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

1998 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 8,
1998, there were 1,882,918 shares of the Common Stock issued and outstanding,
held by approximately 521 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 such semi-annual period.
The regular semi-annual dividend of $0.20 per share was payable on October 15,
1998 to stockholders of record on September 30, 1998. On September 21, 1998, the
Board of Directors declared a special dividend of $.30 per share payable on
October 16, 1998, to stockholders of record as of October 1, 1998. 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>
<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...................................................................................................17
Corporate Information...................................................................................Inside Back Cover
</TABLE>


<PAGE>






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


To Our Stockholders

On behalf of the Board of Directors of Harrodsburg First Financial Bancorp,
Inc., I am pleased to provide you with our fiscal year 1998 Annual Report to
Stockholders, our third full year as a public company.

The Company's consolidated net income for fiscal year 1998 was $1.4 million or
$.79 a share. Total assets at September 30, 1998 were $109.9 million, deposits
were $79 million, and the net loan balance was $85.3 million. Stockholders
equity totaled $29.0 million at September 30, 1998, or $16.24 per share.

During fiscal year 1998, $1.7 million of the Company's stock was repurchased. As
of September 30, 1998, a total of 258,607 shares had been repurchased in open
market transactions. In October 1998, the Board announced another repurchase
plan of an additional 5% of the outstanding shares of the Company. 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.

The Board and management are well aware of the potential impact of the Year
2000. A plan has been developed, and appropriate action is being taken.
Management does not anticipate any adverse effects, and the Year 2000 issues are
further addressed in the Management Discussion and Analysis section of this
report.

During fiscal year 1998, the Board approved a dividend reinvestment plan, and
this will be available with the anticipated April dividend. Also introduced
during the year was a Direct Teller phone line whereby customers can access
information on their accounts 24 hours a day, seven days a week. During fiscal
1998 the Board applied and received permission from the Office of Thrift
Supervision to establish an additional branch location in Lawrenceburg. It is
expected that construction will begin in the spring of 1999.

On a sad note, during fiscal 1998, Jack L. Coleman, Sr., a Director of the
Company and the Bank, passed away. Jack had served as a Director for 29 years,
and he is greatly missed.

We want to thank you for the trust and confidence you have shown in Harrodsburg
First Financial Bancorp, Inc., and we look forward to serving you in fiscal
1999.

Sincerely,

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

                                        1

<PAGE>


<TABLE>
<CAPTION>

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


Financial Condition Data
                                                                           At September 30, 
                                              ------------------------------------------------------------------------
                                                 1998            1997           1996           1995            1994   
                                              -----------    -----------    -----------     -----------    -----------
                                                                          (Dollars in Thousands) 
                                              ------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>             <C>            <C>        
Total Amount of:
    Assets...............................     $   109,919    $   109,638    $   108,953     $   107,234    $    91,465
    Loans receivable, net................          85,272         81,261         77,502          75,434         72,640
    Investments (1)......................          14,966         14,382         14,884           8,580          7,266
    Cash and cash equivalents............           8,074         12,621         15,065          21,990         10,350
    Deposits.............................          78,996         78,629         76,946          75,893         82,091
    Stockholders' equity.................          28,982         29,773         30,222          30,185          9,043
-------------------------------------------------------------------------------------------------------------------

Number of:
    Real estate loans outstanding........           1,601          1,668          1,710           1,745          1,764
    Deposit accounts.....................           9,590          9,594          9,524          10,559          9,930
    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,
                                              ------------------------------------------------------------------------
                                                 1998            1997           1996           1995            1994   
                                              -----------    -----------    -----------     -----------    -----------
                                                                       (Dollars in Thousands) 
                                              ------------------------------------------------------------------------

<S>                                           <C>            <C>            <C>             <C>            <C>        
Interest income..........................     $     7,778    $     7,699    $     7,712     $     6,612    $     6,210
Interest expense.........................           3,897          3,835          3,901           3,807          3,277
                                              -----------    -----------    -----------     -----------    -----------
    Net interest income..................           3,881          3,864          3,811           2,805          2,933
Provision for loan losses................              96             11              8              92             60
                                              -----------    -----------    -----------     -----------    -----------
    Net interest income after
     provision for loan losses...........           3,785          3,853          3,803           2,713          2,873
Non-interest income......................             122             95            101              81             86
Non-interest expense (1).................           1,679          1,701          2,225           1,444          1,357
                                              -----------    -----------    -----------     -----------    -----------
Income before income tax expense
    and cumulative effect of change
    in accounting principle..............           2,228          2,247          1,679           1,350          1,602
Income tax expense.......................             799            771            589             459            558
                                              -----------    -----------    -----------     -----------    -----------
    Income before cumulative effect
     of change in accounting principle...           1,429          1,476          1,090           891            1,044
Cumulative effect of change in
    accounting principle (2).............                                                                           19
                                              -----------    -----------    -----------     -----------    -----------
Net income...............................     $     1,429    $     1,476    $     1,090     $       891    $     1,025
                                              ===========    ===========    ===========     ===========    ===========
</TABLE>
-------- 
(1) Reflects one-time special SAIF assessment of $536,063 in fiscal 1996.
(2) 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,
                                              ------------------------------------------------------------------------
                                                 1998            1997           1996           1995            1994   
                                              -----------    -----------    -----------     -----------    -----------
<S>                                                  <C>            <C>            <C>              <C>           <C>  
Performance Ratios:
Return on average assets (net income
    divided by average total assets).......          1.31%          1.36%          1.00%            .95%          1.12%

Return on average equity (net income
    divided by average equity).............          4.98           5.12           3.56            7.84          12.01

Average interest-earning assets to
    average interest-bearing liabilities...        136.40         136.34         139.15          113.08         109.11

Net interest rate spread...................          2.30           2.32           2.14            2.50           2.92

Net yield on average interest-
    earning assets.........................          3.63           3.64           3.57            3.04           3.26

Dividend payout............................         102.4           45.2           72.7             N/A            N/A

Capital Ratios:
Average equity to average assets
    (average equity divided by
    average total assets)..................         26.31          26.64          28.18           12.11           9.32

Equity to assets at period end.............         26.37          27.14          27.74           28.15           9.89

Asset Quality Ratios:
Net interest income after provision for
    loan losses to total other expenses....        225.43         226.51         170.92          187.88         211.56
Non-performing loans to total loans........           .57            .64           1.12             .88           1.86
Non-performing loans to total assets.......           .44            .47            .79             .62           1.48
</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 1998 and 1997.
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
<TABLE>
<CAPTION>

                                              Fiscal 1998                                   Fiscal 1997               
                              ----------------------------------------    ------------------------------------------
                                  Stock Price Range                           Stock Price Range              
                                 ------------------         Per Share        -------------------          Per Share
Quarter                          Low           High          Dividend          Low           High          Dividend
-------------------------------------------------------------------------------------------------------------------
<S>                           <C>           <C>            <C>            <C>             <C>            <C>        
1st                           $   16.125    $    18.250    $      0.40    $     17.50     $     19.25    $      0.15
2nd                               16.500         17.875           0.20          15.25           18.75           0.20
3rd                               16.500         17.750                         14.75           16.00
4th                               14.000         16.750           0.20          14.75           16.75               
--------------------------------------------------------------------------------------------------------------------
Total                                                      $      0.80                                   $      0.35
                                                           ===========                                   ===========
</TABLE>

                                        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

Quantitative Aspects of Market Risk. The Bank does not maintain a trading
account for any class of financial instrument. Further, it is not currently
subject to foreign currency exchange rate risk or commodity price risk. The
stock in the FHLB of Cincinnati does not have equity price risk because it is
issued only to members and is redeemable for its $100 par value. The following
table illustrates quantitative sensitivity to interest rate risk for

                                        4

<PAGE>



financial instruments other than non-interest earning cash balances, FHLB stock
and demand deposit accounts for the Bank as of September 30, 1998.

Market Rate Analysis - September 30, 1998

<TABLE>
<CAPTION>

                                                             Expected Maturity Date
                       ---------------------------------------------------------------------------------------------------
                                                            Year ended September 30,
                       ---------------------------------------------------------------------------------------------------
                                                             (Dollars in Thousands)
                                                                                                                 Fair
                           1999         2000        2001        2002        2003      Thereafter    Total        Value
--------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>          <C>        <C>          <C>       <C>         <C>          <C>    
Assets:                                                                                                                    
 Loans-fixed:                                                                                                              
  Balance                        $44         $42        $245        $471         $382     $14,057     $15,241     $15,721
  Interest rate                8.36%       9.45%       9.02%       8.86%        8.84%       8.19%       8.25%
 Loans-variable:
  Balance                     54,914       1,237       1,259       4,267       11,914                  73,591      75,906
  Interest rate                7.66%       6.22%       7.13%       7.31%        7.39%                   7.80%
 Investments:
  Balance                     11,159                   1,999       2,499        4,040       1,224      20,921      21,008
  Interest rate                4.27%                   6.36%       6.66%        6.28%       5.98%       5.00%
Liabilities:
 Deposits:
  Balance                     15,901                                                                   15,901      15,901
  Interest rate                2.58%                                                                    2.58%
 Deposits-certificates
  Balance                     38,962      16,148       4,397       1,416        1,779                  62,702      63,448
  Interest rate                5.45%       5.81%       5.69%      5.918%        6.14%                   5.59%
</TABLE>

Qualitative Aspects of Market Risk. Net interest income, the primary component
of the Bank's net earnings, is derived from the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities. One of the
Bank's principal financial objectives is to achieve long-term profitability
while reducing its exposure to fluctuations in interest rates. The Bank has
sought to reduce exposure of its earnings to changes in market interest rates by
managing the mismatch between asset and liability maturities and interest rates.

