Dear Stockholders:


We are pleased to report the results of Kentucky First Bancorp's  operations for
fiscal  2003,  our  seventh  full year as a public  company.  While this  report
provides detail  regarding our financial  results for the past year, the results
are  overshadowed  by the  decision  of your  Board of  Directors  to merge your
Company with Kentucky Bancshares, Inc.

Your Board of Directors and  management  remain ever committed to maximizing the
return on your  investment in Kentucky First Bancorp.  Toward that goal, on July
8, 2003,  Kentucky  First  Bancorp  executed a definitive  Agreement and Plan of
Merger with Kentucky Bancshares, Inc. (who was named Bourbon Bancshares, Inc. at
the  time  of the  signing  of  the  Agreement),  which  provides  for  Kentucky
Bancshares'  acquisition  of Kentucky  First Bancorp and First  Federal  Savings
Bank. The Agreement  provides that Kentucky  Bancshares  will pay Kentucky First
Bancorp  stockholders  $23.25  in cash  per  share of  common  stock  that  each
stockholder  holds on September 8, 2003.  The  transaction  is expected to close
during the fourth  quarter of 2003,  subject  to  regulatory  approvals  and the
approval of the stockholders of Kentucky First Bancorp.

Kentucky Bancshares is a financial services holding company and is the parent of
Kentucky Bank, a Kentucky  state  chartered  commercial  bank and trust company.
Kentucky Bank has its main office in Paris,  Kentucky with additional offices in
Paris,  North Middletown,  Winchester,  Georgetown,  Versailles,  Nicholasville,
Wilmore and Cynthiana, Kentucky.

The Directors,  management and employees of Kentucky First Bancorp take pride in
the confidence that you, the stockholders, have shown in our Company.

                                Sincerely,


                                /s/ Betty J. Long
                                Betty J. Long
                                President and Chief Executive Officer



<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

     Kentucky First Bancorp, Inc. (the "Company"),  a Delaware corporation,  was
organized at the  direction of the Board of Directors of First  Federal  Savings
Bank,  Cynthiana,  Kentucky  ("First  Federal"  or the  "Bank") in April 1995 to
acquire all of the capital stock to be issued by the Bank in its conversion from
mutual to stock form (the "Conversion"). The Conversion was completed August 28,
1995, with the Company issuing  1,388,625  shares of its common stock, par value
$0.01 per share (the "Common Stock") to the public,  and the Bank issuing all of
its issued and outstanding common stock to the Company. Prior to the Conversion,
the Company did not engage in any material operations. The Company does not have
any  significant  assets other than the  outstanding  capital stock of the Bank,
cash and  interest-bearing  deposits and a note  receivable  from the  Company's
Employee Stock Ownership Plan Trust ("ESOP").  The Company's  principal business
is the business of the Bank.  At June 30, 2003,  the Company had total assets of
$74.5 million,  deposits of $53.0 million, net loans receivable of $33.9 million
and shareholders' equity of $13.2 million.

                           FIRST FEDERAL SAVINGS BANK

     First  Federal  was formed in 1888 under the name of  Cynthiana  Building &
Saving Association. In 1966, the Bank converted to a federally chartered savings
and loan  association  and  adopted the name of First  Federal  Savings and Loan
Association of Cynthiana.  The Bank converted to a federally  chartered  savings
bank under the name of First  Federal  Savings  Bank in January  1988.  The Bank
operates two offices in Cynthiana,  Kentucky. The Bank is principally engaged in
the business of accepting  deposits from the general public through a variety of
deposit  programs and investing these funds by originating and purchasing  loans
secured  by one- to  four-family  residential  properties  located in its market
area,   construction   loans,   commercial  and  multi-family   mortgage  loans,
agricultural loans, commercial business loans and consumer loans.

     First  Federal's  business  strategy  is  to  operate  a  well-capitalized,
profitable  community savings association  dedicated to financing home ownership
in its market area and providing  quality  service to its customers.  The Bank's
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to
applicable  limits for each depositor.  The Bank is a member of the Federal Home
Loan Bank  ("FHLB") of  Cincinnati,  which is one of the twelve  district  banks
comprising the FHLB System.  The Bank is subject to  comprehensive  examination,
supervision and regulation by the Office of Thrift  Supervision  ("OTS") and the
FDIC. Such regulation is intended primarily for the protection of depositors.

     On July 8, 2003,  the Company  entered into an Agreement and Plan of Merger
with Kentucky  Bancshares,  Inc. (who was named Bourbon Bancshares,  Inc. as the
time of the signing of the Agreement) and its wholly owned  subsidiary,  Bourbon
Acquisition  Corp.,  pursuant  to the terms of which,  including  the receipt of
regulatory  approval and the approval of the  stockholders  of the Company,  the
Company will merge into Bourbon  Acquisition  Corp. and each  stockholder of the
Company (except for  stockholders  who have perfected  their appraisal  rights),
will be entitled to receive cash consideration of $23.25 for each share of their
Company  common stock from  Kentucky  Bancshares,  Inc. It is expected  that the
merger will be consummated in the fourth quarter of 2003.

     Both the Company's and First Federal's executive offices are located at 308
North Main Street, Cynthiana,  Kentucky 41031-1210,  and its telephone number is
(859) 234-1440.



<PAGE>



                               MARKET INFORMATION


     The Common Stock began trading under the symbol "KYF" on the American Stock
Exchange on August 29, 1995. As of September 8, 2003,  there were 882,613 shares
of the Common Stock  outstanding.  The number of  registered  holders as of that
date was 237.

     The  following  table  shows the high and low stock  prices  for the Common
Stock and dividends declared on a quarterly basis for the past two fiscal years.
<TABLE>
<CAPTION>
                                                                                           DIVIDENDS
                     QUARTER ENDED                    HIGH               LOW                DECLARED
                          <S>                         <C>               <C>                  <C>

                    September 30, 2001              $13.0000           $12.5000              $0.150
                    December 31, 2001               $13.0000           $12.4500              $0.150
                    March 31, 2002                  $13.1200           $12.7400              $0.160
                    June 30, 2002                   $14.6500           $12.7500              $0.160

                    September 30, 2002              $14.7500           $13.7500              $0.160
                    December 31, 2002               $17.0000           $14.7500              $0.160
                    March 31, 2003                  $17.7000           $16.3500              $0.160
                    June 30, 2003                   $18.0000           $17.3900              $0.160
</TABLE>

     The income of the Company  consists of interest on  investment  and related
securities  and  dividends  which may  periodically  be declared and paid by the
Board of  Directors  of the Bank on the  common  shares  of the Bank held by the
Company.

     In addition to certain federal income tax  considerations,  OTS regulations
impose  limitations on the payment of dividends and other capital  distributions
by savings associations.  Under OTS regulations  applicable to converted savings
associations,  the Bank is not  permitted  to pay a cash  dividend on its common
shares if the Bank's  regulatory  capital  would,  as a result of the payment of
such dividend,  be reduced below the amount required for the liquidation account
established in connection with the Conversion or applicable  regulatory  capital
requirements prescribed by the OTS.

     OTS  regulations  applicable  to all savings  associations  provide  that a
savings  association  which immediately prior to, and on a pro forma basis after
giving  effect to, a proposed  capital  distribution  (including a dividend) has
total capital (as defined by OTS  regulations)  that is equal to or greater than
the amount of its  capital  requirements  is  generally  permitted  without  OTS
approval  (but  subsequent  to 30 days' prior notice to the OTS) to make capital
distributions,  including dividends,  during a calendar year in an amount not to
exceed net income for the current calendar year plus the two preceding  calendar
years, less capital distributions paid over the comparable time period.  Savings
associations with total capital in excess of the capital  requirements that have
been  notified by the OTS that they are in need of more than normal  supervision
will be subject to restrictions on dividends.  A savings  association that fails
to meet current  minimum  capital  requirements  is  prohibited  from making any
capital distributions without the prior approval of the OTS.

     The Bank currently meets all of its regulatory requirements and, unless the
OTS  determines  that the Bank is an  institution  requiring  more  than  normal
supervision,  the Bank  may pay  dividends  in  accordance  with  the  foregoing
provisions of the OTS regulations.


                                      -2-
<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     In addition to  historical  information  contained  herein,  the  following
discussion   contains   forward-looking   statements   that  involve  risks  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.

     Some of the  forward-looking  statements included herein are the statements
regarding management's determination of the amount and adequacy of the allowance
for loan losses and the effect of certain recent accounting pronouncements.

GENERAL

     The Company's principal business since August 28, 1995 has been that of the
Bank.  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 and  purchase  mortgage and
other loans and, to a lesser extent, to purchase  investment and mortgage-backed
securities.  As such,  its earnings have depended  primarily on its net interest
income, or "spread," which is the difference between the amount it receives from
interest  earned on loans and  investments  ("interest-earning  assets") and the
amount it pays in interest on its  deposits  and  borrowings  ("interest-bearing
liabilities").  Results of operations  are also  dependent upon the level of the
Bank's other income,  including fee income and service  charges and by the level
of  its  general,   administrative   and  other  expense,   including   employee
compensation and benefits,  occupancy and equipment  expense and other operating
expenses.

     The  operations  of the  Bank  are  significantly  affected  by  prevailing
economic  conditions  and  the  monetary,  fiscal  and  regulatory  policies  of
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 likewise heavily
influenced  by  prevailing  market  rates of  interest on  competing  investment
alternatives,  account  maturities and the levels of personal income and savings
in the Bank's market areas.

ASSET/LIABILITY MANAGEMENT

     Net interest income, the primary component of First Federal's net earnings,
is determined by the  difference,  or "spread,"  between the yield earned on the
Bank's  interest-earning  assets  and the  rates  paid  on its  interest-bearing
liabilities  and the  relative  amounts  of such  assets  and  liabilities.  Key
components  of a  successful  asset/liability  strategy are the  monitoring  and
managing of interest rate  sensitivity  of both the  interest-earning  asset and
interest-bearing  liability  portfolios.  First  Federal  has  employed  various
strategies  intended to minimize  the  adverse  effect of interest  rate risk on
future  operations  by  providing  a better  match  between  the  interest  rate
sensitivity of its assets and liabilities.  Such strategies include the purchase
of federal  agency bonds and the  origination  and  purchase of  adjustable-rate
mortgage  loans  secured  by  one-to-four   family   residential   real  estate,
multi-family   and  commercial  real  estate  loans.  The  Bank's  loan  pricing
strategies are designed to encourage customers to choose adjustable rate, rather
than fixed rate, mortgage loans.

INTEREST RATE SENSITIVITY ANALYSIS AND NET PORTFOLIO VALUE

     First Federal,  like other financial  institutions,  is subject to interest
rate risk to the extent that its  interest-earning  assets  reprice  differently
than its  interest-bearing  liabilities.  As a part of its effort to monitor its


                                      -3-
<PAGE>

interest rate risk, First Federal reviews the reports of the OTS which set forth
the  application of the "net portfolio  value" ("NPV")  methodology  used by the
OTS. Generally, NPV is the discounted present value of the difference between an
institution's incoming cash flows from interest-earning assets and outgoing cash
flows  on  interest-bearing   liabilities  and  off  balance  sheet  items.  The
methodology  attempts  to quantify  interest  rate risk as the change in the NPV
which would result from theoretical changes in market interest rates.

     The following  tables set forth the interest rate sensitivity of the Bank's
net  portfolio  value as of June 30,  2003 and June 30,  2002,  in the  event of
instantaneous  and permanent  100 basis point  increases and decreases in market
interest rates.
<TABLE>
<CAPTION>
                                              NET PORTFOLIO VALUE, JUNE 30, 2003

                                    Net Portfolio Value                   NPV as % of Portfolio Value of Assets
             Change        --------------------------------------         -------------------------------------
            in Rates       Amount         $ Change      % Change          NPV Ratio       Basis Point Changes
            --------       ------         --------      --------          ---------       -------------------
                                            (Dollars in thousands)
              <S>               <C>          <C>             <C>           <C>                  <C>
             +300 bp        $11,818        $(2,971)         (20)%          16.12%              (292) bp
             +200 bp         13,099         (1,690)         (11)           17.46               (158) bp
             +100 bp         14,162           (627)          (4)           18.50                (54) bp
                0 bp         14,789             --           --            19.04                 --
             -100 bp         15,035            246            2            19.16                 12  bp
</TABLE>
<TABLE>
<CAPTION>

                                                NET PORTFOLIO VALUE, JUNE 30, 2002

                                         Net Portfolio Value            NPV as % of Portfolio Value of Assets
             Change        ------------------------------------------   -------------------------------------
            in Rates       Amount         $ Change      % Change        NPV Ratio       Basis Point Changes
            --------       ------         --------      --------        ---------       -------------------
                                            (Dollars in thousands)
               <S>           <C>             <C>            <C>           <C>                    <C>
             +300 bp        $10,842        $(4,262)         (28)%         14.03%              (420) bp
             +200 bp         12,426         (2,678)         (18)          15.68               (255) bp
             +100 bp         13,915         (1,189)          (8)          17.14               (109) bp
                0 bp         15,104             --           --           18.23                 --
             -100 bp         15,875            771            5           18.86                 63  bp
</TABLE>

     Certain  shortcomings  are inherent in the method of analysis  presented in
the computation of NPV. For example, although certain assets and liabilities may
have similar  maturities  or periods to  repricing,  they may react in differing
degrees to changes in market interest rates. The interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates,  while  interest  rates on other  types may lag behind  changes in market
rates. Additionally, certain assets, such as adjustable rate loans have features
which restrict changes in interest rates on a short-term basis and over the life
of the asset. In addition, the proportion of adjustable rate loans in the Bank's
portfolio could decrease in future periods if market interest rates remain at or
decrease below current levels due to refinance  activity.  Further, in the event
of a change in interest  rates,  prepayment  and early  withdrawal  levels would
likely deviate significantly from those assumed in the tables.

