SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission File Number: 0-18832

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FIRST FEDERAL FINANCIAL CORPORATION
OF KENTUCKY(Exact name of registrant as specified in its charter)

|Kentucky                                                       |  | 61-1168311                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|2323 Ring Road, Elizabethtown, Kentucky                        |  | 42701                               
|(Address of principal executive offices)                       |  | Zip Code                            

Registrant's telephone number, including area code:(270) 765-2131

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $1.00 per share(Title of Class)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety
days. Yes ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

The aggregate market value of the outstanding voting stock held by non-affiliates of the registrant based on a June 30, 2003 closing price of
$32.47 as quoted on the NASDAQ National Market was $95,967,877. Solely for purposes of this calculation, the shares held by directors and executive officers of the registrant and by any stockholder
beneficially owning more than 5% of the registrant's outstanding common stock are deemed to be shares held by affiliates.

As
of February 27, 2004 there were issued and outstanding 3,705,438 shares of the registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE



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FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
2003 ANNUAL REPORT AND FORM 10-K

TABLE OF CONTENTS

|           |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  | Part I.                                                                               |  |     
|Item 1.    |  | Business                                                                              |  | 3   
|Item 2.    |  | Properties                                                                            |  | 15  
|Item 3.    |  | Legal Proceedings                                                                     |  | 15  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 15  
|           |  | Part II.                                                                              |  |     
|Item 5.    |  | Market for Registrant's Common Stock and Related Stockholder Matters                  |  | 16  
|Item 6.    |  | Selected Financial Data                                                               |  | 17  
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 18  
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 39  
|Item 8.    |  | Financial Statements and Supplementary Data                                           |  | 40  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |  | 74  
|Item 9A.   |  | Controls and Procedures                                                               |  | 74  
|           |  | Part III.                                                                             |  |     
|Item 10.   |  | Directors and Executive Officers of the Registrant                                    |  | 74  
|Item 11.   |  | Executive Compensation                                                                |  | 74  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 74  
|Item 13.   |  | Certain Relationships and Related Transactions                                        |  | 75  
|           |  | Part IV.                                                                              |  |     
|Item 14.   |  | Principal Accountant Fees and Services                                                |  | 75  
|Item 15.   |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 76  
|Signatures |  | 77                                                                                   

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PART I

Preliminary Note Regarding Forward-Looking Statements

Statements by First Federal Financial Corporation of Kentucky (the "Corporation") contained in "Item 1Business,"
"Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations," and other sections of this report that are not statements of historical fact
constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). In addition, the Corporation may make forward-looking
statements in future filings with the Securities and Exchange Commission ("SEC"), in press releases, and in oral and written statements made by or with the approval of the Corporation. Forward-looking
statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per share, capital and other financial items; (2) statements of plans and
objectives of the Corporation or its management or Board of Directors; (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions
underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "plans," "targeted," and similar expressions are intended to identify forward-looking statements, but are not
the exclusive means of identifying such statements.

Forward-looking
statements involve risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements. Some of the events
or circumstances that could cause such difference include the following: changes in general economic conditions and economic conditions in Kentucky and the markets served by the Corporation any of
which may affect, among other things, the level of non-performing assets, charge-offs, and provision expense; changes in the interest rate environment which may reduce interest
margins and impact funding sources; changes in market rates and prices which may adversely impact the value of financial products including securities, loans and deposit; changes in tax laws, rules
and regulations; various monetary and fiscal policies and regulations, including those established by the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Kentucky Department
of Financial Institutions; competition with other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions; ability to grow core
businesses; ability to develop and introduce new banking-related products, services and enhancements and gain market acceptance of such products; and management's ability to manage these and other
risks.

Item 1.    Business

General Description

The Corporation

First Federal Financial Corporation of Kentucky was incorporated in August 1989 under the laws of the Commonwealth of Kentucky and became the holding
company for First Federal Savings Bank of Elizabethtown ("First Federal" or the "Bank"), effective on June 1, 1990. Since that date, the Corporation has engaged in no significant activity other
than holding the stock of First Federal and directing, planning and coordinating the business of the Bank. Accordingly, the information set forth in this report, including financial statements and
related data, relates primarily to First Federal and its subsidiaries.

On
January 8, 2003, First Federal converted to a Kentucky chartered commercial bank from a federally chartered savings bank. In connection with the conversion, both the
Corporation and First Federal changed to a fiscal year ending on December 31. This report covers the year ended December 31, 2003.

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The Bank

First Federal is headquartered in Elizabethtown, Kentucky. First Federal was originally founded in 1923 as a state-chartered institution and became federally
chartered in 1940. In 1987, the Bank converted to a federally chartered savings bank and converted from mutual to stock form. The Bank is a member of the FHLB of Cincinnati and, since converting to a
state charter, is subject to regulation, examination
and supervision by the Federal Deposit Insurance Corporation ("FDIC") and Kentucky Department of Financial Institutions ("KDFI"). The Bank's deposits are insured by the Savings Association Insurance
Fund ("SAIF") and administered by the FDIC.

The
Bank serves the needs and caters to the economic strengths of the local communities in which it operates and strives to provide a high level of personal and professional customer
service. The Bank offers a variety of financial services to its retail and commercial banking customers. These services include personal and corporate banking services, trust and estate planning, and
personal investment financial counseling services.

Our
full complement of lending services includes:



The
Bank also provides a broad selection of deposit instruments. These include:



The
Bank also supports its customers by providing services such as:



Through
the Bank's trust and estate planning and our personal investment financial counseling services, it offers a wide variety of mutual funds, equity investments, and fixed and
variable annuities.

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The
Bank participates in the wholesale capital markets through the management of its security portfolio and its use of various forms of wholesale funding. The security portfolio contains
a variety of instruments, including callable debentures, taxable and non-taxable debentures, fixed and adjustable rate mortgage backed securities, and collateralized mortgage obligations.

The
Bank's results of operations depend primarily on net interest income, which is the difference between interest income from interest-earning assets and interest expense on
interest-bearing liabilities. The Bank's operations are also affected by non-interest income, such as service charges, insurance agency revenue, loan fees, gains and losses from the sale
of mortgage loans and gains from the sale of real estate held for development. Its principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy
costs, data processing expense and provisions for loan losses.

On
July 1, 2003, the Corporation joined the Russell 3000 Index and will remain in place for one year in the small-cap Russell 2000 Index. Annual reconstitution of the
Russell indexes identifies the 3,000 largest U.S. stocks as of the end of May, ranking them by total market capitalization to create the Russell 3000. The largest 1,000 companies in the ranking
comprise the Russell 1000 Index, while the remaining 2,000 companies become the widely used Russell 2000 Index. Membership in Russell's 21 U.S. equity indexes is determined primarily by market
capitalization rankings and style attributes. Russell indexes are widely used by managers for index funds and as benchmarks for both passive and active investment strategies. Management anticipates
that the Corporation will remain in the Russell 2000 Index until the next annual reconstitution in May 2004.

Market Area Served

The Bank's primary market area consists of six counties in Central Kentucky: Hardin; Hart; Nelson; Bullitt; Meade; and Jefferson. The following table provides
demographic and economic information by county as of December 31, 2003.

|County    |  | Population |  | Trend(1) |   | % Below
Poverty |  | Number
Employed |  | Unemployment
Rate% |  | Trend(1) |    | Average
Weekly
Wage |  | Median
Family
Income |  | Median
Home
Price
|--------- |  | ---------- |  | -------- | - | --------------- |  | --------------- |  | ------------------ |  | -------- | -- | ------------------- |  | -------------------- |  | -----------------
|Hardin    |  | 95,724     |  | 2.0      | % | 8.2             |  | 38,545          |  | 6.90               |  | 0.4      | %  | 537                 |  | 50,200               |  | 86,000           
|Hart      |  | 17,445     |  | 1.0      | % | 18.6            |  | 4,201           |  | 4.80               |  | (0.8     | )% | 406                 |  | 35,200               |  | 45,000           
|Nelson    |  | 38,823     |  | 4.0      | % | 10.0            |  | 12,859          |  | 6.70               |  | (0.3     | )% | 514                 |  | 49,400               |  | 71,375           
|Bullitt   |  | 63,800     |  | 3.0      | % | 6.2             |  | 11,680          |  | 5.20               |  | 1.1      | %  | 478                 |  | 56,200               |  | 93,250           
|Meade     |  | 27,439     |  | 4.0      | % | 9.3             |  | 3,717           |  | 6.60               |  | 0.5      | %  | 479                 |  | 44,000               |  | 70,100           
|Jefferson |  | 698,080    |  | 1.0      | % | 9.5             |  | 431,473         |  | 5.60               |  | 1.0      | %  | 667                 |  | 56,200               |  | 102,650          

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General and Operating Strategies

The Bank's operating strategy is to serve the needs and cater to the economic strengths of the local communities in which it operates and strives to provide a
high level of personal and professional customer service. The Bank offers a variety of financial services to our retail and commercial banking customers.

Our
growth strategy is focused on a combination of acquisitions and expansion in our existing markets through internal growth as well as establishing new branches.

Acquisitions.Management believes that the consolidation in the banking industries, along with the easing of branch banking,
as well as increased regulatory burdens, concerns about technology and marketing, are likely to lead owners of community banks and agencies within the Bank's market areas

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to
explore the possibility of sale or combination with a broader-based financial service companies such as ourselves.

In
addition, branching opportunities have arisen from time to time as a result of divestiture of branches by large national and regional bank holding companies of certain overlapping
branches resulting from consolidations. As a result, branch locations have become available for purchase.

Management's
strategy in assimilating acquisitions is to emphasize revenue growth as well as to continuously review the operations of the acquired entities and streamline operations
where feasible. Management does not believe that implementing wholesale administrative cost reductions in acquired institutions are beneficial to our long-term growth, because significant
administrative changes in community banks can have an adverse impact on customer satisfaction in the acquired institution's community. However, management has determined that certain human resource,
processing, and accounting functions can be consolidated immediately upon acquisition to achieve higher productivity levels without compromising customer service. Increases in revenue growth are
emphasized by offering customers a broader product line consistent with full service banking.

Branch Expansion.Management continues to consider markets for branch expansion. Because of the economic growth in the Bank's
markets over the past several years, management may consider further branch expansion in its current or surrounding market areas. However, the Bank does not rule out branch expansion in other areas
experiencing economic growth. As discussed above, we anticipate opening two new branches in Jefferson County in early 2004.

The
Bank considers a variety of criteria when evaluating potential acquisition candidates or branching opportunities. These include:



Internal Growth.Management believes that its largest source of internal growth is through our ongoing solicitation program
conducted by branch managers and lending officers, followed by referrals from customers. The primary reason for referrals is positive customer feedback regarding our customer service and response
time.

The
Bank's goal in continuing its expansion is to maintain a profitable, customer-focused financial institution. The Bank believes that its existing structure, management, data and
operational systems are sufficient to achieve further internal growth in asset size, revenues and capital without proportionate increases in operating costs. This growth should also allow us to
increase the lending limits, thereby enabling the Bank to increase our ability to serve the needs of existing and new customers. The Bank's operating strategy has always been to provide high quality
community banking services to our customers and increase market share through active solicitation of new business, repeat business and referrals from customers, and continuation of selected
promotional strategies.