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 up to 30
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, 1998, 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.


                                        5

<PAGE>



In addition to shortening the average repricing of its assets, 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 market
rates of interest on its certificates of deposit, which are typically higher on
its longer term certificates, in order to encourage depositors to invest in
certificates with longer maturities.

There have been no significant changes in the Bank's primary market risk
exposures or methods for managing those exposures since September 30, 1998.

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, 1998 would decrease by $1.4 million or 4.7% 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.
Certificates of deposit constitute approximately 79% of the Bank's total
deposits and generally pay higher rates of interest than core deposits. The
Bank's emphasis on certificates of deposits may result in a higher average cost
of deposits which may adversely affect the Bank's interest rate spread. 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.


                                        6

<PAGE>


<TABLE>
<CAPTION>

                                                                            Year Ended September 30,               
                                       -------------------------------------------------------------------------------------------
                                                       1998                         1997                              1996        
                                       ------------------------------  ------------------------------  ---------------------------
                                       Average             Average    Average              Average    Average             Average
                                       Balance  Interest  Yield/Cost  Balance   Interest  Yield/Cost  Balance  Interest Yield/Cost
                                       -------  --------  ----------  -------   --------  ----------  -------  -------- ----------
                                                                     (Dollars in Thousands)
Interest-earning assets:
<S>                                    <C>       <C>       <C>        <C>         <C>      <C>        <C>       <C>      <C>  
   Loans receivable..................  $ 83,637  $6,550      7.83%    $ 79,642    $6,239     7.83%    $ 74,797  $5,970     7.98%
   Investment securities(3) .........    23,335   1,228      5.26       26,480     1,460     5.51       32,043   1,742     5.44
                                       --------  ------               --------    ------              --------  ------
     Total interest-earning assets...   106,972   7,778      7.27      106,122     7,699     7.25      106,840   7,712     7.22
                                                 ------                           ------                        ------
                                                                                
Non-interest earning assets..........     2,118                          2,031                           1,871
                                       --------                       --------                        --------
   Total assets......................  $109,090                       $108,153                        $108,711
                                       ========                       ========                        ========
                                                                                
Interest-bearing liabilities:                                                   
   Deposits..........................  $ 78,425   3,897      4.97     $ 77,834     3,835     4.93     $ 76,779   3,901     5.08
                                       --------  ------               --------    ------              --------  ------
   Total interest-bearing liabilities    78,425   3,897      4.97       77,834     3,835     4.93       76,779   3,901     5.08
                                                 ------                           ------                        ------
                                                                                
Non-interest bearing liabilities:....     1,965                          1,512                           1,296
                                       --------                       --------                        --------
   Total liabilities.................    80,390                         79,346                          78,075
Stockholders' equity.................    28,700                         28,807                          30,636
                                       --------                       --------                        --------
   Total liabilities & stockholders'                                            
     equity .........................  $109,090                       $108,153                        $108,711
                                       ========                       ========                        ========
Net interest income..................             3,881                           $3,864                        $3,811
                                                 ======                           ======                        ======
Interest rate spread(4)..............                        2.30%                           2.32%                         2.14%
                                                             ====                            ====                          ====
Net yield on interest-earning 
   assets(5) ........................                        3.63%                           3.64%                         3.57%
                                                             ====                            ====                         =====
Ratio of average interest-earning
   assets to average interest-
   bearing liabilities ..............                      136.40%                         136.34%                       139.15%
                                                           ======                          ======                        ======
</TABLE>
--------
 
3 Includes interest-bearing overnight deposits and term deposits with FHLB.
4 Interest-rate spread represents the difference between the average yield on
  interest-earning assets and the average cost of interest-bearing
  liabilities.
5 Net yield on interest-bearing assets represents net interest income as a
  percentage of average interest-earning assets.

                                        7

<PAGE>



The net interest margin is a key measure in determining the Bank's income
performance. The Bank's net interest margin was 3.63% for the year ended
September 30, 1998 compared to 3.64% for the same period in 1997. Net interest
income increased only $17,000 or .4% for the year ended September 30, 1998 as
compared to the same period in 1997. Interest income increased $79,000 or 1.0%
while interest expense increased $62,000 or 1.6% for the 1998 period compared to
the 1997 period.

The Bank's net interest margin was 3.64% for the year ended September 30, 1997
compared to 3.57% for the same period in 1996. The 1997 increase was due to an
increase of net interest income of approximately $53,000 or 1.4%. Interest
income for the year ended September 30, 1997 decreased approximately $13,000 or
 .2% compared to the same period in 1996. During these same periods, interest
expense decreased approximately $66,000 or 1.7%.

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.

                                        8

<PAGE>


<TABLE>
<CAPTION>


                                                          Year Ended September 30, 
                                  ------------------------------------------------------------------------
                                            1998 vs 1997                          1997 vs 1996            
                                  ---------------------------------   ------------------------------------
                                           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                $ 313     $       $        $ 313    $ 390    $ (111)    $ (7)    $ 272
   Investment securities(1)         (176)     (66)       8     (234)    (304)       23       (4)     (285)
                                   -----     ----    -----    -----    -----    ------     ----     -----
     Total                         $ 137     $(66)   $   8    $  79    $  86    $  (88)    $(11)    $ (13)
                                   =====     ====    =====    =====    =====    ======     ====     =====
                                                                                          
Interest expense:                                                                         
   Deposits                        $  30     $ 32    $        $  62    $  54    $ (118)    $ (2)    $ (66)
                                   -----     ----    -----    -----    -----    ------     ----     -----
     Total                         $  30     $ 32    $        $  62    $  54    $ (118)    $ (2)    $ (66)
                                   =====     ====    =====    =====    =====    ======     ====     =====
                                                                                          
Net change in interest income      $ 107     $(98)   $   8    $  17    $  32    $   30     $ (9)    $  53
                                   =====     ====    =====    =====    =====    ======     ====     =====
</TABLE>
--------
1  Includes interest-earning overnight deposits and term deposits with FHLB of
   Cincinnati.

                                        9

<PAGE>



NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risk and uncertainties.
Economic circumstances, the Company's operations, and the Company's actual
results could differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein, but also include changes in the economy and
interest rates in the nation and the Company's market area generally.


COMPARISON OF THE RESULTS OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1998 AND 1997

Net Income. Net income decreased by $47,000, or 3.18% to $1,429,000 for the year
ended September 30, 1998 as compared to $1,476,000 for the year ended September
30, 1997. The net decrease was due to an increase in net interest income of
$17,000 an increase in non-interest income of $27,000, and a decrease in
non-interest expense of $22,000 offset by an increase in the provision for loan
losses of $85,000, and an increase in income tax expense of $28,000.

Net Interest Income. Net interest income for the year ended September 30, 1998
was $3.9 million. The increase in net interest income in fiscal 1998 compared to
1997 of $17,000 was due to an increase in interest income of $79,000 offset by
an increase in interest expense of $62,000. Interest income in 1998 was $7.8
million with an average yield of 7.27% compared to $7.7 million with an average
yield of 7.25% in 1997. The increase in interest expense of $62,000 was
primarily due to the increase in the average balance in interest bearing
liabilities. The average balance of interest bearing liabilities in 1998 was
$78.4 million with an average cost of funds of 4.97% compared to average
balances of interest bearing liabilities in 1997 of $77.8 million with an
average cost of funds of 4.93%.

Interest Income. Interest income was $7.8 million, or 7.27% of average
interest-earning assets, for the year ended September 30, 1998 as compared to
$7.7 million, or 7.25% of average interest-earning assets, for the year ended
September 30, 1997. Interest income increased $79,000 or 1.03% from 1997 to
1998. The increase was primarily due to management maintaining a higher average
balance of loans receivable, which has a higher average yield during the year
ended September 30, 1998 compared to the year ended September 30, 1997.

Interest Expense. Interest expense was $3.9 million, or 4.97% of average
interest-bearing liabilities, for the year ended September 30, 1998 as compared
to $3.8 million, or 4.93% of average interest-bearing liabilities, for the
corresponding period in 1997. The increase in interest expense of $62,000 was
the result of a 4 basis point increase in the average rate paid on the deposits
plus the increase of $591,000 in the average balance of interest bearing
deposits for the year ended September 30, 1998 compared to the same period in
1997.

Provision for Loan Losses. The provision for loan losses was $96,000 and $11,000
for the years ended September 30, 1998 and 1997, 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, 1998 and 1997
the allowance for loan losses represented .38% of total loans.

Non-Interest Income. Non-interest income amounted to $122,000 and $95,000 for
the years ended September 30, 1998 and 1997, respectively. The largest item in
non-interest income is service fees on loan and deposit accounts, which amounted
to $99,000 and $75,000 for 1998 and 1997, respectively.


                                       10

<PAGE>



Non-Interest Expense. Non-interest expense decreased approximately $22,000, or
1.29%, to $1.7 million for the year ended September 30, 1998. Non-interest
expense was 1.5% and 1.6% of average assets for the years ended September 30,
1998 and 1997, respectively. The decrease of $22,000 was due to a decrease of
$27,000 in federal and other insurance premiums and a decrease of $47,000 in
other operating expenses offset by an increase of $29,000 in compensation and
benefits, an increase of $9,000 in occupancy expenses plus an increase of
$14,000 in data processing expenses. The decrease of $27,000 in federal and
other insurance premiums is due to savings in 1998 resulting from the reduction
of the insurance assessment rate on the Bank's deposits as a result of the
recapitalization of SAIF. The decrease of $47,000 in other operating expenses
was primarily due to decrease in legal expense and Delaware franchise taxes of
the Company. The increase of $29,000 in compensation and benefits resulted from
a $9,000 increase related to benefits earned in the employee stock option plan
and normal salary increases and related benefits of $20,000.