     Finally,  the ability of many  borrowers to service  their  adjustable-rate
debt may decrease in the event of an interest  rate  increase.  The retention of
adjustable-rate  mortgage and  commercial  loans in the Bank's  portfolio  helps
reduce the Bank's  exposure to changes in  interest  rates.  However,  there are
unquantifiable   credit  risks  resulting  from  potential  increased  costs  to
borrowers as a result of  repricing of  adjustable-rate  mortgage  loans.  It is
possible that during periods of rising  interest  rates,  the risk of default on
adjustable-rate  mortgage  loans may  increase due to the upward  adjustment  of
interest cost to the borrower.

                                      -4-
<PAGE>

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS

     Net  interest  income is affected by (i) the  difference  between  rates of
interest  earned  on  interest-earning  assets  and  rates of  interest  paid on
interest-bearing  liabilities  ("interest  rate  spread")  and (ii) the relative
amounts  of  interest-earning  assets  and  interest-bearing  liabilities.  When
interest-earning assets approximate or exceed interest-bearing  liabilities, any
positive  interest  rate spread  will  generate  net  interest  income.  Savings
institutions have  traditionally  used interest rate spreads as a measure of net
interest income.  Another  indication of an institution's net interest income is
its "net yield on interest-earning  assets" which is net interest income divided
by average  interest-earning  assets.  The  following  table sets forth  certain
information  relating  to  the  Bank's  average   interest-earning   assets  and
interest-bearing  liabilities  and  reflects  the  average  yield on assets  and
average cost of liabilities for the periods indicated. Such yields and costs are
derived by dividing  income or expense by the average daily balance of assets or
liabilities,  respectively,  for  the  periods  presented.  During  the  periods
indicated, nonaccruing loans are included in the net loan category.
<TABLE>
<CAPTION>
                                                                                    Year Ended June 30,
                                        --------------------------------------------------------------------------------------------
                                                      2003                           2002                         2001
                                        ----------------------------   -----------------------------  -----------------------------
                                                           Average                          Average                        Average
                                        Average             Yield/     Average              Yield/    Average              Yield/
                                        Balance   Interest   Cost      Balance   Interest    Cost     Balance  Interest     Cost
                                        -------   -------- ---------   -------   --------  --------   -------  --------    -------
<S>                                       <C>        <C>        <C>      <C>        <C>         <C>     <C>      <C>         <C>
                                                                                  (Dollars in thousands)
Interest-earning assets:
  Loans receivable, net (1)............ $37,076    $2,749     7.41%    $44,065    $3,449    7.83%   $ 45,637     $3,688      8.08%

  Mortgage-backed securities...........  19,229     1,026     5.34      19,430     1,158    5.96      14,241        959      6.73

  Investment securities................  14,192       606     4.27       8,453       459    5.43       8,953        525      5.86

  Other interest-earning assets........   3,550        70     1.97       3,809       118    3.10       2,126        131      6.16
                                        -------   -------              -------    ------            --------     ------

    Total interest-earning assets......  74,047     4,451     6.01      75,757     5,184    6.84      70,957      5,303      7.47

Non-interest-earning assets............   3,179                          2,211                         1,875
                                        -------                        -------                      --------
    Total assets....................... $77,226                        $77,968                      $ 72,832
                                         ======                         ======                      ========

Interest-bearing liabilities:
  Deposits............................. $53,228     1,308     2.46     $53,516     1,902    3.55    $ 51,429      2,292      4.46

  Borrowings...........................   9,990       440     4.40      11,082       488    4.40       8,239        470      5.70
                                        -------    ------               ------    ------             -------     ------

     Total interest-bearing liabilities  63,218     1,748     2.77      64,598     2,390    3.70      59,668      2,762      4.63
                                                    -----  -------                 -----  ------                  -----    ------

Non-interest-bearing liabilities.......     968                            622                           566
                                       --------                       --------                      --------
     Total liabilities.................  64,186                         65,220                        60,234
Shareholders' equity...................  13,040                         12,748                        12,598
                                         ------                         ------                      --------
     Total liabilities and
       shareholders' equity............ $77,226                        $77,968                       $72,832
                                         ======                        =======                       =======
Net interest income....................            $2,703                         $2,794                         $2,541
                                                    =====                          =====                          =====
Interest rate spread (2)...............                       3.24%                         3.14%                            2.84%
                                                           =======                        ======                           ======
Net yield on interest-earning assets (3)                      3.65%                         3.69%                            3.58%
                                                           =======                        ======                           ======
Ratio of average interest-earning assets
  to average interest-bearing liabilities                   117.13%                       117.27%                          118.92%
                                                           =======                        ======                           ======
</TABLE>

(1)  Includes non-accrual loans.
(2)  Represents  the  difference  between the average yield on  interest-earning
     assets and the average cost of interest-bearing liabilities.
(3)  Represents  net interest  income as a percentage of the average  balance of
     interest-earning assets for the same period.

                                      -5-
<PAGE>

RATE/VOLUME ANALYSIS

     The 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   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume multiplied by old rate); and (ii) changes in rates (change in
rate  multiplied  by old  volume).  Changes  in  rate-volume  (changes  in  rate
multiplied  by the  changes in volume)  are  allocated  proportionately  between
changes in rate and changes in volume.
<TABLE>
<CAPTION>

                                                                     Year Ended June 30,
                                          ---------------------------------------------------------------
                                                   2003 vs. 2002                   2002 vs. 2001
                                          -----------------------------    ------------------------------
                                                Increase (Decrease)             Increase (Decrease)
                                                      Due to                            Due to
                                          -----------------------------    ------------------------------
                                           Rate      Volume       Total    Rate      Volume       Total
                                          ------   ----------   --------   -----   -----------   --------
<S>                                         <C>       <C>         <C>       <C>       <C>          <C>
                                                                        (In thousands)

Interest income:
  Loans                                   $(175)     $(525)      $(700)   $(114)      $(125)      $(239)
  Mortgage-backed securities               (120)       (12)       (132)    (120)        319         199
  Investment securities                    (114)       261         147      (38)        (28)        (66)
  Other interest-earning assets             (40)        (8)        (48)     (85)         72         (13)
                                          -----     ------       -----    -----       -----        ----
     Total interest-earning assets         (449)      (284)       (733)    (357)        238        (119)
                                                                           ----         ---        ----

Interest expense:
  Deposits                                 (584)       (10)       (594)    (480)         90        (390)
  Borrowings                                 --        (48)        (48)    (122)        140          18
                                           ----       ----        ----     ----        ----       -----
     Total interest-bearing liabilities    (584)       (58)       (642)    (602)        230        (372)
                                           ----       ----        ----     ----        ----        ----

Increase (decrease) in net interest                             $  (91)                           $ 253
  income                                                         =====                             ====

</TABLE>

COMPARISON OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 2003 TO JUNE 30, 2002

     The Company's  consolidated  total assets amounted to $74.5 million at June
30, 2003, a decrease of $5.2 million,  or 6.5%, from the total at June 30, 2002.
The decrease in assets was primarily due to  prepayments  of mortgage  loans and
repayments of advances from the Federal Home Loan Bank.

     Liquid  assets  (i.e.  cash,   interest-bearing   deposits  and  investment
securities)  increased by $7.7 million, or 52.4%, to a total of $22.5 million at
June 30, 2003.  Investment securities purchases amounted to $10.9 million during
fiscal 2003, while maturities  totaled $6.5 million.  The increase in investment
securities was funded primarily by repayments of mortgage-backed  securities and
principal repayments on mortgage loans. Mortgage-backed securities totaled $15.3
million at June 30, 2003, a decrease of $6.9  million,  or 31.2%,  from June 30,
2002 levels.  The decrease was due  primarily to principal  repayments  totaling
$11.2 million, partially offset by purchases of $4.2 million during the period.

     Net loans  receivable  decreased by $5.4 million,  or 13.8%,  during fiscal
2003,  to a total of $33.9  million at June 30, 2003.  Principal  repayments  of
$14.7 million exceeded loan disbursements of $9.2 million. The decrease in loans
was  primarily  comprised  of a  $2.9  million  decrease  in  loans  secured  by
one-to-four  family residential real estate and a $1.9 million decrease in loans
secured by nonresidential real estate and


                                      -6-
<PAGE>

land. The allowance for loan losses totaled $340,000 at June 30, 2003,  compared
to $241,000 at June 30, 2002.  During the fiscal year ended June 30,  2003,  the
Company  realized  a  recovery  totaling  $150,000  from  the  settlement  of  a
nonperforming  loan,  of which  $100,000  was  recorded  as an  addition  to the
allowance for loan losses,  which  accounted for the increase in the  allowance.
Nonperforming  loans totaled  $146,000 at June 30, 2003,  compared to $51,000 at
June 30,  2002.  The  allowance  for loan  losses  represented  233% and 473% of
non-performing  loans  at  June  30,  2003  and  2002,  respectively.   Although
management  believes  that its  allowance  for loan  losses at June 30, 2003 was
adequate  based  upon the  available  facts and  circumstances,  there can be no
assurance  that  additions  to such  allowance  will not be  necessary in future
periods, which could adversely affect the Company's results of operations.

     Deposits  totaled  $53.0  million  at June 30,  2003,  a  decrease  of $1.2
million,  or 2.1%,  from June 30, 2002  levels.  Although  management  generally
pursues a strategy of moderate growth in deposits, the Bank historically has not
engaged in sporadic  increases and decreases in interest rates offered,  nor has
it offered the highest interest rate in its market area.  Advances from the FHLB
totaled $7.7 million at June 30,  2003,  a decrease of $4.1  million,  or 34.9%,
from the total at June 30, 2002.

     The Company's  shareholders'  equity  amounted to $13.2 million at June 30,
2003, an increase of $89,000,  or 0.7%, over June 30, 2002 levels.  The increase
resulted  from net  earnings of  $872,000,  an increase in  unrealized  gains on
securities designated as available for sale of $311,000, amortization effects of
stock benefit  plans of $149,000,  and issuance of shares under the stock option
plan of $136,000,  which were  partially  offset by purchases of treasury  stock
totaling $832,000 and by dividends paid on common stock totaling $547,000.

COMPARISON OF RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 2003 AND
2002

     GENERAL.  Net earnings  amounted to $872,000 for the fiscal year ended June
30,  2003,  a decrease of  $75,000,  or 7.9%,  compared  to the  $947,000 of net
earnings reported in fiscal 2002. The decrease in net earnings was due primarily
to a $91,000 decrease in net interest income and a $105,000 increase in general,
administrative  and other  expense,  which were  partially  offset by an $89,000
decrease  in the  provision  for losses on loans and a $24,000  decrease  in the
provision for federal income taxes.

     NET INTEREST INCOME.  Interest  income totaled $4.5 million for the fiscal
year ended  June 30,  2003,  a decrease  of  $733,000,  or 14.1%,  from the $5.2
million of interest income  reported in fiscal 2002. The decrease  resulted from
an 83 basis point decrease in the average  yield,  from 6.84% during fiscal 2002
to 6.01% during  fiscal 2003,  and a decrease of $1.7  million,  or 2.3%, in the
average balance of interest-earning assets outstanding. Interest income on loans
decreased by $700,000,  or 20.3%, due to a $7.0 million,  or 15.9%,  decrease in
the average balance of loans outstanding and a 42 basis point decrease in yield,
from 7.83% during  fiscal 2002 to 7.41% during fiscal 2003.  Interest  income on
mortgage-backed  securities decreased by $132,000,  or 11.4%, due to a $201,000,
or 1.0%,  decrease  in the  average  balance  outstanding  and a 62 basis  point
decrease in average yield,  from 5.96% during fiscal 2002 to 5.34% during fiscal
2003.  Interest income on investment  securities and  interest-bearing  deposits
increased by $99,000, or 17.2%, due to a $5.5 million, or 44.7%, increase in the
average  balance  outstanding,  which was  partially  offset by a 90 basis point
decrease in the average  yield,  from 4.71%  during  fiscal 2002 to 3.81% during
fiscal 2003.

     Interest  expense  totaled  $1.7 million for the fiscal year ended June 30,
2003, a decrease of $642,000,  or 26.9%, from the $2.4 million of total interest
expense  reported in fiscal  2002.  Interest  expense on deposits  decreased  by
$594,000,  or 31.2%,  due to a 109 basis point  decrease in the average  cost of
deposits,  from 3.55%  during  fiscal 2002 to 2.46% during  fiscal  2003,  and a
decrease in the average  balance of deposits  outstanding.  Interest  expense on
borrowings  decreased  by  $48,000,  or 9.8%,  due to a $1.1  million,  or 9.9%,

                                      -7-
<PAGE>

decrease in the average balance of such advances  outstanding.  The decreases in
the  weighted-average  yields on  interest-earning  assets and  weighted-average
costs of interest-bearing liabilities were due primarily to the overall decrease
in interest rates in the economy.

     As a result of the  foregoing  changes  in  interest  income  and  interest
expense,  net interest income decreased by $91,000,  or 3.3%, to a total of $2.7
million for the fiscal year ended June 30, 2003, as compared to fiscal 2002. The
interest rate spread  amounted to 3.24% and 3.14% during the  respective  fiscal
2003 and 2002 years,  while the net interest  margin amounted to 3.65% in fiscal
2003 and 3.69% in fiscal 2002.