For
the most part, the Bank's customers seek a banking relationship with a service-oriented community banking organization. Our operational systems have been designed to facilitate
personalized

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service.
Management believes its banking locations have an atmosphere which facilitates personalized services and decision-making, yet are of sufficient financial size with broad product lines to meet
customers' needs. Management also believes that economic expansion in the Bank's market areas will continue to contribute to internal growth. Through our primary emphasis on customer service and our
management's banking experience, the Bank intends to continue internal growth by attracting customers and primarily focusing on the following:



Lending Activities

Residential Real Estate & Construction Lending.Residential mortgage loans made by First Federal are secured primarily
by single-family homes and include construction loans. The majority of First Federal's mortgage loan portfolio is secured by real estate in Hardin, Nelson, Hart, Meade, and Bullitt counties. Fixed
rate residential real estate loans originated by the Bank have terms ranging from ten to thirty years. Interest rates are competitively priced within the primary geographic lending market, and vary
according to the term for which they are fixed.

The
Bank generally emphasizes the origination of adjustable-rate mortgage loans ("ARMs") when possible. The Bank offers six ARM products with an annual adjustment, which is
tied to a national index with a maximum adjustment of 2% annually, and a lifetime maximum adjustment cap of 6%. As of December 31, 2003, approximately 38.4% of the Bank's residential real
estate loans were adjustable rate loans with adjustment periods ranging from one to five years and balloon loans of seven years or less. The origination of these ARMs can be more difficult in a
low interest rate environment where there is a significant demand for fixed rate mortgages. The Bank limits the maximum loan-to-value ratio on
one-to-four-family residential first mortgages to 90% of the appraised value and generally limits the loan-to-value ratio on second
mortgages on one-to-four-family dwellings to 90%.

Construction
loans involve additional risks because loan funds are advanced upon the security of the project under construction, which is of uncertain value before the completion of
construction. The uncertainties inherent in estimating construction costs, delays arising from labor problems, material shortages, and other unpredictable contingencies, make it relatively difficult
to evaluate accurately the total loan funds required to complete a project, and related loan-to-value ratios. The analysis of

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prospective
construction loan projects requires significantly different expertise from that required for permanent residential mortgage lending.

The
Bank's underwriting criteria are designed to evaluate and minimize the risks of each construction loan. Among other things, the Bank considers evidence of the availability of
permanent financing or a takeout commitment to the borrower; the reputation of the borrower and his or her financial condition; the amount of the borrower's equity in the project; independent
appraisals and cost estimates; pre-construction sale and leasing information; and cash flow projections of the borrower.

Commercial Real Estate Lending.The largest portion of the Bank's lending activity is the origination of commercial loans
that are primarily secured by real estate and are generated at banking centers primarily in the Bank's market area. In recent years, First Federal has put greater emphasis on small business lending,
originating loans for small and medium-sized businesses from its various locations.    The Bank makes commercial loans to a variety of industries. Substantially all of the commercial real
estate loans originated by First Federal have adjustable interest rates with maturities of 25 years or less or are loans with fixed interest rates and maturities of five years or less. At
December 31, 2003, the Bank had $239.4 million outstanding in commercial real estate loans. The security for commercial real estate loans includes retail businesses, warehouses,
churches, apartment buildings and motels. In addition, the payment experience of loans secured by income producing properties typically depends on the success of the related real estate project and
thus may be more vulnerable to adverse conditions in the real estate market or in the economy generally.

Loans
secured by multi-family residential property, consisting of properties with more than four separate dwelling units amounted to $18.6 million of the loan portfolio at
December 31, 2003. First Federal generally does not lend above 75% of the appraised values of multi-family residences on first mortgage loans. The mortgage loans First Federal currently offers
on multi-family dwellings are generally one or five year ARMs with maturities of 25 years or less.

Consumer Lending.The Bank's consumer loans include loans on automobiles, boats, recreational vehicles and other consumer
goods, as well as loans secured by savings accounts, home improvement loans, and unsecured lines of credit. As of December 31, 2003, consumer loans outstanding were $81.8 million or
approximately 14.8% of the Bank's total gross loan portfolio. These loans involve a higher risk of default than loans secured by one-to-four-family residential
loans. The Bank believes, however, that the shorter term and the normally higher interest rates available on various types of consumer loans helps maintain a profitable spread between the Bank's
average loan yield and its cost of funds. Home equity lines of credit as of December 31, 2003, totaled $38.4 million.

The
Bank's underwriting standards reflect the greater risk in consumer lending than in residential real estate lending. Among other things, the capacity of individual borrowers to repay
can change rapidly, particularly during an economic downturn, collection costs can be relatively higher for smaller loans, and the value of collateral may be more likely to depreciate. The Consumer
Lending Policy establishes the appropriate consumer lending authority for all loan officers based on experience, training, and past performance for approving high quality loans. Loans beyond
individual authorities must be approved by additional officers, the Executive Loan Committee or the Board of Directors, based on the size of the loan. The Bank requires detailed financial information
and credit bureau reports for each consumer loan applicant to establish the applicant's credit history, the adequacy of income for debt retirement, and job stability based on the applicant's
employment records. Co-signers are required for applicants who are determined marginal or who fail to qualify individually under these standards.
Adequate collateral is required on the majority of consumer loans. The Executive Loan Committee monitors and evaluates unsecured lending activity by each loan officer.

In
1999, the Bank developed an indirect consumer loan program. The indirect consumer loan portfolio is comprised of new and used automobile, motorcycle and all terrain vehicle loans
originated on the behalf of the Bank by a select group of auto dealers within the service area. Indirect consumer

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loans
are considered to have greater risk of loan losses than direct consumer loans due to, among other things: borrowers may have no existing relationship with the Bank; borrowers may not be
residents of the lending area; less detailed financial statement information may be collected at application; collateral values can be more difficult to determine; and the condition of vehicles
securing the loan can deteriorate rapidly. To address the additional risks associated with indirect consumer lending, the Executive Loan Committee continually evaluates data regarding the dealers
enrolled in the program, including monitoring turn down and delinquency rates. All applications are approved by specific lending officers, selected based on experience in this field, who obtain credit
bureau reports on each application to assist in the decision. Aggressive collection procedures encourage more timely recovery of late payments. At December 31, 2003, total loans under the
indirect consumer loan program totaled $28.3 million.

Commercial Business Lending.The commercial business loan portfolio has grown in recent years as a result of the Bank's focus
on small business lending. The Bank makes secured and unsecured loans for commercial, corporate, business, and agricultural purposes, including issuing letters of credit and engaging in inventory
financing and commercial leasing activities. Commercial loans generally are made to small-to-medium size businesses located within the Bank's defined market area. Commercial
loans generally carry a higher yield and are made for a shorter term than real estate loans. Commercial loans, however, involve a higher degree of risk than residential real estate loans due to
potentially greater volatility in the value of the assigned collateral, the need for more technical analysis of the borrower's financial position, the potentially greater impact that changing economic
conditions may have on the borrower's ability to retire debt, and the additional expertise required for commercial lending personnel.    Commercial business loans outstanding at
December 31, 2003 totaled $30.3 million.

Subsidiary Activities

In 1978, the Bank formed First Service Corporation of Elizabethtown ("First Service"). First Service acts as a broker for the purpose of selling mortgage life,
credit life and accident and disability insurance to the Bank's customers. As well as investment services to the Bank's customers in the area of tax-deferred annuities, government
securities and stocks and bonds. First Service employs four full-time employees to perform these services. This investment function operates under licenses held by First Service. The net
income of First Service was $47,000 for the year ended December 31, 2003.

In
July 1999, the Bank formed First Heartland Mortgage Company of Elizabethtown ("First Heartland") through which the secondary market lending department originates qualified VA,
KHC, RHC and conventional secondary market loans on the behalf of the investors, thereby providing necessary liquidity to the Bank and needed loan products to the Bank's customers. The loans are sold
with servicing released. The Bank has continued to experience good growth in the level of mortgages being processed by First Heartland. During 2003, First Heartland originated $87.5 million in
loans on the behalf of investors. The net income of First Heartland Mortgage was $516,000 for the year ended December 31, 2003.

In
March 2003, the Bank formed First Federal Office Park, LLC, a direct result of the charter conversion. The subsidiary holds commercial lots adjacent to the Bank's home office
on Ring Road in Elizabethtown, which are available for sale. During the year ended December 31, 2003 the Bank sold two lots resulting in a $452,000 gain.

In
March 2003, the Bank also formed First Heartland Title, LLC, through which the Bank provides title insurance coverage for mortgage borrowers. The subsidiary is a joint venture
with a local title insurance company in which the Bank holds a 48% interest. The new LLC generated $250,000 in net income for the year ended December 31, 2003 of which the Bank's portion was
$120,000.

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Competition

First Federal faces substantial competition both in attracting and retaining deposits and in lending. Direct competition for deposits comes from commercial banks,
savings institutions, and credit unions located in north-central Kentucky, and less directly from money market mutual funds and from sellers of corporate and government debt securities.

The
primary competitive factors in lending are interest rates and loan origination fees and the range of services offered by the various financial institutions. Competition for
origination of real estate loans normally comes from commercial banks, savings institutions, mortgage bankers, mortgage brokers, and insurance companies. Retail establishments effectively compete for
loans by offering credit cards and retail installment contracts for the purchase of goods and merchandise. Management believes that First Federal has been able to compete effectively in its primary
market area.

First
Federal has offices in nine cities in six contiguous counties. In addition to the financial institutions, with offices in these counties, First Federal competes with several
commercial banks and savings institutions in surrounding counties, many of which have assets substantially greater than First Federal. These competitors attempt to gain market share through their
financial product mix, pricing strategies, internet banking and banking center locations. In addition, Kentucky's interstate banking statute, which permits banks in all states to enter the Kentucky
market if they have reciprocal interstate banking statutes, has further increased competition for the Bank. We believe that competition from both bank and non-bank entities will continue
to remain strong in the near future.

The
following table sets forth the Bank's market share and rank in terms of deposits in each Kentucky county where it has offices. The Bank has one office in Jefferson County, which is
Metro Louisville, Kentucky, with a population of more than 650,000.

County

Number of Offices

FFKY Market Share %

FFKY RankHardin

4

21.74

2Nelson

2

9.61

3Hart

1

18.01

3Bullitt

2

21.07

3Meade

3

57.12

1Jefferson

1

<1.00

N/M


Employees

As of December 31, 2003, the Bank had 247 employees of which 227 were full-time and 20 part-time. None of the Bank's employees are
subject to a collective bargaining agreement, and the Bank believes that it enjoys good relations with its personnel.

Regulation

General Regulatory Matters.On January 8, 2003, First Federal converted from a federally chartered savings bank to a
Kentucky chartered commercial bank. Before the conversion, First Federal was subject to the regulation of the Office of Thrift Supervision. As a Kentucky chartered commercial bank, First Federal is
now subject to supervision and regulation, which involves regular bank examinations, by both the Federal Deposit Insurance Corporation ("FDIC") and the Kentucky Department of Financial Institutions
("KDFI"). The deposits of First Federal are insured by the FDIC. Kentucky's banking statutes contain a "super-parity" provision that permits a well-rated Kentucky banking corporation to
engage in any banking activity in which a national bank operating in any state; a state bank, thrift or savings bank operating in any other state; or a federal chartered thrift or federal savings
association meeting the qualified thrift lender test and operating in any state could engage,

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provided
it first obtains a legal opinion specifying the statutory or regulatory provisions that permit the activity.