Income Tax Expense. The provision for income tax expense amounted to
approximately $799,000 and $771,000 for the years ended September 30, 1998 and
1997, respectively. The provision for income tax expense as a percentage of
income before income tax expenses amounted to 35.9% and 34.3% for 1998 and 1997,
respectively.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1997 AND 1996

Net Income. Net income increased by $386,000, or 35.4% to $1,476,000 for the
year ended September 30, 1997 as compared to $1,090,000 for the year ended
September 30, 1996. The net increase was due to an increase in net interest
income of $53,000 and a decrease in non-interest expense of $524,000 offset by
an increase in the provision for loan losses of $3,000, a decrease in
non-interest income of $6,000 and an increase in income tax expense of $182,000.

Net Interest Income. Net interest income for the year ended September 30, 1997
was $3.9 million, compared to $3.8 million for the year ended September 30,
1996. The increase in net interest income in fiscal 1997 of $53,000 was due to a
decrease in interest expense of $66,000 offset by a decrease in interest income
of $13,000. The decrease in interest expense of $66,000 was primarily due to a
lower average interest rate paid on deposits in 1997 compared to 1996. The
average balance of interest bearing liabilities in 1997 was $77.8 million with
an average cost of funds of 4.93%, compared to average balances of interest
bearing liabilities in 1996 of $76.8 million with an average cost of funds of
5.08%. Interest income in 1997 was $7.7 million with an average yield of 7.25%,
compared to $7.7 million with an average yield of 7.22% in 1996.

Interest Income. Interest income was $7.7 million, or 7.25% of average
interest-earning assets, for the year ended September 30, 1997 as compared to
$7.7 million, or 7.22% of average interest-earning assets, for the year ended
September 30, 1996. Interest income decreased $13,000 or .17% from 1996 to 1997.
The change was primarily due to a $718,000 decrease in the average balance of
interest-earning assets during the year ended September 30, 1997 compared to the
year ended September 30, 1996.

Interest Expense. Interest expense was $3.8 million, or 4.93% of average
interest-bearing liabilities, for the year ended September 30, 1997 as compared
to $3.9 million, or 5.08% of average interest-bearing liabilities, for the
corresponding period in 1996. The decrease in interest expense of $66,000 was
the result of a 15 basis point decrease in the average rate paid on the deposits
offset by the increase of $1.0 million in the average balance of interest
bearing deposits for the year ended September 30, 1997 compared to the same
period in 1996.

Provision for Loan Losses. The provision for loan losses was $11,000 and $8,000
for the years ended September 30, 1997 and 1996, 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

                                       11

<PAGE>



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, 1997 and 1996 the allowance for loan losses
represented .37% of total loans.

Non-Interest Income. Non-interest income amounted to $95,000 and $101,000 for
the years ended September 30, 1997 and 1996, respectively. The largest item in
non-interest income is service fees on loan and deposit accounts, which amounted
to $75,000 and $77,000 for 1997 and 1996, respectively.

Non-Interest Expense. Non-interest expense decreased approximately $524,000, or
23.6%, from $2.2 million for the year ended September 30, 1996 to $1.7 million
for the year ended September 30, 1997. Non-interest expense was 1.6% and 2.0% of
average assets for the years ended September 30, 1997 and 1996, respectively.
The decrease of $524,000 was primarily due to a decrease of $670,000 in federal
insurance premiums offset by an increase in compensation and benefits of $76,000
and an increase in other operating expense of $50,000. The decrease of $670,000
in federal insurance premiums was the result of a one-time special assessment of
$536,000 charged in 1996 to recapitalize the Savings Association Insurance Fund
(SAIF), and an additional $134,000 savings in 1997 due to the reduction of the
insurance assessment rate on the Bank's deposits as a result of the
recapitalization of SAIF. The increase of $76,000 in compensation and benefits
resulted from an increase of $21,000 related to benefits earned in the employee
stock option plan, and $55,000 in normal salary increases and related benefits.
The increase of $50,000 in other operating expense was primarily due to
increases in Delaware franchise taxes of the Company and expenses related to
operating two automatic teller machines which were installed in September of
1996.

Income Tax Expense. The provision for income tax expense amounted to
approximately $771,000 and $589,000 for the years ended September 30, 1997 and
1996, respectively. The provision for income tax expense as a percentage of
income before income tax expenses amounted to 34.3% and 35.1% for 1997 and 1996,
respectively.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND 1997

The Company's consolidated assets increased $281,000, or .26%, to $109.9 million
at September 30, 1998 compared to $109.6 million at September 30, 1997.
Securities available-for-sale increased $1.1 million, securities
held-to-maturity increased $76,000, loans increased $4.0 million, cash and cash
equivalents plus certificates of deposit decreased $5.1 million, and other
non-interest earning assets increased by $233,000.

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 $1.1 million due to
the increase in fair value of such securities. Securities held-to-maturity
increased $76,000 due primarily to a FHLB stock dividend offset by principle
repayments on mortgage backed securities.

Loans receivable increased $4.0 million or 4.9% to $85.3 million at September
30, 1998 from $81.3 million at September 30, 1997. The increase in loans during
the year ended September 30, 1998 is the result of management becoming more
active in loan solicitation plus a declining interest rate environment in fiscal
year 1998.

Liabilities of the Company increased $1.1 million, or 1.34%, to $80.9 million at
September 30, 1998 compared to $79.9 million at September 30, 1997. The increase
in liabilities was primarily due to the increase in deposits of $366,000,
reflecting management's success in attracting depositors within the local market
area and the increase of $354,000 in dividends payable.

Stockholder's equity was $29.0 million at September 30, 1998 and decreased
approximately $800,000 from the balance at September 30, 1997. The decrease was
due to the repurchase of common stock totaling $1.7 million plus the declaration
of dividends totaling $1.4 million offset by net income of $1.4 million, an
increase of $700,000 in

                                       12

<PAGE>



the net unrealized appreciation on securities available-for-sale, plus an
increase of $200,000 due to ESOP shares earned in 1998.

Year 2000 Readiness

The financial industry is one of the largest industries impacted by the year
2000 issue. However, this is not a new problem. This issue was first faced years
ago when financial institutions began issuing mortgage loans for 25-30 years,
which caused the maturity date to fall in year 2000 or beyond. So, this is not a
new issue for financial institutions.

The following discussion of the implications of the Year 2000 problem for the
Bank contains numerous forward looking statements based on inherently uncertain
information. The cost of the project and the date on which the Bank plans to
complete the internal Year 2000 modifications are based on management's best
estimates, which are derived utilizing a number of assumptions of future events
including the continued availability of internal and external resources, third
party modifications, and other factors. However, there can be no guarantee that
these statements will be achieved, and actual results could differ. Moreover,
although management believes it will be able to make the necessary modifications
in advance, there can be no guarantee that failure to modify the systems would
not have a material adverse effect on the Bank.

The Bank places a high degree of reliance on computer systems of third parties,
such as customers, suppliers, and other financial and governmental institutions.
Although the Bank is assessing the readiness of these third parties and
preparing contingency plans, there can be no guarantee that the failure of these
third parties to modify their systems in advance of December 31, 1999 would not
have a material adverse affect on the Bank.

First Federal Savings Bank of Harrodsburg has fully completed the Awareness
Phase and has completed approximately 95% of the Assessment Phase of its Year
2000 Compliance Plan. All mission critical systems have been identified and the
status determined. In addition, the Bank is actively pursuing responses from
those few vendors who have not replied on those systems determined mission
necessary or mission desirable.

The Bank is currently working on the Renovation Phase of its Plan. As the Bank
uses an outside service provider, INTRIEVE, Inc., the renovation of its mission
critical system largely depends upon their progress. They are actively pursuing
every avenue required to insure their Y2K compliance and are currently being
monitored by the Bank's regulatory agency, the Office of Thrift Supervision.
INTRIEVE, Inc. is keeping their customers informed as to their state of
readiness. The Bank has identified that its teller processing hardware and
software, used to process deposits, withdrawals, payments, and other customer
transactions, are not currently Y2K compatible, and the Bank has signed a
contract for the purchase of Y2K compatible hardware and software. The hardware
and software is currently scheduled for installation during the first or second
quarter of 1999. The Bank anticipates all testing should be completed by June
30, 1999.

Total expenses related to year 2000 compliance are estimated at approximately
$115,500. Expenses consist of the cost of replacement hardware and software,
consulting fees and labor. Expenses to date are approximately $7,000. The bulk
of expenses are estimated at $106,500 for 1999, of which the main expense is
replacement hardware and software, and the remaining estimated expenses are
$2,000 in the year 2000 for consulting fees and labor.

The major component of risk to the Bank lies with its service provider,
INTRIEVE, Inc. Should INTRIEVE, Inc. not become fully Y2K compliant, it would be
necessary for the Bank to revert to manual processing of customer accounts.
Though this would be a labor-intensive process, it would be possible to operate
in such a manner for a reasonable period of time. The Bank does not anticipate
any risk associated with environmental systems, such as heating/air
conditioning, phone systems, or utilities, as it has been assured that all
systems are Y2K compliant.