     PROVISION  FOR LOSSES ON LOANS.  A provision for losses on loans is charged
to earnings to bring the total  allowance for loan losses to a level  considered
appropriate by management based on historical experience, the volume and type of
lending  conducted by the Bank,  the status of past due  principal  and interest
payments, general economic conditions, particularly as such conditions relate to
the Bank's market area, and other factors related to the  collectibility  of the
Bank's loan portfolio.  During fiscal 2003, the Corporation  realized a $150,000
recovery on a nonperforming loan. Based upon the foregoing analysis,  management
elected to record  $100,000 as an addition to the  allowance for loan losses and
$50,000 as a credit to  operations.  This  addition  to the  allowance  for loan
losses was  predicated  primarily  upon the level of the  Bank's  non-performing
loans during the periods. There can be no assurance that the loan loss allowance
of the Bank will be adequate  to cover  losses on  non-performing  assets in the
future.

     OTHER INCOME.  Other income totaled $200,000 for the fiscal year ended June
30, 2003, an increase of $8,000, or 4.2%, compared to fiscal 2002, due primarily
to an $18,000, or 32.7%, increase in other operating income, partially offset by
a $10,000, or 7.3%, decrease in service charges on deposit accounts.

     GENERAL,  ADMINISTRATIVE  AND OTHER EXPENSE.  General,  administrative  and
other  expense  totaled $1.7 million for the fiscal year ended June 30, 2003, an
increase of $105,000,  or 6.6%, over fiscal 2002. The increase was due primarily
to an $83,000,  or 9.7%,  increase  in employee  compensation  and  benefits,  a
$12,000,  or 7.4%,  increase in occupancy and equipment and a $13,000,  or 3.6%,
increase in other operating expense.  The increase in employee  compensation and
benefits  was due  primarily to  increased  costs  related to the ESOP and other
benefit plans,  as well as normal merit  increases year to year. The increase in
occupancy and equipment  was due  primarily to additional  depreciation  expense
associated  with the main  office  renovation  completed  in  fiscal  2002.  The
increase  in other  operating  expense was due to an increase in legal costs and
pro-rata increases in various operating costs year to year.

     FEDERAL  INCOME  TAXES.  The  provision  for federal  income taxes  totaled
$376,000  for the fiscal year ended June 30,  2003,  a decrease  of $24,000,  or
6.0%,  compared to fiscal 2002. This decrease resulted primarily from a decrease
in net earnings  before taxes of $99,000,  or 7.3%. The effective tax rates were
30.1% and 29.7% for the fiscal years ended June 30, 2003 and 2002, respectively.

COMPARISON OF RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 2002 AND
2001

     GENERAL.  Net earnings  amounted to $947,000 for the fiscal year ended June
30,  2002,  an increase of $208,000,  or 28.1%,  compared to the $739,000 of net
earnings  reported in fiscal  2001.  The  increase in net  earnings was due to a
$253,000  increase  in net  interest  income and a $95,000  decrease in general,
administrative  and other  expense,  which  were  partially  offset by a $28,000
decrease in other income and a $112,000  increase in the  provision  for federal
income taxes.

     NET INTEREST  INCOME.  Interest  income totaled $5.2 million for the fiscal
year ended June 30, 2002, a decrease of $119,000, or 2.2%, from the $5.3 million
of interest  income  reported in fiscal 2001.  The

                                      -8-
<PAGE>

decrease  resulted  from a 63 basis point  decrease in the average  yield,  from
7.47% during fiscal 2001 to 6.84% during fiscal 2002, which was partially offset
by a $4.8 million,  or 6.8%, increase in the average balance of interest-earning
assets outstanding. Interest income on loans decreased by $239,000, or 6.5%, due
to a $1.6 million, or 3.4%, decrease in the average balance of loans outstanding
and a 25 basis point  decrease in yield,  from 8.08% during fiscal 2001 to 7.83%
during fiscal 2002. Interest income on mortgage-backed  securities  increased by
$199,000,  or 20.8%,  due to a $5.2 million,  or 36.4%,  increase in the average
balance outstanding,  which was partially offset by a 77 basis point decrease in
average  yield,  from 6.73%  during  fiscal 2001 to 5.96%  during  fiscal  2002.
Interest income on investment securities and interest-bearing deposits decreased
by $79,000,  or 12.0%,  due to a 121 basis point  decrease in the average yield,
from 5.92% during fiscal 2001 to 4.71% during  fiscal 2002,  which was partially
offset by a $1.2 million, or 10.7%, increase in the average balance outstanding.

     Interest  expense  totaled  $2.4 million for the fiscal year ended June 30,
2002, a decrease of $372,000,  or 13.5%, from the $2.8 million of total interest
expense  reported in fiscal  2001.  Interest  expense on deposits  decreased  by
$390,000,  or 17.0%,  due to a 91 basis point  decrease  in the average  cost of
deposits,  from 4.46% during fiscal 2001 to 3.55% during fiscal 2002,  which was
partially offset by a $2.1 million,  or 4.1%, increase in the average balance of
deposits  outstanding.  Interest expense on borrowings  increased by $18,000, or
3.8%, due to a $2.8 million,  or 34.5%,  increase in the average balance of such
advances  outstanding,  which was partially offset by a 130 basis point decrease
in the average cost of advances,  from 5.70% during  fiscal 2001 to 4.40% during
fiscal 2002. The decreases in the  weighted-average  yields on  interest-earning
assets  and  weighted-average  costs of  interest-bearing  liabilities  were due
primarily to the overall  decrease in interest rates in the economy during 2001.
This low interest  rate  environment  continued  through the first six months of
2002.

     As a result of the  foregoing  changes  in  interest  income  and  interest
expense, net interest income increased by $253,000, or 10.0%, to a total of $2.8
million for the fiscal year ended June 30, 2002, as compared to fiscal 2001. The
interest rate spread  amounted to 3.14% and 2.84% during the  respective  fiscal
2002 and 2001 years,  while the net interest  margin amounted to 3.69% in fiscal
2002 and 3.58% in fiscal 2001.

     PROVISION  FOR LOSSES ON LOANS.  A provision for losses on loans is charged
to earnings to bring the total  allowance for loan losses to a level  considered
appropriate by management based on historical experience, the volume and type of
lending  conducted by the Bank,  the status of past due  principal  and interest
payments, general economic conditions, particularly as such conditions relate to
the Bank's market area, and other factors related to the  collectibility  of the
Bank's  loan  portfolio.  As a result of such  analysis,  management  recorded a
$39,000 provision for losses on loans during each of the fiscal years ended June
30,  2002 and 2001.  These  additions  to the  allowance  for loan  losses  were
predicated  primarily upon the level of the Bank's  non-performing  loans during
the periods.

     OTHER INCOME.  Other income totaled $192,000 for the fiscal year ended June
30,  2002,  a decrease  of  $28,000,  or 12.7%,  compared  to fiscal  2001,  due
primarily  to a  $17,000,  or 11.0%,  decrease  in  service  charges  on deposit
accounts and an $8,000, or 12.7%, decrease in other operating income.

     GENERAL,  ADMINISTRATIVE  AND OTHER EXPENSE.  General,  administrative  and
other  expense  totaled  $1.6 million for the fiscal year ended June 30, 2002, a
decrease of $95,000,  or 5.6%,  from fiscal 2001. The decrease was due primarily
to a $121,000, or 12.3%,  decrease in employee compensation and benefits,  which
was partially  offset by a $14,000,  or 10.0%,  increase in data  processing and
$16,000, or 4.7%, increase in other operating expense.

                                      -9-
<PAGE>

     The decrease in employee  compensation  and benefits was primarily due to a
reduction  in staffing  levels  year to year and a $101,000  decrease in expense
related to the  expiration of the management  recognition  plan, a stock benefit
plan  implemented  following  the Bank's  conversion  from mutual to stock form.
These decreases were partially  offset by normal merit increases and an increase
in expense  associated with the ESOP. The increases in data processing and other
operating expense were attributable  primarily to pro-rata  increases related to
the Company's overall growth year to year.

     FEDERAL  INCOME  TAXES.  The  provision  for federal  income taxes  totaled
$400,000  for the fiscal year ended June 30, 2002,  an increase of $112,000,  or
38.9%,  compared  to fiscal  2001.  This  increase  resulted  primarily  from an
increase in net earnings before taxes of $320,000,  or 31.2%.  The effective tax
rates were 29.7% and 28.0% for the fiscal  years  ended June 30,  2002 and 2001,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's  primary  source of liquidity is dividends  paid by the Bank.
The Bank,  as a stock  savings  institution,  is subject  to certain  regulatory
limitations with respect to the payment of dividends to the Company.

     First Federal's principal sources of funds for operations are deposits from
its  primary  market  area,   principal  and  interest  payments  on  loans  and
mortgage-backed  securities and proceeds from maturing investment securities. In
addition, as a member of the FHLB of Cincinnati,  the Bank is eligible to borrow
funds from the FHLB of  Cincinnati  in the form of  advances.  First  Federal is
required  by OTS  regulations  to  maintain  minimum  levels  of  liquid  assets
consistent with safe and sound operation.

     The  Bank's  liquid  assets  consist of cash and cash  equivalents  and the
portfolio of  investment  and  mortgage-backed  securities.  The level of liquid
assets is dependent on the Bank's operating,  financing and investing activities
during any given period. At June 30, 2003, the Bank had outstanding  commitments
to originate  loans  totaling  $188,000.  Certificates  of deposit  scheduled to
mature in one year or less at June 30, 2003,  totaled  $26.6  million.  The Bank
believes that it has adequate  resources to fund all of its commitments and that
it can adjust the rate of certificates of deposit in order to retain deposits in
changing interest rate environments.

     First  Federal's  capital  ratios  are  substantially  in excess of current
regulatory capital requirements.  At June 30, 2003, the Bank's tangible and core
capital  amounted  to 16.2% of  adjusted  total  assets,  or  14.7%  and  12.2%,
respectively,  in excess  of the  Bank's  current  1.5%  tangible  and 4.0% core
capital  requirements.  Additionally,  the Bank's  risk-based  capital ratio was
36.0% at June 30, 2003, or 28.0% in excess of the Bank's 8.0% risk-based capital
requirement.

CRITICAL ACCOUNTING POLICIES

     Management's  discussion and analysis of the Company's  financial condition
is based  on the  consolidated  financial  statements,  which  are  prepared  in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of such financial  statements  requires  management to
make  estimates  and  assumptions  that affect the  reported  amounts of assets,
liabilities,  revenues and expenses and related  disclosure of contingent assets
and  liabilities.  On an ongoing  basis,  management  evaluates  its  estimates,
including those related to the allowance for loan losses.

     Management  believes the allowance for loan losses is a critical accounting
policy that required the most significant  estimates and assumptions used in the
preparation of the  consolidated  financial  statements.

                                      -10-
<PAGE>

The  allowance for loan losses is based on  management's  evaluation of the
level of the allowance  required in relation to the  estimated  loss exposure in
the loan  portfolio.  Management  believes  the  allowance  for loan losses is a
significant  estimated  loss  therefore  regularly  evaluates it for adequacy by
taking  into  consideration  factors  such as prior  loan loss  experience,  the
character and size of the loan portfolio,  business and economic  conditions and
management's  estimation  of future  losses.  The use of different  estimates or
assumptions  could produce  different  provisions for loan losses.  Refer to the
discussion of Allowance for Loan Losses in Notes A (5) and D to the Consolidated
Financial  Statements  for a detailed  description  of  management's  estimation
process and methodology related to the allowance for loan losses.


                                      -11-
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Kentucky First Bancorp, Inc.

We have audited the accompanying  consolidated statements of financial condition
of Kentucky  First  Bancorp,  Inc. as of June 30, 2003 and 2002, and the related
consolidated statements of earnings,  comprehensive income, shareholders' equity
and cash flows for each of the three  years in the period  ended June 30,  2003.
These   consolidated   financial   statements  are  the  responsibility  of  the
Corporation's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Kentucky  First
Bancorp,  Inc. as of June 30, 2003 and 2002, and the results of its  operations,
comprehensive  income and cash  flows for each of the three  years in the period
ended June 30, 2003, in conformity with accounting principles generally accepted
in the United States of America.


