan
shall be settled  exclusively by arbitration,  conducted before a panel of three
arbitrators  sitting in a location selected by the Participant within fifty (50)
miles  from the  location  of the  Employer,  in  accordance  with  rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
award of the arbitrator in any court having jurisdiction.

                                   ARTICLE IX

                             LEGAL FEES AND EXPENSES

9.1 Subject to the notice provisions in Section 9.2 hereof, all reasonable legal
fees and other expenses paid or incurred by Participant  pursuant to any dispute
or question of interpretation  relating to this Plan shall be paid or reimbursed
by the Employer,  if  Participant  is successful  pursuant to a legal  judgment,
arbitration or settlement.

9.2 A  Participant  must provide the Employer with ten (10) business days notice
of a  complaint  of  entitlement  under this Plan before the  Employer  shall be
liable  for the  payment  of any legal  fees or other  expenses  referred  to in
Section 9.1 hereof.

                                    ARTICLE X

                               REQUIRED PROVISIONS

10.1 The Employer may  terminate an Officer's  employment  at any time,  but any
termination by the Employer,  other than  termination for Just Cause,  shall not
prejudice  Officer's  right to  compensation  or other benefits under this Plan.
Officer shall not have the right to receive  compensation  or other benefits for
any  period  after  termination  for  Just  Cause  as  defined  in  Section  1.1
hereinabove.

10.2 If an Officer is suspended and/or temporarily prohibited from participating
in the  conduct  of Savings  Bank's  affairs by a notice  served  under  Section
8(e)(3) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.  Section
1818(e)(3)  or  (g)(1),  Savings  Bank's  obligations  under  this Plan shall be
suspended as of the date of service of such notice unless stayed by  appropriate
proceedings.  If the charges in the notice are  dismissed,  Savings Bank may, in
its  discretion,  (i) pay an Officer  all or part of the  compensation  withheld
while their Plan  obligations  were suspended and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.

10.3 If an Officer is removed and/or  permanently  prohibited from participating
in the  conduct  of Savings  Bank's  affairs by an order  issued  under  Section
8(e)(4) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.  Section
1818(e)(4)  or (g)(1),  all  obligations  of Savings  Bank under this Plan shall
terminate  as of the  effective  date of the  order,  but  vested  rights of the
contracting parties shall not be affected.

<PAGE>

10.4 If Savings Bank is in default (as defined in Section 3(x)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1)), all obligations of Savings
Bank  under  this  Plan  shall  terminate  as of the date of  default,  but this
paragraph shall not affect any vested rights of the contracting parties.

10.5 All obligations of Savings Bank under this Plan shall be terminated, except
to the extent  determined  that  continuation  of the Plan is necessary  for the
continued operation of Savings Bank institution,  (i) by the Director of the OTS
(or his designee),  the Federal Deposit  Insurance  Corporation  ("FDIC") or the
Resolution Trust Corporation  ("RTC"), at the time FDIC enters into an agreement
to  provide  assistance  to or on behalf of  Savings  Bank  under the  authority
contained  in Section  13(c) of the  Federal  Deposit  Insurance  Act, 12 U.S.C.
Section  1823(c);  or (ii) by the  Director of the OTS (or his  designee) at the
time the Director (or his  designee)  approves a  supervisory  merger to resolve
problems  related to the  operations  of Savings  Bank or when  Savings  Bank is
determined by the Director to be in an unsafe or unsound  condition.  Any rights
of the parties that have already vested,  however, shall not be affected by such
action.

IN WITNESS  WHEREOF,  Great Financial Bank, FSB has established  this Plan to be
executed by its duly authorized  executive  officer and the corporate seal to be
affixed and duly attested, effective as of the day 30th of March, 1994.


ATTEST:                       GREAT FINANCIAL BANK, FSB


__________________________    By:________________________________
                                         Paul M. Baker
Secretary                              President and Chief
                                        Executive Officer






<PAGE>

EXHIBIT 11      STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS        

<TABLE>
<CAPTION>

                                                             Twelve Months Ended
                                                                 December 31,
                                                             -------------------
                                                               1996       1995
                                                             --------   --------
<S>                                                          <C>        <C>
Net income                                                   $19,507    $21,690
                                                             ========   ========
Weighted average number of common shares and 
  equivalents:
    Shares issued                                             16,531     16,531
    Shares in treasury                                        (2,153)    (1,194)  
    Shares held by the ESOPs which have not                  
     been committed to be released                            (1,075)    (1,185)
    Shares issuable pursuant to stock option
     plans less shares assumed repurchased                    
     at the average market price                                 990        754
                                                             --------   --------
Number of shares for computation of primary         
  earnings per share                                          14,293     14,906

    Net additional shares issuable pursuant to 
     stock option plans at period-end market price                64        162
                                                             --------   --------
Number of shares for computation of fully
 diluted earnings per share                                   14,357     15,068
                                                             ========   ========
Earnings per share:
 Primary                                                       $1.36      $1.46
                                                             ========   ========
 Fully diluted                                                 $1.36      $1.44
                                                             ========   ========

</TABLE>


<PAGE>


EXHIBIT 21    SUBSIDIARIES OF THE REGISTRANT

The  following  is a  listing  of  the  Subsidiaries  of the  Registrant,  or if
indented, subsidiaries of the subsidiary under which they are listed.


                                                    Jurisdiction of
Name                                                 Incorporation

Great Financial Bank, FSB                              United States
   Great Financial Services, Inc.                      Kentucky
   Great Financial Properties, Inc.                    Kentucky
   Lanidrac Service Corp.                              Kentucky
   First Appraisal Service, Inc.                       Kentucky