                                       13

<PAGE>



However, as First Federal Savings Bank does not control all software it uses or
interfaces to, it is possible that errors may be undetected should other parties
fail to ensure their systems are year 2000 compliant.

First Federal has adopted a Contingency Plan to be used in the event on-line
processing with INTRIEVE, Inc., the Bank's service provider, is not operational
due to the rollover of the date from December 31, 1999 to January 1, 2000. The
plan, if needed, will be implemented by the Year 2000 Steering Team as
designated in the Bank's Year 2000 Compliance Plan approved by the Board of
Directors.

Despite the best efforts of management to address this issue, the vast number of
external entities that have direct and indirect business relationships with the
Bank, such as customers, vendors, payment system providers, and other financial
institutions, makes it impossible to assure that a failure to achieve compliance
by one or more of these entities would not have material adverse impact on the
operations of the Bank.

Regulatory Capital

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 core capital equal to 4% 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 regulatory capital requirements and position
at September 30, 1998 and 1997:

                                                 1998              1997  
                                          ----------------   ---------------
                                                  (Dollars in Thousands)
                                          Amount   Percent   Amount   Percent 
                                          ------   -------   ------   ------- 

Core capital............................  $24,912   23.5     $23,392    21.3
Core capital requirement................    4,247    4.0       3,210     3.0
                                          -------   ----     -------    ----

Excess..................................  $20,665   19.5     $20,182    18.3
                                          =======   ====     =======    ====

Tangible capital .......................  $24,912            $23,392
General valuation allowance.............      335                235
                                          -------            -------

Total capital (core and supplemental)...   25,247   43.8      23,627    43.1
Risk-based capital requirement..........    4,612    8.0       4,387     8.0
                                          -------   ----     -------    ----

Excess..................................  $20,635   35.8     $19,240    35.1
                                          =======   ====     =======    ====

Liquidity

The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At September 30, 1998, the Bank could pay on
its common stock dividends of approximately $13.2 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, 1998, 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.


                                       14

<PAGE>



The Company's operating activities produced positive cash flows for the fiscal
years ended September 30, 1998, 1997, and 1996.

The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At September 30, 1998 and
1997, cash and cash equivalents totaled $8.1 million and $12.6 million,
respectively.

At September 30, 1998, the Bank had $39.0 million in certificates of deposits
due within one year and $20.5 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 or borrowings. At September 30,
1998, the Bank had $1.9 million 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
4.0%. The Bank's liquidity ratio at September 30, 1998, 1997, and 1996 was
27.34%, 32.2%, and 34.26%, 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.

Impact of Recent Accounting Pronouncements

Accounting for Earnings Per Share. In February 1997, the FASB issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital strucutres, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.

SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all prior-period EPS data
presented. The Company adopted the statement at the end of the first quarter in
fiscal year 1998 with no material effect on the Company.

Reporting of Comprehensive Income. In June 1997, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 130,
Reporting of Comprehensive Income ("SFAS 130"), which establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of financial statements. This
statement also requires that all items that are required to be

                                       15

<PAGE>



recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements.

This statement is effective for fiscal years beginning after December 15, 1997.
Earlier application is permitted. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company does
not anticipate that adoption of SFAS 130 will have a material effect on the
Company.

Disclosure about Segments and Related Information. In June 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 131, Disclosure about Segments of an Enterprise and Related Information
("SFAS 131"), which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. This
statement also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This statement requires the
reporting of financial and descriptive information about an enterprise's
reportable operating segments.

This statement is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. The Company does not anticipate that the
adoption of SFAS 131 will have a material effect on the Company.

                                       16

<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, 1998 and 1997
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,
1998. 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, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three year period ended September 30, 1998 in conformity with generally
accepted accounting principles.

Miller, Mayer, Sullivan, & Stevens, LLP
Lexington, Kentucky
December 4, 1998


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

                                       17

<PAGE>




            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1998 and 1997

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


<TABLE>
<CAPTION>
ASSETS                                                                               1998                1997
                                                                               -----------------   -----------------

<S>                                                                            <C>                 <C>              
Cash and due from banks                                                        $         739,772   $         739,782
Interest Bearing Deposits                                                              7,334,333          11,881,011
Certificates of deposit                                                                                      600,000
Securities available-for-sale at fair value                                            3,825,492           2,717,352
Securities held-to-maturity, fair value of $11,226,762 and                                                           
    $11,055,369 for 1998 and 1997, respectively                                       11,140,809          11,064,606
Loans receivable, net                                                                 85,271,904          81,261,278
Accrued interest receivable                                                              660,798             641,324
Premises and equipment, net                                                              852,123             656,197
Other assets                                                                              94,046              76,771
                                                                               -----------------   -----------------
    Total assets                                                               $     109,919,277   $     109,638,321
                                                                               =================   =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                       $      78,995,644   $      78,629,205
Advance payments by borrowers for taxes and insurance                                     71,849              66,070
Deferred Federal income tax                                                            1,398,193           1,003,636
Dividends payable                                                                        354,445
Other liabilities                                                                        117,533             166,586
                                                                               -----------------   -----------------
    Total liabilities                                                                 80,937,664          79,865,497
                                                                               -----------------   -----------------

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                                                         21,154,129          21,077,239
   Retained earnings, substantially restricted                                        11,003,179          11,037,504
   Net unrealized appreciation on securities available-for-sale,                                                     
       net of deferred income taxes                                                    2,475,007           1,743,634
   Treasury stock, 258,607 and 157,369 shares, at cost, for 1998                      (4,477,515)         (2,790,826)
       and 1997, respectively
   Unallocated employee stock ownership plan (ESOP) shares                            (1,391,400)         (1,512,940)
                                                                               -----------------   -----------------
   Total stockholders' equity                                                         28,981,613          29,772,824
                                                                               -----------------   -----------------
   Total liabilities and stockholders' equity                                  $     109,919,277   $     109,638,321
                                                                               =================   =================
</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 INCOME
             for the years ended September 30, 1998, 1997, and 1996

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


<TABLE>
<CAPTION>

                                                                        1998            1997            1996
                                                                   --------------   -------------  ---------------
<S>                                                                <C>              <C>            <C>            
Interest income:
   Interest on loans                                               $    6,549,702   $   6,238,613  $     5,970,236
   Interest and dividends on securities                                   769,604         781,583          433,018
   Other interest income                                                  459,484         678,480        1,308,723
                                                                   --------------   -------------  ---------------
       Total interest income                                            7,778,790       7,698,676        7,711,977
                                                                   --------------   -------------  ---------------

Interest expense:
   Interest on deposits                                                 3,897,383       3,834,806        3,901,228
                                                                   --------------   -------------  ---------------

Net interest income                                                     3,881,407       3,863,870        3,810,749
Provision for loan losses                                                  96,631          11,000            7,500
                                                                   --------------   -------------  ---------------
Net interest income after provision for loan losses                     3,784,776       3,852,870        3,803,249
                                                                   --------------   -------------  ---------------

Non-interest income:
   Loan and other service fees, net                                        99,189          75,275           77,214
   Other                                                                   23,594          20,165           24,030
                                                                   --------------   -------------  ---------------
                                                                          122,783          95,440          101,244
                                                                   --------------   -------------  ---------------
Non-interest expense:
   Compensation and benefits                                              940,119         911,051          834,471
   Occupancy expenses, net                                                138,310         129,040          121,604
   Federal and other insurance premiums                                    51,062          78,539          748,464
   Data processing expenses                                               119,365         104,842           95,711
   State franchise tax                                                     95,044          94,904           93,037
   Other operating expenses                                               335,365         383,031          332,295
                                                                   --------------   -------------  ---------------
                                                                        1,679,265       1,701,407        2,225,582
                                                                   --------------   -------------  ---------------
Income before income tax expense                                        2,228,294       2,246,903        1,678,911
Income tax expense                                                        799,620         770,637          588,744
                                                                   --------------   -------------  ---------------
Net income                                                         $    1,428,674   $   1,476,266  $     1,090,167
                                                                   ==============   =============  ===============
Earnings per common share                                          $         0.79   $        0.78  $          0.55
                                                                   ==============   ============   ===============
Earnings per common share assuming dilution                        $         0.79   $        0.78  $          0.55
                                                                   ==============   =============  ===============
Weighted average common shares outstanding during the year              1,811,551       1,896,684        1,998,877
                                                                   ==============   =============  ===============
Weighted average common shares after dilutive                           
   effect outstanding during the year                                   1,813,229       1,896,684        1,998,877
                                                                   ==============   =============  ===============
</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 STOCKHOLDERS' EQUITY
             for the years ended September 30, 1998, 1997, and 1996

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


<TABLE>
<CAPTION>

                                                                                                              Net Unrealized    
                                                                                 Additional                   Appreciation on   
                                                                      Common      Paid-In       Retained         Securities     
                                                                      Stock       Capital       Earnings      Available-for-Sale
                                                                     -------    -----------   ------------   -------------------

<S>                                                                  <C>        <C>           <C>                <C>            
Balance, September 30, 1995                                          $218,213   $20,948,904   $  9,934,378       $  829,419     
   Net income                                                                                    1,090,167                      
   Change in net unrealized gain on securities available-for-sale,                                                              
       net of deferred income taxes                                                                                 362,506     
   Dividend declared                                                                              (795,471)                     
   ESOP shares earned in 1996                                                        52,668                                     
   Purchase of 49,392 shares of common stock                                                                                    
                                                                     --------   -----------   ------------       ----------     
                                                                                                               