/s/ Grant Thornton

Cincinnati, Ohio
August 1, 2003


                                      -12-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                             June 30, 2003 and 2002
                        (In thousands, except share data)
<TABLE>
<CAPTION>
          <S>                                                         <C>         <C>
         ASSETS                                                           2003       2002

Cash and due from banks                                                $    500    $    600
Interest-bearing deposits in other financial institutions                 6,378       3,079
                                                                       --------    --------
         Cash and cash equivalents                                        6,878       3,679

Investment securities available for sale - at market                     15,655      11,105
Mortgage-backed securities available for sale - at market                15,287      22,204
Loans receivable - net                                                   33,932      39,355
Office premises and equipment - at depreciated cost                       1,368       1,237
Real estate acquired through foreclosure                                     --          45
Federal Home Loan Bank stock - at cost                                      725       1,477
Accrued interest receivable                                                 469         484
Prepaid expenses and other assets                                           115          86
Prepaid federal income taxes                                                 86          --
                                                                       --------    --------

         Total assets                                                  $ 74,515    $ 79,672
                                                                       ========    ========


         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                               $ 52,963    $ 54,119
Advances from the Federal Home Loan Bank                                  7,676      11,794
Accrued interest payable                                                     78         156
Other liabilities                                                           240         179
Accrued federal income taxes                                                 --           5
Deferred federal income taxes                                               319         269
                                                                       --------    --------
         Total liabilities                                               61,276      66,522

Commitments                                                                  --          --

Shareholders' equity
  Preferred stock - authorized 500,000 shares of $.01 par value;
    no shares issued                                                         --          --
  Common stock - authorized 3,000,000 shares of $.01 par value;
    1,388,625 shares issued                                                  14          14
  Additional paid-in capital                                              9,330       9,301
  Retained earnings - restricted                                          9,711       9,386
  Less shares acquired by Employee Stock Ownership Plan                    (370)       (462)
  Less 506,012 and 463,297 shares of treasury stock at June 30, 2003
    and 2002, respectively - at cost                                     (6,112)     (5,444)
  Accumulated comprehensive income, unrealized gains on securities
    designated as available for sale, net of related tax effects            666         355
                                                                       --------    --------
         Total shareholders' equity                                      13,239      13,150
                                                                       --------    --------

         Total liabilities and shareholders' equity                    $ 74,515    $ 79,672
                                                                       ========    ========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -13-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                       CONSOLIDATED STATEMENTS OF EARNINGS

                 For the year ended June 30, 2003, 2002 and 2001
                        (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                         2003              2002             2001
<S>                                                                       <C>              <C>               <C>
Interest income
  Loans                                                                $2,749            $3,449           $3,688
  Mortgage-backed securities                                            1,026             1,158              959
  Investment securities                                                   606               459              525
  Interest-bearing deposits and other                                      70               118              131
                                                                      -------            ------           ------
         Total interest income                                          4,451             5,184            5,303

Interest expense
  Deposits                                                              1,308             1,902            2,292
  Borrowings                                                              440               488              470
                                                                       ------            ------           ------
         Total interest expense                                         1,748             2,390            2,762
                                                                       ------            ------           ------

         Net interest income                                            2,703             2,794            2,541

Provision for (recoveries of) losses on loans                             (50)               39               39
                                                                      -------           -------           ------

         Net interest income after provision
           for (recoveries of) losses on loans                          2,753             2,755            2,502

Other income
  Gain on investment securities transactions                               --                --               3
  Service charges on deposit accounts                                     127               137              154
  Other operating                                                          73                55               63
                                                                      -------           -------           ------
         Total other income                                               200               192              220

General, administrative and other expense
  Employee compensation and benefits                                      943               860              981
  Occupancy and equipment                                                 175               163              169
  Data processing                                                         155               154              140
  State franchise tax                                                      61                65               63
  Other operating                                                         371               358              342
                                                                       ------            ------           ------
         Total general, administrative and other expense                1,705             1,600            1,695
                                                                       ------            ------            -----

         Earnings before income taxes                                   1,248             1,347            1,027

Federal income taxes
  Current                                                                 486               339              236
  Deferred                                                               (110)               61               52
                                                                       ------           -------          -------
         Total federal income taxes                                       376               400              288
                                                                       ------           -------          -------

         NET EARNINGS                                                 $   872           $   947          $   739
                                                                       ======            ======           ======

         EARNINGS PER SHARE
           Basic                                                        $1.02             $1.07             $.80
                                                                         ====              ====              ===

           Diluted                                                       $.97             $1.03             $.79
                                                                         ====              ====              ===
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -14-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                 For the year ended June 30, 2003, 2002 and 2001
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                  2003         2002         2001
<S>                                                                               <C>           <C>          <C>
Net earnings                                                                   $   872      $   947       $  739

Other comprehensive income (loss), net of tax:
  Cumulative effect of transfer of securities from held to maturity
    to available for sale, net of tax of $90 for the year ended June 30, 2001       --           --         (174)
  Unrealized holding gains on securities during the period, net of taxes
    of $160, $139 and $273 in 2003, 2002 and 2001, respectively                    311          270          529
  Reclassification adjustment for realized gains included in
    earnings, net of tax of $1 for the year ended June 30, 2001                     --           --           (2)
                                                                                 -----        -----      -------

Comprehensive income                                                            $1,183       $1,217       $1,092
                                                                                 =====        =====        =====

Accumulated comprehensive income                                               $   666      $   355      $    85
                                                                                ======       ======       ======
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -15-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                For the years ended June 30, 2003, 2002 and 2001
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                                  UNREALIZED
                                                                                                                 GAINS (LOSSES)
                                                                                            SHARES               ON SECURITIES
                                                               ADDITIONAL                  ACQUIRED               DESIGNATED
                                                      COMMON     PAID-IN     RETAINED      BY STOCK     TREASURY  AS AVAILABLE
                                                       STOCK     CAPITAL     EARNINGS    BENEFIT PLANS   STOCK     FOR SALE    TOTAL

<S>                                                     <C>         <C>         <C>             <C>         <C>      <C>        <C>
Balance at July 1, 2000                            $     14   $  9,320    $  8,754    $   (798)   $ (4,039)   $   (268)   $ 12,983

Purchase of treasury stock                                -          -           -           -      (1,260)          -      (1,260)
Amortization expense of stock benefit plans               -        (50)          -         243           -           -         193
Net earnings for the year ended June 30, 2001             -          -         739           -           -           -         739
Cash dividends of $.55 per share                          -          -        (507)          -           -           -        (507)
Issuance of shares under stock option plan                -         (6)          -           -          45           -          39
Transfer of securities to available for
 sale classification                                      -          -           -           -           -        (174)       (174)
Unrealized gains on securities designated as
  available for sale, net of related tax effects          -          -           -           -           -         527         527
                                                   --------   --------    --------    --------    --------    --------    --------

Balance at June 30, 2001                                 14      9,264       8,986        (555)     (5,254)         85      12,540

Purchase of treasury stock                                -          -           -           -        (190)          -        (190)
Amortization expense of stock benefit plans               -         37           -          93           -           -         130
Net earnings for the year ended June 30, 2002             -          -         947           -           -           -         947
Cash dividends of $.62 per share                          -          -        (547)          -           -           -        (547)
Unrealized gains on securities designated as
  available for sale, net of related tax effects          -          -           -           -           -         270         270
                                                   --------   --------    --------    --------    --------    --------    --------

Balance at June 30, 2002                                 14      9,301       9,386        (462)     (5,444)        355      13,150

Purchase of treasury stock                                -          -           -           -        (832)          -        (832)
Amortization expense of stock benefit plans               -         57           -          92           -           -         149
Net earnings for the year ended June 30, 2003             -          -         872           -           -           -         872
Cash dividends of $.64 per share                          -          -        (547)          -           -           -        (547)
Issuance of shares under stock option plan                -        (28)          -           -         164           -         136
Unrealized gains on securities designated as
  available for sale, net of related tax effects          -          -           -           -           -         311         311
                                                   --------   --------    --------    --------    --------    --------    --------
Balance at June 30, 2003                           $     14   $  9,330    $  9,711    $   (370)   $ (6,112)   $    666    $ 13,239
                                                   ========   ========    ========    ========    ========    ========    ========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      -16-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 For the year ended June 30, 2003, 2002 and 2001
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                              2003           2002           2001
<S>                                                                             <C>           <C>             <C>
Cash flows from operating activities:
  Net earnings for the year                                              $     872      $     947       $    739
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of discounts and premiums on loans,
      investments and mortgage-backed securities - net                         139            (11)           (19)
    Amortization of deferred loan origination fees                             (23)           (23)           (23)
    Depreciation and amortization                                               72             71             79
    Provision for (recoveries of) losses on loans                              (50)            39             39
    Amortization of expense related to stock benefit plans                     149            130            193
    Gain on investment securities transactions                                  --             --             (3)
    Gain on sale of real estate acquired through foreclosure                    (5)            --             --
    Federal Home Loan Bank stock dividends                                     (48)           (78)           (98)
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                               15            (20)           (40)
      Prepaid expenses and other assets                                        (29)            (5)           439
      Accrued interest payable                                                 (78)            (2)            11
      Other liabilities                                                         61            (11)          (430)
      Federal income taxes
        Current                                                                (91)            12             79
        Deferred                                                              (110)            61             52
                                                                         ---------      ---------        -------
         Net cash provided by operating activities                             874          1,110          1,018

Cash flows provided by (used in) investing activities:
  Purchase of investment securities designated as available for sale       (10,853)        (6,547)        (1,000)
  Proceeds from maturity of investment securities                            6,525          3,776          2,216
  Purchase of mortgage-backed securities designated as available
   for sale                                                                 (4,153)       (12,545)        (2,010)
  Principal repayments on mortgage-backed securities                        11,180          5,241          2,178
  Purchase of loans                                                             --         (2,207)        (3,139)
  Loan principal repayments                                                 14,706         17,825         11,850
  Loan disbursements                                                        (9,210)        (9,314)        (9,527)
  Purchase of office premises and equipment                                   (203)          (171)           (13)
  Proceeds from redemption of Federal Home Loan Bank stock                     800             --             --
  Proceeds from sale of real estate acquired through foreclosure                50             --             --
                                                                         ---------        -------        -------
         Net cash provided by (used in) investing activities                 8,842         (3,942)           555
                                                                           -------        -------        -------

         Net cash provided by (used in) operating and investing
           activities (subtotal carried forward)                             9,716         (2,832)         1,573
                                                                           -------        -------        -------
</TABLE>

                                      -17-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                 For the year ended June 30, 2003, 2002 and 2001

<TABLE>
<CAPTION>

                                                                                    2003            2002          2001
<S>                                                                                   <C>             <C>           <C>
         Net cash provided by (used in) operating and investing
           activities (subtotal brought forward)                                  $9,716         $(2,832)      $ 1,573

Cash flows provided by (used in) financing activities:
  Net increase (decrease) in deposits                                             (1,156)          1,689          (854)
  Proceeds from Federal Home Loan Bank advances                                    2,500           3,200         7,500
  Repayment of Federal Home Loan Bank advances                                    (6,618)           (217)       (5,516)
  Proceeds from note payable                                                          --              --           100
  Repayment of note payable                                                           --              --          (100)
  Purchase of treasury stock                                                        (832)           (190)       (1,260)
  Proceeds from issuance of shares under stock option plan                           136              --            39
  Dividends on common stock                                                         (547)           (547)         (507)
                                                                                  ------          ------        ------
         Net cash provided by (used in) financing activities                      (6,517)          3,935          (598)
                                                                                  ------          ------        ------

Net increase in cash and cash equivalents                                          3,199           1,103           975

Cash and cash equivalents at beginning of year                                     3,679           2,576         1,601
                                                                                  ------          ------        ------

Cash and cash equivalents at end of year                                          $6,878         $ 3,679       $ 2,576
                                                                                  ======          ======        ======


Supplemental disclosure of cash flow information:
    Cash paid during the year for:
        Federal income taxes                                                      $  607         $   327       $   240
                                                                                  ======          ======        ======

    Interest on deposits and borrowings                                           $1,826         $ 2,392       $ 2,751
                                                                                  ======          ======        ======

Supplemental disclosure of noncash investing activities:
  Transfer of investment and mortgage-backed securities to an
    available for sale classification                                             $   --         $    --       $10,310
                                                                                  ======          ======        ======

  Transfer from loans to real estate acquired through foreclosure                 $   --         $    45       $    --
                                                                                  ======          ======        ======

  Unrealized gains on securities designated as available
    for sale, net of related tax effects                                          $  311         $   270       $   529
                                                                                  ======          ======        ======
</TABLE>
The accompanying notes are an integral part of these statements.

                                      -18-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Kentucky First Bancorp,  Inc. (the "Company") is a savings and loan holding
     company whose activities are primarily  limited to holding the common stock
     of First  Federal  Savings  Bank (the  "Savings  Bank").  The Savings  Bank
     conducts a general banking  business in central  Kentucky which consists of
     attracting deposits from the general public and applying those funds to the
     origination of loans for residential, consumer and nonresidential purposes.
     The Savings  Bank's  profitability  is  significantly  dependent on its 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 Savings 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 accounting  principles  generally accepted in the United
     States of America ("U.S. GAAP") and general accounting practices within the
     financial services industry. In preparing consolidated financial statements
     in accordance with U.S. 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.

     1. Principles of Consolidation
        ---------------------------

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

     2. Investment Securities and Mortgage-Backed Securities
        ----------------------------------------------------

     The Company  accounts for  investment  and  mortgage-backed  securities  in
     accordance with Statement of Financial  Accounting  Standards  ("SFAS") No.
     115  "Accounting  for Certain  Investments in Debt and Equity  Securities."
     SFAS No. 115 requires  that  investments  in debt and equity  securities be
     categorized as held-to-maturity, trading, or available for sale. Securities
     classified  as  held-to-maturity  are to be  carried  at  cost  only if the
     Company has the  positive  intent and ability to hold these  securities  to
     maturity.  Trading  securities and  securities  designated as available for
     sale are  carried  at fair  value with the  resulting  unrealized  gains or
     losses recorded to operations or shareholders' equity, respectively. During
     fiscal   2001,   management   elected  to  transfer  all   investment   and
     mortgage-backed  securities  from  the  held-to-maturity  portfolio  to  an
     available for sale classification, in conjunction with the adoption of SFAS
     No. 133.  Securities  transferred  totaled $10.3 million,  resulting in the
     recognition of a net unrealized loss upon transfer of $174,000.

     Realized gains and losses on sales of securities  are recognized  using the
     specific identification method.

                                      -19-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     3. Loans Receivable
        ----------------

     Loans receivable are stated at the principal amount  outstanding,  adjusted
     for  deferred  loan  origination  fees and the  allowance  for loan losses.
     Interest is accrued as earned unless the  collectibility  of the loan is in
     doubt. 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 that cash payments are received until, in management's judgment,
     the borrower's ability to make periodic interest and principal payments has
     returned to normal,  in which case the loan is returned to accrual  status.
     If the  ultimate  collectibility  of the loan is in  doubt,  in whole or in
     part,  all  payments  received  on  nonaccrual  loans are applied to reduce
     principal until such doubt is eliminated.

     4. Loan Origination Fees
        ---------------------

     The Savings 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  Costs 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 Savings 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.

     5. Allowance for Loan Losses
        -------------------------

     It is the  Savings  Bank's  policy  to  provide  valuation  allowances  for
     estimated  losses  on loans  based on past loss  experience,  trends in the
     level of delinquent and problem loans,  adverse  situations that may affect
     the  borrower's  ability to repay,  the estimated  value of any  underlying
     collateral and current and anticipated  economic  conditions in the primary
     lending area. When the collection of a loan becomes doubtful,  or otherwise
     troubled,  the  Savings  Bank  records  a  loan  charge-off  equal  to  the
     difference between the fair value of the property securing the loan and the
     loan's carrying value.  Major loans  (including  development  projects) and
     major  lending  areas are  reviewed  periodically  to  determine  potential
     problems at an early date.  The  allowance  for loan losses is increased by
     charges to earnings and decreased by charge-offs (net of recoveries).

