EXHIBIT 13

<PAGE>
--------------------------------------------------------------------------------

1996 ANNUAL REPORT

--------------------------------------------------------------------------------








                    HARRODSBURG FIRST FINANCIAL BANCORP, INC.


<PAGE>



                    HARRODSBURG FIRST FINANCIAL BANCORP, INC.
--------------------------------------------------------------------------------


Harrodsburg  First  Financial  Bancorp,   Inc.,  a  Delaware   corporation  (the
"Company"), was organized by First Federal Savings Bank of Harrodsburg, formerly
Harrodsburg  First Federal  Savings and Loan  Association,  ("Harrodsburg  First
Federal" or the "Bank") to be a savings  institution  holding company whose only
subsidiaries  are the Bank and its  subsidiary.  On September 29, 1995, the Bank
converted from mutual to stock form as a wholly owned subsidiary of the Company.
In connection with the conversion,  the Company issued  2,182,125  shares of its
common stock (the "Common Stock") to the public.

The Company is a unitary  savings and loan holding company subject to regulation
by the Office of Thrift  Supervision  ("OTS") of the Department of the Treasury.
The  primary  activity  of the  Company  is  holding  the  stock of the Bank and
operating  the Bank.  Accordingly,  the  information  set forth in this  report,
including  financial  statements and related data, relates primarily to the Bank
and its subsidiary.

First Federal Savings Bank of Harrodsburg was formed in 1961 as a federal mutual
savings and loan  association  and  obtained  insurance of accounts and became a
member of the Federal Home Loan Bank ("FHLB") of  Cincinnati at that time.  Upon
its  conversion  to stock form in September  1995,  the Bank adopted its present
name.  The  Bank  operates  through  one full  service  office  in  Harrodsburg,
Kentucky, and another full service branch office in Lawrenceburg, Kentucky.

The  executive  offices  of the  Company  and the Bank are  located at 104 South
Chiles Street,  Harrodsburg,  Kentucky 40330,  and its telephone number is (606)
734-5452.

                         MARKET AND DIVIDEND INFORMATION
--------------------------------------------------------------------------------
Market for the Common Stock

Since  October 4, 1995,  the Common  Stock of the  Company  has been  listed for
trading  under the  symbol  "HFFB" on the  National  Association  of  Securities
Dealers,  Inc. Automated Quotation ("Nasdaq") National Market. As of December 6,
1996,  there were 2,047,933  shares of the Common Stock issued and  outstanding,
held by approximately 1,274 stockholders of record,  including beneficial owners
in nominee or street name.

Dividends

On March 18, 1996,  the Board of Directors of the Company  established  a policy
whereby  the  Company  will pay a  semi-annual  cash  dividend of $.20 per share
payable as of the 15th day of each April and October or the first  business  day
thereafter  if such day is not a business day, to  stockholders  of record as of
the last  business day of the month  following  the end of the such  semi-annual
period.  On  September  16,  1996,  the Board of  Directors  declared a one time
special  dividend of $.15 per share payable on October 16, 1996, to stockholders
of  record  as of  October  1,  1996.  The  Board of  Directors  of the  Company
periodically  reviews its dividend policy.  Any change in the Company's dividend
policy,  as determined  by the Board of Directors,  will depend on the Company's
debt and equity structure,  earnings, regulatory capital requirements, and other
factors,  including  economic  conditions,   regulatory  restrictions,  and  tax
considerations.  See Note 7 of Notes to  Consolidated  Financial  Statements for
restrictions on the payment of cash dividends.  For further information on stock
prices and dividends, see Stock Prices and Dividends (page 3).

                                TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S>                                                                                     <C>
Harrodsburg First Financial Bancorp, Inc................................................Inside Front Cover
Market and Dividend Information.........................................................Inside Front Cover
Letter to Stockholders...................................................................................1
Selected Financial and Other Data........................................................................2
Management's Discussion and Analysis of Financial Condition and Results of Operations....................4
Financial Statements....................................................................................16
Corporate Information...........................................................................Back Cover
</TABLE>


<PAGE>



                             LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------



To Our Stockholders

It is  with  great  pleasure  that we  present  the  second  annual  report  for
Harrodsburg First Financial  Bancorp,  Inc., for the fiscal year ended September
30, 1996.  It has been an extremely  busy and exciting  year as your Company and
its subsidiary adjusted to life as a public company.

We are proud of the fact that of the seventy-five  companies that converted from
mutual to the stock form of ownership  from June 30, 1995 through  September 30,
1996,  the  stock  of  Harrodsburg  First  Financial  has  led  the  country  in
appreciation of price from its initial price of $10 per share.

The  completion of the initial  public  offering in September 1995 paved the way
for a record  earnings  performance in the current fiscal year. Net earnings for
fiscal 1996 totaled  $1,090,167 or $.55 per share,  representing  an increase of
22.3% over our fiscal 1995  earnings of $891,025.  The net income for the fiscal
1996  earnings  reflect a charge of  $353,802,  net of the  federal  income  tax
benefit, for a special assessment by the Savings Association Insurance Fund. The
legislation  that  implemented  this special  assessment  was signed into law by
President  Clinton on September 30, 1996, and should put behind us, once and for
all, the federal deposit  insurance  premium disparity between banks and savings
institutions and the savings and loan debacle of the 1980s. This one time charge
will reduce future federal deposit  insurance premium expense and will result in
improved earnings in years to come.

In late September 1996, the  installation of ATMs at both offices was completed,
and the customer response to this service has been very positive.

After the completion of six months as a public  company,  the Board of Directors
approved  a  stock  repurchase  program  of up to 5% or  109,106  shares  of the
Company's stock. The  authorization for this program expired September 29, 1996,
with the Company being able to repurchase  49,392  shares.  A second  repurchase
program of 5% of the  outstanding  shares has been  instituted.  The repurchased
shares  will  become  treasury  shares  and will be used for  general  corporate
purposes.  The Board believes that the repurchases will improve liquidity in the
market for the common stock and is expected to increase the  Company's  earnings
per share and book value per share.

We wish to thank you, our stockholders,  for your support in our first year as a
public company. We encourage you to expand you banking  relationships with us as
we pursue the ultimate goal of building long term value for your investment.

Sincerely,


/s/Jack Hood
Jack Hood
President and Chief Executive Officer



<PAGE>



                        SELECTED FINANCIAL AND OTHER DATA
--------------------------------------------------------------------------------


Financial Condition Data
<TABLE>
<CAPTION>
                                                               At September 30,
                                        1996         1995        1994         1993        1992
                                      ---------   ---------    ---------   ---------    ------
                                                               (Dollars in Thousands)
<S>                                   <C>         <C>          <C>         <C>          <C>
Total Amount of:
   Assets.........................    $ 108,953   $ 107,234    $  91,465   $  89,744    $  90,335
   Loans receivable, net..........       77,502      75,434       72,640      72,172       71,996
   Investments (1)................       14,884       8,580        7,266       1,244        1,219
   Cash and cash equivalents......       15,065      21,990       10,350      15,255       15,435
   Deposits.......................       76,946      75,893       82,091      81,455       83,006
   Stockholders' equity...........       30,222      30,185        9,043       8,018        7,076
----------------------------------------------------------------------------------------------

Number of:
   Real estate loans outstanding..        1,710       1,745        1,764       1,849        1,922
   Deposit accounts...............        9,524      10,559        9,930       9,908       10,347
   Full service offices...........            2           2            2           2            2
</TABLE>

----------------------------
(1) Includes FHLB stock, and term deposits with the FHLB.

Operating Data
<TABLE>
<CAPTION>
                                                    For the year ended September 30,
                                        1996         1995        1994         1993        1992
                                      ---------   ---------    ---------   ---------    ------
                                                         (Dollars in Thousands)

<S>                                   <C>         <C>          <C>         <C>          <C>
Interest income...................    $   7,712   $   6,612    $   6,210   $   6,433    $   7,209
Interest expense..................        3,901       3,807        3,277       3,745        4,985
                                      ---------   ---------    ---------   ---------    ---------
   Net interest income............        3,811       2,805        2,933       2,688        2,224
Provision for loan losses.........            8          92           60          60           45
                                      ---------   ---------    ---------   ---------    ---------
   Net interest income after
    provision for loan losses.....        3,803       2,713        2,873       2,628        2,179
Non-interest income...............          101          81           86         102          104
Non-interest expense..............        2,225       1,444        1,357       1,303        1,206
                                      ---------   ---------    ---------   ---------    ---------
Income before income tax expense
   and cumulative effect of change
   in accounting principle........        1,679       1,350        1,602       1,427        1,077
Income tax expense................          589         459          558         485          371
                                      ---------   ---------    ---------   ---------    ---------
   Income before cumulative effect
    of change in accounting principle     1,090       891          1,044         942          706
Cumulative effect of change in
   accounting principle (1).......                                    19
                                      ---------   ---------    ---------   ---------    ---------
Net income........................    $   1,090   $     891    $   1,025   $     942    $     706
                                      =========   =========    =========   =========    =========
</TABLE>

--------------------------------------------
(1)  Reflects adoption of Statement of Financial  Accounting  Standards ("SFAS")
     No. 109, "Accounting for Income Taxes."

                                        2

<PAGE>



Key Operating Ratios
<TABLE>
<CAPTION>
                                                    At or for the year ended September 30,
                                      -------------------------------------------------------------
                                           1996         1995        1994        1993         1992
                                        ---------   ---------    ---------   ---------    ---------
<S>                                      <C>          <C>         <C>         <C>          <C>
Performance Ratios:
Return on average assets (net income
   divided by average total assets)        1.00%        .95%        1.12%       1.04%         .79%

Return on average equity (net income
   divided by average equity).....         3.56        7.84        12.01       12.48        10.44

Average interest-earning assets to
   average interest-bearing liabilities  125.55      113.08       109.11      107.43       106.12

Net interest rate spread..........         2.14        2.50         2.92        2.71         2.20

Net yield on average interest-
   earning assets.................         3.57        3.04         3.26        3.03         2.55

Dividend payout...................         72.7

Capital Ratios:
Average equity to average assets
   (average equity divided by
   average total assets)..........        28.18       12.11         9.32        8.34         7.56

Equity to assets at period end....        27.74       28.15         9.89        8.93         7.83

Asset Quality Ratios:
Net interest income after provision for
   loan losses to total other expenses   170.92      187.88       211.56      201.69       180.68
Non-performing loans to total loans        1.12         .88         1.86        1.33         2.03
Non-performing loans to total assets        .79         .62         1.48        1.07         1.62
</TABLE>

Stock Prices and Dividends

The  following  table sets forth the range of high and low sales  prices for the
common  stock as well as  dividends  declared  in each  quarter  for  1996.  The
information is not shown for 1995 because the Company's  stock was issued to the
public initially on September 29, 1995. Such over-the-counter  market quotations
reflect inter-dealer prices,  without retail mark-up,  mark-down,  or commission
and may not necessarily represent actual transactions.

Quarterly Stock Information
                                                  Fiscal 1996
                                         ------------------------------
                                         Stock Price Range
                                         -----------------    Per Share
Quarter                                  Low         High      Dividend
-----------------------------------------------------------------------
1st                                   $   12.00   $   15.75    $
2nd                                       13.25       14.63         0.20
3rd                                       13.00       15.75
4th                                       15.25       18.25         0.20
------------------------------------------------------------------------
Total                                                          $    0.40
                                                               =========

                                        3

<PAGE>
                           MANAGEMENT'S DISCUSSION AND
            ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

General

Harrodsburg First Financial  Bancorp,  Inc.  ("Company") became publicly held on
September 29, 1995, when its wholly-owned subsidiary completed a conversion from
a federal mutual  savings and loan  association to a federal stock savings bank,
First  Federal  Savings  Bank  of  Harrodsburg  ("Bank").  The  purpose  of  the
discussion  that follows is to provide insight into the  consolidated  financial
condition and results of operations of Harrodsburg First Financial Bancorp, Inc.
and its subsidiary, First Federal Savings Bank of Harrodsburg.

The primary  business of the Company is the operation of the Bank. The assets of
the  Company  consist of a portion  of the net cash  proceeds  from the  initial
public  offering,  all of  the  Bank's  outstanding  capital  stock,  and a note
receivable from the Company's Employee Stock Ownership Plan ("ESOP"). Therefore,
this discussion relates primarily to the Bank.

Historically,  the Bank has functioned as a financial  intermediary,  attracting
deposits from the general public and using such deposits, to make mortgage loans
and, to a lesser extent consumer loans and to purchase investment securities. As
such, its net earnings are dependent primarily on its net interest income, which
is the difference between interest income earned on its interest-earning  assets
and  interest  paid on  interest-bearing  liabilities.  Net  interest  income is
determined  by (i) the  difference  between  yields  earned on  interest-earning
assets and rates paid on interest-bearing liabilities (interest rate spread) and
(ii) the  relative  amounts  of  interest-earning  assets  and  interest-bearing
liabilities.  The  Bank's  interest  rate  spread  is  affected  by  regulatory,
economic,  and competitive  factors that influence  interest rates, loan demand,
and deposit flows. To a lesser extent, the Bank's net earnings are also affected
by the level of non-interest income, which primarily consists of service charges
and  other  fees.  In  addition,  net  earnings  are  affected  by the  level of
non-interest (general and administrative) expenses.

The  operations  of the Bank and the entire  thrift  industry are  significantly
affected by prevailing economic  conditions,  competition,  and the monetary and
fiscal policies of the federal  government and  governmental  agencies.  Lending
activities are  influenced by the demand for and supply of housing,  competition
among  lenders,  the level of interest  rates,  and the  availability  of funds.
Deposit flows and costs of funds are  influenced  by prevailing  market rates of
interest, competing investments,  account maturities, and the levels of personal
income and savings in the Bank's market area.

The Bank's interest-earning  assets have been historically  concentrated in real
estate-collateralized instruments,  principally single-family residential loans,
and to a lesser extent, loans secured by multi-family residential and commercial
properties, construction loans, home equity lines of credit, second mortgages on
single-family  residences  and  consumer  loans,  both  secured  and  unsecured,
including  loans  secured  by  savings  accounts.   The  Bank  also  invests  in
securities,  primarily U.S.  Government  Treasury and Agency securities,  and in
interest-earning deposits,  primarily with the FHLB of Cincinnati. Its source of
funding for these investments has principally been deposits placed with the Bank
by consumers in the market areas it serves.