Balance, September 30, 1996                                           218,213    21,001,572     10,229,074        1,191,925     
   Net income                                                                                    1,476,266                      
   Change in net unrealized gain on securities available-for-sale,                                                              
       net of deferred income taxes                                                                                 551,709     
   Dividend declared                                                                              (667,836)                     
   ESOP shares earned in 1997                                                        75,667                                     
   Purchase of 107,977 shares of common stock                                                                                   
                                                                     --------   -----------   ------------       ----------     
Balance, September 30, 1997                                           218,213    21,077,239     11,037,504        1,743,634     
   Net income                                                                                    1,428,674                      
   Change in net unrealized gain on securities available-for-sale,                                                              
       net of deferred income taxes                                                                                 731,373     
   Dividend declared                                                                            (1,462,999)                     
   ESOP shares earned in 1998                                                        76,890                                     
   Purchase of 101,238 shares of common stock                                                                                   
                                                                     --------   -----------   ------------       ----------    
Balance, September 30, 1998                                          $218,213   $21,154,129   $ 11,003,179       $2,475,007    
                                                                     ========   ===========   ============       ==========    
                                                                                                               
</TABLE>

<TABLE>
<CAPTION>

                                                                                                        
                                                                                      Unallocated          Total     
                                                                         Treasury         ESOP         Stockholders' 
                                                                           Stock         Shares           Equity     
                                                                        -------------  -------------   ------------- 
<S>                                                                     <C>           <C>             <C>
Balance, September 30, 1995                                                           $  (1,745,700)  $  30,185,214  
   Net income                                                                                             1,090,167  
   Change in net unrealized gain on securities available-for-sale,                                                   
       net of deferred income taxes                                                                         362,506  
   Dividend declared                                                                                       (795,471) 
   ESOP shares earned in 1996                                                               116,400         169,068  
   Purchase of 49,392 shares of common stock                               (789,495)                       (789,495) 
                                                                       ------------     -------------   -------------
                                                                                                                     
Balance, September 30, 1996                                                (789,495)     (1,629,300)     30,221,989  
   Net income                                                                                             1,476,266  
   Change in net unrealized gain on securities available-for-sale,                                                   
       net of deferred income taxes                                                                         551,709  
   Dividend declared                                                                                       (667,836) 
   ESOP shares earned in 1997                                                               116,360         192,027  
   Purchase of 107,977 shares of common stock                            (2,001,331)                     (2,001,331) 
                                                                      -------------   -------------   -------------  
Balance, September 30, 1997                                              (2,790,826)     (1,512,940)     29,772,824  
   Net income                                                                                             1,428,674  
   Change in net unrealized gain on securities available-for-sale,                                                   
       net of deferred income taxes                                                                         731,373  
   Dividend declared                                                                                     (1,462,999) 
   ESOP shares earned in 1998                                                               121,540         198,430  
   Purchase of 101,238 shares of common stock                           (1,686,689)                      (1,686,689) 
                                                                      ------------    -------------   -------------  
Balance, September 30, 1998                                             (4,477,515)   $  (1,391,400)  $  28,981,613  
                                                                      ============    =============   =============  
</TABLE>











               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
             for the years ended September 30, 1998, 1997, and 1996

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

<TABLE>
<CAPTION>


                                                                   1998           1997            1996
                                                               -------------  -------------   -------------
Operating activities

<S>                                                            <C>            <C>             <C>          
Net income                                                     $   1,428,674  $   1,476,266   $   1,090,167
Adjustments to reconcile net income to net cash
provided by operating activities:
   Provision for loan losses                                          96,631         11,000           7,500
   Provision for depreciation                                         70,809         55,017          58,344
   ESOP benefit expense                                              198,430        192,027         169,068
   Amortization of loan fees                                         (65,361)       (41,689)        (56,935)
   Amortization of investment discount                                 4,349         (2,691)           (466)
   FHLB stock dividend                                               (95,400)       (87,300)        (80,000)
   Change in:
     Interest receivable                                             (19,474)        34,109        (121,747)
     Interest payable                                                   (437)           676          (1,522)
     Accrued liabilities                                             (48,615)      (552,244)        171,557
     Prepaid expense                                                 (17,275)        41,610          (9,646)
     Income taxes payable                                             17,790        163,000        (121,367)
                                                               -------------  -------------   -------------

   Net cash provided by operating activities                       1,570,121      1,289,781       1,104,953
                                                               -------------  -------------   -------------

Investing activities

Net (increase) decrease in loans                                  (4,041,896)    (3,728,253)     (2,019,375)
Purchase of certificates of deposit                                                (600,000)
Maturity of certificates of deposit                                  600,000      2,500,000       3,000,000
Purchase of securities held-to-maturity                           (5,000,000)    (3,502,968)     (9,208,636)
Call of security held-to-maturity                                  5,000,000      3,000,000         500,000
Principle repayments - mortgage back securities                       14,847         31,119          33,679
Purchase of fixed assets                                            (266,735)       (53,294)       (177,977)
Retirement of assets                                                                                    297
                                                               -------------  -------------   -------------

   Net cash provided (used) by investing activities               (3,693,784)    (2,353,396)     (7,872,012)
                                                               -------------  -------------   -------------

</TABLE>









                                   (Continued)

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


                                       21

<PAGE>



            HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
             for the years ended September 30, 1998, 1997, and 1996

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


<TABLE>
<CAPTION>

                                                                       1998              1997              1996
                                                                  --------------    --------------    ---------------
Financing activities

<S>                                                                <C>               <C>               <C>    
Net increase (decrease) in demand deposits,                                                                           
   NOW accounts and savings accounts                                    (378,672)          (53,051)           984,882
Net increase (decrease) in certificates of deposit                       745,111         1,736,046             68,152
Net increase (decrease) in custodial accounts                              5,779            (2,464)           (18,395)
ESOP stock purchase
Purchase of treasury stock                                            (1,686,689)       (2,001,331)          (789,495)
Payment of dividends                                                  (1,108,554)       (1,059,469)          (403,838)
                                                                  --------------    --------------    ---------------
   Net cash provided (used) by financing activities                   (2,423,025)       (1,380,269)          (158,694)
                                                                  --------------    --------------    ---------------
   Increase (decrease) in cash and cash equivalents                   (4,546,688)       (2,443,884)        (6,925,753)
Cash and cash equivalents, beginning of year                          12,620,793        15,064,677         21,990,430
                                                                  --------------    --------------    ---------------
Cash and cash equivalents, end of year                            $    8,074,105    $   12,620,793    $    15,064,677
                                                                  ==============    ==============    ===============
Supplemental Disclosures
   Cash payments for:
      Interest on deposits                                        $    3,897,821    $    3,834,129    $     3,902,750
      Income taxes                                                $      830,000    $      602,000    $       710,111

</TABLE>

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


                                       22

<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, 1998, 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.


                                       23

<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. Investment 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.

         Regulations require the Bank to maintain an amount of cash and U.S.
         government and other approved securities equal to a prescribed
         percentage (4% at September 30, 1998 and 5% at 1997) of deposit
         accounts (net of loans secured by deposits) plus short-term borrowings.
         At September 30, 1998 and 1997, 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 initially recorded at fair value, net of selling
         expenses, establishing a new cost basis. Expenses relating to holding
         property, including interest expense, are not capitalized. These
         expenses are charged to operations as incurred.

                                   (Continued)

                                       24

<PAGE>


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

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


         After foreclosure, valuations are periodically performed by management,
         and the real estate is carried at the lower of carrying amount or fair
         value less estimated selling expenses.

         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 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.

         In June 1993, the FASB issued SFAS No. 114, Accounting by Creditors for
         Impairment of a Loan. This promulgation, which was amended by SFAS No.
         118 as to certain income recognition and disclosure provisions, became
         effective as to the Company in fiscal 1996. The new accounting
         standards require that impaired loans be measured based upon the
         present value of expected future cash flows discounted at the loan's
         effective interest rate, or as an alternative, at the loan's observable
         market price or fair value of the collateral. The Bank's current
         procedures for evaluating impaired loans result in carrying such loans
         at the lower of cost or fair value.

         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.

                                   (Continued)

                                       25

<PAGE>


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

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


         Deposits. The Bank's deposits are insured by the Savings Association
         Insurance Fund ("SAIF"), which is administered by the Federal Deposit
         Insurance Corporation ("FDIC"). 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, was reduced from 23%
         to approximately 6% 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.

         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.