     The Savings Bank accounts for impaired  loans in  accordance  with SFAS No.
     114,  "Accounting  by Creditors for  Impairment of a Loan," which  requires
     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 Savings Bank's current procedures for evaluating  impaired
     loans result in carrying such loans at the lower of cost or fair value.


                                      -20-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5. Allowance for Loan Losses (continued)
        -------------------------

     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 Savings Bank
     considers  its  investment  in one- to  four-family  residential  loans and
     consumer  installment  loans to be homogeneous and therefore  excluded from
     separate  identification for evaluation of impairment.  With respect to the
     Savings Bank's investment in multi-family and nonresidential loans, and its
     evaluation of impairment thereof,  such loans are collateral  dependent and
     as a result are  carried as a practical  expedient  at the lower of cost or
     fair value.

     It is the Savings  Bank's  general  policy to charge off unsecured  credits
     that are more than ninety days delinquent.  Similarly, collateral dependent
     loans  which  are more  than  ninety  days  delinquent  are  considered  to
     constitute  more than a minimum  delay in repayment  and are  evaluated for
     impairment under SFAS No. 114 at that time.

     The  Savings  Bank had no  impaired  loans at June 30,  2003 and 2002.  The
     Savings Bank had one impaired loan totaling  $306,000 at June 30, 2001. The
     allowance  for losses  specifically  related to this  account  amounted  to
     $200,000 at June 30, 2001.  During the fiscal year ended June 30, 2002, the
     loan was  written  down to the market  value of the  underlying  collateral
     through a charge-off to the allowance for loan losses, and was subsequently
     deeded to the Savings Bank in lieu of  foreclosure.  During fiscal 2003 the
     property was sold resulting in a gain of $5,000.

     6. Office Premises and Equipment
        -----------------------------

     Office premises and equipment are carried at cost and include  expenditures
     which extend the useful lives of existing assets. Maintenance,  repairs and
     minor  renewals  are  expensed  as  incurred.   For  financial   reporting,
     depreciation  and  amortization  are  provided  on  the  straight-line  and
     accelerated  methods over the useful  lives of the assets,  estimated to be
     forty years for  buildings,  ten to forty years for building  improvements,
     and five to ten years for furniture and equipment. An accelerated method is
     used for tax reporting purposes.

     7. Real Estate Acquired Through Foreclosure
        ----------------------------------------

     Real estate  acquired  through  foreclosure  is carried at the lower of the
     loan's unpaid principal balance (cost) or fair value less estimated selling
     expenses  at the date of  acquisition.  Real  estate  loss  provisions  are
     recorded if the  properties'  fair value  subsequently  declines  below the
     amount  determined at the recording  date. In determining the lower of cost
     or fair value at acquisition, costs relating to development and improvement
     of property are capitalized. Costs relating to holding real estate acquired
     through foreclosure,  net of rental income, are charged against earnings as
     incurred.




                                      -21-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     8. Federal Income Taxes
        --------------------

     The  Company  accounts  for federal  income  taxes in  accordance  with the
     provisions of SFAS No. 109,  "Accounting for Income Taxes." 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  consolidated  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's  principal  temporary  differences  between pretax  financial
     income and taxable income result from  different  methods of accounting for
     deferred  loan  origination  fees and costs,  Federal  Home Loan Bank stock
     dividends,  the general  loan loss  allowance,  deferred  compensation  and
     certain  components  of benefit  plans.  Additional  temporary  differences
     result  from  depreciation  computed  using  accelerated  methods  for  tax
     purposes.

     9. Benefit Plans
        -------------

     The Company provides  retirement  benefits for  substantially all employees
     who have  completed  one year of service  and have  attained  the age of 21
     through the Kentucky First  Bancorp,  Inc.  Employee  Stock  Ownership Plan
     ("ESOP").  Expense  recognized  related to the ESOP  totaled  approximately
     $180,000,  $149,000  and $129,000 for the fiscal years ended June 30, 2003,
     2002 and 2001, respectively.

     Additionally,  the Company had the Kentucky First Bancorp,  Inc. Management
     Recognition Plan ("MRP").  The MRP purchased 55,545 shares of the Company's
     common stock in the open market.  All of the shares available under the MRP
     were granted to executive officers,  directors and employees of the Savings
     Bank in fiscal 1996.  The MRP provided  that common stock awarded under the
     MRP vested ratably over a five year period. A provision of $101,000 related
     to the MRP was charged to expense for the fiscal year ended June 30,  2001.
     At June 30, 2001, all allocated shares had been  distributed.  As a result,
     no expense provision was necessary for fiscal 2003 or 2002.

     10. Earnings Per Share
         ------------------

     Basic earnings per share for the years ended June 30, 2003,  2002 and 2001,
     is computed based upon the  weighted-average  shares outstanding during the
     period less shares in the ESOP that are unallocated and not committed to be
     released. Weighted-average common shares deemed outstanding gives effect to
     36,651,  45,810 and 56,229 unallocated ESOP shares for the years ended June
     30, 2003, 2002 and 2001, respectively.


                                      -22-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     10. Earnings Per Share (continued)
         ------------------

     Diluted  earnings per share is computed  taking into  consideration  common
     shares  outstanding and dilutive potential common shares to be issued under
     the Company's stock option plan. The computations are as follows:

<TABLE>
<CAPTION>
                                                                     2003             2002              2001
    <S>                                                                <C>             <C>                <C>
    Weighted-average common shares
      outstanding (basic)                                           850,787           885,152          926,955
    Dilutive effect of  assumed exercise
      of stock options                                               51,123            35,800           13,394
                                                                    -------           -------          -------
    Weighted-average common shares
      outstanding (diluted)                                         901,910           920,952          940,349
                                                                    =======           =======          =======
</TABLE>

     11. Stock Option Plan
         -----------------

     In fiscal 1996 the Board of Directors  adopted the Kentucky  First Bancorp,
     Inc.  Stock Option and Incentive  Plan (the "Plan") which  provided for the
     issuance of 173,579 shares  (adjusted for the fiscal 1997 return of capital
     distribution)  of authorized,  but unissued  shares of common stock at fair
     value at the date of grant.  The Plan  provides for one-fifth of the shares
     granted to be  exercisable on each of the first five  anniversaries  of the
     date of the grant.

     The  Company  accounts  for the  Plan in  accordance  with  SFAS  No.  123,
     "Accounting   for   Stock-Based   Compensation,"   which  contains  a  fair
     value-based method for valuing  stock-based  compensation that entities may
     use, which measures  compensation  cost at the grant date based on the fair
     value of the  award.  Compensation  is then  recognized  over  the  service
     period,  which is usually the vesting period.  Alternatively,  SFAS No. 123
     permits  entities  to  continue  to account  for stock  options and similar
     equity  instruments  under Accounting  Principles Board ("APB") Opinion No.
     25,  "Accounting for Stock Issued to Employees."  Entities that continue to
     account for stock options using APB Opinion No. 25 are required to make pro
     forma  disclosures  of net earnings and earnings per share,  as if the fair
     value-based method of accounting defined in SFAS No. 123 had been applied.

     The Company  applies APB  Opinion  No. 25 and  related  Interpretations  in
     accounting for its stock option plan. Accordingly, no compensation cost has
     been  recognized  with respect to the Plan. Had  compensation  cost for the
     Plan been determined  based on the fair value at the grant date in a manner
     consistent  with the accounting  method  utilized in SFAS No. 123, then the
     Company's  consolidated  net earnings and earnings per share for the fiscal
     years ended June 30, 2003,  2002 and 2001,  would have been recorded as the
     pro forma amounts indicated below:

                                      -23-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     11. Stock Option Plan (continued)
         -----------------
<TABLE>
<CAPTION>
                                                                                  2003         2002         2001
<S>                                                                                <C>          <C>           <C>
    Net earnings (In thousands)                           As reported             $872         $947         $739
                                 Stock-based compensation, net of tax               (2)          --          (27)
                                                                                  ----         ----         ----

                                                            Pro-forma             $870         $947         $712
                                                                                  ====         ====         ====

    Earnings per share
      Basic                                               As reported            $1.02        $1.07         $.80
                                 Stock-based compensation, net of tax               --           --         (.03)
                                                                                  ----         ----         ----

                                                            Pro-forma            $1.02        $1.07         $.77
                                                                                  ====         ====         ====

      Diluted                                             As reported             $.97        $1.03         $.79
                                 Stock-based compensation, net of tax             (.01)          --         (.03)
                                                                                  ----         ----         ----

                                                            Pro-forma             $.96        $1.03         $.76
                                                                                  ====         ====         ====
</TABLE>


     The fair value of each option grant is estimated on the date of grant using
     the  modified  Black-Scholes   options-pricing  model  with  the  following
     weighted-average  assumptions  used for  grants  in  fiscal  2003 and 2002:
     dividend yield of 3.5%,  expected volatility of 20.0%, a risk-free interest
     rate of 2.0% and an expected life of ten years.

     A summary of the status of the  Company's  stock option plan as of June 30,
     2003,  2002 and 2001,  and changes during the periods ending on those dates
     is presented below:

<TABLE>
<CAPTION>
                                                    2003                    2002                     2001
                                                         WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                          AVERAGE                 AVERAGE                 AVERAGE
                                                         EXERCISE                EXERCISE                EXERCISE
                                               SHARES      PRICE       SHARES      PRICE       SHARES      PRICE

<S>                                             <C>        <C>          <C>         <C>         <C>          <C>
    Outstanding at beginning of year          142,183  $  9.7767      140,447  $  9.7375      144,282    $9.7375
    Granted                                     1,389    17.0000        1,736    12.9500           --         --
    Exercised                                 (13,886)    9.7375           --         --       (3,835)    9.7375
    Forfeited                                      --         --           --         --           --         --
                                              -------   --------      -------   --------      -------     ------

    Outstanding at end of year                129,686  $  9.8583      142,183  $  9.7767      140,447    $9.7375
                                              =======   ========      =======   ========      =======     ======

    Options exercisable at year-end           128,297  $  9.8248      140,447  $  9.7375      140,447    $9.7375
                                              =======   ========      =======   ========      =======     ======

    Weighted-average fair value of options
      granted during the year                              $2.33                   $1.78                     N/A
                                                            ====                    ====                     ===
</TABLE>

                                      -24-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     11. Stock Option Plan (continued)
         -----------------

     The following information applies to options outstanding at June 30, 2003:
<TABLE>
<CAPTION>
    <S>                                                               <C>
    Number outstanding                                                 128,297
    Range of exercise prices                                  $9.7375-$12.9500
    Number outstanding                                                   1,389
    Range of exercise prices                                          $17.0000
    Weighted-average exercise price                                    $9.8583
    Weighted-average remaining contractual life                      2.9 years
</TABLE>

     12. Investment in Subsidiary
         ------------------------

     The  Savings  Bank  has  a  wholly-owned   subsidiary,   Cynthiana  Service
     Corporation, which was incorporated for the sole purpose of owning stock in
     the Savings Bank's data processor. The subsidiary's assets at June 30, 2003
     and 2002 are limited to a $15,000  investment  in such stock.  As a result,
     the subsidiary has not been consolidated based on materiality.

     13. Fair Value of Financial Instruments
         -----------------------------------

     SFAS No.  107,  "Disclosures  about Fair Value of  Financial  Instruments,"
     requires disclosure of the fair value of financial instruments, both assets
     and liabilities whether or not recognized in the consolidated  statement of
     financial  condition,  for which it is  practicable to estimate that value.
     For financial  instruments  where quoted  market prices are not  available,
     fair values are based on estimates  using present value and other valuation
     methods.

     The methods used are greatly affected by the assumptions applied, including
     the discount rate and estimates of future cash flows.  Therefore,  the fair
     values  presented  may not  represent  amounts that could be realized in an
     exchange for certain financial instruments.

     The  following  methods  and  assumptions  were  used  by  the  Company  in
     estimating its fair value disclosures for financial instruments at June 30,
     2003 and 2002:

               CASH AND CASH EQUIVALENTS:  The carrying amounts presented in the
               consolidated  statements of financial condition for cash and cash
               equivalents are deemed to approximate fair value.

               INVESTMENT AND  MORTGAGE-BACKED  SECURITIES:  For investments and
               mortgage-backed  securities,  fair  value is  deemed to equal the
               quoted market price.

               LOANS  RECEIVABLE:  The loan portfolio has been  segregated  into
               categories  with  similar  characteristics,  such as  one-to-four
               family residential,  multi-family  residential and nonresidential
               real estate.  These loan categories were further  delineated into
               fixed-rate  and  adjustable-rate  loans.  The fair values for the
               resultant loan  categories were computed via discounted cash flow
               analysis,  using  current  interest  rates offered for loans with
               similar terms to borrowers of similar credit  quality.  For loans
               on deposit  accounts and  consumer  and other loans,  fair values
               were deemed to equal the historic carrying values. The historical
               carrying  amount  of  accrued  interest  on  loans is  deemed  to
               approximate fair value.

                                      -25-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     13. Fair Value of Financial Instruments (continued)
         -----------------------------------

               FEDERAL HOME LOAN BANK STOCK:  The carrying  amount  presented in
               the consolidated  statements of financial  condition is deemed to
               approximate fair value.

               DEPOSITS:  The fair value of NOW accounts,  passbook accounts and
               money market deposits is deemed to approximate the amount payable
               on demand.  Fair values for  fixed-rate  certificates  of deposit
               have been  estimated  using a  discounted  cash flow  calculation
               using the  interest  rates  currently  offered  for  deposits  of
               similar remaining maturities.