Asset/Liability Management

Net  interest  income,  the primary  component  of the Bank's net  earnings,  is
derived from the  difference or "spread"  between the yield on  interest-earning
assets and the cost of the interest-bearing  liabilities. The Bank has sought to
reduce its  exposure to changes in interest  rates by matching  more closely the
effective maturities or repricing characteristics of its interest-earning assets
and  interest-bearing  liabilities.  The  matching  of  the  Bank's  assets  and
liabilities  may be  analyzed  by  examining  the extent to which its assets and
liabilities are interest rate sensitive and

                                        4

<PAGE>



by monitoring the expected  effects of interest rate changes on an institution's
net interest income and net portfolio value.

An asset or liability is interest rate  sensitive  within a specific time period
if it will  mature or reprice  within  that time  period.  If the Bank's  assets
mature or reprice more quickly or to a greater extent than its liabilities,  the
Bank's net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates.  If the Bank's assets mature or reprice more slowly or to a lesser extent
than its liabilities, as is the case with most savings institutions,  the Bank's
net  portfolio  value and net  interest  income  would tend to  decrease  during
periods of rising interest rates but increase during periods of falling interest
rates. The Bank's policy has been to mitigate the interest rate risk inherent in
the  historical  savings  institution  business of originating  long-term  loans
funded by  short-term  deposits  by  pursuing  certain  strategies  designed  to
decrease the  vulnerability of its earnings to material and prolonged changes in
interest rates.

Management's  principal  strategy in managing the Bank's  interest rate risk has
been to maintain short and intermediate-term assets in the portfolio,  including
locally  originated  adjustable rate mortgage loans.  The Bank does not actively
offer  long-term  fixed rate  loans.  All fixed rate loans that are  offered are
secured by one to four-family owner-occupied dwellings for terms of no more than
20 years.  Likewise,  the interest  rate charged on the Bank's  adjustable  rate
loans typically  reprice after one,  three, or five years with maximum  periodic
interest rate adjustment limits ("caps"). At September 30, 1996, the Bank had no
adjustable  rate loans that reprice after five years from that date. In managing
its investment portfolio,  the Bank seeks to purchase investments that mature on
a basis that approximates the estimated maturities of the Bank's liabilities.

Management has attempted to lengthen the average  maturity of its liabilities by
adopting a tiered  pricing  program for its  certificates  of deposit.  The Bank
offers  higher  rates of interest on its longer  term  certificates  in order to
encourage depositors to invest in certificates with longer maturities.

Interest Rate Sensitivity Analysis

The  Bank's  future  financial  performance  depends  to a large  extent  on how
successful it is in limiting the  sensitivity of earnings and net asset value to
changes in interest  rates.  Such  sensitivity  may be analyzed by examining the
amount by which the market value of the Bank's portfolio equity changes given an
immediate  and  sustained  change  in  interest  rates.   Based  on  the  latest
information available,  the Bank's market value of portfolio equity at September
30,  1996  would  decrease  by $1.0  million  or 3.0%  given a 200  basis  point
immediate and sustained increase in interest rates.

Average Balances, Interest, and Average Yields

Net interest  income is affected by (i) the difference  ("interest rate spread")
between  rates of  interest  earned  on  interest-earning  assets  and  rates of
interest paid on  interest-bearing  liabilities and (ii) the relative amounts of
interest-earning assets and interest-bearing  liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread  will  generate  net  interest  income.  Savings  institutions  have
traditionally  used interest  rate spreads as a measure of net interest  income.
Another  indication of an institution's net interest income is its "net yield on
interest-earning  assets"  which  is net  interest  income  divided  by  average
interest-earning  assets.  The following  table sets forth  certain  information
relating  to the Bank's  average  interest-earning  assets and  interest-bearing
liabilities  and  reflects  the  average  yield on assets  and  average  cost of
liabilities  for the  periods  indicated.  Such  yields and costs are derived by
dividing  income  or  expense  by the  average  monthly  balance  of  assets  or
liabilities,  respectively,  for  the  periods  presented.  During  the  periods
indicated,  nonaccruing  loans are  included in the net loan  category.  Average
balances  are derived  from  month-end  average  balances.  Management  does not
believe  that the use of month-end  average  balances  instead of average  daily
balances has caused any material difference in the information presented.

                                        5

<PAGE>
<TABLE>
<CAPTION>
                                                                     Year Ended September 30,
                                   -------------------------------------------------------------------------------------------------
                                                 1996                            1995                            1994
                                   -------------------------------  ------------------------------  --------------------------------
                                      Average            Average     Average               Average  Average                Average
                                      Balance Interest   Yield/Cost Balance    Interest  Yield/Cost Balance    Interest   Yield/Cost
                                      ------- --------   ---------- -------    --------  ---------- -------    --------   ----------
                                                                              (Dollars in Thousands)
<S>                                <C>        <C>           <C>     <C>       <C>           <C>     <C>        <C>           <C>

Interest-earning assets:
   Loans receivable.............   $  74,797  $   5,970     7.98%   $  74,013 $   5,634     7.61%   $  71,745  $   5,528     7.71%
   Investment securities (1)....      32,043      1,742     5.44       18,191       978     5.38       18,322        682     3.72
                                   ---------  ---------     ----    --------- ---------     ----    ---------  ---------     ----
     Total interest-
       earning assets...........     106,840      7,712     7.22       92,204     6,612     7.17       90,067      6,210     6.89
                                              ---------                       ---------     ----               ---------

Non-interest earning assets.....       1,871                            1,673                           1,586
                                   ---------                        ---------                       ---------
   Total assets.................   $ 108,711                        $  93,877                       $  91,653
                                   =========                        =========                       =========

Interest-bearing liabilities:
   Deposits.....................   $  76,779      3,901     5.08    $  81,539     3,807     4.67    $  82,545      3,277     3.97
                                   ---------  ---------     ----    --------- ---------     ----    ---------  ---------     ----
   Total interest-bearing
     liabilities................      76,779      3,901     5.08       81,539     3,807     4.67       82,545      3,277     3.97
                                              ---------     ----              ---------     ----               ---------

Non-interest bearing
  liabilities...................       1,296                              966                             570
                                   ---------                        ---------                       ---------
   Total liabilities............      78,075                           82,505                          83,115
Stockholders' equity............      30,636                           11,372                           8,538
                                   ---------                        ---------                       ---------
   Total liabilities &
     stockholders' equity.......   $ 108,711                        $  93,877                       $  91,653
                                   =========                        =========                       =========
Net interest income.............              $   3,811                       $   2,805                        $   2,933
                                              =========                       =========                        =========
Interest rate spread (2)........                            2.14%                           2.50%                            2.92%
                                                            =====                           ====                             ====
Net yield on interest-earning
  assets (3)....................                            3.57%                           3.04%                            3.26%
                                                            =====                           ====                             ====
Ratio of average interest-
  earning assets to average
  interest- bearing liabilities.                          125.55%                         113.08%                          109.11%
                                                          =======                         ======                           ======
</TABLE>

--------------------------------
(1)  Includes interest-earning overnight deposits and term deposits with FHLB.
(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                        6

<PAGE>



The net  interest  margin is a key  measure in  determining  the  Bank's  income
performance.  The  Bank's  net  interest  margin  was 3.57%  for the year  ended
September  30,  1996  compared  to 3.04% for the same  period in 1995.  The 1996
increase was due to an increase of net  interest  income of  approximately  $1.0
million  or  35.8%.  Interest  income  for the year  ended  September  30,  1996
increased  approximately  $1.1  million or 16.6%  compared to the same period in
1995.  During  these same  periods,  interest  expense  increased  approximately
$94,000 or 2.5%.

The  increase in net interest  income of $1.0 million  between 1996 and 1995 was
due  primarily  to the  increase in the volume of average  net  interest-earning
assets of approximately $14.6 million in 1996 compared to 1995.

The Bank's net interest  margin was 3.04% for the year ended  September 30, 1995
compared to 3.26% for the same period in 1994.  The 1995  decrease  was due to a
decrease of net  interest  income of  approximately  $128,000 or 4.6%.  Interest
income for the year ended September 30, 1995 increased approximately $402,000 or
6.5% compared to the same period in 1994.  During these same  periods,  interest
expense increased approximately $530,000 or 16.2%.

The decrease in net interest income of $128,000 between 1995 and 1994 was due to
the average  interest  rates paid on deposits  increasing at a greater rate than
the average interest yield on interest-earning  assets, which was offset to some
extent by the increase in the volume of average net  interest-earning  assets of
approximately $2.1 million in 1995 compared to 1994.

Rate/Volume Analysis

The following table below sets forth certain  information  regarding  changes in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning  assets and  interest-bearing  liabilities,
information  is  provided  on  changes  attributable  to (i)  changes  in volume
(changes  in  average  volume  multiplied  by old rate);  (ii)  changes in rates
(changes in rate multiplied by old average volume); (iii) changes in rate-volume
(changes in rate multiplied by the change in average  volume).  Average balances
are derived from month-end balances. Management does not believe that the use of
month-end  balances  instead of average  daily  balances has caused any material
difference in the information presented.


                                        7

<PAGE>


<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                      -------------------------------------------------------------------------------------------
                                                        1996 vs 1995                               1995 vs 1994
                                      -----------------------------------------       -------------------------------------------
                                                        Increase (Decrease)                        Increase (Decrease)
                                                        Due to                                        Due to
                                                              Rate/                                             Rate/
                                      Volume    Rate         Volume       Net           Volume      Rate       Volume        Net
                                      ------ -----------   ---------    -------       ---------    -------    ---------   ------
                                                                               (In Thousands)
<S>                                   <C>       <C>        <C>          <C>           <C>          <C>        <C>         <C>
Interest-earning assets:
  Loans receivable                    $    60   $    274   $       3    $   337       $     175    $   (68)   $      (2)  $   105
  Investment securities (1)               744         11           8        763              (5)       304           (2)      297
                                      -------   --------   ---------    ----------    ---------    -------    ---------   -------
    Total                             $   804   $    285   $      11    $ 1,100       $     170    $   236    $      (4)  $   402
                                      =======   ========   =========    =======       =========    =======    =========   =======

Interest expense:
  Deposits                            $  (222)  $    336   $     (20)   $    94       $     (40)   $   577    $      (7)  $   530
                                      -------   --------   ---------    -------       ---------    -------    ---------   -------
    Total                             $  (222)  $    336   $     (20)   $    94       $     (40)   $   577    $      (7)  $   530
                                      =======   ========   =========    =======       =========    =======    =========   =======

Net change in interest income         $ 1,026   $    (51)  $      31    $ 1,006       $     210    $  (341)   $       3   $  (128)
                                      =======   ========   =========    =======       =========    =======    =========   =======
</TABLE>

--------------------------------------------
(1)  Includes interest-earning overnight deposits and term deposits with FHLB of
     Cincinnati.

                                        8

<PAGE>



COMPARISON OF THE RESULTS OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1996 AND 1995

Net Income

Income  before  the  cumulative  effect  of a  change  in  accounting  principle
increased by $199,000 or 22.3% to  $1,090,000  for the year ended  September 30,
1996 as compared to $891,000  for the same period in 1995.  The net increase was
due to an increase of $1,006,000 in net interest income,  an increase of $20,000
in  non-interest  income  plus a decrease  in the  provision  for loan losses of
approximately  $84,000 offset by an increase of $781,000 in non-interest expense
and an increase of $130,000 in income tax expense.

Interest Income

Interest income was $7.7 million, or 7.22% of average  interest-earning  assets,
for the year ended  September 30, 1996 as compared to $6.6 million,  or 7.17% of
average interest-earning assets, for the year ended September 30, 1995. Interest
income  increased  by $1.1  million or 16.6%  from 1995 to 1996.  The change was
primarily  due  to  a  $14.6  million   increase  in  the  average   balance  of
interest-earning assets during the year ended September 30, 1996 compared to the
year ended September 30, 1995.

Interest Expense

Interest  expense  was  $3.9  million,  or  5.08%  of  average  interest-bearing
liabilities,  for the year ended September 30, 1996 as compared to $3.8 million,
or 4.67% of average interest-bearing  liabilities,  for the corresponding period
in 1995. The increase in interest expense of $94,000 was primarily the result of
an increase in the average  rates paid on deposits  offset by a decrease of $4.8
million in the average balance of interest  bearing  deposits for the year ended
September 30, 1996 compared to the same period in 1995.

Provision for Loan Losses

The provision for loan losses was approximately $8,000 and $92,000 for the years
ended  September  30, 1996 and 1995,  respectively.  Management  considers  many
factors in  determining  the necessary  levels of the allowance for loan losses,
including an analysis of specific loans in the portfolio, estimated value of the
underlying  collateral,  assessment of general trends in the real estate market,
delinquency trends,  prospective  economic and regulatory  conditions,  inherent
loss in the loan  portfolio,  and the  relationship  of the  allowance  for loan
losses to outstanding loans. At September 30, 1996 the allowance for loan losses
represented .37% of total loans compared to .39% at September 30, 1995.

Non-Interest Income

Non-interest  income  amounted  to  $101,000  and  $81,000  for the years  ended
September  30, 1996 and 1995,  respectively.  The largest  item in  non-interest
income is service fees on loan and deposit  accounts,  which amounted to $77,000
and $59,000 for 1996 and 1995, respectively. The increase in non-interest income
of  $20,000  was  primarily  due to the  increase  in  income  from late fees on
delinquent loans and service fee income on NOW accounts.

Non-Interest Expense

Non-interest expense increased  approximately  $781,000 or 54.2% to $2.2 million
for the year ended  September  30, 1996  compared  to $1.4  million for the same
period in 1995. Non-interest expense was 2.0% and 1.5% of average assets for the
years ended September 30, 1996 and 1995, respectively.  The increase of $781,000
was

                                        9

<PAGE>



primarily  due to an  increase of $560,000  in federal  insurance  premiums,  an
increase of $89,000 in compensation and benefits, and an increase of $129,000 in
other operating expenses. The increase of $560,000 in federal insurance premiums
was primarily  due to a one-time  special  assessment  of $536,000,  pursuant to
legislation  signed by the President on September 30, 1996 to  recapitalize  the
Savings  Association  Insurance Fund (SAIF).  The increase in  compensation  and
benefits resulted from  compensation  expense related to the ESOP of $169,000 in
1996, which was not incurred in 1995,  offset in part by a $30,000  contribution
to the defined  benefit pension plan in 1995 that was not incurred in 1996, plus
a decrease in salaries  and bonuses of $45,000 in 1996 as compared to 1995.  The
decrease in salaries  and bonuses in 1996 was due to a bonus of $81,000  paid in
1995 that was not paid in 1996.  The  increase of  $129,000  in other  operating
expense was primarily due to increased legal and accounting fees, plus taxes and
other regulatory filing fees associated with being a public company.