In
connection with the conversion, the Corporation registered to become a bank holding company under the Bank Holding Company Act of 1956, and is subject to supervision and regulation by
the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). As a bank holding company, the Corporation is required to file with the Federal Reserve Board annual and quarterly
reports and other information regarding its business operations and the business operations of its subsidiaries. The Corporation is also subject to examination by the Federal Reserve Board and to
operational guidelines established by the Federal Reserve Board. The Corporation is subject to the Bank Holding Company Act and other federal laws on the types of activities in which it may engage,
and to other supervisory requirements, including regulatory enforcement actions for violations of laws and regulations.

Acquisitions and Change in Control.As a bank holding company, the Corporation must obtain Federal Reserve Board approval
before acquiring, directly or indirectly, ownership or control of more than 5% of the voting stock of a bank, and before engaging, or acquiring a company that is not a bank but is engaged in certain
non-banking activities. In approving these acquisitions, the Federal Reserve Board considers a number of factors, and weighs the expected benefits to the public such as greater
convenience, increased competition and gains in efficiency, against the risks of possible adverse effects such as undue concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. The Federal Reserve Board also considers the financial and managerial resources of the bank holding company, its subsidiaries and any company to be acquired, and
the effect of the proposed transaction on these resources. It also evaluates compliance by the holding company's financial institution subsidiaries and the target institution with the Community
Reinvestment Act. The Community Reinvestment Act generally requires each financial institution to take affirmative action to ascertain and meet the credit needs of its entire community, including low
and moderate income neighborhoods.

Federal
law also prohibits a person or group of persons from acquiring "control" of a bank holding company without notifying the Federal Reserve Board in advance, and then only if the
Federal Reserve Board does not object to the proposed transaction. The Federal Reserve Board has established a rebuttable presumptive standard that the acquisition of 10% or more of the voting stock
of a bank holding company with a class of securities registered under the Securities Exchange Act of 1934 would constitute an acquisition of control of the bank holding company. In addition, any
company is required to obtain the approval of the Federal Reserve Board before acquiring 25% (5% in the case of an acquiror that is a bank holding company) or more of any class of a bank holding
company's voting securities, or otherwise obtaining control or a "controlling influence" over a bank holding company.

The Gramm-Leach-Bliley Act.The Gramm-Leach-Bliley Act of 1999 (the "GLB Act"), signed into law on November 12, 1999,
amended a number of Federal banking laws that affect the Corporation and First Federal. The provisions of the GLB Act believed to be of most significance to the Corporation and First Federal are
discussed below. In particular, the GLB Act permits a bank holding company to elect to become a financial holding company, which permits the holding company to conduct activities that are "financial
in nature." To become and maintain its status as a financial holding company, the bank holding company and all of its affiliated depository institutions must be well-capitalized, well
managed, and have at least a satisfactory Community Reinvestment Act rating. The Corporation has not filed an election to became a financial holding company.

The
GLB Act also repeals most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. In particular, the GLB Act repeals sections 20
and 32 of the Glass-Steagall Act, thus permitting unrestricted affiliations between banks and securities firms. The GLB Act also provides that, while the states continue to have the authority to
regulate insurance

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activities,
in most instances they are prohibited from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations
or cross-marketing activities. Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically
regulate bank insurance activities in areas identified in the GLB Act. Federal bank regulatory agencies adopted insurance consumer protection regulations that apply to sales practices, solicitations,
advertising and disclosures that became effective April 1, 2001.

The
GLB Act contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, at the inception of the customer
relationship and annually thereafter, the institution's policies and procedures regarding the handling of customers' nonpublic personal financial information. The GLB Act provides that, except for
certain limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so
provided and the customer is given the opportunity to opt out of such disclosure. An institution may not disclose to a non-affiliated third party, other than to a consumer reporting
agency, customer account numbers or other similar account identifiers for marketing purposes. The GLB Act allows the states to adopt stricter customer privacy protections. The Act also makes it a
criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means. The GLB Act also contains requirements
for the posting of notices by operators of automated teller machines regarding fees charged for the use of such machines.

Other Holding Company Regulations.Federal law substantially restricts transactions between financial institutions and their
affiliates. As a result, a bank is limited in extending credit to its holding company (or any non-bank subsidiary), in investing in the stock or other securities of the bank holding
company or its non-bank subsidiaries, and/or in taking such stock or securities as collateral for loans to any borrower. Moreover, transactions between a bank and a bank holding company
(or any non-bank subsidiary) must generally be on terms and under circumstances at least as favorable to the bank as those prevailing in comparable transactions with independent third
parties or, in the absence of comparable transactions, on terms and under circumstances that in good faith would be available to nonaffiliated companies.

Under
Federal Reserve policy, a bank holding company is expected to act as a source of financial strength to, and to commit resources to support, its bank subsidiaries. This support may
be required at times when, absent such a policy, the bank holding company may not be inclined to provide it. In addition, any capital loans by the bank holding company to its bank subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of the bank subsidiary. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to
a federal bank
regulatory agency to maintain the capital of a subsidiary banks will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Capital Requirements.The Federal Reserve Board and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to the banking organizations they supervise. Under the risk-based capital requirements, the Corporation and First Federal are each generally required
to maintain a minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) of 8%. At least half of
the total capital must be composed of common equity, retained earnings and qualifying perpetual preferred stock and certain hybrid capital instruments, less certain intangibles ("Tier 1
capital"). The remainder may consist of certain subordinated debt, certain hybrid capital instruments, qualifying preferred stock and a limited amount of the loan loss allowance ("Tier 2
capital" which, together with Tier 1 capital, composes "total capital"). To be considered well-capitalized under the risk-based capital guidelines, an institution must
maintain a total risk-weighted capital ratio of at least 10% and a Tier 1 risk-weighted ratio of 6% or greater.

12

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In
addition, each of the federal bank regulatory agencies has established minimum leverage capital requirements for banking organizations. Banking organizations must maintain a minimum
ratio of Tier 1 capital to adjusted average quarterly assets equal to 3% to 5% subject to federal bank regulatory evaluation of an organization's overall safety and soundness. The following
table shows the ratios of Tier 1 capital and total capital to risk-adjusted assets and the leverage ratios for the Corporation and First Federal as of December 31, 2003.

Capital Adequacy Ratios as of
December 31, 2003

|Risk-Based Capital Ratios   |  | Regulatory
Minimums |   | Well-Capitalized
Minimums |   | The Corporation |   | First Federal |  
|--------------------------- |  | ------------------- | - | ------------------------- | - | --------------- | - | ------------- | -
|Tier 1 capital(1)           |  | 4.0                 | % | 6.0                       | % | 10.9            | % | 10.5          | %
|Total risk-based capital(2) |  | 8.0                 | % | 10.0                      | % | 12.0            | % | 11.6          | %
|Tier 1 leverage ratio(3)    |  | 4.0                 | % | 5.0                       | % | 8.6             | % | 8.2           | %

---

The
Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"), among other things, identifies five capital categories for insured depository institutions:
well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. The Corporation and First Federal are classified as
"well-capitalized." FDICIA also requires the bank regulatory agencies to implement systems for "prompt corrective action" for institutions that fail to meet minimum capital requirements
within these five categories, with progressively more severe restrictions on operations, management and capital distributions according to the category in which an institution is placed. Failure to
meet capital requirements can also cause an institution to be directed to raise additional capital. FDICIA also mandates that the agencies adopt safety and soundness standards relating generally to
operations and management, asset quality and executive compensation, and authorizes administrative action against an institution that fails to meet such standards.

In
addition, the Federal Reserve Board and the FDIC have each adopted risk-based capital standards that explicitly identify concentrations of credit risk and the risk arising
from non-traditional activities, as well as an institution's ability to manage these risks, as important factors to be taken into account by each agency in assessing an institution's
overall capital adequacy. The capital guidelines also provide that an institution's exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the
agency as a factor in evaluating a banking organization's capital adequacy. The agencies also jointly adopted a regulation, effective January 1, 2002, amending their regulatory capital
standards to change the treatment of certain recourse obligations, direct credit subsidies, residual interest and other positions in securitized transactions that expose banking organizations to
credit risk. The regulation amends the agencies' regulatory capital standards to align more closely the risk-based capital treatment of recourse obligations and direct credit subsidies, to
vary the capital requirements for positions in securitized transactions (and certain other credit exposures) according to their relative risk, and to require capital commensurate with the risks
associated with residual interests.

13

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In
addition to the "prompt corrective action" directives, failure to meet capital guidelines can subject a banking organization to a variety of other enforcement remedies, including
additional substantial restrictions on its operations and activities, termination of deposit insurance by the FDIC, and under some conditions the appointment of a conservator or receiver.

Deposit Insurance.First Federal's deposits are insured by the FDIC up to the statutory maximum limit of $100,000 per
depositor through the Savings Association Insurance Fund. For this protection, First Federal must pay semiannual assessments to the FDIC. The assessment rate for an insured depository institution
depends on the assessment risk classification assigned to the institution by the FDIC, which will be determined by the institution's capital level and supervisory evaluations.

Dividends.The Corporation is a legal entity separate and distinct from First Federal. The majority of the Corporation's
revenue is from dividends paid to it by First Federal. First Federal is subject to laws
and regulations that limit the amount of dividends they can pay. If, in the opinion of a federal regulatory agency, an institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice, the agency may require, after notice and hearing, that the institution cease and desist from such practice. The federal banking agencies have indicated that paying
dividends that deplete an institution's capital base to an inadequate level would be an unsafe and unsound banking practice. Under FDICIA, an insured institution may not pay any dividend if payment
would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the Federal Reserve and the FDIC have issued policy statements providing that bank holding companies and banks
should generally pay dividends only out of current operating earnings.

Under
Kentucky law, dividends by Kentucky banks may be paid only from current or retained net profits. Before any dividend may be declared for any period (other than with respect to
preferred stock), a bank must increase its capital surplus by at least 10% of the net profits of the bank for the period until the bank's capital surplus equals the amount of its stated capital
attributable to its common stock. Moreover, the KDFI Commissioner must approve the declaration of dividends if the total dividends to be declared by a bank for any calendar year would exceed the
bank's total net profits for such year combined with its retained net profits for the preceding two years, less any required transfers to surplus or a fund for the retirement of preferred stock or
debt. First Federal is also subject to the Kentucky Business Corporation Act, which generally prohibits dividends to the extent they result in the insolvency of the corporation from a balance sheet
perspective or its becoming unable to pay debts as they come due.

Available Information

The Corporation files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports with the Securities and Exchange Commission. These reports are available at the SEC's website at http://www.sec.gov. The Corporation's reports are
available on its website athttp://www.ffsbky.com. You
may obtain electronic or paper copies of the Corporation's reports free of charge by contacting Rebecca Bowling, Corporate Secretary-Treasurer, First Federal Savings Bank, 2323 Ring Road,
Elizabethtown, Kentucky 42701 (telephone) 270-765-2131.