         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, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>

                                                                                   1998
                                                       -------------------------------------------------------------
                                                                           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, 77,088 shares                               $       75,482 $     3,750,010                 $    3,825,492
                                                       ============== =============== =============   ==============
Securities, held-to-maturity:
  Debt Securities:
    U.S. Government and Federal Agencies               $    9,497,073 $        75,502                 $    9,572,575
    Municipal bonds                                           213,339           8,518                        221,857
                                                       -------------- --------------- -------------   --------------
                                                            9,710,412          84,020                      9,794,432
                                                       -------------- --------------- -------------   --------------
  Mortgage-backed Securities                                   51,897           1,933                         53,830
                                                       -------------- --------------- -------------   --------------
  Federal Home Loan
    Bank of Cincinnati, capital stock - 13,785 shares       1,378,500                                      1,378,500
                                                       -------------- --------------- -------------   --------------
                                                       $   11,140,809 $        85,953                 $   11,226,762
                                                       ============== =============== =============   ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                                   1997
                                                       -------------------------------------------------------------
                                                                           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, 77,088 shares                               $       75,482 $     2,641,870 $               $    2,717,352
                                                       ============== =============== =============   ==============
Securities, held-to-maturity:
  Debt Securities:
    U.S. Government and Federal Agencies               $    9,501,551 $               $       8,171   $    9,493,380
    Municipal bonds                                           213,211                         2,881          210,330
                                                       -------------- --------------- -------------   --------------
                                                            9,714,762                        11,052        9,703,710
                                                       -------------- --------------- -------------   --------------
  Mortgage-backed Securities                                   66,744           1,815                         68,559
                                                       -------------- --------------- -------------   --------------
  Federal Home Loan
    Bank of Cincinnati, capital stock - 12,831 shares       1,283,100                                      1,283,100
                                                       -------------- --------------- -------------   --------------
                                                       $   11,064,606 $         1,815 $      11,052   $   11,055,369
                                                       ============== =============== =============   ==============
</TABLE>


                                   (Continued)

                                       27

<PAGE>


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

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


         The amortized cost and estimated market value of debt securities at
         September 30, 1998, by contractual maturity, are as follows:

                                                                       Estimated
                                                      Amortized          Market
                                                         Cost            Value
                                                      ----------     -----------
         Due after one year through five years        $8,538,386     $ 8,606,995
         Due after five through ten years              1,172,026       1,187,437
                                                      ----------     -----------
                                                      $9,710,412     $ 9,794,432
                                                      ==========     ===========

         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 $3,750,010 net of deferred income
         taxes of $1,275,003 has been recorded as a separate component of
         stockholders' equity as of September 30, 1998.

         For the year ended September 30, 1998, the Bank received $5,000,000
         from the call of ten debt securities backed by a U.S. Government
         agency, which were classified as held-to-maturity. For the year ended
         September 30, 1997, the Bank received $3,000,000 from the call of four
         debt securities backed by a U.S. Government agency, which were
         classified as held-to-maturity. 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.

3.       Loans Receivable

         Loans receivable, net at September 30, 1998 and 1997 consists of the
         following:
<TABLE>
<CAPTION>

                                                                1998               1997
                                                          ----------------   ----------------
<S>                                                       <C>                <C>             
Loans secured by first lien mortgages on real estate:
   One-to-four residential property                       $     68,813,909   $     67,084,072
   Multi-family residential property                             3,500,193          3,449,405
   Commercial properties                                         3,370,033          3,035,878
   Construction                                                  5,241,492          3,534,550
   Agricultural                                                  3,859,698          2,996,550
Consumer loans:
   Home equity                                                   1,831,249          1,495,124
   Home improvement and personal                                 1,660,771          1,617,668
   Loans secured by savings deposits                               554,653            482,938
                                                          ----------------   ----------------
                                                                88,831,998         83,696,185
Loans in process                                                (2,925,287)        (1,890,397)
Provisions for loan losses                                        (335,000)          (308,250)
Deferred loan origination fees                                    (299,807)          (236,260)
                                                          ----------------   ----------------
   Loans receivable, net                                  $     85,271,904   $     81,261,278
                                                          ================   ================

</TABLE>

                                   (Continued)

                                       28

<PAGE>


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

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


       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.

       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,
                                           ----------------------------------------------
                                               1998            1997             1996
                                           -------------   -------------    -------------
<S>                                        <C>             <C>              <C>          
Balance at beginning or period             $     308,250   $     297,250    $     297,292
Additions charged to operations                   96,631          11,000            7,500
Charge-offs                                      (73,084)                          (7,542)
Recoveries                                         3,203
                                           -------------   -------------    -------------
Balance at end of period                   $     335,000   $     308,250    $     297,250
                                           =============   =============    =============
</TABLE>

       The following is a summary of non-performing loans (in thousands) at
       September 30, 1998, 1997, and 1996, respectively:

<TABLE>
<CAPTION>
                                                            September 30,
                                            ----------------------------------------------
                                                1998            1997             1996
                                            -------------   -------------    -------------
<S>                                         <C>                               
Non-accrual loans                           $               $                $
Loans past due 90 days or more                        489             520              866
                                            -------------   -------------    -------------
Total non-performing loan balances          $         489   $         520    $         866
                                            =============   =============    =============
</TABLE>

      At September 30, 1998 and 1997, 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 years ended September 30, 1998
      and 1997 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, 1998 and 1997 are summarized as follows:

                                                     September 30,
                                            ------------------------------
                                                1998             1997
                                            -------------    -------------
Balance at beginning of period              $     187,857    $     194,446
  Additions during year                             3,886            3,050
  Repayments                                       (8,947)          (9,639)
                                            -------------    -------------
Balance at end of period                    $     182,796    $     187,857
                                            =============    =============


                                   (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         1998             1997
------------------------------------------   -------------    -------------   --------------
<S>                                           <C>             <C>             <C>           
Land, buildings and improvements              30-45 years     $   1,086,560   $      839,285
Furniture, fixtures and equipment              5-10 years           613,650          604,099
                                                              -------------   --------------
                                                                  1,700,210        1,443,384
      Less accumulated depreciation                                (848,087)        (787,187)
                                                              -------------   --------------
                                                              $     852,123   $      656,197
                                                              =============   ==============
</TABLE>

      Depreciation expense for the years ended September 30, 1998, 1997 and 1996
      amounted to $70,809, $55,017, and $58,344, respectively. In fiscal year
      1997, payments totaling $39,017 were made to an affiliate of a Director
      for improvements made to the Bank's main office.

5.    Deposits

      Deposit account balances as of the dates indicated are summarized as
follows:
<TABLE>
<CAPTION>

                                                                                       September 30,
                                                                            ----------------------------------
                                                                                 1998               1997
                                                                            ---------------    ---------------
<S>                                                                         <C>                <C>            
Demand deposit accounts, non-interest bearing                               $       392,679    $       317,760
Passbook accounts with a weighted average rate of 2.79% at                                                     
September 30, 1998 and 1997                                                       7,402,288          7,788,957
NOW and MMDA deposits with a weighted average rate of 2.40%                                                    
and 2.45% at September 30, 1998 and 1997, respectively                            8,498,332          8,565,254
                                                                            ---------------    ---------------
                                                                                 16,293,299         16,671,971
Certificate of deposits with a weighted average interest rate of 5.63%                                         
at September 30, 1998 and 1997                                                   62,702,345         61,957,234
                                                                            ---------------    ---------------
              Total Deposits                                                $    78,995,644    $    78,629,205
                                                                            ===============    ===============
Jumbo certificates of deposit (minimum denomination of $100,000)            $     4,970,710    $     4,315,449
                                                                            ===============    ===============
Certificates of deposit by maturity at September 30, 1998 and 1997 (in
thousands) are as follows:
<CAPTION>

                                                                                      September 30,
                                                                            ----------------------------------
                                                                                 1998               1997
                                                                            ---------------    ---------------
<S>                                                                         <C>                <C>            
Within one year                                                             $        38,962    $        44,890
Over 1 to 3 years                                                                    20,545             15,427
Maturing in years thereafter                                                          3,195              1,640
                                                                            ---------------    ---------------
                                                                            $        62,702    $        61,957
                                                                            ===============    ===============

</TABLE>

                                   (Continued)

                                       30

<PAGE>


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

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


      Certificates of deposit by maturity and interest rate category at
      September 30, 1998 (in thousands) are as follows:

                                    Amount Due
                ----------------------------------------------------------
                Less Than                               After 3             
                One Year     1-2 Years     2-3 Years     Years     Total
                --------     ---------     ---------    -------   -------
4.01--6.00%     $ 36,350     $  14,275     $  4,251     $ 2,061   $56,937
6.01--8.00%        2,612         1,873          146       1,134     5,765
                --------     ---------     --------     -------   -------
                $ 38,962     $  16,148     $  4,397     $ 3,195   $62,702
                ========     =========     ========     =======   =======

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

                                                  Years Ended September 30,
                                     ---------------------------------------------------
                                          1998               1997              1996
                                     --------------     ---------------   --------------
<S>                                  <C>                <C>               <C>           
Money market and NOW account         $      202,576     $       202,209   $      195,471
Savings Accounts                            211,923             217,967          224,418
Certificates                              3,482,884           3,414,630        3,481,339
                                     --------------     ---------------   --------------
                                     $    3,897,383     $     3,834,806   $    3,901,228
                                     ==============     ===============   ==============
</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, 1998 and 1997. At September 30, 1998, the Bank had pledged $800,000 of
      their overnight deposits held by the FHLB of Cincinnati to secure certain
      customer deposit balances.