               ADVANCES  FROM  FEDERAL  HOME LOAN BANK:  The fair value of these
               advances  is  estimated  using the rates  currently  offered  for
               similar  advances  of  similar  remaining   maturities  or,  when
               available, quoted market prices.

               COMMITMENTS TO EXTEND CREDIT: For fixed-rate and  adjustable-rate
               loan   commitments,   the  fair  value  estimate   considers  the
               difference between current levels of interest rates and committed
               rates. The difference  between the fair value and notional amount
               of outstanding loan commitments at June 30, 2003 and 2002 was not
               material.

     Based on the foregoing methods and assumptions, the carrying value and fair
     value of the Company's financial instruments at June 30 are as follows:
<TABLE>
<CAPTION>

                                                                     2003                            2002
                                                        CARRYING            FAIR         CARRYING           FAIR
                                                           VALUE           VALUE            VALUE          VALUE
<S>                                                        <C>                <C>           <C>                <C>
                                                                               (In thousands)
    Financial assets
      Cash and cash equivalents                         $  6,878        $  6,878         $  3,679       $  3,679
      Investment securities                               15,655          15,655           11,105         11,105
      Mortgage-backed securities                          15,287          15,287           22,204         22,204
      Loans receivable                                    33,932          35,253           39,355         40,222
      Federal Home Loan Bank stock                           725             725            1,477          1,477
                                                         -------         -------          -------        -------

         Total financial assets                          $72,477         $73,798          $77,820        $78,687
                                                          ======          ======           ======         ======

    Financial liabilities
      Deposits                                           $52,963         $53,203          $54,119        $54,417
      Advances from the Federal Home Loan Bank             7,676           7,861           11,794         11,738
                                                         -------         -------          -------        -------

         Total financial liabilities                     $60,639         $61,064          $65,913        $66,155
                                                          ======          ======           ======         ======
</TABLE>

                                      -26-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     14. Advertising
         -----------

     Advertising  costs are expensed when  incurred.  The Company's  advertising
     expense  totaled  $26,000,  $26,000 and $25,000 for the fiscal  years ended
     June 30, 2003, 2002 and 2001, respectively.

     15. Cash and Cash Equivalents
         -------------------------

     For purposes of reporting  cash flows,  cash and cash  equivalents  include
     cash  and due from  banks  and  interest-bearing  deposits  due from  other
     financial institutions with original maturities of less than ninety days.

     16. Effects of Recent Accounting Pronouncements
         -------------------------------------------

     In August 2001, the Financial  Accounting  Standards  Board ("FASB") issued
     Statement of Financial  Accounting  Standards ("SFAS") No. 144, "Accounting
     for the Impairment or Disposal of Long-Lived  Assets." SFAS No. 144 carries
     over  the  recognition   and  measurement   provisions  in  SFAS  No.  121.
     Accordingly,  an entity must  recognize an impairment  loss if the carrying
     value of a long-lived  asset or asset group (a) is not  recoverable and (b)
     exceeds its fair value.  Similar to SFAS No. 121,  SFAS No. 144 requires an
     entity to test an asset or asset group for  impairment  whenever  events or
     changes  in  circumstances  indicate  that its  carrying  amount may not be
     recoverable.  SFAS No. 144  differs  from SFAS No. 121 in that it  provides
     guidance on estimating future cash flows to test recoverability.  An entity
     may use either a probability-weighted approach or best-estimate approach in
     developing estimates of cash flows to test recoverability.  SFAS No. 144 is
     effective for financial  statements issued for fiscal years beginning after
     December 15, 2001 and interim periods within those fiscal years. Management
     adopted SFAS No. 144 effective July 1, 2002, without material effect on the
     Company's financial condition or results of operations.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
     Associated  with  Exit or  Disposal  Activities."  SFAS  No.  146  provides
     financial  accounting and reporting guidance for costs associated with exit
     or disposal activities,  including one-time termination benefits,  contract
     termination  costs other than for a capital lease, and costs to consolidate
     facilities  or relocate  employees.  SFAS No. 146 is effective  for exit or
     disposal activities  initiated after December 31, 2002.  Management adopted
     SFAS No. 146  effective  January 1, 2003,  without  material  effect on the
     Company's financial condition or results of operations.

     In October  2002,  the FASB issued SFAS No.  147,  "Accounting  for Certain
     Financial Institutions:  An Amendment of FASB Statements No. 72 and 144 and
     FASB  Interpretation  No.  9,"  which  removes  acquisitions  of  financial
     institutions  from the  scope  of SFAS  No.  72,  "Accounting  for  Certain
     Acquisitions of Banking and Thrift  Institutions,"  except for transactions
     between mutual  enterprises.  Accordingly,  the excess of the fair value of
     liabilities  assumed over the fair value of tangible and intangible  assets
     acquired in a business  combination  should be recognized and accounted for
     as goodwill in accordance with SFAS No. 141,  "Business  Combinations," and
     SFAS No. 142, "Goodwill and Other Intangible Assets."

     SFAS  No.  147 also  requires  that the  acquisition  of a  less-than-whole
     financial  institution,  such as a branch,  be accounted  for as a business
     combination if the transferred assets and activities constitute a business.
     Otherwise,  the  acquisition  should be accounted for as the acquisition of
     net assets.

                                      -27-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     16. Effects of Recent Accounting Pronouncements (continued)
         -------------------------------------------

     SFAS No. 147 also  amends the scope of SFAS No.  144,  "Accounting  for the
     Impairment or Disposal of Long-Lived Assets," to include long-term customer
     relationship   assets   of   financial   institutions   (including   mutual
     enterprises) such as depositor- and borrower-relationship intangible assets
     and credit cardholder intangible assets.

     The provisions of SFAS No. 147 related to unidentifiable  intangible assets
     and  the  acquisition  of  a  less-than-whole   financial  institution  are
     effective for acquisitions for which the date of acquisition is on or after
     October 1, 2002. The provisions related to impairment of long-term customer
     relationship  assets are effective October 1, 2002.  Transition  provisions
     for previously recognized unidentifiable intangible assets are effective on
     October 1, 2002, with earlier application permitted.

     Management adopted SFAS No. 147 effective October 1, 2002, without material
     effect on the Company's financial condition or results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No.
     123,  "Accounting for  Stock-Based  Compensation,"  to provide  alternative
     methods of transition for a voluntary change to the fair value based method
     of accounting for stock-based employee compensation.  In addition, SFAS No.
     148 amends the disclosure requirements of SFAS No. 123 to require prominent
     disclosures  in both  annual and  interim  financial  statements  about the
     method of accounting for stock-based  employee  compensation and the effect
     of the method  used on  reported  results.  SFAS No. 148 is  effective  for
     fiscal years  beginning  after  December 15, 2002.  The interim  disclosure
     provisions  are  effective  for  financial  reports  containing   financial
     statements  for  interim   periods   beginning  after  December  15,  2002.
     Management  adopted the  disclosure  provisions  of SFAS No. 148  effective
     March  31,  2002,  without  material  effect  on  the  Company's  financial
     position, results of operations or cash flows.

     In January  2003,  the FASB issued FASB  Interpretation  No. 46 ("FIN 46"),
     "Consolidation of Variable  Interest  Entities." FIN 46 requires a variable
     interest  entity to be consolidated by a company if that company is subject
     to a  majority  of the risk of loss  from the  variable  interest  entity's
     activities  or  entitled  to receive a majority  of the  entity's  residual
     returns, or both. FIN 46 also requires  disclosures about variable interest
     entities that a company is not required to consolidate, but in which it has
     a significant variable interest.  The consolidation  requirements of FIN 46
     apply  immediately to variable  interest entities created after January 31,
     2003.  The  consolidation  requirements  apply to existing  entities in the
     first fiscal year or interim period beginning after June 15, 2003.  Certain
     of the disclosure  requirements  apply in all financial  statements  issued
     after January 31, 2003, regardless of when the variable interest entity was
     established. The Company has no variable interest entities. Management does
     not  expect  FIN 46 to have a material  effect on the  Company's  financial
     statements.

                                      -28-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     16. Effects of Recent Accounting Pronouncements (continued)
         -------------------------------------------

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative  Instruments and Hedging  Activities"  which  clarifies  certain
     implementation  issues  raised by  constituents  and amends  SFAS No.  133,
     "Accounting for Derivative  Instruments and Hedging Activities," to include
     the  conclusions  reached by the FASB on certain FASB Staff  Implementation
     Issues that,  while  inconsistent  with Statement 133's  conclusions,  were
     considered by the Board to be preferable;  amends SFAS No. 133's discussion
     of financial guarantee contracts and the application of the shortcut method
     to an  interest-rate  swap agreement  that includes an embedded  option and
     amends other pronouncements.

     The guidance in  Statement  149 is generally  effective  for new  contracts
     entered into or modified after June 30, 2003 and for hedging  relationships
     designated after that date.

     Management  does not expect  SFAS No. 149 to have a material  effect on the
     Company's financial position or results of operations.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial Instruments with Characteristics of both Liabilities and Equity,"
     which changes the  classification in the statement of financial position of
     certain  common  financial  instruments  from  either  equity or  mezzanine
     presentation  to  liabilities  and  requires  an issuer of those  financial
     statements  to recognize  changes in fair value or  redemption  amount,  as
     applicable,  in  earnings.  SFAS No.  150  requires  an issuer to  classify
     certain  financial   instruments  as  liabilities,   including  mandatorily
     redeemable preferred and common stocks.

     SFAS  No.  150 is  effective  for  financial  instruments  entered  into or
     modified  after May 31, 2003 and, with one  exception,  is effective at the
     beginning of the first interim period  beginning  after June 15, 2003 (July
     1, 2003 as to the  Company).  The effect of  adopting  SFAS No. 150 must be
     recognized  as a  cumulative  effect  of an  accounting  change  as of  the
     beginning of the period of adoption.  Restatement  of prior  periods is not
     permitted.  Management  does not  expect  SFAS No.  150 to have a  material
     effect on the Company's financial statements.

     17. Reclassifications
         -----------------

     Certain  prior year amounts have been  reclassified  to conform to the 2003
     consolidated financial statement presentation.


                                      -29-
<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES

     The amortized cost, gross  unrealized  gains,  gross unrealized  losses and
     estimated fair values of investment  securities designated as available for
     sale at June 30, 2003 and 2002, are summarized as follows:
<TABLE>
<CAPTION>

                                                                               JUNE 30, 2003
                                                                            GROSS           GROSS      ESTIMATED
                                                       AMORTIZED       UNREALIZED      UNREALIZED           FAIR
                                                            COST            GAINS          LOSSES          VALUE
     <S>                                                  <C>             <C>               <C>              <C>
                                                                               (In thousands)
    U.S. Government agency obligations:
      Due in three years or less                         $11,065             $238          $   (4)       $11,299
      Due after three years through five years               988              107              --          1,095

    Municipal obligations:
      Due in three years or less                           1,423               56              --          1,479
      Due after three years through five years               559               53              --            612
      Due after five years                                 1,100               70              --          1,170
                                                         -------             ----           -----        -------

         Total investment securities                     $15,135             $524          $   (4)       $15,655
                                                          ======              ===           =====         ======

                                                                               JUNE 30, 2002
                                                                            GROSS           GROSS      ESTIMATED
                                                       AMORTIZED       UNREALIZED      UNREALIZED           FAIR
                                                            COST            GAINS          LOSSES          VALUE
                                                                               (In thousands)
    U.S. Government agency obligations:
      Due in three years or less                        $  7,060            $  97           $ (14)      $  7,143
      Due after three years through five years               985               36              --          1,021

    Municipal obligations:
      Due in three years or less                           1,417               54              --          1,471
      Due after three years through five years               321               17              --            338
      Due after five years                                 1,085               47              --          1,132
                                                         -------             ----            ----        -------

         Total investment securities                     $10,868             $251           $ (14)       $11,105
                                                          ======              ===            ====         ======
</TABLE>

    At June 30, 2003, investment securities totaling $2.9 million were pledged
to secure public deposits.