14

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Item 2.    Properties

The Corporation's executive offices, principal support and operational functions are located at 2323 Ring Road in Elizabethtown, Kentucky. All of First Federal's
banking centers are located in Kentucky. The location of the 13 banking centers, whether owned or leased, and their respective approximate square footage is set forth in the following table.

|Banking Centers              |  | Owned or
Leased |  | Approximate
Square
Footage
|---------------------------- |  | --------------- |  | --------------------------
|ELIZABETHTOWN                |  |                 |  |                           
|2323 Ring Road               |  | Owned           |  | 55,000                    
|325 West Dixie Avenue        |  | Owned           |  | 1,764                     
|101 Wal-Mart Drive           |  | Leased          |  | 984                       
|RADCLIFF                     |  |                 |  |                           
|475 West Lincoln Trail       |  | Owned           |  | 2,728                     
|BARDSTOWN                    |  |                 |  |                           
|401 East John Rowan Blvd.    |  | Leased          |  | 4,500                     
|315 North Third Street       |  | Owned           |  | 1,271                     
|MUNFORDVILLE                 |  |                 |  |                           
|925 Main Street              |  | Owned           |  | 2,928                     
|SHEPHERDSVILLE               |  |                 |  |                           
|395 N. Buckman Street        |  | Owned           |  | 7,600                     
|MT. WASHINGTON               |  |                 |  |                           
|279 Bardstown Road           |  | Owned           |  | 2,500                     
|BRANDENBURG                  |  |                 |  |                           
|416 East Broadway            |  | Leased          |  | 4,395                     
|50 Old Mill Road             |  | Leased          |  | 575                       
|FLAHERTY                     |  |                 |  |                           
|4055 Flaherty Road           |  | Leased          |  | 1,216                     
|LOUISVILLE                   |  |                 |  |                           
|11901 Standiford Plaza Drive |  | Leased          |  | 650                       

Item 3.    Legal Proceedings

Although the Bank is, from time to time, involved in various legal proceedings in the normal course of business, there are no material pending legal proceedings
to which the Corporation, the Bank, or its subsidiaries is a party, or to which any of their property is subject.

Item 4.    Submission of Matters to a Vote of Security Holders

No matters were submitted for shareholder approval during the fourth quarter of 2003.

15

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PART II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters

The
Common Stock of the Corporation is traded on the NASDAQ National Market System (NASDAQ) under the symbol "FFKY". The following table shows the high and low closing prices of the
Corporation's Common Stock and the dividends paid.

|                   |  | Quarter Ended |       |      |   | Two
Months Ended
|------------------ |  | ------------- | ----- | ---- | - | ----------------
|
|December 31, 2003: |  |               |       |      |   |                 
|High               |  | $             | 28.91 |      | $ | 35.95           
|Low                |  |               | 22.25 |      |   | 27.37           
|Cash dividends(1)  |  |               | 0.16  |      |   | 0.18            
|                   |  | 3/31          |       | 6/30 |   | 9/30            
|December 31, 2002: |  |               |       |      |   |                 
|High               |  | $             | 20.50 |      | $ | 23.85           
|Low                |  |               | 17.25 |      |   | 20.25           
|Cash dividends(1)  |  |               | 0.16  |      |   | 0.16            

At
February 27, 2004 the number of registered shareholders was approximately 716. Because shares are often registered in the broker's name rather than the owner, the exact number
of shareholders is not readily available. Management estimates that the number of beneficial owners is significantly greater.

It
is currently the policy of the Corporation's Board of Directors to continue to pay quarterly dividends, but any future dividends are subject to the Board's discretion based on its
consideration of the Corporation's operating results, financial condition, capital, income tax considerations, regulatory restrictions and other factors.

|Plan category                                              |  | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights |  | Weighted-average
exercise price of
outstanding options,
warrants and rights |       | Number of securities
Remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (1))
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     |  | 68,970                                                                                      |  | $                                                                           | 19.36 |                                                                                                                                            
|Equity compensation plans not approved by security holders |  |                                                                                            |  |                                                                             |      |                                                                                                                                            
|                                                           |  |                                                                                             |  |                                                                             |       |                                                                                                                                            
|Total                                                      |  | 68,970                                                                                      |  | $                                                                           | 19.36 |                                                                                                                                            
|                                                           |  |                                                                                             |  |                                                                             |       |                                                                                                                                            

16

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Of
the options outstanding at December 31, 2003, 1,100 were granted under a previous plan. See Note 11 of the Notes to Consolidated Financial Statements for additional
information required by this item.

Item 6.

Selected Consolidated Financial and Other Data

|                               |  | At December 31, |         | At June 30,
|------------------------------ |  | --------------- | ------- | -----------
|
|Financial Condition Data:      |  |                 |         |            
|Total assets                   |  | $               | 676,335 |            
|Net loans outstanding(1)       |  |                 | 550,153 |            
|Interest bearing deposits      |  |                 |        |            
|Investments                    |  |                 | 34,938  |            
|Deposits                       |  |                 | 529,162 |            
|Borrowings                     |  |                 | 88,283  |            
|Stockholders' equity           |  |                 | 56,321  |            
|Number of:                     |  |                 |         |            
|Real estate loans outstanding  |  |                 | 7,660   |            
|Deposit accounts               |  |                 | 48,443  |            
|Offices                        |  |                 | 13      |            
|Full time equivalent employees |  |                 | 257     |            

|                                 |         |   |        |      |   | Year Ended June 30,
|-------------------------------- | ------- | - | ------ | ---- | - | -------------------
|
|
|Operations Data:                 |         |   |        |      |   |                    
|Interest income                  |         | $ | 39,339 |      | $ | 21,556             
|Interest expense                 |         |   | 16,365 |      |   | 9,394              
|Net interest income              |         |   | 22,974 |      |   | 12,162             
|Provision for loan losses        |         |   | 1,656  |      |   | 1,161              
|Non-interest income              |         |   | 7,981  |      |   | 3,177              
|Non-interest expense(2)          |         |   | 17,292 |      |   | 7,597              
|Income tax expense               |         |   | 4,004  |      |   | 2,199              
|Net income                       |         |   | 8,003  |      |   | 4,382              
|Earnings per share:(3)           |         |   |        |      |   |                    
|                                 | Basic   |   | $      | 2.12 |   | $                  
|                                 | Diluted |   |        | 2.10 |   |                    
|Book value per share(3)          |         |   | 15.20  |      |   | 14.88              
|Dividends paid per
share(3)      |         |   | 0.70   |      |   | 0.33               
|Dividend payout ratio            |         |   | 33%    |      |   | 30%                
|Return on average assets         |         |   | 1.18%  |      |   | 1.31%              
|Average equity to average assets |         |   | 8.26%  |      |   | 8.77%              
|Return on average equity         |         |   | 14.32% |      |   | 14.89%             

---

17

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Item 7.    Management Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The Corporation, through its subsidiary, First Federal Savings Bank conducts operations in 13 full-service banking centers in six contiguous counties
in Kentucky along the Interstate 65 corridor. The Corporation's market presence ranges from the major metropolitan market of Louisville in Jefferson County, Kentucky approximately 40 miles North of
its headquarters in Elizabethtown, Kentucky to approximately 30 miles South to Hart County, Kentucky. The Corporation's core markets have experienced a solid compound annual growth rate of 7% in
deposits for the past four years. Management anticipates a similar growth rate of its markets for the next few years and believes it is well positioned to benefit from this continued growth.

The
Corporation has positioned itself as a leader in the markets it operates in holding a 21% market share in the five counties south of Jefferson County, significantly above the next
competitor holding just 8% of the market. The Corporation's presence in Jefferson County currently remains under 1%. However, management believes it can increase its presence in the county, as the
primarily market share is held by 6 large out of state holding companies. We believe that many customers will prefer a banking relationship with an institution headquartered in its region even though
many of our competitors in the Jefferson County market area have greater resources than we do. The Corporations current branch in Jefferson County has achieved a compound annual growth of
approximately 140% over the past four years. In addition, approximately $90 million in commercial loans, primarily commercial real estate, were closed in 2002 and 2003, as a result of the
customer contacts made within Jefferson County. The Corporation's flexibility in loan products, rapid credit approval, and efficient loan closing process has been received with great success. Building
upon the success of the commercial lending operations will be the development of a retail presence. Accordingly, the Corporation anticipates opening two additional branches in Jefferson County by
April of 2004. Although preliminary results have been positive, we are still early in the process. As is the case in any branch expansion, start-up costs will impact the financial
performance of the Bank for a period of time but we are optimistic that our expansion strategy for Jefferson County will minimize this period of time and the long-term benefits will
outweigh the initial investment.

The
Corporation is focused on expanding its leadership role in its markets emphasizing both the retail and commercial lines of business. In addition to expanding its leadership position,
the Corporation is also focused on maintaining a high level of profitability. This focus led to the adoption of a strategic initiative to improve return on equity in 1999. The Corporation identified
several key factors to support the initiative including:



Since
1999, the Corporation has increased its return on equity from 10.8% in 1999, to 14.4% in 2003. The increase in return on equity was accompanied by a compound annual growth rate of
20% in diluted earning per share over the same period of time. While management believes opportunities for improvement exist, it attributes much of the improvement in return on equity to various
components of the factors of its initiative.

18

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Emphasize commercial lending:

The Corporation's emphasis on commercial lending continued to produce positive results generating a $91 million, or 50% increase in commercial loans to
$273 million at December 31, 2003, compared to $182 million at December 31, 2002. This favorable trend has resulted in a $144 million, or 112% increase in commercial
loans from December 31, 2001, and a $172 million, or 170% increase in commercial loans from December 31, 2000. The percentage of commercial loans in the Bank's portfolio has
increased from 35% at December 31, 2002, to 49% at December 31, 2003 while residential loans declined from 49% at December 31, 2002, to 35% at December 31, 2003. The
portfolio mix also changed significantly during 2003 as commercial loans grew to 49% of the total loan portfolio. Management intends to continue this commercial lending emphasis and anticipates
continued increases in the commercial and commercial real estate portfolios.

Expand our retail base in our current branches as well as in growing markets within our region:

In January 2003, the Corporation implemented an effort to develop a bank-wide service and sales culture emphasizing expanded account
relationships. To achieve this goal, the corporation increased the number of associates in banking centers, relationship bankers, business development officers, stockbrokers, and loan officers with
experience in commercial lending. The results of this effort have contributed to the growth on the Corporation as well as aided it in the transition from a Federally chartered thrift to a
State-Chartered commercial bank in January of 2003. The increase in staff also contributed to a $1.6 million, or 21% increase in employee compensation expense for the year ended
December 31, 2003, compared to the year ended December 31, 2002. Management expects a continued increase in employee compensation expense in the 2004 calendar year as it continues its
expansion into Jefferson County.

Maintain an operationally efficient organization:

Despite the increase in employee compensation expense for 2003, the Corporation still maintained an efficiency ratio of 56% for the year ended December 31,
2003, an increase from 54% in 2002, but comparable to 56% in 1999.