6.    Income Taxes

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

                                                    Years ended September 30,
                                          ---------------------------------------------
                                              1998            1997            1996
                                          -------------   ------------    -------------
Federal income tax expense:
<S>                                       <C>             <C>             <C>          
  Current expense                         $     781,830   $    762,596    $     690,171
  Deferred expense (benefit)                     17,790          8,041         (101,427)
                                          -------------   ------------    -------------
                                          $     799,620   $    770,637    $     588,744
                                          =============   ============    =============
</TABLE>


                                   (Continued)

                                       31

<PAGE>


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

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


      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,
                                            -----------------------------------------
                                                1998            1997          1996
                                            -----------     -----------   ------------

<S>                                         <C>             <C>              <C>         
Deposit insurance                           $               $   182,261   $  (182,261)
FHLB stock                                       32,436          29,682        27,200
Allowance for loan losses                        (9,095)       (196,898)       57,357
Other, net                                       (5,551)         (7,004)       (3,723)
                                            -----------     -----------   -----------
      Net deferred tax expense (benefit)    $    17,790     $     8,041   $  (101,427)
                                            ===========     ===========   ===========
</TABLE>
                                                                               
      For the 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,
                                                         ---------------------------------
                                                           1998        1997       1996
                                                         ---------   --------    --------

<S>                                                      <C>         <C>         <C>     
Expected income tax expense at federal tax rate          $ 757,619   $763,947    $570,830
Other, net                                                  42,001      6,690      17,914
                                                         ---------   --------    --------
      Total income tax expense                           $ 799,620   $770,637    $588,744
                                                         =========   ========    ========
Effective income tax rate                                    35.9%      34.3%       35.1%
                                                         =========   ========    ========
</TABLE>

      Deferred tax assets and liabilities as of September 30, 1998 and 1997
consisted of the following:


                                                           1998         1997
                                                         --------    ---------
Deferred tax assets:
  Deferred loan fee income                               $101,934    $ 80,328
  Allowance for loan losses                               112,688     103,593
                                                         --------    --------
                                                          214,622     183,921
                                                         --------    --------
Deferred tax liabilities:
  FHLB stock                                              272,237     239,802
  Fixed asset basis over tax basis                         65,575      49,519
                                                         --------    --------
                                                          337,812     289,321
                                                         --------    --------
    Net deferred tax liability                           $123,190    $105,400
                                                         ========    ========

      In addition to the net deferred tax liability at September 30, 1998 of
      $123,190 outlined in the preceding table, the financial statements include
      a deferred tax liability of $1,275,003 that was charged against the
      unrealized gain on securities available-for-sale of $3,750,010. The net
      amount of $2,475,007 is recorded as a separate component of stockholders'
      equity.

      For the year ended September 30, 1996, the Bank was allowed a special bad
      debt deduction limited generally to eight percent (8%) of otherwise
      taxable income and subject to certain limitations based

                                   (Continued)

                                       32

<PAGE>


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

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


      on aggregate loans and savings account balances at the end of the year. If
      the amounts qualifying as deductions under the Internal Revenue Code
      provision were later used for purposes other than bad debt losses, they
      would be subject to Federal income tax at the then current corporation
      rate.

      In 1996, the Internal Revenue Service repealed this special provision for
      thrift institutions, such as the Bank, for determining the allowable tax
      bad debt reserves. Effective for tax years ending December 31, 1996 or
      after, fiscal year September 30, 1997 for the Bank, all thrift
      institutions are taxed as other banking institutions. Institutions under
      $500 million in assets are allowed to use the reserve method of
      determining their bad debt deduction based on their actual experience
      while larger institutions (over $500 million) must use the specific charge
      off method in determining their deduction. Tax bad debt reserves
      accumulated since September 30, 1988 must be included in taxable income of
      the Bank prorated over a six year period, beginning in the tax year
      effected by the change. This change did not have a material impact on the
      Bank as a deferred tax liability was provided for these accumulated
      reserves. The accumulated tax bad debt reserves as of September 30, 1988,
      which amounts to approximately $2,134,000 is only subject to being taxed
      at a later date under certain circumstances, such as the Bank converting
      to a type of institution that is not considered a bank for tax purposes.
      These financial statements do not include any deferred tax liability
      related to the accumulated tax bad debt reserves as of September 30, 1988.

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 two tests, hereinafter described as the
      core capital requirement and the risk-based capital requirement. The core
      capital requirement provides for minimum core capital (stockholders'
      equity less all intangible assets plus certain forms of supervisory
      goodwill and other qualifying intangible assets such as capitalized
      mortgage servicing rights) equal to 4.0% of adjusted total assets. 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 Bank multiplies the value
      of each asset on its statement of financial condition by a defined
      risk-weighting factor, e.g., one-to-four family residential loans carry a
      risk-weighted factor of 50%.


                                   (Continued)

                                       33

<PAGE>


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

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


      As of September 30, 1998, the Bank's regulatory capital exceeded all
      minimum regulatory capital requirements as shown in the following table:
<TABLE>
<CAPTION>

                                                                             Regulatory Capital
                                                           ------------------------------------------------------
                                                               Core                     Risk-based                
                                                             Capital       Percent        Capital       Percent
                                                           ------------   ----------   -------------   ----------
                                                                               (In thousands)
                                                           ------------------------------------------------------
<S>                                                        <C>            <C>           <C>            <C>        
Capital under generally accepted accounting principles     $ 27,387                 %   $     27,387             %
Adjustments:                                                                                                    
   Net unrealized appreciation on securities
   available-for-sale                                        (2,475)                          (2,475)             
  General valuation allowances                                                                   335
                                                           --------                    -------------
Regulatory capital computed                                  24,912             23.5          25,247         43.8
Minimum capital requirement                                   4,247              4.0           4,612          8.0
                                                           --------       ----------   -------------   ----------
Regulatory capital-excess                                  $ 20,665             19.5%  $      20,635         35.8%
                                                           ========       ==========   =============   ==========
</TABLE>

       Retained Earnings Restriction. Retained earnings at September 30, 1998
       includes tax bad debt reserves of approximately $2,134,000 accumulated
       prior to December 31, 1987, for which no Federal income tax has been
       provided. These tax bad debt reserves are only taxable in certain
       circumstances, such as if the Bank converted to an institution that did
       not qualify as a bank for tax purposes (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.

       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 of 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.


                                   (Continued)

                                       34

<PAGE>


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

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


8.     Retirement Benefits

       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 $8,614, $7,440, and $6,888 to the Plan
       for the years ended September 30, 1998, 1997, and 1996, 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 8.25%) per the Wall Street Journal.

       The Bank makes annual contributions to the ESOP Trust equal to the ESOP's
       debt service requirement less dividends, if any, received by the ESOP
       which are used for debt service. Dividends of $120,671 and $57,026 were
       used in fiscal year 1998 and 1997 to pay ESOP debt service. The ESOP
       shares are pledged as collateral on the debt. As the debt is repaid,
       shares are released from collateral and allocated to active participants
       based on a formula specified in the ESOP agreement.

       ESOP compensation was $198,430 for the year ended September 30, 1998. For
       1998, 12,154 shares were released from collateral. At September 30, 1998,
       there were 139,140 unallocated ESOP shares having a fair value of
       $2,104,493. ESOP compensation was $192,027 for the year ended September
       30, 1997. For 1997, 11,638 shares were released from collateral. At
       September 30, 1997, there were 151,294 unallocated ESOP shares having a
       fair value of $2,458,528. ESOP compensation was $169,068 for the year
       ended September 30, 1996. For 1996, 11,638 shares were released from
       collateral. At September 30, 1996, there were 162,932 unallocated ESOP
       shares having a fair value of $2,851,275.

       Option Plan. On January 21, 1997, the stockholders of the Company
       approved the establishment of the Harrodsburg First Financial Bancorp,
       Inc. 1996 Stock Option Plan. Under the Option Plan, the Company may grant
       either incentive or non-qualified stock options to Directors and key
       employees for an aggregate of 200,000 shares of the Company's common
       stock, with an exercise price equal to the fair market value of the stock
       at the date of the award. Upon exercise of the options, the Company may
       issue stock out of authorized shares or purchase the stock in the open
       market. The option to purchase shares expires ten years after the date of
       the grant. Effective with the approval of the Option Plan, options to
       purchase 190,000 shares of common stock were awarded to key employees and
       directors with an exercise price of $16.50 per share. The options vest,
       and thereby become exercisable, at the rate of 20% on the date of grant,
       January 21, 1997, and 20% annually thereafter. The Options become vested
       immediately in the case of death or disability, or upon a change in the
       control of the Company.


                                   (Continued)

                                       35

<PAGE>


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

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


       A summary of option transactions for the year ended September 30, 1998
are as follows:
                                                        Option        Number
                                                        Price        of Units
                                                        -----        --------

        Balance outstanding at beginning of year       $  16.50         190,000
        Granted
        Exercised                                                              
                                                                    -----------
        Balance outstanding at end of year             $  16.50         190,000
                                                                    ===========
        Shares exercisable                                               76,000
                                                                    ===========
        Shares available for grant                                       10,000
                                                                    ===========

        In October 1995, the Financial Accounting Standards Board issued SFAS
        No. 123 "Accounting for Stock-Based Compensation," which was effective
        for fiscal years beginning after December 15, 1995. The new standard
        defines a fair value method of accounting for stock options and similar
        equity instruments. Under the fair value method, compensation cost is
        measured at the grant date, based on the fair value of the award and is
        recognized over the service period, which is usually the vesting period.

        Companies are not required to adopt the fair value method of accounting
        for employee stock-based transactions, and may continue to account for
        such transactions under Accounting Principles Board (APB) Opinion No. 25
        "Accounting for Stock Issued to Employees." Under this method the
        compensation cost is measured by the difference between the fair value
        of the Company's stock at the date of the award, and the exercise price
        to be paid by the employee. If a company chooses to report stock based
        compensation under APB 25, they must disclose the pro forma net income
        and earnings per share as if the Company had applied the new method of
        accounting. Accordingly, the following table shows the Company's net
        income and earnings per share on a pro forma basis as if the
        compensation cost for the stock options awarded were accounted for in
        accordance with SFAS No. 123 for the year ended September 30, 1998.
<TABLE>
<CAPTION>

                                               Reported Per Consolidated
                                                 Financial Statements         Pro Forma Amount
                                                 --------------------         ----------------
                                                       1998                         1998     
                                                 ----------------             ---------------
<S>                                              <C>                          <C>            
        Net income                               $      1,428,674             $     1,223,376
                                                 ================             ===============
        Earnings per common share                $           0.79             $          0.68
                                                 ================             ===============
</TABLE>

        Employee Recognition Plan. On January 21, 1997, the stockholders of the
        Company approved the establishment of the First Federal Savings Bank of
        Harrodsburg Restricted Stock Plan (RSP). The objective of the RSP is to
        enable the Bank to attract and retain personnel of experience and
        ability in key positions of responsibility. Those eligible to receive
        benefits under the RSP will be such employees as selected by members of
        a committee appointed by the Company's Board of Directors.