Income Tax Expense

The  provision  for income tax expense  amounted to  approximately  $589,000 and
$459,000  for the years ended  September  30, 1996 and 1995,  respectively.  The
provision  for income tax expense as a percentage  of income  before  income tax
expense and cumulative effect of the change in accounting  principle amounted to
35.1% and 34.0% for 1996 and 1995, respectively.


COMPARISON OF THE RESULTS OF OPERATIONS FOR THE YEARS ENDED
SEPTEMBER 30, 1995 AND 1994

Net Income

Net  income  decreased  by  $134,000  or 13.0% to  $891,000  for the year  ended
September 30, 1995 as compared to $1,025,000 for the same period in 1994. Income
before the cumulative effect of the change in accounting  principle decreased by
$153,000 or 14.6% to $891,000 in 1995 compared to  $1,044,000  in 1994.  The net
decrease of $153,000 was due to a decrease of $129,000 in net interest income, a
decrease of  approximately  $5,000 in  non-interest  income,  plus  increases of
approximately   $32,000  in  the  provision  for  loan  losses  and  $86,000  in
non-interest  expense offset by  approximately a $99,000  decrease in income tax
expense for 1995 compared to 1994.

Interest Income

Interest income was $6.6 million,  or 7.17% of average  interest-earning  assets
for the year ended  September 30, 1995 as compared to $6.2 million,  or 6.89% of
average interest-earning assets, for the year ended September 30, 1994. Interest
income  increased by $402,000 or 6.5% from 1994 to 1995. The change was due to a
28  basis  point   increase   in  the   average   rate  earned  on  the  average
interest-earning  assets plus a $2.1 million  increase in the average balance of
interest-earning assets during the year ended September 30, 1995 compared to the
year ended September 30, 1994.

Interest Expense

Interest  expense  was  $3.8  million,  or  4.67%  of  average  interest-bearing
deposits,  for the year ended September 30, 1995 as compared to $3.3 million, or
3.97% of average  interest-bearing  deposits,  for the  corresponding  period in
1994.  Interest  expense  increased by $530,000 or 16.2% from 1994 to 1995.  The
change was due  primarily to a 70 basis point  increase in the average rate paid
on the  deposits  during the year  ended  September  30,  1995  compared  to the
corresponding period in 1994.


                                       10

<PAGE>



Provision for Loan Losses

The  provision  for loan  losses was  $92,000  and  $60,000  for the years ended
September 30, 1995 and 1994.  Management  considers  many factors in determining
the necessary levels of the allowance for loan losses,  including an analysis of
specific loans in the portfolio,  estimated value of the underlying  collateral,
assessment  of general  trends in the real estate  market,  delinquency  trends,
prospective  economic  and  regulatory  conditions,  inherent  loss in the  loan
portfolio,  and the relationship of the allowance for loan losses to outstanding
loans. At September 30, 1995 the allowance for loan losses  represented  .39% of
total  loans  compared  to .34% at  September  30,  1994.  The  provisions  were
necessary  to raise the  allowance  for loan losses to a level  consistent  with
management's analysis of the loan portfolio.

Non-Interest Income

Non-interest  income  amounted  to  $81,000  and  $86,000  for the  years  ended
September 30, 1995 and 1994,  respectively.  The largest  items in  non-interest
income are service fees on loan and deposit accounts,  which amounted to $59,000
and $63,000 for 1995 and 1994, respectively.  The decline in non-interest income
of  $5,000  was  primarily  due to the  decrease  in  income  from  late fees on
delinquent loans.

Non-Interest Expense

Non-interest  expense increased  approximately  $86,000 or 6.3% to $1,444,000 at
September 30, 1995  compared to  $1,358,000 at September 30, 1994.  Non-interest
expense  was 1.5% of average  assets  for both 1995 and 1994.  The  increase  of
$86,000 was due primarily to an increase in compensation and benefits of $70,000
plus an increase of $10,000 in  occupancy  expenses.  The increase of $70,000 in
compensation  and benefits was due to normal increases in salary and benefits of
$41,000 offset by a $26,000 decline in the  contribution  to the  multi-employer
pension plan,  plus in fiscal year 1994,  the Bank  recognized a gain of $55,000
upon  termination of their defined  benefit pension plan (see Note 8 of Notes to
Consolidated  Financial  Statements).  The  increase  of  $10,000  in  occupancy
expenses was due to increased  depreciation charges and maintenance expense. For
a possible one-time expense to the Bank to recapitalized the Savings Association
Insurance Funds, see "SAIF Premium Disparity Possible Assessment."

Income Taxes

The  provision  for income tax expense  amounted to  approximately  $459,000 and
$558,000  for the years ended  September  30, 1995 and 1994,  respectively.  The
provision  for income tax expense as a percentage  of income  before  income tax
expenses and cumulative effect of the change in accounting principle amounted to
34.0% and 34.8% for 1995 and 1994, respectively.


COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1996 and 1995

The  Company's  consolidated  assets  increased  $1.8  million or 1.6% to $109.0
million at September 30, 1996 compared to $107.2  million at September 30, 1995.
Securities  available-for-sale  increased $549,000,  securities held-to-maturity
increased $8.7 million,  loans increased $2.1 million, cash and cash equivalents
plus  certificates  of deposit  decreased  $9.9  million and other  non-interest
earning assets increased by $270,000.

Securities  classified  as  available-for-sale  are  carried at market  value in
accordance with SFAS No. 115,  "Accounting  for Certain  Investments in Debt and
Equity Securities." Securities  available-for-sale increased $549,000 due to the
increase in fair value of such securities. Securities held-to-maturity increased
$8.7 million due

                                       11

<PAGE>



to the purchase of debt  securities of U.S.  Government  agencies  totaling $9.2
million offset by the call of a $500,000 FHLB bond.

Liabilities  of the Company  increased  $1.7 million or 2.2% to $78.7 million at
September 30, 1996 compared to $77.0 million at September 30, 1995. The increase
in  liabilities  was  primarily due to the increase in deposits of $1.1 million,
reflecting  management's aggressive strategy in attracting depositors within the
local market area.

Stockholder's  equity was $30.2  million at  September  30,  1996 and  increased
approximately  $37,000 over the balance at September 30, 1995.  The increase was
due to net income of $1.1 million, an increase of $362,000 in the net unrealized
appreciation on securities  available-for-sale,  and an increase of $169,000 due
to ESOP shares earned,  offset by the purchase of common stock totaling $789,000
pursuant to a  repurchase  agreement  approved by the Board of  Directors of the
Company on March 18, 1996, plus the payment of dividends totaling $795,000.

The OTS imposes  regulations  which provide that the savings  institutions  must
maintain certain levels of capital.  Specifically,  the regulations provide that
savings  institutions  must maintain  tangible capital equal to 1.5% of adjusted
total  assets,  core  capital  equal  to  3%  of  adjusted  total  assets  and a
combination  of core and  supplementary  capital  equal  to 8% of risk  weighted
assets.

The  following  summarizes  the Bank's  capital  requirements  and  position  at
September 30, 1996 and 1995:
<TABLE>
<CAPTION>

                                                        1996                    1995
                                             -----------------------      -----------------------
                                                              (Dollars in Thousands)
                                               Amount        Percent         Amount      Percent

<S>                                          <C>           <C>             <C>          <C>
Tangible capital........................     $    21,754        20.2       $  20,531         19.1
Tangible capital requirement............           1,618         1.5           2,134          1.5
                                             -----------   ---------       ---------    ---------
Excess..................................     $    20,136        18.7       $  18,397         17.6
                                             ===========   =========       =========    =========
Core capital............................     $    21,754        20.2       $  20,531         19.1
Core capital requirement................           3,235         3.0           4,268          3.0
                                             -----------   ---------       ---------    ---------
Excess..................................     $    18,519        17.2       $  16,263         16.1
                                             ===========   =========       =========    =========
Tangible capital .......................     $    21,754                   $  20,531
General valuation allowance.............             290                         290
                                             -----------                   ---------
Total capital (core and supplemental)...          22,044        40.7          20,821         30.4
Risk-based capital requirement..........           4,334         8.0           5,469          8.0
                                             -----------   ---------       ---------    ---------

Excess..................................     $    17,710        32.7       $  15,352         22.4
                                             ===========   =========       =========    =========
</TABLE>

Liquidity

The liquidity of the Company  depends  primarily on the dividends  paid to it as
the sole  shareholder  of the Bank. At September 30, 1996, the Bank could pay on
its common stock dividends of approximately $11.5 million.

The Bank's primary sources of funds are deposits and proceeds from principal and
interest  payments of loans.  Additional  sources of liquidity are advances from
the FHLB of Cincinnati and other borrowings. At September 30, 1996, the Bank had
no outstanding borrowings.  The Bank has utilized and may in the future, utilize
FHLB of  Cincinnati  borrowings  during  periods  when  management  of the  Bank
believes that such borrowings  provide a lower cost source of funds than deposit
accounts  and the Bank  desires  liquidity  in order to help  expand its lending
operations.

                                       12

<PAGE>



The Company's  operating  activities produced positive cash flows for the fiscal
years ended September 30, 1996, 1995, and 1994.

The Bank's  most  liquid  assets are cash and  cash-equivalents,  which  include
investments in highly liquid, short-term investments.  At September 30, 1996 and
1995,  cash and cash  equivalents  totaled  $15.1  million  and  $22.0  million,
respectively.

At September 30, 1996,  the Bank had $39.7 million in  certificates  of deposits
due  within  one year  and  $17.2  million  due  between  one and  three  years.
Management believes, based on past experience, that the Bank will retain much of
the deposits or replace them with new deposits.  At September 30, 1996, the Bank
had $900,000 in outstanding commitments to originate mortgages. The Bank intends
to fund these  commitments  with  short-term  investments and proceeds from loan
repayments.

OTS regulations  require that the Bank maintain  specified  levels of liquidity.
Liquidity is measured as a ratio of cash and certain investments to withdrawable
savings.  The minimum  level of liquidity  required by  regulation  is presently
5.0%.  The Bank's  liquidity  ratio at September  30, 1996,  1995,  and 1994 was
34.26%, 36.10%, and 15.43%, respectively.

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 change in the relative  purchasing
power of money  over  time and due to  inflation.  The  impact of  inflation  is
reflected  in the  increased  cost  of the  Company's  operations.  Unlike  most
industrial  companies,  nearly all 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.

Other Developments - BIF-SAIF Premium Disparity;  Deposit Insurance  Assessment;
Bad Debt Reserve Recapture

The Bank's savings  deposits are insured by the Savings  Associations  Insurance
Fund  ("SAIF"),   which  is  administered  by  the  Federal  Deposit   Insurance
Corporation  ("FDIC").  The  assessment  rate  currently  ranges  from  0.23% of
deposits   for  well   capitalized   institutions   to  0.31%  of  deposits  for
undercapitalized institutions.

The FDIC also  administers  the Bank Insurance Fund ("BIF"),  which has the same
designated  reserve  ratio as the SAIF.  On August 8, 1995,  the FDIC adopted an
amendment to the BIF  risk-based  assessment  schedule which lowered the deposit
insurance  assessment  rate for  most  commercial  banks  and  other  depository
institutions  with  deposits  insured  by the BIF to a range of 0.31% of insured
deposits for undercapitalized  BIF-insured institutions to 0.04% of deposits for
well-capitalized   institutions,   which  constitute  over  90%  of  BIF-insured
institutions.  The FDIC  amendment  became  effective  September  30,  1995.  On
November 14, 1995,  the BIF  assessment  rate schedule was further  revised to a
statutory minimum of $2,000 annually for well capitalized  institutions to 0.27%
for  deposits  for  undercapitalized  institutions.  These  revisions to the BIF
assessment  rate  schedule  created  a  substantial  disparity  in  the  deposit
insurance premiums paid by BIF and SAIF members and placed SAIF-insured  savings
institutions  such as the  Bank at a  significant  competitive  disadvantage  to
BIF-insured institutions.

On September  30,  1996,  the  President  signed  legislation  which among other
things,  recapitalized the Savings Associations Insurance Fund through a special
assessment on most savings financial institutions, such as the Bank. The special
assessment  amounted to 65.7 basis points applied to the Bank's insured deposits
as of March 31, 1995,  and amounted to $536,000.  The expense was  recognized in
the consolidated financial statements for the year ended

                                       13

<PAGE>



statements  for the year ended  September 30, 1996, and the after tax impact was
to reduce net income by $354,000 or $0.18 per share of common stock. As a result
of this special assessment, the insurance assessment rate on the Bank's deposits
will be reduced beginning January 1, 1997.

In  addition,  the  legislation  repealed  the  bad  debt  deduction  under  the
percentage  of taxable  income  method of the Internal  Revenue Code for savings
banks.  Savings banks,  like the Bank, which have previously used the percentage
of taxable  income method in computing  its bad debt  deduction for tax purposes
will be required to recapture  into taxable  income  post-1987  reserves  over a
six-year  period  beginning with the 1996 taxable year (fiscal year 1997 for the
Bank). The start of such recapture may be delayed until the 1998 taxable year if
the dollar amount of the  institution's  residential  loan  originations in each
year is not less than the average dollar amount of residential  loans originated
in each of the nine most recent  years  disregarding  the years with the highest
and  lowest  originations  during  such  period.  For  purposes  of  this  test,
residential  loan  originations  would not include  refinancing  and home equity
loans.  The impact of this  legislation  will not have a material  impact on the
financial statements of the Company.