The
following discussion and analysis covers the primary factors affecting the Corporation's performance and financial condition. It should be read in conjunction with the accompanying
audited consolidated financial statements included in this report.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Corporation's accounting and reporting policies comply with accounting principles generally accepted in the United States of America and conform to general
practices within the banking industry. The accounting policy relating to the allowance for loan losses is critical to the understanding of the Corporation's results of operations since the application
of this policy requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change. See
"Allowance and Provision for Loan Losses" herein for a complete discussion of the First Federal Financial Corporation's accounting methodologies related to the allowance. Also refer to Note 1
in the "Notes to Consolidated Financial Statements" for details regarding all of the Corporation's critical and significant accounting policies.

RESULTS OF OPERATIONS

The Corporation reported net income of $8.0 million during the year ended December 31, 2003 compared with $8.1 million for the 2002 period.
Diluted earnings per share increased 6% from $1.98 during 2002 to $2.10 for 2003. Earnings remained relatively constant for the comparative periods. Favorable increases in non-interest
income generated from the gain on sale of mortgage loans, service

19

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charges
on deposit accounts, and two lots held for sale were offset with a decline in net interest income as well as an increase in non-interest expense. The Bank's book value per common
share increased from $14.88 at December 31, 2002 to $15.20 at December 31, 2003. Net income for 2003 generated return on average assets of 1.18% and return on average equity of 14.32%.
These compare with return on average assets of 1.24% and return on average equity of 13.87% for the 2002 period.

The
Corporation reported net income of $4.4 million during the six months ended December 31, 2002 compared with $3.7 million for the same period ended 2001, an
increase of 17%. Diluted earnings per share increased 20% from $.90 during 2001 to $1.08 for 2002. The increase in earnings for 2002 was primarily attributable to increased net interest income, and an
absence of goodwill amortization, service charges on deposit accounts and gain on sale of mortgage loans. The Bank's book value per common share increased from $13.77 at December 31, 2001 to
$14.88 at December 31, 2002. Net income for 2002 generated a return on average assets of 1.31% and a return on average equity of 14.89%. These compare with a return on average assets of 1.23%
and a return on average equity of 13.35% for the 2001 period.

The
Corporation reported net income of $7.5 million during the fiscal year ended June 30, 2002 compared with $5.6 million for the 2001 period, an increase of 32%.
Diluted earnings per share also
increased 32% from $1.36 during 2001 to $1.80 for 2002. The increase in earnings for 2002 was primarily attributable to increased net interest income, service charges on deposit accounts and gain on
sale of mortgage loans.    The Bank's book value per common share increased from $14.53 at June 30, 2001 to $15.72 at June 30, 2002. Net income for the six months ended
December 31, 2002 generated return on average assets of 1.19% and return on average equity of 13.08%. These compare with return on average assets of .95% and return on average equity of 10.62%
for the same period in 2001.

Net Interest IncomeThe principal source of the Bank's revenue is net interest income. Net interest income is the difference
between interest income on interest-earning assets, such as loans and securities and the interest expense on liabilities used to fund those assets, such as interest-bearing deposits and borrowings.
Net interest income is impacted by both changes in the amount and composition of interest-earning assets and interest-bearing liabilities as well as market interest rates.

Net
interest income for the year ended December 31, 2003 declined to $23.0 million compared to $23.8 million for the 2002 period due to a narrowing net interest
margin. The Bank's net interest margin declined from 3.84% for 2002 to 3.61% for 2003. The net interest rate spread decreased from 3.53% during 2002 to 3.37% in 2003. The net interest margin declined
due to a reduction in short-term market interest rates by the Federal Reserve, which occurred in January 2003. Customer deposit interest rates did not adjust downward as quickly to
offset declining interest yields on loans and investments. Additionally, lower interest rates encouraged a large volume of residential refinancing in favor of the secondary market loans, reducing the
Bank's residential mortgage loan portfolio.During the 2003 period, residential mortgage loans held in the Bank's portfolio decreased by
$75.7 million as a majority of the new and refinanced residential mortgage loan originations were sold during 2003. The substitution of commercial and commercial real estate loans for
residential mortgage loans has resulted in a declining yield on the Bank's loan portfolio. However, the underlying benefits of this strategy have been to substantially reduce interest rate risk and
position the Bank to improve its net interest margin should interest rates begin to rise.(For additional analysis on the effect of increasing and decreasing interest rates on
the Corporation's net interest margin, see the interest rate sensitivity model under "Asset/Liability Management and Market Risk.")

For
the six months ended December 31, 2002, net interest income was $12.2 million, up $1.2 million from the $11.0 million attained during the comparable
period of 2001. The Bank was able to increase its net interest income through growth in its interest-earning assets and declines in the cost of interest-bearing liabilities. The Bank's net interest
margin remained steady at 3.82% for the six months ended December 31, 2002 as compared to 3.83% for the 2001 six month period. The net

20

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interest
rate spread increased from 3.45% during 2001 or 3.52% in 2002. The net interest spread and margin benefited from a significant decline in the Bank's cost of funds due to a reduction on
short-term market interest rates by the Federal Reserve which occurred principally during calendar 2001. The Bank's cost of funds averaged 3.25% during 2002, a decrease of 115 basis points
from the 2001 average cost of funds of 4.40% compared to a decrease of 108 basis points on interest earning assets from 7.85% to 6.77%. The 2002 period includes Trust Preferred Securities which were
issued in March 2002. Although substantially all categories of interest income and interest expense declined during 2002, interest rates payable on deposit products generally declined more than
rates on interest-bearing assets. During the 2002 period, average interest-earning assets were $637.3 million, an increase of $62.8 million over the same period in 2001. Total average
interest bearing liabilities increased from $523.8 million during 2001 or $578.7 million for the same period in 2002.

For
fiscal year ended June 30, 2002, net interest income was $22.7 million, up $4.7 million from the $18.0 million attained during 2001. This was principally
due to an improved interest rate margin compared to 2001. The Bank's net interest margin increased from 3.22% during 2001 to 3.83% for the 2002 period. The net interest rate spread increased from
2.81% during 2001 to 3.48% in 2002. The net interest spread and margin benefited from a significant decline in the Bank's cost of funds due to a reduction in short-term market interest
rates by the Federal Reserve which occurred principally during calendar 2001. Although substantially all categories of interest income and interest expense declined during 2002, interest rates payable
on deposit products generally declined more than rates on interest-bearing assets.    During the 2002 period, average interest-earning assets were $593.4 million, an increase of
$35.7 million over the same period in 2003. Total average interest bearing liabilities increased from $514.8 million during 2001 to $540.9 million for the same period in 2002. The
2002 period includes Trust Preferred Securities which were issued in March 2002.

21

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AVERAGE BALANCE SHEET

The following table sets forth information relating to the Bank's average balance sheet and reflects the average yield on assets and average cost of liabilities
for the periods indicated. Dividing income or expense by the average monthly balance of assets or liabilities, respectively, derives such yields and costs for the periods presented.

|                                                                                 |                                                 | Year Ended
December 31, 2003       |        | Six Months Ended
December 31, 2002 |        
|-------------------------------------------------------------------------------- | ----------------------------------------------- | ---------------------------------- | ------ | ---------------------------------- | -------
|
|
|ASSETS                                                                           |                                                 |                                    |        |                                    |        
|Interest earning assets:                                                         |                                                 |                                    |        |                                    |        
|                                                                                 | Equity securities                               |                                    | $      | 2,073                              |        
|                                                                                 | State and political subdivision securities (1)  |                                    |        | 1,083                              |        
|                                                                                 | U.S. Treasury and agencies                      |                                    |        | 12,766                             |        
|                                                                                 | Corporate bond                                  |                                    |        | 2,000                              |        
|                                                                                 | Mortgage-backed securities                      |                                    |        | 6,976                              |        
|                                                                                 | Loans receivable(2)(3)(4)                       |                                    |        | 531,750                            |        
|                                                                                 | FHLB stock                                      |                                    |        | 6,421                              |        
|                                                                                 | Interest bearing deposits                       |                                    |        | 73,555                             |        
|                                                                                 |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 | Total interest earning assets      |        |                                    | 636,624
|                                                                                 |                                                 |                                    |        |                                    |        
|Less: Allowance for loan losses                                                  |                                                 |                                    | (5,006 | )                                  |        
|Non-interest earning assets                                                      |                                                 |                                    | 45,075 |                                    |        
|                                                                                 |                                                 |                                    |        |                                    |        
|                                                                                 | Total assets                                    |                                    | $      | 676,693                            |        
|                                                                                 |                                                 |                                    |        |                                    |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                             |                                                 |                                    |        |                                    |        
|Interest bearing liabilities:                                                    |                                                 |                                    |        |                                    |        
|                                                                                 | Savings accounts                                |                                    | $      | 77,905                             |        
|                                                                                 | NOW and money market Accounts                   |                                    |        | 115,785                            |        
|                                                                                 | Certificates of deposit and other time deposits |                                    |        | 301,730                            |        
|                                                                                 | FHLB Advances                                   |                                    |        | 77,726                             |        
|                                                                                 | Trust Preferred Securities                      |                                    |        | 10,000                             |        
|                                                                                 |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 | Total interest bearing liabilities |        |                                    | 583,146
|                                                                                 |                                                 |                                    |        |                                    |        
|Non-interest bearing liabilities:                                                |                                                 |                                    |        |                                    |        
|                                                                                 | Non-interest bearing deposits                   |                                    |        | 34,075                             |        
|                                                                                 | Other liabilities                               |                                    |        | 3,594                              |        
|                                                                                 |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 | Total liabilities                  |        |                                    | 620,815
|Stockholders' equity                                                             |                                                 |                                    | 55,878 |                                    |        
|                                                                                 |                                                 |                                    |        |                                    |        
|                                                                                 | Total liabilities and stockholders' equity      |                                    | $      | 676,693                            |        
|                                                                                 |                                                 |                                    |        |                                    |        
|Net interest income                                                              |                                                 |                                    |        |                                    | $      
|                                                                                 |                                                 |                                    |        |                                    |        
|Net interest spread                                                              |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 |                                    |        |                                    |        
|Net interest margin                                                              |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 |                                    |        |                                    |        
|Ratio of average interest earning assets to average interest bearing liabilities |                                                 |                                    |        |                                    |        
|                                                                                 |                                                 |                                    |        |                                    |        

---

22

---

AVERAGE BALANCE SHEET

The following table sets forth information relating to the Bank's average balance sheet and reflects the average yield on assets and average cost of liabilities
for the periods indicated. Dividing income or expense by the average monthly balance of assets or liabilities, respectively, derives such yields and costs for the periods presented.