                                      -30-
<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)

     The amortized cost, gross  unrealized  gains,  gross unrealized  losses and
     estimated  fair values of  mortgage-backed  securities at June 30, 2003 and
     2002 are summarized as follows:
<TABLE>
<CAPTION>

                                                                                 JUNE 30, 2003
                                                                             GROSS            GROSS    ESTIMATED
                                                       AMORTIZED        UNREALIZED       UNREALIZED         FAIR
                                                            COST             GAINS           LOSSES        VALUE
    <S>                                                 <C>                     <C>             <C>           <C>
    AVAILABLE FOR SALE:                                                         (In thousands)
      Federal Home Loan Mortgage
        Corporation participation certificates            $1,669             $  59          $    --     $  1,728
      Government National Mortgage
        Association participation certificates               872                44               --          916
      Federal National Mortgage Association
        participation certificates                        12,258               394               (9)      12,643
                                                          ------              ----            -----       ------

         Total mortgage-backed securities                $14,799              $497           $   (9)     $15,287
                                                          ======               ===            =====       ======


                                                                                 JUNE 30, 2002
                                                                             GROSS            GROSS    ESTIMATED
                                                       AMORTIZED        UNREALIZED       UNREALIZED         FAIR
                                                            COST             GAINS           LOSSES        VALUE
    AVAILABLE FOR SALE:                                                         (In thousands)
      Federal Home Loan Mortgage
        Corporation participation certificates          $  5,496             $  73            $  --     $  5,569
      Government National Mortgage
        Association participation certificates             1,494                37               --        1,531
      Federal National Mortgage Association
        participation certificates                        14,913               191               --       15,104
                                                          ------               ---             ----       ------

         Total mortgage-backed securities                $21,903              $301            $  --      $22,204
                                                          ======               ===             ====       ======
</TABLE>

     The amortized cost of mortgage-backed  securities,  by contractual terms to
     maturity, are shown below. Expected maturities will differ from contractual
     maturities  because  borrowers may  generally  prepay  obligations  without
     prepayment penalties.
<TABLE>
<CAPTION>

                                                                             JUNE 30,
                                                                     2003               2002
   <S>                                                               <C>                   <C>
                                                                          (In thousands)
    Due within three years                                   $         3        $         6
    Due in three to five years                                        --                481
    Due in five to ten years                                       4,063                 --
    Due in ten to twenty years                                     8,104             14,668
    Due after twenty years                                         2,629              6,748
                                                                 -------            -------

                                                                 $14,799            $21,903
                                                                  ======             ======

</TABLE>
                                      -31-
<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio at June 30 is as follows:
<TABLE>
<CAPTION>

                                                                                      2003                2002
   <S>                                                                                  <C>                 <C>
                                                                                          (In thousands)
    Residential real estate
      One-to-four family                                                           $20,989             $23,934
      Multi-family                                                                   2,671               2,712
      Construction                                                                     196                 488
    Nonresidential real estate and land                                              7,554               9,440
    Consumer                                                                         1,663               1,658
    Commercial                                                                       1,312               1,566
                                                                                   -------             -------
                                                                                    34,385              39,798
    Less:
      Undisbursed portion of loans in process                                           89                 154
      Deferred loan origination fees                                                    24                  47
      Unearned discount                                                                 --                   1
      Allowance for loan losses                                                        340                 241
                                                                                  --------            --------

                                                                                   $33,932             $39,355
                                                                                  ========            ========
</TABLE>

     The Savings Bank's lending efforts have historically focused on one-to-four
     family and  multi-family  residential  real estate  loans,  which  comprise
     approximately  $23.8  million,  or 70%, of the total loan portfolio at June
     30, 2003,  and $27.0  million,  or 69%, of the total loan portfolio at June
     30, 2002.  Generally,  such loans have been underwritten on the basis of no
     more than an 85% loan-to-value  ratio, which has historically  provided the
     Savings  Bank with  adequate  collateral  coverage in the event of default.
     Nevertheless, the Savings Bank, as with any lending institution, is subject
     to the risk  that real  estate  values  could  deteriorate  in its  primary
     lending area of central  Kentucky,  thereby  impairing  collateral  values.
     However, management is of the belief that residential real estate values in
     the Savings Bank's primary lending area are presently stable.


NOTE D - ALLOWANCE FOR LOAN LOSSES

     The activity in the  allowance for loan losses is summarized as follows for
     the years ended June 30:
<TABLE>
<CAPTION>

                                                                            2003           2002           2001
   <S>                                                                        <C>            <C>            <C>
                                                                                   (In thousands)

    Balance at beginning of year                                            $241           $480           $443
    Provision for (recoveries of) losses on loans                            (50)            39             39
    Net recoveries (charge-offs)                                             149           (278)            (2)
                                                                            ----           ----           ----

    Balance at end of year                                                  $340           $241           $480
                                                                            ====           ====           ====
</TABLE>

                                      -32-
<PAGE>

                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 2003, 2002 and 2001


NOTE D - ALLOWANCE FOR LOAN LOSSES (continued)

     As of June 30,  2003,  the  Savings  Bank's  allowance  for loan losses was
     solely  general in nature,  and was includible as a component of regulatory
     risk-based capital,  subject to certain percentage limitations.  The fiscal
     2002 charge-off related to a loan defined as impaired at June 30, 2001. The
     loan was  charged-off  to the extent of the market value of its  underlying
     collateral in fiscal 2002.  The net recoveries in fiscal 2003 relate to the
     subsequent recovery of this charge-off.

     Nonperforming and nonaccrual loans totaled approximately $146,000,  $51,000
     and $286,000 at June 30, 2003, 2002 and 2001, respectively.

     During the years ended June 30,  2003,  2002 and 2001,  interest  income of
     approximately $1,000,  $17,000 and $29,000,  respectively,  would have been
     recognized  had  nonperforming  loans been  performing in  accordance  with
     contractual terms.


NOTE E - OFFICE PREMISES AND EQUIPMENT

     Office premises and equipment at June 30 are comprised of the following:
<TABLE>
<CAPTION>

                                                                                      2003                2002
  <S>                                                                                   <C>                 <C>
                                                                                           (In thousands)

    Land                                                                           $   466             $   448
    Office buildings and improvements                                                1,173               1,053
    Furniture, fixtures and equipment                                                  480                 415
                                                                                    ------              ------
                                                                                     2,119               1,916
      Less accumulated depreciation and
        amortization                                                                   751                 679
                                                                                    ------              ------

                                                                                    $1,368              $1,237
                                                                                    ======              ======
</TABLE>

                                      -33-

<PAGE>
                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE F - DEPOSITS

Deposits consist of the following major classifications at June 30:

DEPOSIT TYPE AND WEIGHTED-
AVERAGE INTEREST RATE
<TABLE>
<CAPTION>
                                                                                  2003                  2002
        <S>                                                                        <C>                    <C>
                                                                                           (In thousands)
NOW accounts
  2003 - 0.47%                                                                   $10,334
  2002 - 0.85%                                                                                         $10,422
Passbook
  2003 - 1.10%                                                                     6,523
  2002 - 1.75%                                                                                           6,152
Money market deposit accounts
  2003 - 1.23%                                                                     2,897
  2002 - 2.05%                                                                                           2,758
                                                                                 -------               -------
Total demand, transaction and
  passbook deposits                                                               19,754                19,332

Certificates of deposit
  Original maturities of:
    Less than 12 months
      2003 - 2.02%                                                                 9,142
      2002 - 3.04%                                                                                      14,674
    12 months to 24 months
      2003 - 2.48%                                                                16,364
      2002 - 3.69%                                                                                      10,476
    30 months to 36 months
      2003 - 3.89%                                                                 1,256
      2002 - 5.01%                                                                                       1,660
    More than 36 months
      2003 - 4.91%                                                                 1,831
      2002 - 5.49%                                                                                       2,979
  Individual retirement accounts
      2003 - 3.02%                                                                 4,616
      2002 - 4.31%                                                                                       4,998
                                                                                 -------               -------
Total certificates of deposit                                                     33,209                34,787
                                                                                 -------               -------

Total deposit accounts                                                           $52,963               $54,119
                                                                                 =======               =======
</TABLE>

At June 30, 2003 and 2002, the Savings Bank had certificate of deposit  accounts
with  balances in excess of $100,000  totaling  $2.8  million and $3.0  million,
respectively.

                                      -34-

<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE F - DEPOSITS (continued)

    Interest expense on deposits for the year ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>

                                                                            2003           2002           2001
     <S>                                                                     <C>            <C>            <C>
                                                                                     (In thousands)
    NOW, passbook and money market deposit
      accounts                                                           $   213        $   282        $   337
    Certificates of deposit                                                1,095          1,620          1,955
                                                                           -----          -----          -----

                                                                          $1,308         $1,902         $2,292
                                                                           =====          =====          =====
</TABLE>

    Maturities of outstanding certificates of deposit at June 30 are summarized
as follows:
<TABLE>
<CAPTION>

                                                                                           2003           2002
        <S>                                                                                <C>             <C>
                                                                                              (In thousands)

    Less than one year                                                                  $26,605        $29,880
    One to three years                                                                    5,537          4,033
    Over three years                                                                      1,067            874
                                                                                        -------       --------

                                                                                        $33,209        $34,787
                                                                                        =======        =======
</TABLE>


NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

     Advances from the Federal Home Loan Bank,  collateralized  at June 30, 2003
     by pledges of certain  residential  mortgage  loans  totaling $8.2 million,
     certain securities  totaling $1.1 million and the Savings Bank's investment
     in Federal Home Loan Bank stock, are summarized as follows:
<TABLE>
<CAPTION>

                                            MATURING
                                            YEAR ENDING                                        JUNE 30,
    INTEREST RATE                           JUNE 30,                                  2003                2002
                                                                                       (Dollars in thousands)
    <S>                                       <C>                                       <C>                <C>
    5.91%                                   2003                                    $   --            $  1,000
    3.78% - 6.56%                           2004                                     2,000               2,000
    4.04% - 4.23%                           2005                                     2,000               2,000
    1.89%                                   2006                                        --               3,100
    5.64%                                   2010                                     3,000               3,000
    4.00%                                   2025                                       275                 283
    4.00%                                   2026                                        90                  93
    3.00%                                   2030                                       311                 318
                                                                                    ------             -------

                                                                                    $7,676             $11,794
                                                                                    ======             =======

           Weighted-average interest rate                                             4.94%              4.22%
                                                                                      ====               ====
</TABLE>

A $15.0 million cash  management line of credit at the Federal Home Loan Bank is
also  available to the Company.  No advances from the line had been made at June
30, 2003.

                                      -35-
<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE H - FEDERAL INCOME TAXES

     Federal  income  taxes  differ from the amounts  computed at the  statutory
     corporate tax rate for the year ended June 30 as follows:
<TABLE>
<CAPTION>

                                                                            2003           2002           2001
    <S>                                                                       <C>          <C>             <C>
                                                                                     (In thousands)
    Federal income taxes computed at
      statutory rate                                                        $424           $458           $349
    Decrease in taxes resulting from
      municipal interest income                                              (48)           (58)           (61)
                                                                            ----           ----           ----
    Federal income tax provision per consolidated
      statements of earnings                                                $376           $400           $288
                                                                            ====           ====           ====
</TABLE>

    The composition of the Company's net deferred tax liability at June 30 is as
follows:
<TABLE>
<CAPTION>

                                                                                           2003           2002
        <S>                                                                                <C>             <C>
                                                                                               (In thousands)
     Taxes (payable) refundable on temporary
     differences at estimated corporate tax rate:
       Deferred tax assets:
         Allowance for loan losses                                                        $ 115         $   82
         Deferred compensation                                                              108            105
         Retirement plans                                                                    29             29
                                                                                          -----          -----
           Total deferred tax assets                                                        252            216

       Deferred tax liabilities:
         Book/tax depreciation                                                              (36)           (16)
         Federal Home Loan Bank stock dividends                                            (102)          (187)
         Deferred loan origination costs                                                    (62)           (70)
         Employee stock ownership plan                                                      (29)           (29)
         Unrealized gains on securities designated as
           available for sale                                                              (342)          (183)
                                                                                           ----           ----
           Total deferred tax liabilities                                                  (571)          (485)
                                                                                           ----           ----

           Net deferred tax liability                                                     $(319)         $(269)
                                                                                           ====           ====
</TABLE>


                                      -36-

<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE H - FEDERAL INCOME TAXES (continued)

     Prior to 1997,  the Savings Bank was allowed a special bad debt  deduction,
     generally limited to 8% of otherwise taxable income, and subject to certain
     limitations  based on aggregate loans and deposit  account  balances at the
     end of the year. If the amounts that  qualified as  deductions  for federal
     income  taxes are  later  used for  purposes  other  than bad debt  losses,
     including distributions in liquidation,  such distributions will be subject
     to federal  income  taxes at the then  current  corporate  income tax rate.
     Retained earnings at June 30, 2003 include  approximately  $1.6 million for
     which  federal  income  taxes  have  not  been  provided.   The  amount  of
     unrecognized  deferred tax liability  relating to the  cumulative  bad debt
     deduction was approximately $520,000 at June 30, 2003.


NOTE I - LOAN COMMITMENTS

     The Savings Bank is a party to financial instruments with off-balance-sheet
     risk in the normal  course of business to meet the  financing  needs of its
     customers,   including  commitments  to  extend  credit.  Such  commitments
     involve,  to varying degrees,  elements of credit and interest-rate risk in
     excess of the amount recognized in the consolidated  statement of financial
     condition.  The contract or notional amounts of the commitments reflect the
     extent of the Savings Bank's involvement in such financial instruments.

     The Savings Bank's  exposure to credit loss in the event of  nonperformance
     by the other party to the financial  instrument  for  commitments to extend
     credit  is  represented  by  the  contractual   notional  amount  of  those
     instruments.  The  Savings  Bank uses the same  credit  policies  in making
     commitments   and   conditional   obligations   as   those   utilized   for
     on-balance-sheet instruments.

     At  June  30,  2003,  the  Savings  Bank  had  outstanding  commitments  of
     approximately  $188,000 to originate  loans.  In the opinion of  management
     such loan commitments  equaled or exceeded prevailing market interest rates
     as of June  30,  2003,  and will be  funded  from  normal  cash  flow  from
     operations.


NOTE J - RELATED PARTY TRANSACTIONS

     In the normal  course of business,  the Savings Bank has made loans to some
     of its  directors,  officers and  employees.  In the opinion of management,
     such loans are  consistent  with  sound  lending  practices  and are within
     applicable  regulatory lending limitations.  The aggregate dollar amount of
     loans outstanding to directors and executive officers totaled approximately
     $144,000 and $139,000 at June 30, 2003 and 2002, respectively.

     During the fiscal year ended June 30,  2002,  the Company  purchased  5,137
     shares  directly  from a director  of the Company in  conjunction  with its
     share  repurchase  program.  The shares were purchased at $12.75 per share,
     the closing market quote prior to the purchase of the shares.


                                      -37-
<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE K - REGULATORY CAPITAL

     The  Savings  Bank is  subject  to  minimum  regulatory  capital  standards
     promulgated  by the Office of Thrift  Supervision  (the "OTS").  Failure to
     meet minimum capital  requirements  can initiate  certain  mandatory -- and
     possibly  additional  discretionary  --  actions  by  regulators  that,  if
     undertaken,  could  have a  direct  material  effect  on  the  consolidated
     financial statements.  Under capital adequacy guidelines and the regulatory
     framework for prompt corrective action, the Savings Bank must meet specific
     capital guidelines that involve quantitative measures of the Savings Bank's
     assets,  liabilities,  and certain  off-balance-sheet  items as  calculated
     under regulatory accounting  practices.  The Savings Bank's capital amounts
     and  classifications  are also  subject  to  qualitative  judgments  by the
     regulators about components, risk weightings and other factors.