Impact of Recent Accounting Pronouncements

Disclosures  of Fair Value of  Financial  Instruments.  In  December  1991,  the
Financial  Accounting Standards Board (the "FASB") issued Statement of Financial
Accounting  Standards  ("SFAS")  No.  107,  "Disclosures  about  Fair  Value  of
Financial  Instruments."  SFAS No. 107 requires the Company to disclose the fair
value of its  financial  instruments,  which will  include  the  majority of its
balance sheet accounts in addition to selected off-balance sheet items. SFAS No.
107 became effective for the Company in fiscal 1996 because the Company has less
than $150 million in total  assets.  Earlier  adoption was required for entities
with assets in excess of $150  million.  SFAS No. 107 focuses only on disclosure
of fair values in the  financial  statements,  and  therefore,  has no effect on
consolidated financial position and results of operations.

Accounting for Impaired  Loans. In September 1993, the FASB issued SFAS No. 114,
"Accounting  by Creditors for Impairment of a Loan." SFAS No. 114 specifies that
allowances  for loan losses on impaired  loans  should be  determined  using the
present  value of  estimated  future cash flows of the loan,  discounted  at the
loans' effective  interest rate. A loan is impaired when it is probable that all
principal  and  interest  amounts  will not be  collected  according to the loan
contract.  SFAS No. 114 is effective for fiscal years  beginning  after December
15, 1994, which for the Company is the 1996 fiscal year. Management adopted SFAS
No. 114 on October 1, 1995,  without  material impact on consolidated  financial
position or results of operations.  In October 1994, the FASB amended certain of
the revenue  recognition  provisions of SFAS No. 114 by the issuance of SFAS No.
118.  Such  revisions  similarly  had no  material  effect  on the  consolidated
financial condition or results of operations of the Company.

Derivative Financial Statements.  In October 1994, the FASB issued SFAS No. 119,
"Disclosure about Derivative  Financial  Instruments and Fair Value of Financial
Instruments."  SFAS No. 119 requires financial  statement  disclosure of certain
derivative financial instruments,  defined as futures,  forwards,  swaps, option
contracts, or other financial instruments with similar  characteristics.  In the
opinion of management, the disclosure requirements of SFAS No. 119 will not have
a material effect on the Company's  consolidated  financial condition or results
of  operations,   as  the  Company  does  not  invest  in  derivative  financial
instruments,  as defined in SFAS No. 119. As a result, the applicability of SFAS
No. 119 relates solely to disclosure  requirements  pertaining to fixed-rate and
adjustable-rate loan commitments.

Accounting  for  ESOP.  The  Accounting  Standards  Executive  Committee  of the
American  Institute  of  Certified  Public  Accountants   ("AcSEC")  has  issued
Statement of Position ("SOP 93-6") on "Employers'  Accounting for Employee Stock
Ownership Plans" ("ESOP").  SOP 93-6, among other things, changes the measure of
compensation  expense  recorded by employers from the cost of ESOP shares to the
fair value of ESOP shares.  To the extent that fair value of the Company's  ESOP
shares differs from the costs of such shares, compensation expense must be

                                       14

<PAGE>



recorded in the Company's financial statements for the fair value of ESOP shares
allocated to participants  for a reporting  period.  SOP 93-6 was adopted by the
Company during fiscal 1995, without material financial statement effect.

Accounting  for Mortgage  Servicing.  In May 1995, the FASB issued SFAS No. 122,
"Accounting  for Mortgage  Servicing  Rights."  SFAS No. 122  requires  that the
Company  recognizes  as separate  assets  rights to service  mortgage  loans for
others,  regardless of how those servicing rights were acquired.  An institution
that  acquires  mortgage   servicing  rights  through  either  the  purchase  or
origination  of  mortgage  loans and sells  those  loans with  servicing  rights
retained would allocate some of the cost of the loans to the mortgage  servicing
rights.  SFAS No. 122 also  requires  that an  enterprise  allocate  the cost of
purchasing or  originating  the mortgage  loans  between the mortgage  servicing
rights and the loans, when mortgage loans are securitized,  if it is practicable
to estimate the fair value of mortgage servicing rights. Additionally,  SFAS No.
122 requires that capitalized  mortgage  servicing rights and capitalized excess
servicing  receivables be assessed for impairment.  Impairment would be measured
based  on  fair  value.  SFAS  No.  122 is to be  applied  prospectively  in the
Company's  fiscal year beginning  October 1, 1996, to  transactions  in which an
entity acquires mortgage  servicing rights and to impairment  evaluations of all
capitalized   mortgage   servicing  rights  and  capitalized   excess  servicing
receivables whenever acquired. Retroactive application is prohibited. Management
adopted SFAS No. 122 on October 1, 1996, as required, without material effect on
the Company's consolidated financial position or results of operations.

Accounting for Stock-Based  Compensation.  In October 1994, the FASB issued SFAS
No.  123  entitled  "Accounting  for  Stock-Based  Compensation."  SFAS No.  123
establishes a fair value based method of accounting for stock-based compensation
paid to employees.  SFAS No. 123  recognizes the fair value of an award of stock
or stock options on the grant date and is effective for  transactions  occurring
after December 1995.  Companies are allowed to continue to measure  compensation
cost for those plans using the intrinsic value based method of accounting, which
generally does not result in  compensation  expense  recognition for most plans.
Companies  that elect to remain with the  existing  accounting  are  required to
disclose in a footnote to the financial  statements pro forma net earnings,  and
if  presented,  earnings  per share,  as if SFAS No. 123 had been  adopted.  The
Company does not currently have any  outstanding  stock options,  and therefore,
adoption  of SFAS  No.  123 will not have a  material  effect  on the  Company's
consolidated financial condition or results of operations.

Accounting for Transfers of Financial Assets. In June 1996, the FASB issued SFAS
No. 125,  "Accounting for Transfers of Financial Assets,  Servicing Rights,  and
Extinguishment of Liabilities," that provides  accounting  guidance on transfers
of financial  assets,  servicing  of financial  assets,  and  extinguishment  of
liabilities.  SFAS No. 125 introduces an approach to accounting for transfers of
financial assets that provides a means of dealing with more complex transactions
in which the seller disposes of only a partial  interest in the assets,  retains
rights or obligations, makes use of special purpose entities in the transaction,
or otherwise has continuing  involvement  with the transferred  assets.  The new
accounting method, the financial components approach, provides that the carrying
amount of the  financial  assets  transferred  be allocated to components of the
transaction based on their relative fair values.  SFAS No. 125 provides criteria
for determining  whether control of assets has been  relinquished  and whether a
sale has  occurred.  If the transfer does not qualify as a sale, it is accounted
for as secured borrowing. Transactions subject to the provisions of SFAS No. 125
include,    among   others,    transfers   involving   repurchase    agreements,
securitizations   of   financial   assets,   loan   participations,    factoring
arrangements, and transfers of receivables with recourse.

An entity that undertakes an obligation to service  financial assets  recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets,  and all the securitized  assets are retained and
classified  as  held-to-maturity).  A  servicing  asset  or  liability  that  is
purchased or assumed is initially recognized at its fair value. Servicing assets
and  liabilities are amortized in proportion to and over the period of estimated
net  servicing  income  or net  servicing  loss and are  subject  to  subsequent
assessments for impairment based on fair value.

                                       15

<PAGE>
                      MILLER, MAYER, SULLIVAN & STEVENS LLP
                          CERTIFIED PUBLIC ACCOUNTANTS
                     "INNOVATORS OF SOLUTION TECHNOLOGY"(sm)


                          INDEPENDENT AUDITORS' REPORT

                               Board of Directors
                    Harrodsburg First Financial Bancorp, Inc.
                              Harrodsburg, Kentucky


We have audited the  accompanying  consolidated  balance  sheets of  Harrodsburg
First Financial  Bancorp,  Inc. and Subsidiary as of September 30, 1996 and 1995
and the related  consolidated  statements of income,  stockholders'  equity, and
cash flows for each of the years in the three year period  ended  September  30,
1996. These  consolidated  financial  statements are the  responsibility  of the
management  of  Harrodsburg  First  Financial  Bancorp,   Inc.  (Company).   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  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  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Harrodsburg First
Financial  Bancorp,  Inc. and  Subsidiary as of September 30, 1996 and 1995, and
the  results of their  operations  and their cash flows for each of the years in
the three year period ended  September  30, 1996 in  conformity  with  generally
accepted accounting principles.



/s/Miller, Mayer, Sullivan & Stevens
Lexington, Kentucky
November 27, 1996


                                                              (606) 223-3095
2365 HARRODSBURG ROAD   LEXINGTON, KENTUCKY 40504-3399   FAX: (606) 223-2143

                                       16

<PAGE>




            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1996 and 1995

                             ----------------------

<TABLE>
<CAPTION>

ASSETS                                                                1996             1995
                                                                  -------------    ------------
<S>                                                               <C>              <C>
Cash and due from banks                                           $     834,621    $    551,447
Interest Bearing Deposits                                            14,230,056      21,438,983
Certificates of deposit                                               2,500,000       5,500,000
Securities available-for-sale at fair value                           1,881,429       1,332,177
Securities held-to-maturity, fair value of $10,398,994 and
   $1,751,411 for 1996 and 1995, respectively                        10,502,766       1,747,343
Loans receivable, net                                                77,502,336      75,433,526
Accrued interest receivable                                             675,433         553,686
Premises and equipment, net                                             657,920         538,584
Other assets, including Federal income tax refund of $49,272
   and $35,428 for 1996 and 1995, respectively                          168,113         138,527
                                                                  -------------    ------------

   Total assets                                                   $ 108,952,674    $107,234,273
                                                                  =============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                          $  76,946,210    $ 75,893,177
Advance payments by borrowers for taxes and insurance                    68,534          86,929
Deferred Federal income tax                                             719,402         634,083
Dividends payable                                                       391,633
Other liabilities                                                       604,906         434,870
                                                                  -------------   -------------
   Total liabilities                                                 78,730,685      77,049,059
                                                                  -------------   -------------

Stockholders' equity
   Common stock, $0.10 par value, 5,000,000 shares authorized;
       2,182,125 shares issued and outstanding                          218,213         218,213
   Additional paid-in capital                                        21,001,572      20,948,904
   Retained earnings, substantially restricted                       10,229,074       9,934,378
   Net unrealized appreciation on securities available-for-sale,
       net of deferred income taxes                                   1,191,925         829,419
   Treasury stock, 49,392 shares, at cost                              (789,495)
   Unallocated employee stock ownership plan (ESOP) shares           (1,629,300)     (1,745,700)
                                                                  -------------    ------------
         Total stockholders' equity                                  30,221,989      30,185,214
                                                                  -------------    ------------

         Total liabilities and stockholders' equity               $ 108,952,674    $107,234,273
                                                                  =============    ============
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       17

<PAGE>
            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
             for the years ended September 30, 1996, 1995, and 1994

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

                                                           1996         1995         1994
                                                        -----------  -----------  -----------
<S>                                                     <C>          <C>          <C>
Interest income:
   Interest on loans                                    $ 5,970,236  $ 5,634,417  $ 5,527,683
   Interest and dividends on securities                     433,018      104,368       84,588
   Other interest income                                  1,308,723      872,911      598,271
                                                        -----------  -----------  -----------
      Total interest income                               7,711,977    6,611,696    6,210,542
                                                        -----------  -----------  -----------

Interest expense:
   Interest on deposits                                   3,901,228    3,807,113    3,277,153
                                                        -----------  -----------  -----------

Net interest income                                       3,810,749    2,804,583    2,933,389
Provision for loan losses                                     7,500       91,982       60,000
                                                        -----------  -----------  -----------
Net interest income after provision for loan losses       3,803,249    2,712,601    2,873,389
                                                        -----------  -----------  -----------

Non-interest income:
   Loan and other service fees, net                          77,214       58,829       63,234
   Other                                                     24,030       22,314       22,587
                                                        -----------  -----------  -----------
                                                            101,244       81,143       85,821
                                                        -----------  -----------  -----------
Non-interest expense:
   Compensation and benefits                                834,471      745,285      675,114
   Occupancy expenses, net                                  121,604      130,781      120,816
   Federal and other insurance premiums                     748,464      188,072      187,979
   Data processing expenses                                  95,711       92,976       86,044
   State franchise tax                                       93,037       83,694       87,472
   Other operating expenses                                 332,295      202,898      200,282
                                                        -----------  -----------  -----------
                                                          2,225,582    1,443,706    1,357,707
                                                        -----------  -----------  -----------
Income before income tax expense and cumulative effect
   of change in accounting principle                      1,678,911    1,350,038    1,601,503
Income tax expense                                          588,744      459,013      557,921
                                                        -----------  -----------  -----------

Income before cumulative effect of change in
   accounting principle                                   1,090,167      891,025    1,043,582

Cumulative effect of change in accounting principle                                  (18,591)
                                                        -----------  -----------  -----------

Net income                                              $ 1,090,167  $   891,025  $ 1,024,991
                                                        ===========  ===========  ===========

Earnings per share                                      $    0.55
                                                        ===========
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       18

<PAGE>



            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
             for the years ended September 30, 1996, 1995, and 1994

                             ----------------------

<TABLE>
<CAPTION>
                                                                            Net Unrealized
                                                  Additional                Appreciation on                 Unearned     Total
                                      Common       Paid-In       Retained     Securities       Treasury       ESOP     Stockholders'
                                       Stock       Capital       Earnings   Available-for-Sale   Stock       Shares      Equity
                                    -----------  -----------    ----------  --------------    -----------  ----------- ------------

<S>                                 <C>          <C>            <C>         <C>               <C>          <C>           <C>
Balance, September 30, 1993         $            $              $8,018,362  $                 $            $             $8,018,362

   Net income                                                    1,024,991                                                1,024,991
                                    -----------  -----------    ----------  --------------    -----------  -----------   ----------

Balance, September 30, 1994                                      9,043,353                                                9,043,353

   Issuance of common stock             218,213   20,948,904                                               (1,745,700)   19,421,417

   Net income                                                      891,025                                                  891,025

   Cumulative effect
     October 1, 1994 of change in
     accounting for securities                                                     629,086                                  629,086

   Change in net unrealized
     gain on securities
     available-for-sale,
     net of deferred income taxes                                                  200,333                                  200,333
                                    -----------  -----------    ----------  --------------    -----------  -----------   ----------

Balance, September 30, 1995             218,213   20,948,904     9,934,378         829,419                 (1,745,700)   30,185,214

   Net income                                                    1,090,167                                                1,090,167

   Change in net unrealized
     gain on securities
     available-for-sale,
     net of deferred income taxes                                                  362,506                                  362,506