|                                                                                 |                                                 | Year Ended June 30,                    |       
|-------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------------------- | ------
|
|
|
|ASSETS                                                                           |                                                 |                                        |       
|Interest earning assets:                                                         |                                                 |                                        |       
|                                                                                 | Equity securities                               |                                        | $     
|                                                                                 | State and political subdivision securities(1)   |                                        |       
|                                                                                 | U.S. Treasury and agencies                      |                                        |       
|                                                                                 | Corporate bond Mortgage-backed securities       |                                        |       
|                                                                                 | Loans receivable(2)(3)(4)                       |                                        |       
|                                                                                 | FHLB stock                                      |                                        |       
|                                                                                 | Interest bearing deposits                       |                                        |       
|                                                                                 |                                                 |                                        |       
|                                                                                 |                                                 | Total interest earning assets          |       
|                                                                                 |                                                 |                                        |       
|Less: Allowance for loan losses                                                  |                                                 |                                        | (3,273
|Non-interest earning assets                                                      |                                                 |                                        | 36,371
|                                                                                 |                                                 |                                        |       
|                                                                                 |                                                 | Total assets                           |       
|                                                                                 |                                                 |                                        |       
|LIABILITIES AND ST0CKHOLDERS' EQUITY                                             |                                                 |                                        |       
|Interest bearing liabilities:                                                    |                                                 |                                        |       
|                                                                                 | Savings accounts                                |                                        | $     
|                                                                                 | NOW and money market Accounts                   |                                        |       
|                                                                                 | Certificates of deposit and other time deposits |                                        |       
|                                                                                 | FHLB Advances                                   |                                        |       
|                                                                                 | Trust Preferred Securities                      |                                        |       
|                                                                                 |                                                 |                                        |       
|                                                                                 |                                                 | Total interest bearing liabilities     |       
|                                                                                 |                                                 |                                        |       
|Non-interest bearing liabilities:                                                |                                                 |                                        |       
|                                                                                 | Non-interest bearing deposits                   |                                        |       
|                                                                                 | Other liabilities                               |                                        |       
|                                                                                 |                                                 |                                        |       
|                                                                                 |                                                 | Total liabilities                      |       
|Stockholders' equity                                                             |                                                 |                                        | 57,007
|                                                                                 |                                                 |                                        |       
|                                                                                 |                                                 | Total liabilities stockholders' equity |       
|                                                                                 |                                                 |                                        |       
|Net interest income                                                              |                                                 |                                        |       
|                                                                                 |                                                 |                                        |       
|Net interest spread                                                              |                                                 |                                        |       
|                                                                                 |                                                 |                                        |       
|Net interest margin                                                              |                                                 |                                        |       
|                                                                                 |                                                 |                                        |       
|Ratio of average interest earning assets to average interest bearing liabilities |                                                 |                                        |       
|                                                                                 |                                                 |                                        |       

---

23

---

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 assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (changes in rate multiplied by old volume);
(2) changes in volume (change in vilume multiplied by old rate); and (3) changes in rate-volume (change in rate multiplied by change in volume). Changes in rate-volume are
proportionately allocated between rate and volume variance.

|                                   |                                                 | Year Ended
December 31,
2003 vs. 2002
Increase (decrease)
Due to change in |        | Six Months Ended
December 31,
2002 vs. 2001
Increase (decrease)
Due to change in |  
|---------------------------------- | ----------------------------------------------- | -------------------------------------------------------------------------- | ------ | -------------------------------------------------------------------------------- | -
|
|
|Interest income:                   |                                                 |                                                                            |        |                                                                                  |  
|                                   | Equity securities                               |                                                                            | $      | 2                                                                                |  
|                                   | State and political subdivision securities      |                                                                            |        | (4                                                                               | )
|                                   | U.S. Treasury and agencies                      |                                                                            |        | (175                                                                             | )
|                                   | Corporate bond                                  |                                                                            |        | 30                                                                               |  
|                                   | Mortgage-backed securities                      |                                                                            |        | (13                                                                              | )
|                                   | Loans                                           |                                                                            |        | (4,065                                                                           | )
|                                   | FHLB stock                                      |                                                                            |        | (39                                                                              | )
|                                   | Interest bearing deposits                       |                                                                            |        | (412                                                                             | )
|                                   |                                                 |                                                                            |        |                                                                                  |  
|Total interest earning assets      |                                                 |                                                                            | (4,676 | )                                                                                |  
|                                   |                                                 |                                                                            |        |                                                                                  |  
|Interest expense:                  |                                                 |                                                                            |        |                                                                                  |  
|                                   | Savings accounts                                |                                                                            |        | (609                                                                             | )
|                                   | NOW and money market accounts                   |                                                                            |        | (732                                                                             | )
|                                   | Certificates of deposit and other time deposits |                                                                            |        | (1,870                                                                           | )
|                                   | FHLB advances                                   |                                                                            |        | (10                                                                              | )
|                                   | Trust Preferred Securities                      |                                                                            |        | (51                                                                              | )
|                                   |                                                 |                                                                            |        |                                                                                  |  
|Total interest bearing liabilities |                                                 |                                                                            | (3,272 | )                                                                                |  
|                                   |                                                 |                                                                            |        |                                                                                  |  
|Net change in net interest income  |                                                 | $                                                                          | (1,404 | )                                                                                | $
|                                   |                                                 |                                                                            |        |                                                                                  |  

24

---

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 assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (changes in rate multiplied by old volume); (2) changes in volume
(change in volume multiplied by old rate); and (3) changes in rate-volume (change in rate multiplied by change in volume). Changes in rate-volume are proportionately allocated between rate and volume
variance.

Year Ended June 30,
2002 vs. 2001
Increase (decrease)
Due to change inRate

Volume

Net
Change(Dollars in thousands)Interest income:Equity securities

$
2

$
(2
)
$
State and political subdivision securities


1


3


4U.S. Treasury and agencies


(432
)

(1,531
)

(1,963
)Corporate bond








Mortgage-backed securities


(11
)

(18
)

(29
)Loans


(1,517
)

1,566


49FHLB stock


(109
)

49


(60
)Interest bearing deposits


(205
)

914


709Total interest earning assets


(2,271
)

981


(1,290
)Interest expense:Savings accounts


(205
)

470


265NOW and money market accounts


(809
)

412


(397
)Certificates of deposit and other time deposits


(4,399
)

(81
)

(4,480
)FHLB advances


(831
)

(732
)

(1,563
)Trust Preferred Securities





172


172Total interest bearing liabilities


(6,244
)

241


(6,003
)Net change in net interest income

$
3,973

$
740

$
4,713


Non-Interest IncomeNon-interest income was $8.0 million for the year
ended December 31, 2003, as compared to $5.9 million for the 2002 period, an increase of $2.1 million or 35%. The increased level of non-interest income during 2003
was primarily due to increased gains on sale of mortgage loans, growth in fees and services charges resulting from a higher volume of retail and commercial transactions and the sale of two lots held
for investment during the December 31, 2003 quarter. Offsetting these increases were decreases in brokerage and insurance commissions.

Customer
service fees on deposit accounts increased by $562,000 or 14% during 2003 due to growth in customer deposits, overdraft fee income on retail checking accounts and the sale of
fee based products. The Bank continues to increase its customer base through cross-selling opportunities and marketing initiatives and promotions. Gain on sale of mortgage loans increased by $749,000
to $1.6 million for 2003 compared to 2002. The increase in gain on sale of mortgage loans was the result of an increase in consumer refinance activity of 1-4 family
fixed-rate residential loans, which the Bank sells into the secondary market through its subsidiary, First Heartland Mortgage Company.

25

---

Management
believes that the consumer refinancing activity in 2004 will not keep pace with that of 2003, but can not estimate the magnitude of the decreased gain. Income from brokerage commissions and
insurance sales decreased $153,000 as a result of a decline in demand for these products. All other non-interest income increased by $891,000 during 2003 compared to 2002, attributable to
a wide variety of customer service fees resulting from the growth in loans and deposits, the sale of two lots previously held for sale and the creation of First Heartland Title, LLC, a subsidiary of
the Bank that provides title insurance coverage for mortgage borrowers. The subsidiary is a joint venture with a local title insurance company in which the Bank holds a 48% interest. The new LLC
generated $120,000 in income for the Bank for the year ended December 31, 2003.

Non-interest
income was $3.2 million for the six months ended December 31, 2002, compared to $2.6 million for the 2001 period. The increased level of
non-interest income during 2002 was primarily due to increased service fees on deposit accounts and to a lesser extent, gain on sale of mortgage loans. Offsetting these increases were
slight decreases in brokerage and insurance commissions and other income.

Customer
service fees on deposit accounts increased by $711,000 or 50% during 2002 due to growth in overdraft fee income on retail checking accounts. Gain on sale of mortgage loans
increased by $164,000 or 46% for 2002 compared to 2001 as declining market interest rates continued an increase in consumer refinance activity of 1-4 family fixed-rate
residential loans, which the Bank sells into the secondary market through its subsidiary, First Heartland Mortgage Company. Mortgage banking income depends upon loan demand and refinance volume which
management anticipates will continue at or near current levels for at least the next quarter, but less
than pace of first half of 2003. Income from brokerage commissions and insurance sales decreased $46,000 as a result of a decline in demand for these products. Other income decreased during the 2002
period by $294,000 due to increases in customer fees waived and increased losses on repossessed assets attributed to the indirect dealer loan program.

Non-interest
income was $5.4 million during the fiscal year ended June 30, 2002, and $5.1 million during 2001. The increased level of
non-interest income during 2002 was primarily due to increased service fees on deposit accounts and to a lesser extent, gains on the sale of mortgage loans. Service charges on deposit
accounts increased by $715,000 or 28% during 2002 due to growth in fee-related customer transactions and growth in deposits, a result of the general shift in funds from the stock market to
bank deposits. Service charges on deposit accounts were positively affected by the Bank's introduction of a new overdraft program.

Gain
on sale of mortgage loans increased by $125,000 or 24% for 2002 compared to 2001 as declining interest rates prompted an increase in consumer refinance activity of 1-4
family fixed-rate residential loans, which the Bank sells into the secondary market through its subsidiary, First Heartland Mortgage Company. During 2002 the Bank did not report any gains
from investment sales compared to reported gains of $696,000 for 2001. Income from brokerage commissions and insurance sales decreased $96,000 as a result of a decline in demand for these products.

Non-Interest ExpenseNon-interest expense increased by $1.7 million or
11% to $17.3 million for the year ended December 31, 2003 compared to 2002. The most significant factors impacting non-interest expense for the period include an increase in
staffing levels and employee benefits expense, and a change in accounting rules that discontinued amortization of goodwill from acquisitions. Management anticipates moderate increases in
non-interest expense are likely going forward as the Bank broke ground during May 2003 on two traditional banking centers in higher growth market areas in Louisville, Kentucky.
These banking centers are expected to open during the March 2004 and June 2004 quarters. The Bank intends to close its existing supermarket banking center located within
one-half mile of the southern Louisville banking center currently under construction. Non-interest expense levels are often measured using an efficiency ratio
(non-interest expense divided by the sum of

26

---

net
interest income and non-interest income). A lower efficiency ratio is indicative of higher bank performance. The Bank's efficiency ratios were 56% and 52% for the years ended
December 31, 2003 and 2002.

Employee
compensation and benefits, the largest component of non-interest expense, increased $1.6 million or 21% for 2003. The increase in employee compensation
reflects higher incentive bonuses due to certain corporate performance objectives being met, coupled with growth in the overall staffing level from 241 full-time equivalent employees at
December 31, 2002 to 257 full-time equivalent employees at December 30, 2003. During the year, ten new retail
positions have been filled in preparation of the upcoming expansions into Jefferson County, Kentucky, coupled with an expanded facility in Hardin County, Kentucky. Staff increased during 2003 as
management continues to emphasize the Bank's retail sales culture and to expand the products and services we can offer to our retail and commercial customers.

As
a result of adopting new accounting standards on July 1, 2002, the Corporation ceased annual amortization of $832,000 on remaining goodwill assets of $8.4 million.
Accordingly, no amortization expense was recognized for the year ended December 31, 2003 or the six months ended December 31, 2002. The new standards require annual impairment testing
for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. These tests have not resulted in any impairments. All other non-interest
expenses increased $468,000 to $7.8 million during the 2003 period compared to 2002.