     The minimum capital  standards of the OTS generally require the maintenance
     of regulatory capital  sufficient to meet each of three tests,  hereinafter
     described as the tangible capital requirement, the core capital requirement
     and the risk-based capital  requirement.  The tangible capital  requirement
     provides for minimum tangible capital (defined as shareholders' equity less
     all  intangible  assets) equal to 1.5% of adjusted  total assets.  The core
     capital  requirement  provides for minimum core capital  (tangible  capital
     plus certain forms of supervisory goodwill and other qualifying  intangible
     assets)  equal  to  4.0%  of  adjusted  total  assets,   except  for  those
     associations with the highest  examination  rating and acceptable levels of
     risk. The risk-based  capital  requirement  provides for the maintenance of
     core capital plus general loss  allowances  equal to 8.0% of  risk-weighted
     assets. In computing  risk-weighted assets, the Savings Bank multiplies the
     value of each asset on its  statement of  financial  condition by a defined
     risk-weighting factor, e.g., one- to four-family  residential loans carry a
     risk-weighted factor of 50%.

     During  fiscal  2002,  the Savings Bank was notified by the OTS that it was
     categorized as "well-capitalized" under the regulatory framework for prompt
     corrective action. To be categorized as "well-capitalized" the Savings Bank
     must maintain minimum capital ratios as set forth in the following  tables.
     As of June 30, 2003 and 2002, management believes that the Savings Bank met
     all capital adequacy requirements to which it was subject.

<TABLE>
<CAPTION>
                                                                AS OF JUNE 30, 2003
                                                                                                 TO BE "WELL-
                                                                                              CAPITALIZED" UNDER
                                                                     FOR CAPITAL               PROMPT CORRECTIVE
                                             ACTUAL                ADEQUACY PURPOSES          ACTION PROVISIONS
                                         ---------------           -----------------          ------------------
                                         AMOUNT    RATIO           AMOUNT    RATIO             AMOUNT     RATIO
<S>                                        <C>      <C>             <C>       <C>                <C>         <C>
                                                               (Dollars in thousands)

    Tangible capital                    $11,849    16.2%         >$1,100     >1.5%           >$3,665      >  5.0%
                                                                 -           -               -            -

    Core capital                        $11,849    16.2%         >$2,932     >4.0%           >$4,398      >  6.0%
                                                                 -           -               -            -

    Risk-based capital                  $12,189    36.0%         >$2,710     >8.0%           >$3,387      > 10.0%
                                                                 -           -               -            -
</TABLE>

                                      -38-

<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE K - REGULATORY CAPITAL (continued)
<TABLE>
<CAPTION>
                                                                AS OF JUNE 30, 2002
                                                                                                 TO BE "WELL-
                                                                                              CAPITALIZED" UNDER
                                                                     FOR CAPITAL               PROMPT CORRECTIVE
                                             ACTUAL                ADEQUACY PURPOSES          ACTION PROVISIONS
                                        ----------------         --------------------         ------------------
                                        AMOUNT    RATIO           AMOUNT    RATIO             AMOUNT     RATIO
    <S>                                  <C>       <C>             <C>       <C>               <C>        <C>
                                                               (Dollars in thousands)

    Tangible capital                    $12,129    15.3%          >$1,186     >1.5%           >$3,953     > 5.0%
                                                                  -           -               -           -

    Core capital                        $12,129    15.3%          >$3,162     >4.0%           >$4,744     > 6.0%
                                                                  -           -               -           -

    Risk-based capital                  $12,370    32.1%          >$3,082     >8.0%           >$3,852     >10.0%
                                                                  -           -               -           -
</TABLE>

     The Savings Bank's management  believes that, under the current  regulatory
     capital  regulations,  the Savings  Bank will  continue to meet its minimum
     capital requirements in the foreseeable future.  However, events beyond the
     control of the Savings Bank, such as increased interest rates or a downturn
     in the economy in the Savings Bank's market area,  could  adversely  affect
     future  earnings  and,  consequently,  the ability to meet  future  minimum
     regulatory capital requirements.


                                      -39-

<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE L - CONDENSED FINANCIAL STATEMENTS OF KENTUCKY FIRST BANCORP, INC.

     The  following  condensed  financial  statements  summarize  the  financial
     position of Kentucky First Bancorp,  Inc. as of June 30, 2003 and 2002, and
     the results of its  operations  and its cash flows for the years ended June
     30, 2003, 2002 and 2001.

                          KENTUCKY FIRST BANCORP, INC.
                        STATEMENTS OF FINANCIAL CONDITION
                             June 30, 2003 and 2002
                                 (In thousands)
<TABLE>
<CAPTION>

         ASSETS                                                                       2003                  2002
      <S>                                                                               <C>                  <C>
    Deposits in First Federal Savings Bank                                         $   161               $   113
    Interest-bearing deposits in other financial institutions                          110                    67
    Loan receivable from ESOP                                                          370                   462
    Investment in First Federal Savings Bank                                        12,514                12,484
    Prepaid expenses and other assets                                                   47                     8
    Prepaid federal income taxes                                                        43                    19
                                                                                    ------                ------

         Total assets                                                              $13,245               $13,153
                                                                                    ======                ======

         LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities
      Accounts payable and other liabilities                                       $     6               $     3

    Shareholders' equity
      Common stock and additional paid-in capital                                    9,344                 9,315
      Retained earnings                                                              9,711                 9,386
      Less treasury stock                                                           (6,112)               (5,444)
      Less shares acquired by employee stock ownership plan                           (370)                 (462)
      Unrealized gains on securities designated as available for sale,
        net of related tax effects                                                     666                   355
                                                                                    ------                ------
          Total shareholders' equity                                                13,239                13,150
                                                                                    ------                ------

          Total liabilities and shareholders' equity                               $13,245               $13,153
                                                                                    ======                ======
</TABLE>
<TABLE>
<CAPTION>

                          KENTUCKY FIRST BANCORP, INC.
                             STATEMENTS OF EARNINGS
                    Years ended June 30, 2003, 2002 and 2001
                                 (In thousands)
                                                                              2003           2002           2001
   <S>                                                                         <C>          <C>             <C>
    Revenue
      Interest income                                                       $    5       $     19        $    43
      Equity in earnings of First Federal Savings Bank                         919            983            754
                                                                              ----         ------          -----
          Total revenue                                                        924          1,002            797

    General, administrative and other expense                                   76             74             66
                                                                              ----         ------          -----

    Earnings before income tax credits                                         848            928            731

    Federal income tax credits                                                 (24)           (19)            (8)
                                                                              ----         ------          -----

          NET EARNINGS                                                      $  872       $    947         $  739
                                                                              ====         ======          =====
</TABLE>

                                      -40-
<PAGE>



                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001


NOTE  L -  CONDENSED  FINANCIAL  STATEMENTS  OF  KENTUCKY  FIRST  BANCORP,  INC.
(continued)

                          KENTUCKY FIRST BANCORP, INC.
                            STATEMENTS OF CASH FLOWS
                     Year ended June 30, 2003, 2002 and 2001
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                         2003       2002      2001
<S>                                                                    <C>        <C>        <C>
Cash provided by (used in) operating activities:
  Net earnings for the year                                            $   872    $   947    $   739
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Distributions from consolidated subsidiary in excess of earnings       430         --      1,245
    Undistributed earning of consolidated subsidiary                        --       (482)        --
    Increase (decrease) in cash due to changes in:
      Prepaid expenses and other assets                                    (39)        (5)        --
      Prepaid federal income taxes                                         (24)        (9)        25
      Accounts payable and other liabilities                                 3         (5)         2
                                                                       -------    -------    -------
        Net cash provided by operating activities                        1,242        446      2,011

Cash flows provided by investing activities:
  Proceeds from repayment of loan                                           92         93         93

Cash flows provided by (used in) financing activities:
  Proceeds from note payable                                                --         --        100
  Repayment of note payable                                                 --         --       (100)
  Dividends on common stock                                               (547)      (547)      (507)
  Proceeds from exercise of stock options                                  136         --         39
  Purchase of treasury stock                                              (832)      (190)    (1,260)
                                                                       -------    -------    -------
        Net cash used in financing activities                           (1,243)      (737)    (1,728)
                                                                       -------    -------    -------

Net increase (decrease) in cash and cash equivalents                        91       (198)       376

Cash and cash equivalents at beginning of year                             180        378          2
                                                                       -------    -------    -------

Cash and cash equivalents at end of year                               $   271    $   180    $   378
                                                                       =======    =======    =======
</TABLE>

     The Savings Bank is subject to regulations  imposed by the Office of Thrift
     Supervision ("OTS") regarding the amount of capital  distributions  payable
     by the Savings Bank to the Company.  Generally,  the Savings Bank's payment
     of dividends is limited,  without prior OTS approval, to net income for the
     current calendar year plus the two preceding  calendar years,  less



                                      -41-
<PAGE>

     capital  distributions  paid  over  the  comparable  time  period.  Insured
     institutions  are required to file an application  with the OTS for capital
     distributions in excess of this limitation.  In July 2002, the Savings Bank
     received OTS approval to make $1.5 million in

                                      -42-
<PAGE>


                          KENTUCKY FIRST BANCORP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          JUNE 30, 2003, 2002 AND 2001

     capital  distributions to the Company within the twelve months  thereafter.
     In fiscal 2003, the Savings Bank declared and paid  distributions  totaling
     $1,350,000  pursuant to such approval.  The remaining $150,000 was declared
     and paid in July 2003


    NOTE M - AGREEMENT AND PLAN OF MERGER

     On July 8, 2003,  the Company  entered into an Agreement and Plan of Merger
     with Kentucky  Bancshares,  Inc., a Kentucky  corporation  (which was named
     Bourbon  Bancshares,  Inc.  at the time of the  signing of the  Agreement).
     Pursuant to the Agreement,  Kentucky Bancshares,  Inc. will pay $23.25 cash
     per share for all of the  outstanding  shares of  Kentucky  First  Bancorp,
     Inc.'s common stock. The agreement is subject to shareholder and regulatory
     approval and the transaction is expected to be completed in November 2003.



                                      -43-
<PAGE>



                               BOARD OF DIRECTORS
<TABLE>
<CAPTION>

<S>                                          <C>                                             <C>
WILLIAM D. MORRIS                          MILTON G. REES                               JOHN SWINFORD
Chairman of the Board                      Retired                                      Attorney, Swinford & Sims,
of the Company and the Bank                                                             P.S.C.

BETTY J. LONG                              DIANE E. RITCHIE                             WILBUR H. WILSON
President and Chief Executive              Director                                     Retired
Officer of the Company and
the Bank                                   LUTHER O. BECKETT                            CHARLES S. BRUNKER
                                           Vice Chairman of the Board and               Director
                                           of the Company and the Bank


                                          EXECUTIVE OFFICERS



WILLIAM D. MORRIS                          LUTHER O. BECKETT                            BETTY J. LONG
Chairman of the Board of the               Vice Chairman of the Board and               President and Chief Executive
Company and the Bank                       of the Company and the Bank                  Officer of the Company and the
                                                                                        Bank

RHONDA BROWN                               KEVIN R. TOLLE
Branch Manager                             Vice President and                           ROBBIE G. COX
Vice President of the Bank                 Secretary/Treasurer of the Bank              Vice President and
                                           and Vice President and                       Chief Financial Officer
                                           Secretary/Treasurer of the
                                           Company

                                        OFFICE LOCATIONS

MAIN OFFICE AND CORPORATE                                                               BRANCH OFFICE:
HEADQUARTERS:                                                                           106 Ladish Road
308 North Main Street                                                                   Cynthiana, Kentucky 41031-1210
Cynthiana, Kentucky 41031-1210
(859) 234-1440

                                                                                        STOCKHOLDER INQUIRIES AND
                                                                                        AVAILABILITY OF 10-KSB REPORT:
                                        GENERAL INFORMATION                             A COPY OF THE
INDEPENDENT AUDITORS:                                                                   COMPANY'S ANNUAL
Grant Thornton LLP                        ANNUAL MEETING:                               REPORT ON FORM 10-KSB
Suite 900                                 The Annual Meeting of                         FOR THE FISCAL YEAR
625 Eden Park Drive                       Stockholders will be held on                  ENDED JUNE 30, 2003 AS
Cincinnati, Ohio 45202                    October 23, 2003 at 5:15 p.m., at             FILED WITH THE
                                          First Federal Savings Bank                    SECURITIES AND
SPECIAL COUNSEL:                          308 North Main Street                         EXCHANGE COMMISSION
Stradley Ronon Stevens & Young            Cynthiana, Kentucky 41031-1210                WILL BE FURNISHED
LLP                                                                                     WITHOUT CHARGE TO
1220 19th Street, NW Suite 600            TRANSFER AGENT AND REGISTRAR                  STOCKHOLDERS AS OF
Washington, DC  20036                     Registrar and Transfer Company                THE RECORD DATE FOR
                                          10 Commerce Drive                             THE OCTOBER 23, 2003
                                          Cranford, New Jersey  07016                   ANNUAL MEETING UPON
                                                                                        WRITTEN REQUEST TO
                                                                                        INVESTOR RELATIONS,
                                                                                        KENTUCKY FIRST
                                                                                        BANCORP, INC., 308
                                                                                        NORTH MAIN STREET,
                                                                                        CYNTHIANA, KENTUCKY
                                                                                        41031-1210
</TABLE>