   Dividend declared                                              (795,471)                                                (795,471)

   ESOP shares earned in 1996                         52,668                                                   116,400      169,068

   Purchase of 49,392 shares
     of common stock                                                                            (789,495)                  (789,495)
                                    -----------  -----------    ----------  --------------    -----------  -----------   ----------

Balance, September 30, 1996         $   218,213  $21,001,572   $10,229,074  $    1,191,925    $ (789,495)  $(1,629,300) $30,221,989
                                    ===========  ===========    ==========  ==============    ===========  ===========   ==========
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                       19

<PAGE>
            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             for the years ended September 30, 1996, 1995, and 1994

                             ----------------------
<TABLE>
<CAPTION>
                                                                    1996           1995           1994
                                                                ----------     -----------     -----------
<S>                                                            <C>            <C>            <C>
Operating activities

Net income                                                     $ 1,090,167    $   891,025    $ 1,024,991
Adjustments to reconcile net income to net cash provided
by operating activities:
   Cumulative effect of change in accounting principle                                            18,591
   Provision for loan losses                                         7,500         91,982         60,000
   Provision for depreciation                                       58,344         70,496         65,175
   ESOP benefit expense                                            169,068
   Amortization of loan fees                                       (56,935)       (41,232)       (48,509)
   Amortization of investment discount                                (466)
   FHLB stock dividend                                             (80,000)       (71,100)       (52,900)
   Change in:
     Interest receivable                                          (121,747)       (35,124)      (100,252)
     Interest payable                                               (1,522)           132         (1,237)
     Accrued liabilities                                           171,557         (8,915)       (29,885)
     Prepaid expense                                                (9,646)         8,157         (2,658)
     Income taxes payable                                         (121,367)        56,804         43,238
                                                               -----------    -----------    -----------

   Net cash provided by operating activities                     1,104,953        962,225        976,554
                                                               -----------    -----------    -----------

Investing activities

Net (increase) decrease in loans                                (2,019,375)    (2,819,505)      (504,087)
Purchase of certificates of deposit                                                           (6,000,000)
Maturity of certificates of deposit                              3,000,000        500,000
Purchase of securities held-to-maturity                         (9,208,636)      (500,000)
Call of security held-to-maturity                                  500,000
Principle repayments - mortgage back securities                     33,679         15,031         30,238
Purchase of fixed assets                                          (177,977)      (115,999)       (43,936)
Retirement of assets                                                   297                           182
                                                               -----------    -----------    -----------

   Net cash provided (used) by investing activities             (7,872,012)    (2,920,473)    (6,517,603)
                                                               -----------    -----------    -----------
</TABLE>

                                          (Continued)

               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                       20
<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
             for the years ended September 30, 1996, 1995, and 1994

                             ----------------------
<TABLE>
<CAPTION>
                                                                     1996           1995           1994
                                                                -----------    -----------    -----------
<S>                                                            <C>             <C>             <C>
Financing activities

Net increase (decrease) in demand deposits,
   NOW accounts and savings accounts                                984,882      (3,101,122)       (523,059)
Net increase (decrease) in certificates of deposit                   68,152      (3,096,803)      1,158,678
Net increase (decrease) in custodial accounts                       (18,395)          9,316             808
Proceeds from issuance of common stock ,net                                      21,532,531
ESOP loan                                                                        (1,745,700)
Purchase of treasury stock                                         (789,495)
Payment of dividends                                               (403,838)
                                                               ------------    ------------    ------------

   Net cash provided (used) by financing activities                (158,694)     13,598,222         636,427
                                                               ------------    ------------    ------------

   Increase (decrease) in cash and cash equivalents              (6,925,753)     11,639,974      (4,904,622)

Cash and cash equivalents, beginning of year                     21,990,430      10,350,456      15,255,078
                                                               ------------    ------------    ------------

Cash and cash equivalents, end of year                         $ 15,064,677    $ 21,990,430    $ 10,350,456
                                                               ============    ============    ============


Supplemental Disclosures
   Cash payments for:
       Interest on deposits                                    $  3,902,750    $  3,806,981    $  3,289,998
       Income taxes                                            $    710,111    $    402,209    $    514,683

   Mortgage loans originated to finance sale of
       foreclosed real estate                                                  $     17,500    $

   Transfers from loans to real estate acquired
       through foreclosures                                                                    $     25,000
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                       21

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


1.   Summary of Significant Accounting Policies

     On September  29, 1995,  Harrodsburg  First  Financial  Bancorp,  Inc. sold
     through a public  offering  2,182,125  shares of common stock at a price of
     $10 per  share in  connection  with the  conversion  of  Harrodsburg  First
     Federal  Savings and Loan  Association  from a federally  chartered  mutual
     savings and loan  association to a federally  chartered stock savings bank,
     and the simultaneous  formation of a savings and loan holding  company.  In
     the  conversion,  Harrodsburg  First Federal  Savings and Loan  Association
     changed its name to First Federal Savings Bank of Harrodsburg  (Bank).  The
     net proceeds from the conversion  amounted to $21,167,117,  after deduction
     of certain costs associated with the conversion which totaled $654,133. The
     Company  received all of the capital  stock of the Bank in exchange for 50%
     of the net proceeds received in the conversion.

     The  Company's  articles of  incorporation  authorize the issuance of up to
     500,000 shares of preferred stock,  which may be issued with certain rights
     and  preferences.  As of September  30, 1996,  no preferred  stock has been
     issued.

     The Company is a  corporation  organized  under the laws of  Delaware.  The
     Company  is a  savings  and  loan  holding  company  whose  activities  are
     primarily limited to holding the stock of the Bank. The Bank is a federally
     chartered  stock  savings  bank and a member of the Federal  Home Loan Bank
     System.  As a member of this  system,  the Bank is  required to maintain an
     investment  in capital  stock of the Federal  Home Loan Bank of  Cincinnati
     (FHLB) in an amount equal to at least the greater of 1% of its  outstanding
     loan and  mortgage-backed  securities or .3% of total assets as of December
     31 of each year.

     The Bank  conducts a general  banking  business in central  Kentucky  which
     primarily  consists of  attracting  deposits  from the  general  public and
     applying those funds to the origination of loans for residential, consumer,
     and  nonresidential  purposes.  The Bank's  profitability  is significantly
     dependent on net interest income which is the difference  between  interest
     income generated from interest-earning  assets (i.e. loans and investments)
     and  the  interest  expense  paid  on  interest-bearing  liabilities  (i.e.
     customer  deposits and borrowed funds).  Net interest income is affected by
     the  relative  amount  of  interest-earning   assets  and  interest-bearing
     liabilities and the interest received or paid on these balances.  The level
     of  interest  rates  paid or  received  by the  Bank  can be  significantly
     influenced  by a number  of  environmental  factors,  such as  governmental
     monetary policy, that are outside of management's control.

     The consolidated  financial  information presented herein has been prepared
     in accordance  with generally  accepted  accounting  principles  (GAAP) and
     general accounting  practices within the financial  services  industry.  In
     preparing  consolidated  financial  statements  in  accordance  with  GAAP,
     management is required to make  estimates and  assumptions  that affect the
     reported amounts of assets and liabilities and the disclosure of contingent
     assets and liabilities at the date of the financial statements and revenues
     and expenses during the reporting period.  Actual results could differ from
     such estimates.

     The following is a summary of the Company's significant accounting policies
     which have been consistently applied in the preparation of the accompanying
     consolidated financial statements.

                                       22
<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

     Principles of Consolidation.  The consolidated financial statements include
     the  accounts  of the Company and the Bank.  All  significant  intercompany
     accounts and transactions have been eliminated.

     Loan  Origination  Fees.  The Bank  accounts for loan  origination  fees in
     accordance  with SFAS No. 91 "Accounting for  Nonrefundable  Fees and Costs
     Associated  with  Originating or Acquiring Loans and Initial Direct Cost of
     Leases."  Pursuant  to the  provisions  of SFAS No.  91,  origination  fees
     received  from loans,  net of direct  origination  costs,  are deferred and
     amortized to interest income using the level-yield method, giving effect to
     actual loan  prepayments.  Additionally,  SFAS No. 91 generally  limits the
     definition of loan  origination  costs to the direct costs  attributable to
     originating a loan, i.e., principally actual personnel costs. Fees received
     for loan  commitments  that are  expected  to be drawn  upon,  based on the
     Bank's experience with similar commitments, are deferred and amortized over
     the life of the loan  using the  level-yield  method.  Fees for other  loan
     commitments are deferred and amortized over the loan commitment period on a
     straight-line basis.

     Investment  Securities.  On October 1, 1994, the Bank adopted  Statement of
     Financial  Accounting  Standards(SFAS)  No.  115  "Accounting  for  Certain
     Investments in Debt and Equity  Securities." SFAS No. 115 requires that all
     investments  in debt  securities and all  investments in equity  securities
     that have  readily  determinable  fair  values  be  classified  into  three
     categories.  Securities  that management has positive intent and ability to
     hold until maturity are classified as held-to-maturity. Securities that are
     bought and held  specifically  for the purpose of selling  them in the near
     term are  classified  as  trading  securities.  All  other  securities  are
     classified  as  available-for-sale.  Securities  classified  as trading and
     available-for-sale  are carried at market value.  Unrealized  holding gains
     and s losses  for  trading  securities  are  included  in  current  income.
     Unrealized holding gains and losses for securities  available-for-sale  are
     reported as a net amount in a separate  component of  stockholders'  equity
     until realized.  Investments classified as held-to-maturity will be carried
     at amortized  cost.  The  cumulative  effect of this change was to increase
     stockholders' equity by $629,086,  net of deferred taxes of $324,075, as of
     October 1, 1994.

     Securities  that  management has the intent and ability to hold to maturity
     are  classified  as held-to-  maturity,  and carried at cost,  adjusted for
     amortization  of  premium or  accretion  of  discount  over the term of the
     security,  using the level  yield  method.  Included  in this  category  of
     investments is the FHLB stock which is a restricted  stock carried at cost.
     Securities available-for-sale are carried at market value. Adjustments from
     amortized cost to market value are recorded in stockholders'  equity net of
     deferred income tax until realized.  The identified security method is used
     to determine gains or losses on sales of securities.

     Prior to October  1,  1994,  investment  securities  were  carried at cost,
     adjusted for  amortization  of premiums and  accretion  of  discounts.  The
     investment  securities were carried at cost, as it was management's  intent
     and the  Bank  had the  ability  to hold  the  securities  until  maturity.
     Investment  securities  held  for  indefinite  periods  of  time,  or which
     management utilized as part of its asset/liability  management strategy, or
     that would be sold in  response to changes in  interest  rates,  prepayment
     risk, or the perceived need to increase  regulatory capital were classified
     as  held-for-sale at the point of purchase and carried at the lower of cost
     or market.

                                   (Continued)

                                       23

<PAGE>
            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

     Regulations  require  the  Bank to  maintain  an  amount  of cash  and U.S.
     government and other approved  securities equal to a prescribed  percentage
     (5% at  September  30,  1996 and 1995) of  deposit  accounts  (net of loans
     secured by deposits) plus short-term borrowings.  At September 30, 1996 and
     1995, the Bank met these requirements.

     Federal Home Loan  Mortgage  Corporation  Stock:  On December 6, 1984,  the
     Federal Home Loan Mortgage Corporation created a new class of participating
     preferred stock. The preferred stock was distributed to the twelve district
     banks of the Federal Home Loan Banking System for  subsequent  distribution
     to their member  institutions.  The Bank received 1,606 shares of the stock
     and recorded it at its fair value of $40 per share as of December 31, 1984.
     The fair value of the stock recognized as of December 1984 became its cost.
     The stock  has been  subsequently  classified  as  available-for-  sale and
     carried at market value.

     Office Properties and Equipment. Office properties and equipment are stated
     at cost less accumulated  depreciation.  Depreciation is computed using the
     straight  line  method and the double  declining  balance  method  over the
     estimated useful lives of the related assets. The gain or loss on the sales
     of property and equipment is recorded in the year of disposition.

     Real Estate  Owned.  Real estate owned is  generally  comprised of property
     acquired  through  foreclosure or deed in lieu of  foreclosure.  Foreclosed
     real estate is recorded at the lower of cost or fair value,  net of selling
     expenses,  which subsequently becomes the cost, at the date of foreclosure.
     Expenses relating to holding property,  including interest expense, are not
     capitalized. These expenses are charged to operations as incurred. Gains on
     the sale of real estate are  recognized  upon the ultimate  disposal of the
     property.  Valuations  are  periodically  performed by  management,  and an
     allowance  for  losses  is  established  by a charge to  operations  if the
     carrying value of a property exceeds its net realizable value.

     Loans  Receivable:  Loans  receivable  are stated at the  principal  amount
     outstanding  less the allowance for loan losses and net deferred loan fees.
     The  Bank  has  adequate  liquidity  and  capital,   and  it  is  generally
     management's intention to hold such assets to maturity.

     The  allowance  for loan  losses is  increased  by  charges  to income  and
     decreased  by  charge-offs  (net  of  recoveries).   Management's  periodic
     evaluation  of the  adequacy of the  allowance  is based on the Bank's past
     loan loss  experience,  known and inherent risks in the portfolio,  adverse
     situations that may affect the borrower's  ability to pay,  estimated value
     of any  underlying  collateral,  and  current  economic  conditions.  While
     management uses the best information  available,  future adjustments may be
     necessary if  conditions  differ  substantially  from  assumptions  used in
     management's  evaluation.  In addition,  various regulatory agencies, as an
     integral  part  of  their  examination  process,  periodically  review  the
     allowance for loan losses and may require additions to the allowances based
     on their judgment about information  available to them at the time of their
     examination.

     Interest  earned on loans  receivable  is  recorded  in the period  earned.
     Uncollectible  interest on loans that are contractually past due is charged
     off  or  an  allowance  is  established  based  on  management's   periodic
     evaluation.  The allowance is  established  by a charge to interest  income
     equal to all  interest  previously  accrued,  and  income  is  subsequently
     recognized only to the extent cash payments are

                                   (Continued)

                                       24

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

     received until, in management's  judgment,  the borrower's  ability to make
     periodic  interest and principal  payments is back to normal, in which case
     the loan is returned to accrual status.