Non-interest
expense increased by $316,000 or 4% during the six-month period ended December 31, 2002 compared to the same period in 2001. Factors impacting
non-interest expense included an increase in staffing levels and a change in accounting rules in which goodwill amortization expense from acquisitions is no longer recorded. The Bank's
efficiency ratio improved to 50% in 2002 compared to 53% in 2001. Employee compensation and benefits increased $542,000 or 16% for 2002. The increase reflects growth in the overall staffing level from
219 full-time equivalent employees at December 31, 2001 to 241 at December 31, 2002. The Bank's continued emphasis on building its commercial and retail staff to reflect its
commercial philosophy was the largest contributing factor. Goodwill amortization expense reported for the six months ended December 21, 2001 was $416,000 compared to zero for the six months
ended December 31, 2002.

Non-interest
expense increased by $1.7 million or 13% during the fiscal year ended June 30, 2002 compared to 2001. The increase principally resulted from higher
staffing levels, increased marketing efforts for the Bank's promotional products as well as increases in other expense. The Bank's efficiency ratio was 54% in 2002 compared to 59% in 2001. Employee
compensation and benefits increased $845,000 or 13% for 2002. The increase reflects growth in the overall staffing level from 203 full-time equivalent employees at June 30, 2001 to
227 at June 30, 2002. Marketing and advertising costs increased during 2002 by $107,000 or 21%. The increase is attributable to the Bank's television marketing campaign for the "Simply Free
Checking" product, enhanced marketing for the Bank's overdraft program and the Bank's commercial business. Data processing costs increased during 2002 by $125,000 or 9% due to the introduction efforts
to promote more of the Bank's cash management product, Internet banking, the creation of the Bank's imaging department and processor charges relating to an increase in the number of users. The
remainder of non-interest expense categories increased by a net of $556,000 or 23% during 2002. The increase is primarily attributable to increases in costs associated with the overdraft
program, costs associated with postage, stationary and supplies and other customer account expenses.

ANALYSIS OF FINANCIAL CONDITION

The Corporation's total assets at December 31, 2003 increased to $676.3 million compared to $670.7 million at December 31, 2002. The
available-for-sale and held-to-maturity investment portfolios

27

---

increased
during the 2003 period due to investments in equity securities and two mortgage-backed securities with fixed rate terms of five and seven years. Also, during the 2003 period, the Bank
invested $7.0 million in bank owned life insurance. Net loans (including loans held for sale) increased $21.6 million from December 31, 2002 to $550.2 million at
December 31, 2003. Residential mortgage loans decreased by $75.7 million during the 2003 period as declining market interest rates caused an increase in 1-4 family
refinancing activity into fixed-rate, secondary market loan products. The Bank's emphasis on commercial lending continued to produce positive results generating a $91 million, or
50% increase in commercial loans to $273 million at December 31, 2003, compared to $182 million at December 31, 2002. In addition, the Bank hired an automotive dealer loan
specialist to expand its dealer loan program, which increased $7.7 million to $28.3 million at December 31, 2003, and is expected to continue to increase.

The
Corporation's total assets at December 31, 2002 decreased slightly to $670.7 million compared to $679.4 million at June 30, 2002. The decrease in assets
was primarily due to the decrease in the Bank's cash equivalents and interest bearing deposits, a direct result of the decrease in retail deposits. Further, the investment portfolio decreased as
interest rates declined and securities were called for redemption in accordance with their terms. Offsetting the decline in securities, net loans (including loans held for sale) increased
$8.3 million from June 30, 2002 to $528.5 million at December 31, 2002. Residential mortgage loans decreased by $32.1 million during the 2002 period as declining
market interest rates encouraged homeowners to refinance residential loans in favor of fixed-rate, secondary market loan products. The growth in the commercial and commercial real estate
portfolios remained strong increasing by $38.5 million to $181.9 million at December 31, 2002. This growth is a result of the Bank's continued emphasis on the active pursuit of
lending opportunities that meet its lending criteria.

Loan Portfolio Composition.The following table presents a summary of the Bank's loan portfolio, net of deferred loan fees,
by type. The Bank has no foreign loans in its portfolio and other than the categories noted, there is no concentration of loans in any industry exceeding 10% of total loans.

|                         |              | December 31, |        | June 30, |     
|------------------------ | ------------ | ------------ | ------ | -------- | ----
|
|
|
|Type of Loan:            |              |              |        |          |     
|Real Estate:             |              |              |        |          |     
|                         | Residential  |              | $      | 193,177  |     
|                         | Construction |              |        | 9,952    |     
|                         | Commercial   |              |        | 239,406  |     
|Consumer and home equity |              |              | 53,566 |          | 9.66
|Indirect consumer        |              |              | 28,279 |          | 5.10
|Commercial, other        |              |              | 30,320 |          | 5.47
|                         |              |              |        |          |     
|                         | Total loans  |              | $      | 554,700  |     
|                         |              |              |        |          |     

28

---

Loan Maturity Schedule.The following table sets forth information at December 31, 2003, regarding the
dollar amount of loans, net of deferred loan fees, maturing in the Bank's loan portfolio based on their contractual terms to maturity.

Due during
the year ended
December 31,
2004

Due after
1 through
5 years after
December 31,
2003

Due after 5
years after
December 31,
2003

Total
Loans(Dollars in thousands)Residential mortgage

$
4,302

$
33,794

$
155,081

$
193,177Real estate construction


8,197


1,755





9,952Real estate commercial


42,444


157,907


39,055


239,406Consumer, home equity and indirect consumer


6,514


61,589


13,742


81,845Commercial, other


12,122


15,665


2,533


30,320Total

$
73,579

$
270,710

$
210,411

$
554,700


The
following table breaks down loans maturing after one year, by fixed and adjustable rates.

Fixed Rates

Floating or
Adjustable Rates

Total(Dollars in thousands)Residential mortgage

$
116,432

$
72,443

$
188,875Real estate construction


1,291


464


1,755Real estate commercial


91,238


105,724


196,962Consumer, home equity and indirect consumer


40,405


34,926


75,331Commercial, other


11,632


6,566


18,198Total

$
260,998

$
220,123

$
481,121


Allowance and Provision for Loan Losses

The Bank's Executive Loan Committee evaluates the allowance for loan losses quarterly to maintain a level sufficient to absorb probable incurred credit losses
existing in the loan portfolio. Periodic
provisions to the allowance are made as needed. The allowance is determined based on the application of loss estimates to graded loans by categories. The amount of the provision for loan losses
necessary to maintain an adequate allowance is also based upon an analysis of such factors, as changes in lending policies and procedures; underwriting standards; collection; charge-off
and recovery history; changes in national and local economic business conditions and developments; changes in the characteristics of the portfolio; ability and depth of lending management and staff;
changes in the trend of the volume and severity of past due, non-accrual and classified loans; troubled debt restructuring and other loan modifications; and results of regulatory
examinations.

The
methodology for allocating the allowance for loan and lease losses takes into account the Bank's strategic plan to increase its emphasis on commercial and consumer lending. The Bank
increases the amount of the allowance allocated to commercial loans and consumer loans in response to the growth of the commercial and consumer loan portfolios and management's recognition of the
higher risks and loan losses in these lending areas. The indirect consumer loan program begun in 1999 is comprised of new and used automobile, motorcycle and all terrain vehicle loans originated on
behalf of the Bank by a select group of auto dealers within the Bank's service area. The indirect loan program involves a greater degree of risk and is evaluated quarterly and monitored by the Board
of Directors. In light of the greater charge-offs from indirect consumer loans compared to direct consumer loans,

29

---

proportionally
more of the allowance for consumer loans is allocated for indirect loans than direct loans. As the indirect loan program has evolved, dealer analysis and underwriting standards have
been refined to improve the loan loss experience of the program. In addition, the Bank has hired a dealer loan specialist to expand its dealer loan program. Estimating the allowance is a continuous
process. In this regard, the Executive Loan Committee continues to monitor the performance of indirect consumer loans as well as the Bank's other loan products and updates its estimates as the
evidence warrants.

The
following table sets forth an analysis of the Bank's loan loss experience for the periods indicated.

|                                                        |                      |   |       |     |   | Year Ended June 30, |    
|------------------------------------------------------- | -------------------- | - | ----- | --- | - | ------------------- | ---
|
|
|
|Balance at beginning of period                          |                      | $ | 4,576 |     | $ | 3,735               |    
|                                                        |                      |   |       |     |   |                     |    
|Loans charged-off:                                      |                      |   |       |     |   |                     |    
|                                                        | Real estate mortgage |   |       | 60  |   |                     | 5  
|                                                        | Consumer             |   |       | 721 |   |                     | 419
|                                                        | Commercial           |   |       | 76  |   |                     |   
|                                                        |                      |   |       |     |   |                     |    
|Total charge-offs                                       |                      |   | 857   |     |   | 424                 |    
|                                                        |                      |   |       |     |   |                     |    
|Recoveries:                                             |                      |   |       |     |   |                     |    
|                                                        | Real estate mortgage |   |       |    |   |                     |   
|                                                        | Consumer             |   |       | 190 |   |                     | 74 
|                                                        | Commercial           |   |       | 3   |   |                     | 30 
|                                                        |                      |   |       |     |   |                     |    
|Total recoveries                                        |                      |   | 193   |     |   | 104                 |    
|                                                        |                      |   |       |     |   |                     |    
|Net loans charged-off                                   |                      |   | 664   |     |   | 320                 |    
|                                                        |                      |   |       |     |   |                     |    
|Acquired reserves                                       |                      |   |      |     |   |                    |    
|Provision for loan losses                               |                      |   | 1,656 |     |   | 1,161               |    
|                                                        |                      |   |       |     |   |                     |    
|Balance at end of period                                |                      | $ | 5,568 |     | $ | 4,576               |    
|                                                        |                      |   |       |     |   |                     |    
|Allowance for loan losses to net loans                  |                      |   | 1.01  | %   |   | 87                  | %  
|Net charge-offs to average loans outstanding            |                      |   | 0.12  | %   |   | 0.12                | %  
|Allowance for loan losses to total non-performing loans |                      |   | 105   | %   |   | 100                 | %  

The provision for loan losses decreased 17% to $1.7 million for the fiscal year ended December 30, 2003 compared to
$2.0 million for the 2002 period. The higher provision expense for 2002 was due to a change in loan types. The total allowance for loan losses increased $992,000 to $5.6 million from
December 31, 2002 to December 31, 2003. Management increased the allowance for loan losses due to the continued strong growth in commercial real estate lending and changes in the product
mix within the loan portfolios. Net loan charge-offs decreased $49,000 to $664,000 during 2003 compared to $713,000 during 2002. The decrease in charge-offs is primarily
related to a decrease in charge-offs of indirect consumer loans during the 2003 period.

The
provision for loan losses was $1.2 million for the six months ended December 31, 2002 compared to $760,000 for the 2001 six month period. The total allowance for loan
losses increased $841,000 to $4.6 million from June 30, 2002 to December 31, 2002. Management increased the provision and allowance for loan losses due to a change in the loan
classification and charge-off estimates, the increase in non-performing loans, which reflected the generally recognized slowing in the economy, and continued strong growth in
commercial real estate lending. Net loan charge-offs decreased $62,000 to $320,000 during the 2002 six-month period compared to $382,000 during 2001.