                                   (Continued)

                                       36

<PAGE>


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

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


        The RSP is a non-qualified plan that is managed through a separate
        trust. The Bank will contribute sufficient funds to the RSP Trust for
        the purchase of up to 85,000 shares of common stock.

        Awards made to employees will vest 20% on each anniversary date of the
        award. Shares will be held by the trustee and are voted by the RSP
        trustee as directed by the participant for those shares earned or by the
        Committee for those shares held, but unearned or unawarded. Any assets
        of the trust are subject to the general creditors of the Company. All
        shares awarded vest immediately in the case of a participant's death,
        disability, or upon a change in control of the Company. The Company
        intends to expense RSP awards over the years during which the shares are
        payable, based on the fair market value of the common stock at the date
        of the grant to the employee. As of September 30, 1998, no awards had
        been made under the RSP.

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 $1,854,000 plus unused lines
        of credit granted to customers totaling $2,179,848 at September 30,
        1998. Of the mortgage loan commitments at September 30, 1998
        approximately $255,000 were for fixed rate loans. At September 30, 1997
        mortgage commitments outstanding amounted to approximately $629,800 and
        unused lines of credit amounted to $1,734,061. None of the mortgage loan
        commitments at September 30, 1997 were for fixed rate loans. 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.    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

                                   (Continued)

                                       37

<PAGE>


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

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


       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.

       The estimated fair value of the Company's financial instruments at
September 30, 1998 are as follows:

                                            Carrying             Fair
                                             Amount              Value
                                        ---------------     --------------
Assets
   Cash and cash equivalents            $     8,074,105     $   8,074,105
   Securities available-for-sale              3,825,492         3,825,492
   Securities held-to-maturity               11,140,809        11,226,762
   Loans receivable, net                     85,271,904        88,067,824


                                   (Continued)

                                       38

<PAGE>


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

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


                                                 Carrying            Fair
                                                  Amount             Value
                                                 --------            -----
Liabilities
   Deposits                                      78,995,644       79,740,918
Unrecognized Financial Instruments
   Loan commitments                                                1,854,000
   Unused lines of credit                                          2,179,848

11.    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, 1998.


                    Harrodsburg First Financial Bancorp, Inc.
                   Condensed Statement of Financial Condition
                               September 30, 1998
<TABLE>
<S>                                                                                               <C>           
       Assets:
         Cash and due from banks                                                                  $    1,668,775
         Investment in subsidiary                                                                     27,387,374
         Other assets                                                                                    279,992
                                                                                                  --------------

         Total assets                                                                             $   29,336,141
                                                                                                  ==============

       Liabilities and Stockholders' Equity:
         Accounts payable                                                                         $           83
         Dividends payable                                                                               354,445
                                                                                                  --------------

         Total liabilities                                                                               354,528
                                                                                                  --------------

       Stockholders' equity
         Common stock                                                                                    218,213
         Additional paid-in capital                                                                   21,154,129
         Retained earnings                                                                            11,003,179
         Net unrealized appreciation on securities available-for-sale                                  2,475,007
         Treasury stock, 258,607 shares, at cost                                                      (4,477,515)
         Unearned ESOP shares                                                                         (1,391,400)
                                                                                                  --------------

           Total stockholders' equity                                                                 28,981,613

              Total liabilities and stockholders' equity                                          $   29,336,141
                                                                                                  ==============
</TABLE>



                                   (Continued)

                                       39

<PAGE>


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

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


                    Harrodsburg First Financial Bancorp, Inc.
                          Condensed Statement of Income
                          year ended September 30, 1998

<TABLE>
<S>                                                                                               <C>           
     Income:                                                                                      $            -
                                                                                                  --------------

     Expense:
     Legal fees                                                                                           10,588
     Franchise and license tax                                                                            31,372
     Transfer agent fees                                                                                   9,126
     Accounting fees                                                                                       6,550
     Other operating expenses                                                                             26,252
                                                                                                  --------------
                                                                                                          83,888
                                                                                                  --------------
     Net loss before tax benefit                                                                         (83,888)
     Income tax benefit                                                                                   28,522
                                                                                                  --------------
     Net loss before equity in undistributed net income of subsidiary                                    (55,366)
     Equity in undistributed net income of subsidiary                                                  1,484,040
                                                                                                  --------------
         Net income                                                                               $    1,428,674
                                                                                                  ==============
</TABLE>

                    Harrodsburg First Financial Bancorp, Inc.
                        Condensed Statement of Cash Flows
                          year ended September 30, 1998
<TABLE>
<S>                                                                                               <C>           
     Cash flows from operating activities:
        Net income                                                                                $    1,428,674
        Adjustments to reconcile net income to net cash provided by operating activities:
          Equity in undistributed net income of subsidiary                                            (1,484,040)
          Decrease in other receivables                                                                   92,057
          Decrease in other liabilities                                                                   (1,281)
                                                                                                  --------------
            Net cash provided by operating activities                                                     35,410
                                                                                                  --------------
     Cash flows from investing activities:
            Net cash provided (used) by investing activities                                                   -
                                                                                                  --------------
     Cash flows from financing activities:
        Dividends paid                                                                                (1,108,554)
        Purchase of common stock                                                                      (1,686,689)
          Net cash used by financing activities                                                       (2,795,243)
                                                                                                  --------------
     Net decrease in cash and cash equivalents                                                        (2,759,833)
     Cash and cash equivalents at beginning of period                                                  4,428,608
                                                                                                  --------------

     Cash and cash equivalents at end of period                                                   $    1,668,775
                                                                                                  ==============
</TABLE>

                                   (Continued)

                                       40

<PAGE>


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

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


12.    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, 1998 and 1997

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


ASSETS                                             1998            1997
                                               -------------   -------------

Investments                                    $      15,000   $      15,000
                                               =============   =============

STOCKHOLDERS' EQUITY

Common stock                                   $      15,000   $      15,000
                                               =============   =============

The Service Corporation did not receive income nor did it incur expense during
the years ended September 30, 1998 and 1997.

13.    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 filed a second application, which was
       subsequently approved by OTS, to purchase up to 5% of the then
       outstanding stock. During fiscal year 1997, the Company repurchased
       107,977 shares of common stock at a total cost of $2,001,331. On
       September 15, 1997, the Board of Directors approved filing an application
       with OTS to purchase up to an additional 5% of the outstanding shares of
       common stock as of that date. Upon subsequent approval by the OTS, during
       fiscal year 1998, the Company repurchased 101,238 shares of common stock
       at a total cost of $1,686,689. At the September 21, 1998 Board meeting,
       the Bank declared its intention to begin another 5% repurchase of stock.

14.    Commitments

       As of September 30, 1998, the Company had entered into a contract in the
       amount of approximately $72,000 with their data service provider to
       acquire new equipment and software changes in preparing the Company for
       the year 2000.

                                       41

<PAGE>


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

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

                                         CORPORATE INFORMATION
-------------------------------------------------------------------------------------------------------------------


                                           BOARD OF DIRECTORS

<S>                                       <C>                                    <C>
Jack D. Hood                              Jack L. Coleman, Jr.                   W. Dudley Shryock, CPA
President and Chief Executive             Representative, State of               Sole Practitioner
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

<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
<CAPTION>

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


                                                 OFFICE LOCATIONS

<S>                                                                          <C>
104 South Chiles Street                                                      216 South Main Street
Harrodsburg, Kentucky 40330                                                  Lawrenceburg, Kentucky 40342
<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.                                     
LLP                                       One Franklin Square                      A COPY OF THE COMPANY'S          
2365 Harrodsburg Road                     1301 K Street, N.W., Suite 700 East      1998 ANNUAL REPORT ON            
Lexington, KY 40504-3399                  Washington, DC 20005                     FORM 10-K WITHOUT EXHIBITS       
                                                                                   WILL BE FURNISHED WITHOUT        
General Counsel                           Annual Meeting                           CHARGE TO STOCKHOLDERS AS        
David Patrick                             The 1999 Annual Meeting of               OF THE RECORD DATE FOR THE 1999  
Attorney-at-Law                           Stockholders will be held on January     ANNUAL MEETING UPON              
321 South Main Street                     25, 1999 at 2:00 p.m. at First Federal   WRITTEN REQUEST TO:              
Harrodsburg, KY 40330                     Savings Bank of Harrodsburg, 104                                          
                                          South Chiles Street, Harrodsburg, KY     JACK D. HOOD                     
Walter Patrick                                                                     HARRODSBURG FIRST                
Attorney-at-Law                           Transfer Agent                           FINANCIAL BANCORP, INC.          
Gordon Building                           Illinois Stock Transfer                  P. O. BOX 384                    
P.O. Box 178                              209 West Jackson Blvd., Suite 903        104 SOUTH CHILES STREET          
Lawrenceburg, KY 40342                    Chicago, IL 60606                        HARRODSBURG,  KY  40330          
                                                                                   
</TABLE>

                                                        42