     The Bank adopted SFAS No. 114, as subsequently amended, on October 1, 1995,
     without material effect on consolidated  financial  condition or results of
     operations.

     A loan is defined  under SFAS No. 114 as  impaired  when,  based on current
     information  and events,  it is probable  that a creditor will be unable to
     collect all  amounts due  according  to the  contractual  terms of the loan
     agreement.  In applying the  provisions of SFAS No. 114, the Bank considers
     its  investment  in  one-to-four  family  residential  loans  and  consumer
     installment  loans to be homogenous  and  therefore  excluded from separate
     identification  for  evaluation of  impairment.  With respect to the Bank's
     investment in impaired  multi-family and  nonresidential  loans, such loans
     are  collateral  dependent,  and as a result,  are  carried as a  practical
     expedient at the lower of cost or fair value.

     Collateral dependent loans when put in non-accrual status are considered to
     constitute  more than a minimum  delay in repayment  and are  evaluated for
     impairment under SFAS No. 114 at that time.

     Deposits.  The  Bank's  deposits  are  insured by the  Savings  Association
     Insurance  Fund  ("SAIF"),  which is  administered  by the Federal  Deposit
     Insurance Corporation ("FDIC").  The Bank currently pays an assessment rate
     of 23% on customer deposit balances under $100,000.  On September 30, 1996,
     the President signed legislation,  which among other things,  recapitalized
     the Savings  Association  Insurance  Fund through a special  assessment  on
     savings financial  institutions,  such as the Bank. The special  assessment
     amounted to $536,063  for the Bank and is included in the Federal and other
     insurance  premium  expense for the year ended  September  30,  1996.  As a
     result of the  recapitalization of the SAIF, the Bank's assessment rate for
     insurance  on  deposits,  beginning  in 1997,  is expected to be reduced to
     approximately 4% on customer deposit balances under $100,000.

     Income Taxes.  The Company  accounts for federal income taxes in accordance
     with the  provisions of SFAS No. 109,  "Accounting  for Income Taxes." SFAS
     No. 109 established  financial  accounting and reporting  standards for the
     effects of income taxes that result from the  Company's  activities  within
     the current and previous years. Pursuant to the provisions of SFAS No. 109,
     a deferred tax  liability or deferred tax asset is computed by applying the
     current  statutory  tax  rates to net  taxable  or  deductible  differences
     between the tax basis of an asset or liability  and its reported  amount in
     the financial  statements that will result in taxable or deductible amounts
     in future periods. Deferred tax assets are recorded only to the extent that
     the  amount  of  net  deductible  temporary   differences  or  carryforward
     attributes may be utilized  against current period  earnings,  carried back
     against prior years earnings,  offset against taxable temporary differences
     reversing  in future  periods,  or utilized  to the extent of  management's
     estimate of future taxable  income.  A valuation  allowance is provided for
     deferred  tax  assets  to the  extent  that  the  value  of net  deductible
     temporary  differences and  carryforward  attributes  exceeds  management's
     estimates  of  taxes  payable  on  future  taxable  income.   Deferred  tax
     liabilities  are provided on the total amount of net temporary  differences
     taxable in the future.

                                   (Continued)

                                       25

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

     The Company files a  consolidated  federal income tax return with the Bank.
     The current income tax expense or benefit is allocated to each  Corporation
     included  in the  consolidated  tax  return  based on their tax  expense or
     benefit computed on a separate return basis.

     Employee  Stock  Ownership  Plan.  Shares  of  common  stock  issued to the
     Company's  employee stock  ownership plan (ESOP) are initially  recorded as
     unearned ESOP shares in the  stockholders'  equity at the fair value of the
     shares at the date of the issuance of 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 value of the shares.

     Effect of Implementing  New Accounting  Standards.  In March 1995, the FASB
     issued SFAS No. 121,  "Accounting  for the Impairment of Long-Lived  Assets
     and for  Long-Lived  Assets to Be  Disposed  Of." SFAS No. 121  establishes
     accounting  standards  for the  impairment of  long-lived  assets,  certain
     identifiable  intangibles  and goodwill  related to those assets to be held
     and used, and for  long-lived  assets and certain  identifiable  intangible
     assets to be disposed of. The Standard  requires an  impairment  loss to be
     recognized  when the carrying amount of the asset exceeds the fair value of
     the  asset.  Management  does not  anticipate  the  implementation  of this
     standard having a material adverse impact on the financial statements.

     In May  1995,  the  FASB  issued  SFAS No.  122  "Accounting  for  Mortgage
     Servicing  Rights,"  which  amended  SFAS No. 65  "Accounting  for  Certain
     Mortgage  Banking  Activities."  SFAS No. 122  requires a mortgage  banking
     enterprise to recognize as separate assets rights to service mortgage loans
     for others;  however,  these servicing rights are acquired.  This statement
     applies  prospectively  in fiscal years  beginning after December 15, 1995.
     The Company and the Bank are not currently  involved with mortgage  banking
     activities,  and  therefore,  this standard  would not  currently  have any
     impact on the consolidated financial statements of the Company.

     Cash and Cash  Equivalents.  For  purposes of reporting  consolidated  cash
     flows,  the Bank considers cash,  balances with banks, and interest bearing
     deposits in other financial  institutions with original maturities of three
     months or less to be cash equivalents.

     Reclassification.  Certain  presentations of accounts  previously  reported
     have been reclassified in these  consolidated  financial  statements.  Such
     reclassifications  had no  effect  on net  income  or  retained  income  as
     previously reported.

                                   (Continued)

                                       26
<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

2.   Investment Securities

     The cost and  estimated  fair  value of  securities  held by the Bank as of
     September 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>

                                                             1996
                                    -------------------------------------------------------
                                                      Gross        Gross
                                      Amortized     Unrealized    nrealized
                                        Cost          Gains      U Losses       Fair Value
                                    -------------  ------------  ----------    ------------
<S>                                 <C>            <C>           <C>           <C>
Securities, available-for-sale:
     Federal Home Loan Mortgage,
     capital stock, 19,272 shares   $      75,482  $  1,805,947  $             $  1,881,429
                                    =============  ============  ==========    ============

Securities, held-to-maturity:
  Debt Securities:
     U.S. Government and
       Federal Agencies             $   8,996,019  $      5,625  $   98,574    $  8,903,070
       Municipal bonds                    213,083                    11,392         201,691
                                    -------------  ------------  ----------    ------------
                                        9,209,102         5,625     109,966       9,104,761
                                    -------------  ------------  ----------    ------------

  Mortgage-backed Securities               97,864           569                      98,433
                                    -------------  ------------  ----------    ------------

  Federal Home Loan
     Bank of Cincinnati,
       capital stock - 11,958 shares    1,195,800                                 1,195,800
                                    -------------  ------------  ----------    ------------
                                    $  10,502,766  $      6,194  $  109,966    $ 10,398,994
                                    =============  ============  ==========    ============
</TABLE>
<TABLE>
<CAPTION>
                                                             1995
                                    ------------------------------------------------------
                                                     Gross         Gross
                                     Amortized    Unrealized    Unrealized
                                       Cost          Gains        Losses        Fair Value
                                    -----------   -----------   -----------    -----------
<S>                                 <C>          <C>            <C>            <C>
Securities, available-for-sale:
     Federal Home Loan Mortgage,
     capital stock, 19,272 shares   $    75,482  $  1,256,695   $              $ 1,332,177
                                    ===========   ===========   ===========    ===========

Securities, held-to-maturity:
  Debt Securities:
     Federal Home Loan Bank Bond    $   500,000   $       780   $              $   500,780
                                    -----------   -----------   -----------    -----------

  Mortgage-backed Securities             131543          3288                       134831
                                    -----------   -----------   -----------    -----------

  Federal Home Loan
     Bank of Cincinnati,
       capital stock - 11,158 shares    1115800                                    1115800
                                    -----------   -----------   -----------    -----------

                                     $1,747,343   $     4,068   $              $ 1,751,411
                                    ===========   ===========   ===========    ===========
</TABLE>

     The  amortized  cost  and  estimated  market  value of debt  securities  at
     September 30, 1996, by contractual maturity, are as follows:

                                   (Continued)

                                       27

<PAGE>
            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                                                                                    Estimated
                                                                    Amortized         Market
                                                                      Cost            Value
                                                                  -------------    ------------

<S>                                                               <C>              <C>
     Due after one year through five years                        $   8,996,019    $  8,903,070
     Due after five through ten years                                   104,684          98,655
     Due after ten years                                                108,399         103,036
                                                                  -------------    ------------
                                                                  $   9,209,102    $  9,104,761
                                                                  =============    ============
</TABLE>

     In accordance with the requirements of SFAS No. 115 "Accounting for Certain
     Investments  in  Debt  and  Equity  Securities,"  the  unrealized  gain  on
     securities available-for-sale of $1,805,947 net of deferred income taxes of
     $614,022 has been recorded as a separate component of stockholders'  equity
     as of September 30, 1996.

     For the year ended September 30, 1996, the Bank received  $500,000 from the
     call of a debt  security  backed  by a U.S.  Government  agency,  which was
     classified as  held-to-maturity.  There were no sales of securities for the
     years ended September 30, 1995 and 1994.

3.   Loans Receivable

     Loans  receivable,  net at  September  30,  1996 and 1995  consists  of the
     following:
<TABLE>
<CAPTION>
                                                                      1996             1995
                                                                  -------------    ------------
<S>                                                               <C>              <C>
     Loans secured by first lien mortgages on real estate:
         One-to-four residential property                         $  64,303,729    $ 62,363,932
         Multi-family residential property                            3,558,839       3,053,364
         Commercial properties                                        3,228,376       3,115,742
         Construction                                                 3,891,250       1,978,700
         Agricultural                                                 2,351,985       2,654,301

      Consumer loans:
         Home equity                                                  1,278,828       1,314,148
         Home improvement and personal                                1,176,371       1,825,930
         Loans secured by savings deposits                              407,469         620,595
                                                                  -------------    ------------
                                                                     80,196,847      76,926,712

      Loans in process                                               (2,167,621)       (975,197)
      Provisions for loan losses                                       (297,250)       (297,292)
      Deferred loan origination fees                                   (229,640)       (220,697)
                                                                  -------------    ------------

         Loans receivable, net                                    $  77,502,336    $ 75,433,526
                                                                  =============    ============
</TABLE>

     The Bank has  concentrated  its lending activity within a 45 mile radius of
     Harrodsburg,  Kentucky.  Therefore,  a substantial  portion of its debtors'
     ability to honor their contracts is dependent on the economy of this area.


                                   (Continued)

                                       28

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     The Bank  provides  an  allowance  to the extent  considered  necessary  to
     provide for losses that may be incurred  upon the ultimate  realization  of
     loans. The changes in the allowance on loan losses is analyzed as follows:
<TABLE>
<CAPTION>

                                                          Year Ended September 30,
                                                   --------------------------------------
                                                      1996         1995          1994
                                                   ----------   -----------   -----------

<S>                                                <C>          <C>           <C>
Balance at beginning or period                     $  297,292   $   252,019   $   195,273
Additions charged to operations                         7,500        91,982        60,000
Charge-offs                                            (7,542)      (49,297)       (3,254)
Recoveries                                                            2,588
                                                   ----------   -----------   -----------

Balance at end of period                           $  297,250   $   297,292   $   252,019
                                                   ==========   ===========   ===========
</TABLE>

     The  following  is a summary  of  non-performing  loans (in  thousands)  at
     September 30, 1996, 1995, and 1994, respectively:
<TABLE>
<CAPTION>
                                                               September 30,
                                                   --------------------------------------
                                                      1996         1995          1994
                                                   ----------   -----------   -----------
<S>                                                <C>          <C>           <C>
Non-accrual loans
Loans past due 90 days or more                     $      866   $       667   $     1,354
                                                   ----------   -----------   -----------

Total non-performing loan balances                 $      866   $       667   $     1,354
                                                   ==========   ===========   ===========
</TABLE>

     At September 30, 1996, the Bank had identified no impaired loans as defined
     by SFAS No. 114.  There were no loans in non-accrual  status,  and as such,
     all interest  income  earned for the year ended  September  30, 1996 on the
     loans outstanding has been included in income.

     Loans to executive  officers and directors,  including  loans to affiliated
     companies of which executive  officers and directors are principal  owners,
     and loans to members of the  immediate  family of such persons at September
     30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
                                                                      September 30,
                                                                -------------------------
                                                                   1996          1995
                                                                -----------   -----------

<S>                                                             <C>           <C>
Balance at beginning of period                                  $   207,696   $   172,425
      Additions during year                                                        65,000
      Repayments                                                    (13,250)      (29,729)
                                                                -----------   -----------

Balance at end of period                                        $   194,446   $   207,696
                                                                ===========   ===========
</TABLE>

                                   (Continued)

                                       29

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


4.   Premises and Equipment

     Office premises and equipment included the following:
<TABLE>
<CAPTION>
                  Description                     Useful Life      1996          1995
-----------------------------------------------   -----------   -----------   ----------

<S>                                               <C>           <C>            <C>
Land, buildings and improvements                  30-45 years   $   839,285    $ 744,072

Furniture, fixtures and equipment                  5-10 years       548,357      472,098
                                                                -----------   ----------

                                                                  1,387,642    1,216,170

            Less accumulated depreciation                          (729,722)    (677,586)
                                                                -----------   ----------

                                                                $   657,920   $  538,584
                                                                ===========   ==========
</TABLE>

     Depreciation  expense for the years ended September 30, 1996, 1995 and 1994
     amounted to $58,344, $70,496, and $65,175, respectively.

5.   Deposits

     Deposit  account  balances  as of the dates  indicated  are  summarized  as
     follows:
<TABLE>
<CAPTION>
                                                                                September 30,
                                                                        ----------------------------
                                                                            1996           1995
                                                                        ------------   -------------
<S>                                                                     <C>            <C>
Demand deposit accounts, non-interest bearing                           $    487,377   $     393,546

Passbook accounts with a weighted average rate of 2.79% at
September 30, 1996 and 1995                                                8,328,830       7,828,538

NOW and MMDA deposits with a weighted average rate of 2.47%
at September 30, 1996 and 1995                                             7,908,815       7,600,151
                                                                        ------------   -------------

                                                                          16,725,022      15,822,235

Certificate of deposits with a weighted average interest rate of
5.63% and 5.84% at September 30, 1996 and 1995, respectively              60,221,188      60,070,942
                                                                        ------------   -------------

            Total Deposits                                              $ 76,946,210   $  75,893,177
                                                                        ============   =============

Jumbo certificates of deposit (minimum denomination of $100,000)        $  3,211,065   $   3,855,034
                                                                        ============   =============
</TABLE>

                                   (Continued)

                                       30

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

Certificates  of  deposit  by  maturity  at  September  30,  1996  and  1995 (in
thousands) are as follows:
<TABLE>
<CAPTION>
                                                                     September 30,
                                                              ----------------------------
                                                                  1996           1995
                                                              ------------   -------------

<S>                                                           <C>            <C>
Within one year                                               $     39,678   $      38,329
Over 1 to 3 years                                                   17,707          17,177
Maturing in years thereafter                                         2,836           4,565
                                                              ------------   -------------

                                                              $     60,221   $      60,071
                                                              ============   =============
</TABLE>

     Certificates of deposit by maturity and interest rate category at September
     30, 1996 (in thousands) are as follows:
<TABLE>
<CAPTION>
                                                    Amount Due
                       ---------------------------------------------------------------------
                        Less Than                                     After 3
                        One Year       1-2 Years      2-3 Years        Years        Total
                       -----------    -----------    -----------    -----------  -----------

<S>                    <C>            <C>            <C>            <C>          <C>
2.01--4.00%            $              $              $              $            $
4.01--6.00%                 32,780          9,004          2,857            947       45,588
6.01--8.00%                  6,898          4,154          1,692          1,889       14,633
8.05--10.00%
                       -----------    -----------    -----------    -----------  -----------

                       $    39,678    $    13,158    $     4,549    $     2,836  $    60,221
                       ===========    ===========    ===========    ===========  ===========
</TABLE>

     Interest  expense on deposits for the periods  indicated is  summarized  as
     follows:
<TABLE>

                                                        Years Ended September 30,
                                                ------------------------------------------
                                                    1996           1995           1994
                                                ------------    -----------   ------------
<S>                                             <C>             <C>           <C>
Money market and NOW account                    $    195,471    $   212,952   $    217,059
Savings Accounts                                     224,418        283,208        285,790
Certificates                                       3,481,339      3,310,953      2,774,304
                                                ------------    -----------   ------------
                                                $  3,901,228    $ 3,807,113   $  3,277,153
                                                ============    ===========   ============
</TABLE>

     The Bank maintains arrangements for clearing NOW and MMDA accounts with the
     Federal  Home Loan Bank of  Cincinnati.  The Bank is  required  to maintain
     adequate  collected  funds in its  Demand  Account to cover  average  daily
     clearings.  The Bank was in compliance  with this  requirement at September
     30, 1996 and 1995. At September 30, 1996, the Bank had pledged  $450,000 of
     their  overnight  deposits held by the FHLB of Cincinnati to secure certain
     customer deposit balances.

6.   Income Taxes

     Effective  January 1, 1993, the Bank adopted SFAS No. 109  "Accounting  for
     Income Taxes" which requires an asset and liability  approach to accounting
     for income  taxes.  The  cumulative  effect of adopting SFAS No. 109 was to
     decrease  net income  for the year ended  September  30,  1994 by  $18,591.
     Financial statements for prior periods were not restated.

                                   (Continued)

                                       31

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------



     The  provision  for income taxes for the periods  indicated  consist of the
     following:
<TABLE>
<CAPTION>

                                                         Years ended September 30,
                                                   --------------------------------------
                                                      1996          1995         1994
                                                   -----------   ----------   -----------
<S>                                                <C>           <C>          <C>
Federal income tax expense:
  Current expense                                  $   690,171   $  402,949   $   501,572
  Deferred expense (benefit)                          (101,427)      56,064        56,349
                                                   -----------   ----------   -----------

                                                   $   588,744   $  459,013   $   557,921
                                                   ===========   ==========   ===========
</TABLE>

     Deferred income taxes result from temporary  differences in the recognition
     of income and expenses for tax and financial statement purposes. The source
     of these temporary differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>

                                                            Years ended September 30,
                                                      --------------------------------------
                                                         1996          1995         1994
                                                      -----------   ----------   -----------

<S>                                                   <C>           <C>          <C>
      Deposit insurance                               $  (182,261)  $            $
      Accrued pension cost                                                            18,690
      FHLB stock                                           27,200       24,174        18,054
      Allowance for loan losses                            57,357       35,947        21,574
      Other, net                                           (3,723)      (4,057)       (1,969)
                                                      -----------   ----------   -----------

            Net deferred tax expense (benefit)        $  (101,427)  $   56,064   $    56,349
                                                      ===========   ==========   ===========
</TABLE>

     Forthe  periods  indicated,  total  income tax  expense  differed  from the
     amounts  computed by applying  the U.S.  Federal  income tax rate of 34% to
     income before income taxes as follows:
<TABLE>
<CAPTION>

                                                         Years ended September 30,
                                                   --------------------------------------
                                                      1996          1995         1994
                                                   -----------   ----------   -----------

<S>                                                <C>           <C>          <C>
Expected income tax expense at federal tax rate    $   570,830   $  459,013   $   544,511
Other, net                                              17,914                     13,410
                                                   -----------   ----------   -----------

      Total income tax expense                     $   588,744   $  459,013   $   557,921
                                                   ===========   ==========   ===========
Effective income tax rate                                 35.1%        34.0%         34.8%
                                                   ===========   ==========   ===========
</TABLE>

                                   (Continued)

                                       32

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     Deferred  tax assets and  liabilities  as of  September  30,  1996 and 1995
     consisted of the following:
<TABLE>
<CAPTION>
                                                                    1996         1995
                                                                 ----------   -----------
<S>                                                              <C>          <C>

Deferred tax assets:
    Deferred loan fee income                                     $   78,077   $    74,439
    Deposit insurance assessment                                    182,261
                                                                 ----------   -----------
                                                                    260,338        74,439
                                                                 ----------   -----------
Deferred tax liabilities:
    FHLB stock                                                      210,120       182,920
    Allowance for loan losses                                        93,305        35,948
    Fixed asset basis over tax basis                                 62,293        62,378
                                                                 ----------   -----------
                                                                    365,718       281,246
                                                                 ----------   -----------

    Net deferred taxes payable                                   $  105,380   $   206,807
                                                                 ==========   ===========
</TABLE>

     In addition to the net deferred tax  liability of $105,380  outlined in the
     preceding table, the financial  statements include a deferred tax liability
     of $614,022  that was charged  against the  unrealized  gain on  securities
     available-for-sale of $1,805,947.  The net amount of $1,191,925 is recorded
     as a separate component of stockholders' equity.

     The Internal  Revenue Code allows  savings  institutions a special bad debt
     deduction,  subject to certain limitations,  based on the greater of actual
     experience or a percentage of taxable income method before such  deduction.
     The effective bad debt  deduction  under the  percentage of taxable  income
     method is equal to  approximately  8% of taxable  income.  In  September of
     1996,  legislation  was passed by  Congress,  which  repealed  the bad debt
     deduction  under the  percentage  of taxable  income method of the Internal
     Revenue Code for savings banks.  Savings banks,  like the Bank,  which have
     previously  used the  percentage of taxable  income method in computing its
     bad debt  deduction  for tax purposes  will be required to  recapture  into
     taxable income post 1987 tax reserves over a six-year period,  effective in
     fiscal year 1997 for the Bank. The impact of this legislation will not have
     a material impact on the financial statements of the Company.

7.   Stockholders' Equity and Regulatory Capital

     Regulatory  Capital.  The Bank is  subject to  minimum  regulatory  capital
     requirements  promulgated by the Office of Thrift  Supervision  (OTS). Such
     minimum capital  standards  generally require the maintenance of regulatory
     capital  sufficient to meet each of three tests,  hereinafter  described as
     the tangible  capital  requirement,  the core capital  requirement  and the
     risk-based capital  requirement.  The tangible capital requirement provides
     for minimum  tangible  capital  (defined as  stockholders'  equity less all
     intangible assets) equal to 1.5% of adjusted total assets. The core capital
     requirement  provides  for minimum  core  capital  (tangible  capital  plus
     certain  forms of  supervisory  goodwill  and other  qualifying  intangible
     assets such as  capitalized  mortgage  servicing  rights)  equal to 3.0% of
     adjusted total assets.  A recent OTS proposal,  if adopted in present form,
     would increase the core capital requirement to a range of 4%-5% of adjusted
     total  assets  for  substantially  all  savings  institutions.   Management
     anticipates  no material  change to the Bank's  present  excess  regulatory
     capital  position  as a result  of this  change in the  regulatory  capital
     requirement.   The  risk-based   capital   requirement   provides  for  the
     maintenance of core capital plus general loss  allowances  equal to 8.0% of
     risk-weighted  assets. In computing risk- weighted assets, the Savings Bank
     multiplies the value of each asset on its statement of financial

                                   (Continued)

                                       33

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     condition by a defined  risk-weighting  factor,  e.g.,  one-to-four  family
     residential loans carry a risk- weighted factor of 50%.

     As of  September  30,  1996,  the Bank's  regulatory  capital  exceeded all
     minimum regulatory capital requirements as shown in the following table:
<TABLE>
<CAPTION>

                                                              Regulatory Capital
                                   -------------------------------------------------------------------------
                                    Tangible                   Core                   isk-based
                                    Capital      Percent     Capital      Percent    R Capital      Percent
                                   ----------   ---------   ----------   ---------   -----------   ---------
                                                                (in thousands)
                                   -------------------------------------------------------------------------
Capital under generally
<S>                                <C>          <C>         <C>          <C>         <C>           <C>
accepted accounting princiles      $   22,946           %   $   22,946           %   $    22,946           %
Adjustments:
  Net unrealized appreciation
  on securities available-for-
  sale                                 (1,192)                  (1,192)                   (1,192)
  General valuation allowances                                                               290
                                   ----------               ----------               -----------
Regulatory capital computed            21,754       20.2        21,754       20.2         22,044      40.7
Minimum capital requirement             1,618        1.5         3,235        3.0          4,334       8.0
                                   ----------   ---------   ----------   ---------   -----------   ---------
Regulatory capital-excess          $   20,136       18.7%   4   18,519       17.2%   $    17,710      32.7%
                                   ==========   =========   ==========   =========   ===========   =========
</TABLE>

     Retained  Earnings  Restriction.  The Bank is  allowed a  special  bad debt
     deduction  limited  generally to eight  percent  (8%) of otherwise  taxable
     income and  subject to certain  limitations  based on  aggregate  loans and
     savings account  balances at the end of the year. If the amount  qualifying
     as deductions  under the Internal  Revenue Code are later used for purposes
     other than for bad debt losses,  they will be subject to Federal income tax
     at the then current  corporation  rate.  Retained earnings at September 30,
     1996 includes  approximately  $1,596,000,  for which Federal income tax has
     not been provided nor has been required to be provided (see Note 6).

     Liquidation  Account:  Upon  conversion  to a capital  stock  savings bank,
     eligible  account holders who continued to maintain their deposit  accounts
     in the Bank were granted priority in the event of the future liquidation of
     the Bank through the establishment of a special "Liquidation Account" in an
     amount equal to the  consolidated  net worth of the Bank at March 31, 1995.
     The  liquidation  account  was  $10,236,488  at March 31,  1995 and will be
     reduced in  proportion  to  reductions  in the balance of eligible  account
     holders as determined on each subsequent  fiscal year end. The existence of
     the  liquidation  account will not restrict the use or  application  of net
     worth except with respect to the cash  payment of  dividends.  The Bank may
     not declare or pay a cash dividend on or repurchase any of its common stock
     if the effect  thereof  would  cause its  regulatory  capital to be reduced
     below the amount required for the liquidation account.

                                   (Continued)

                                       34

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     Dividend  Restrictions:  The payment of cash  dividends  by the Bank on its
     Common  Stock is limited by  regulations  of the OTS.  Interest  on savings
     accounts will be paid prior to payments or dividends on common  stock.  The
     Bank may not declare or pay a cash dividend to the Company in excess of the
     greater of (i) 100% of its net income to date during the  current  calendar
     year plus the amount that would reduce by one-half the Bank's capital ratio
     at the  beginning  of the year or (ii) 75% of its net income  over the most
     recent  four  quarter  period   without  prior  OTS  approval.   Additional
     limitation on dividends  declared or paid, or repurchases of the Bank stock
     are tied to the Bank's  level of  compliance  with its  regulatory  capital
     requirements.  At  September  30, 1996,  $11.5  million was  available  for
     payment of dividends from the Bank to the Company under the above mentioned
     OTS restrictions.

8.   Retirement Benefits

     Retirement Benefits: The Bank maintained a noncontributory  defined benefit
     pension plan (Pension Trust) for the year ended  September 30, 1993,  which
     covered all full-time  employees  with one year of service who had attained
     the age of 21.  Effective  October 1, 1993,  the Bank's  Board of Directors
     terminated  the Pension  Trust,  and  effective  the same date approved the
     Bank's  participation  in the  Pentegra  Retirement  Fund  ("Pentegra"),  a
     multi-employer  defined benefit  retirement plan. Net assets of the Pension
     Trust were  transferred  to the  Pentegra  Plan on  October  1,  1993.  The
     accounting  on that date was to recognize  the  termination  of the Pension
     Trust, which resulted in a settlement gain of $54,972.  The gain was due to
     the removal of the accrued pension  liability  related to the Pension Trust
     as of October 1, 1993.

     The new multi-employer plan covers all full-time employees with one year of
     service who have  attained  the age of 21. Under a  multi-employer  defined
     benefit  plan,  pension  expense  is  the  amount  of the  annual  required
     contribution,  and a liability  will be recognized  only for  contributions
     which  are due but  unpaid  at the end of the  accounting  period.  Pension
     expense was $-0-,  $30,843 and  $57,500 for the years ended  September  30,
     1996, 1995, and 1994, respectively.

     Effective April 1, 1993, the Board of Directors adopted an employee pension
     benefit  plan  (referred  to as a  "401K  Plan")  as  described  under  the
     Employees' Retirement Income Security Act of 1974. Under the Plan, the Bank
     is required to match 25% of employee  contributions up to a maximum of 1.5%
     of eligible compensation. The Plan covers all full-time employees. The Bank
     contributed  $6,888,  $7,485,  and  $7,328 to the Plan for the years  ended
     September 30, 1996, 1995, and 1994, respectively.

     Employee  Stock  Ownership  Plan: In connection  with the stock  conversion
     September  30,  1995,  the  Company  established  an  internally  leveraged
     Employee Stock Ownership Plan (the "ESOP") which covers  substantially  all
     full time  employees.  The ESOP  borrowed  $1,745,700  from the Company and
     purchased  174,570  shares of common  stock of the  Company  at the date of
     conversion.  The loan is to be repaid in annual installments over a 15 year
     period with interest, which is based on the published prime rate (currently
     8.50%) per the Wall Street Journal.

     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 $67,500 were used in fiscal year 1996
     to pay ESOP

                                   (Continued)

                                       35

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     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 $169,067 for the year ended September 30, 1996. For
     1996,  11,640 were released from  collateral.  At September 30, 1996, there
     were 162,930 unallocated ESOP shares having a fair value of $2,851,275.

9.   Financial  Instruments  with  Off-Balance  Sheet Risk and  Concentration of
     Credit Risk

     The Bank is party to financial  instruments with off-balance  sheet risk in
     the normal course of business to meet the financing needs of its customers.
     These financial instruments include mortgage commitments  outstanding which
     amounted to  approximately  $931,000 plus unused lines of credit granted to
     customers totaling  $1,588,846 at September 30, 1996. At September 30, 1995
     mortgage commitments  outstanding amounted to approximately  $1,050,000 and
     unused lines of credit amounted to $1,297,367.  These instruments  involve,
     to varying degrees,  elements of credit and interest rate risk in excess of
     the amount recognized in the consolidated balance sheets.

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
     other party to the financial  instrument for loan  commitments and consumer
     lines  of  credit  are  represented  by the  contractual  amount  of  those
     instruments.  The Bank uses the same credit policies in making  commitments
     and conditional  obligations as it does for on-balance  sheet  instruments.
     Since many of the loan commitments may expire without being drawn upon, the
     total commitment amount does not necessarily represent future requirements.
     The Bank  evaluates  each  customer's  credit  worthiness on a case-by-case
     basis. The amount of collateral  obtained upon extension of credit is based
     on  management's  credit  evaluation of the  counterparty.  Collateral held
     varies, but primarily includes residential real estate.

10.  Earnings Per Share

      Earnings per share for the year ended September 30, 1996 was calculated by
      dividing net income of $1,090,167 by the weighted average number of shares
      of common stock  outstanding  during the year, which was 1,998,877 for the
      year ended September 30, 1996. Earnings per share for fiscal year 1995 and
      prior  years are not shown  because  the stock  conversion  was  effective
      September 29, 1995.

11.  Trust Accounts

     The Bank  maintained two Trust accounts during the year ended September 30,
     1996.  The  following  is a  summary  of the Trust  Department  assets at
     September  30,  1996:

                Description                                September  30,  1996
                -----------                                --------------------

     Cash in passbook and  checking account                     $     3,331
     Certificates of deposit                                         22,021
                                                                -----------
            Total                                               $    25,352
                                                                ===========

                                   (Continued)

                                       36

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


12.  Disclosures about Fair Value of Financial Instruments

     In December  1991,  the FASB issued SFAS No. 107,  "Disclosures  About Fair
     Value of Financial  Instruments."  This statement extends the existing fair
     value  disclosure  practices for some instruments by requiring all entities
     to disclose  the fair value of financial  instruments  (as  defined),  both
     assets and  liabilities  recognized and not recognized in the statements of
     financial condition, for which it is practicable to estimate fair value.

     There are inherent limitations in determining fair value estimates, as they
     relate only to specific data based on relevant information at that time. As
     a significant percentage of the Bank's financial instruments do not have an
     active trading market, fair value estimates are necessarily based on future
     expected  cash  flows,  credit  losses,  and other  related  factors.  Such
     estimates are  accordingly,  subjective in nature,  judgmental  and involve
     imprecision.  Future events will occur at levels different from that in the
     assumptions, and such differences may significantly affect the estimates.

     The statement  excludes certain financial  instruments and all nonfinancial
     instruments from its disclosure  requirements.  Accordingly,  the aggregate
     fair value amounts  presented do not represent the underlying  value of the
     Company. Additionally, the tax impact of the unrealized gains or losses has
     not been presented or included in the estimates of fair value.

     The  following  methods  and  assumptions  were  used  by  the  Company  in
     estimating its fair value disclosures for financial instruments.

     Cash and Cash  Equivalents.  The carrying amounts reported in the statement
     of financial  condition  for cash and  short-term  instruments  approximate
     those assets' fair values.

     Investment  Securities.  Fair values for investment securities are based on
     quoted  market  prices,  where  available.  If quoted market prices are not
     available,  fair  values are based on quoted  market  prices of  comparable
     instruments. No active market exists for the Federal Home Loan Bank capital
     stock.  The carrying  value is estimated to be fair value since if the Bank
     withdraws  membership  in the  Federal  Home Loan  Bank,  the stock must be
     redeemed for face value.

     Loans Receivable.  The fair value of loans was 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.

     Deposits.  The fair value of savings  deposits  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.

     Loan Commitments and Unused Home Equity Lines of Credit.  The fair value of
     loan  commitments  and unused  lines of credit is  estimated by taking into
     account   the   remaining   terms  of  the   agreements   and  the  present
     credit-worthiness of the counterparties.

                                   (Continued)

                                       37

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


     The  estimated  fair  value  of  the  Company's  financial  instruments  at
     September 30, 1996 are as follows:

<TABLE>
<CAPTION>
                                                             Carrying            Fair
                                                              Amount            Value
                                                          --------------    --------------
<S>                                                       <C>               <C>
Assets
   Cash and cash equivalents                              $   15,064,677    $   15,064,677
   Certificates of deposit                                     2,500,000         2,500,000
   Securities available-for-sale                               1,881,429         1,881,429
   Securities held-to-maturity                                10,502,766        10,398,994
   Loans receivable, net                                      77,502,336        77,617,294

Liabilities
   Deposits                                                   76,946,210        77,081,851

Unrecognized Financial Instruments
   Loan commitments                                                                931,000
   Unused lines of credit                                                        1,588,846

</TABLE>

                                   (Continued)

                                       38

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


13.  Harrodsburg First Financial  Bancorp,  Inc. Financial  Information  (Parent
     Company Only)

     The parent  company's  principal  assets are its investment in the Bank and
     cash  balances  on  deposit  with the Bank.  The  following  are  condensed
     financial statements for the parent company as of September 30, 1996.

<TABLE>
<CAPTION>
                    Harrodsburg First Financial Bancorp, Inc.
                   Condensed Statement of Financial Condition
                               September 30, 1996
<S>                                                                              <C>
Assets:
        Cash and due from banks                                                  $ 7,548,037
        Investment in subsidiary                                                  22,945,415
        Other assets                                                                 122,498
                                                                                 -----------
        Total assets                                                             $30,615,950
                                                                                 ===========

Liabilities and Stockholders' Equity:
        Dividends payable                                                        $   391,633
        Accounts payable                                                               2,328
                                                                                 -----------
                                                                                     393,961
                                                                                 -----------

Stockholders' equity
        Common stock                                                                 218,213
        Additional paid-in capital                                                21,001,572
        Retained earnings                                                         10,229,074
           Net unrealized appreciation on securities available-for-sale            1,191,925
           Treasury stock, 49,392 shares, at cost                                   (789,495)
           Unearned ESOP shares                                                   (1,629,300)
                                                                                 -----------
             Total stockholders' equity                                           30,221,989
                                                                                 -----------

           Total liabilities and stockholders' equity                            $30,615,950
                                                                                 ===========
</TABLE>

                                   (Continued)

                                       39

<PAGE>


            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------

<TABLE>
<CAPTION>
                    Harrodsburg First Financial Bancorp, Inc.
                          Condensed Statement of Income
                          year ended September 30, 1996

Income:
<S>                                                                              <C>
    Miscellaneous income                                                         $     1,000
                                                                                 -----------
Expense:
    Legal fees                                                                        32,196
    Franchise and license tax                                                         30,435
    Transfer agent fees                                                               10,832
    Accounting fees                                                                   10,000
    Other operating expenses                                                          16,351
                                                                                 -----------
                                                                                      99,814
                                                                                 -----------
    Net loss before tax benefit                                                      (98,814)
    Income tax benefit                                                                 6,096
                                                                                 -----------
    Net loss before equity in undistributed net income of subsidiary                 (92,718)
    Equity in undistributed net income of subsidiary                               1,182,885
                                                                                 -----------
        Net income                                                               $ 1,090,167
                                                                                 ===========
</TABLE>

<TABLE>
<CAPTION>
                    Harrodsburg First Financial Bancorp, Inc.
                        Condensed Statement of Cash Flows
                          year ended September 30, 1996
<S>                                                                              <C>
Cash flows from operating activities:
       Net income                                                                $ 1,090,167
       Adjustments   to  reconcile  net  income  to  net  cash
       provided  by  operating activities:
           Equity in undistributed net income of subsidiary                       (1,182,885)
           Increase in other receivables                                              (6,098)
           Decrease in other liabilities                                            (363,086)
                                                                                 -----------
             Net cash used by operating activities                                  (461,902)
                                                                                 -----------

Cash flows from investing activities:

             Net cash provided (used) by investing activities
                                                                                 -----------
Cash flows from financing activities:
       Dividends paid                                                               (403,838)
       Purchase of common stock                                                     (789,495)
                                                                                 -----------

             Net cash used by financing activities                                (1,193,333)
                                                                                 -----------

    Net decrease in cash and cash equivalents                                     (1,655,235)

    Cash and cash equivalents at beginning of period                               9,203,272
                                                                                 -----------

    Cash and cash equivalents at end of period                                   $ 7,548,037
                                                                                 ===========
</TABLE>

                                   (Continued)

                                       40

<PAGE>

            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             ----------------------


14.  Harrodsburg Savings and Loan Service Corporation

     In 1978, the Bank formed Harrodsburg Savings and Loan Service  Corporation,
     a wholly  owned  subsidiary,  by  purchasing  its  stock for  $15,000.  The
     Subsidiary was created to hold stock in a not for profit  corporation  that
     provides on line computer  processing and inquiry  service for the Bank and
     other savings and loan institutions.

     Summary balance sheets for the wholly owned subsidiary are as follows:


                 Harrodsburg Savings & Loan Service Corporation
                   Balance Sheets, September 30, 1996 and 1995

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


ASSETS                                                              1996         1995
                                                                 ----------   -----------

<S>                                                              <C>          <C>
Investments                                                      $   15,000   $    15,000
                                                                 ==========   ===========

STOCKHOLDERS' EQUITY

Common stock                                                     $   15,000   $    15,000
                                                                 ==========   ===========
</TABLE>

     The Service  Corporation  did not receive  income nor did it incur  expense
     during the years ended September 30, 1996 and 1995.

15.  Stock Purchase

     On March 18, 1996,  the Board of Directors  of the Company  authorized  the
     repurchase  of  up  to  5%  or  109,106  shares  of  the  Company's  stock.
     Subsequently,  49,392 shares were  repurchased at a total cost of $789,495.
     This plan, as approved by OTS, expired September 30, 1996. On September 16,
     1996, the Board of Directors  approved filing a second application with OTS
     to purchase 5% of the then outstanding stock (106,636 shares).


                                       41

<PAGE>



                              CORPORATE INFORMATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                               BOARD OF DIRECTORS
<S>                               <C>                               <C>
Jack D. Hood                      Jack L. Coleman, Jr.              Jack L. Coleman, Sr.
President and Chief Executive     Representative, State of          Partner, Coleman's Lumber Yard
Officer of the Bank and the       Kentucky; Partner, Coleman's
Company                           Lumber Yard

Elwood Burgin                     Thomas Les Letton                 Wickliffe T. Asbury, Sr.
Retired                           President, The Letton Company     Vice President of the Bank and
                                                                    the Company
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                               EXECUTIVE OFFICERS
<S>                                     <C>                             <C>
Jack D. Hood                            Charles W. Graves, Jr.          Wickliffe T. Asbury, Sr.
President and Chief Executive           Vice President of the Bank      Vice President of the Bank
Officer of the Bank and the             and the Company                 and the Company
Company

Debbie C. Roach                                                         Teresa W. Noel
Secretary of the Bank and the Company                                   Treasurer of the Bank and the
                                                                        Company
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                OFFICE LOCATIONS
<S>                                                            <C>
104 South Chiles Street                                        216 South Main Street
Harrodsburg, Kentucky 40330                                    Lawrenceburg, Kentucky 40356
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                     GENERAL INFORMATION
<S>                                    <C>                                     <C>
Independent Accountants                Special Counsel                         Annual Report on Form 10K
Miller, Mayer, Sullivan, & Stevens,    Malizia, Spidi, Sloane, & Fisch, P.C.   A COPY OF THE COMPANY'S
LLP                                    One Franklin Square                     1996 ANNUAL REPORT ON FORM
2365 Harrodsburg Road                  1301 K Street, N.W., Suite 700 East     10-K WITHOUT EXHIBITS WILL
Lexington, KY 40504-3399               Washington, DC  20005                   BE FURNISHED WITHOUT
                                                                               CHARGE TO STOCKHOLDERS AS
General Counsel                        Annual Meeting                          OF THE RECORD DATE FOR THE
David Patrick                          The 1997 Annual Meeting of              1997 ANNUAL MEETING UPON
Attorney-at-Law                        Stockholders will be held on January    WRITTEN REQUEST TO JACK D.
321 South Main Street                  27, 1997 at 2:00 p.m. at First Federal  HOOD, HARRODSBURG FIRST
Harrodsburg, KY 40330                  Savings Bank of Harrodsburg, 104        FINANCIAL BANCORP, INC., P.O.
                                       South Chiles Street, Harrodsburg, KY    BOX 384, 104 SOUTH CHILES
Walter Patrick                                                                 STREET, HARRODSBURG, KY
Attorney-at-Law                        Transfer Agent                          40330
Gordon Building                        Illinois Stock Transfer
P.O. Box 178                           223 West Jackson Blvd,, Suite 1210
Lawrenceburg, KY 40342                 Chicago, IL  60606

</TABLE>


                                       42