30

---

The
decrease in charge-offs is primarily related to an increase in recoveries of consumer and commercial loan charge-offs during the 2002 period.

The
provision for loan losses was $1.6 million for the fiscal year ended June 30, 2002 compared to $1.1 million for 2001. The total allowance for loan losses
increased $829,000 to $3.7 million from June 30, 2001 to June 30, 2002. Management increased the provision and allowance for loan losses due to the increase in
non-performing loans and charge-offs for the period, continued strong growth in commercial real estate lending and the increase in charge-offs and
non-performing loans that reflected the generally recognized slowing in the economy. Net loan charge-offs increased $343,000 to $775,000 during 2002 compared to $432,000 during
2001. The increase in charge-offs is primarily related to charge-offs of indirect consumer loans and commercial real estate loans during the 2002 period.

The
following table depicts management's allocation of the allowance for loan losses by loan type. Allowance funding and allocation is based on management's current evaluation of risk in
each category, economic conditions, past loss experience, loan volume, past due history and other factors. Since these
factors and management's assumptions are subject to change, the allocation is not necessarily predictive of future portfolio performance.

|                     |       | December 31, |       | June 30, |   
|-------------------- | ----- | ------------ | ----- | -------- | --
|
|
|Residential mortgage |       | $            | 456   |          | 35
|Consumer             |       |              | 1,235 |          | 16
|Commercial           |       |              | 3,877 |          | 49
|                     |       |              |       |          |   
|                     | Total |              | $     | 5,568    |   
|                     |       |              |       |          |   

Federal regulations require insured institutions to classify their own assets on a regular basis. The regulations provide for three categories of
classified loanssubstandard, doubtful and loss. The regulations also contain a special mention and a specific allowance category. Special mention is defined as loans that do not currently
expose an insured institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving management's close attention. Assets
classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either
establish specified allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge off such amount. At December 31, 2003, on the basis of management's
review of the Bank's loan portfolio, the Bank had $5.7 million of assets classified substandard, $1.2 million classified as doubtful, $6.3 million classified as special mention
and $82,000 of assets classified as loss.

Loans
are classified according to estimated loss as follows: Substandard-2.5% to 35%; Doubtful-5% to 50%; Loss-100%; and Special
Mention-2% to 10%. The Bank additionally provides a reserve estimate for probable incurred losses in non-classified loans ranging from .20% to 3.50%. Although the Bank may
allocate a portion of the allowance to specific loans or loan categories, the entire allowance is available for active charge-offs. Allowance estimates are developed by the Bank in
consultation with regulatory authorities, actual loss experience and are adjusted for current economic conditions. Allowance estimates are considered a prudent measurement of the risk of the Bank's
loan portfolio and are applied to individual loans based on loan type.

31

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Non-Performing Assets

Non-performing assets consist of restructured loans for which interest rate or other terms have been renegotiated, loans on which interest is no
longer accrued, real estate acquired through foreclosure and repossessed assets. The Bank does not have any loans greater than 90 days past due still on accrual. Loans, including impaired loans
under SFAS 114, are placed on non-accrual status when they become past due 90 days or more as to principal or interest, unless they are adequately secured and in the process
of collection. Loans are considered impaired if full principal or interest payments are not anticipated in accordance with the contractual loan terms. Impaired loans are carried at the present value
of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent.

Loans
are reviewed on a regular basis and normal collection procedures are implemented when a borrower fails to make a required payment on a loan. If the delinquency on a mortgage loan
exceeds 90 days and is not cured through normal collection procedures or an acceptable arrangement is not worked out with the borrower, the Bank institutes measures to remedy the default,
including commencing a foreclosure action. Consumer loans generally are charged off when a loan is deemed uncollectible by management and any available collateral has been disposed of. Commercial
business and real estate loan delinquencies are handled on an individual basis by management with the advice of the Bank's legal counsel. The Bank anticipates that the volume of
non-performing real estate loans will continue to increase, reflecting anticipated growth of the Bank's loan portfolio.

Interest
income on loans is recognized on the accrual basis except for those loans in a nonaccrual of income status. The accrual of interest on impaired loans is discontinued when
management believes, after consideration of economic and business conditions and collection efforts that the borrowers' financial condition is such that collection of interest is doubtful, typically
after the loan becomes 90 days delinquent. When interest accrual is discontinued, existing accrued interest is reversed and interest income is subsequently recognized only to the extent cash
payments are received.

Real
estate acquired by the Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until such time as it is sold. New and used automobile,
motorcycle and all terrain vehicles acquired by the Bank as a result of foreclosure are classified as repossessed assets until they are sold. When such property is acquired it is recorded at the lower
of the unpaid principal balance of the related loan or its fair market value. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses.
Subsequent gains and losses are included in non-interest income and non-interest expense.

32

---

The
following table sets forth information with respect to the Bank's non-performing assets for the periods indicated.

|                                                                    |                             | December 31, |       | June 30, |  
|------------------------------------------------------------------- | --------------------------- | ------------ | ----- | -------- | -
|
|
|Restructured                                                        |                             | $            | 3,037 |          | $
|Past due 90 days still on accrual                                   |                             |              |      |          |  
|Loans on non-accrual status                                         |                             |              | 2,281 |          |  
|                                                                    |                             |              |       |          |  
|                                                                    | Total non-performing loans  |              |       | 5,318    |  
|Real estate acquired through foreclosure                            |                             |              | 387   |          |  
|Other repossessed assets                                            |                             |              | 62    |          |  
|                                                                    |                             |              |       |          |  
|                                                                    | Total non-performing assets |              | $     | 5,767    |  
|                                                                    |                             |              |       |          |  
|Interest income that would have been earned on non-performing loans |                             | $            | 374   |          | $
|Interest income recognized on non-performing loans                  |                             |              | 227   |          |  
|Ratios: Non-performing loans to net loans                           |                             |              | 0.97  | %        |  
|Non-performing assets to net loans                                  |                             |              | 1.05  | %        |  

During
the quarter ended June 30, 2002, the Bank restructured approximately $3.3 million in commercial and residential mortgage loans. The terms of these
loans were renegotiated to reduce the rate of interest and extend the term thus reducing the amount of cash flow required from the borrower to service the loan. The new terms of the restructured loans
are currently being met.

Investment Securities

Interest on securities provides the largest source of interest income for First Federal after interest on loans, constituting 4.9% of the total interest income
for the year ended December 31, 2003. First Federal has the authority to invest in various types of liquid assets, including short-term United States Treasury obligations and
securities of various federal agencies, obligations of states and political subdivisions, corporate bonds, certificates of deposit at insured savings and loans and banks, bankers' acceptances, and
federal funds. The Bank may also invest a portion of its assets in certain commercial paper and corporate debt securities. First Federal is also authorized to invest in mutual funds and stocks whose
assets conform to the investments that First Federal is authorized to make directly. The available-for-sale and held-to-maturity investment portfolios
increased during the 2003 period due to investments in U.S. Treasury and agencies, equity securities and two mortgage-backed securities with fixed rate terms of five and seven years. See Note 2
of the Notes to Consolidated Financial Statements for further information concerning the Bank's investment portfolio.

33

---

The
following table sets forth the carrying value of the Bank's securities portfolio at the dates indicated. At December 31, 2003, the market value of the Bank's securities
portfolio was $34.9 million.

December 31,

June 30,2003

2002

2002

2001(Dollars in thousands)Securities available-for-sale:Equity

$
2,939

$
914

$
930

$
996State and municipal


1,070


1,085


1,048


1,017Total

$
4,009

$
1,999

$
1,978

$
2,013Securities held-to-maturity:U.S. Treasury and agencies

$
19,999

$
13,986

$
20,964

$
19,917Corporate


2,000


2,000





Mortgage-backed


8,930


590


751


1,004Total

$
30,929

$
16,576

$
21,715

$
20,921


The
following table sets forth the scheduled maturities, amortized cost, fair value and weighted average yields for the Bank's securities at December 31, 2003.

Amortized
Cost

Fair
Value

Weighted
Average
Yield*(Dollars in thousands)Securities available-for-sale:Due after one year through five years

$
885

$
957

4.38
%Due after five years through ten years


114


114

4.55Equity


1,801


2,938

3.81Total

$
2,800

$
4,009


Amortized
Cost

Fair
Value

Weighted
Average
Yield*(Dollars in thousands)Securities held-to-maturity:Due in one year or less

$
2,000

$
2,021

3.00
%Due after one year through five years


17,999


18,055

3.84Due after ten years


2,000


2,000

3.66Mortgage-backed


8,930


8,843

3.86Total

$
30,929

$
30,919


---

Premises and Equipment

Premises and equipment increased by $3.6 million due to the purchase of three lots and the reclassification of land previously classified as held for
development. Two of the lots are located in high-growth market areas in Louisville, Kentucky. The Bank is currently constructing two traditional banking centers on these lots. The banking
centers are anticipated to be operational during the March and June 2004 quarters. The Bank has developed a unique building design for all future banking centers to brand its image.

34

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Deposits

First Federal attracts both short-term and long-term deposits from the general public by offering a wide range of deposit accounts and
interest rates. In recent years the Bank has been required by market conditions to rely increasingly on short-term certificate accounts and other deposit alternatives that are more
responsive to market interest rates. The Bank uses forecasts based on interest rate risk simulations to assist management in monitoring the Bank's use of certificates of deposit and other deposit
products as funding sources and the impact of their use on interest income and net interest margin in various rate environments.

The
Bank relies primarily on customer service and long-standing relationships with customers to attract and retain deposits. Market interest rates and rates on deposit
products offered by competing financial institutions can significantly affect the Bank's ability to attract and retain deposits. During the year ended December 31, 2003, deposits increased by
$8.1 million to $529.2 million at December 31, 2003 compared to $521.1 million at December 31, 2002. The increase in retail deposits was primarily in savings and
money market accounts due to growth in public entity deposits for the period. During the six months ended December 31, 2002, retail deposits decreased by $8.8 million to
$521.1 million at December 31, 2002 compared to $529.9 million at June 30, 2002, primarily in certificate of deposit accounts, caused in part by the Bank's deposit
customers shifting funds to higher interest earning products at other financial institutions. The Bank's strategic plan includes a focus toward increasing non-interest bearing accounts and
non-interest income, in addition to maintaining the current interest margin. Non-relationship certificate customers lack the fee income from other products and represent
high-cost funding that can be replaced by current liquidity or FHLB advances as needed.

To
evaluate the funding needs of the Bank in light of deposit trends resulting from these changing conditions, management and Board committees evaluate simulated performance reports that
forecast changes in margins. The Bank continues to offer attractive certificate rates for longer terms to allow the Bank to retain deposit customers and reduce interest rate risk during the current
low-rate environment, while protecting the margin when interest rates increase as the economy recovers.

First
Federal offers statement and passbook savings accounts, NOW accounts, money market accounts and fixed and variable rate certificates with varying maturities. First Federal also
offers tax-deferred individual retirement accounts. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. As of
December 31, 2003, approximately 44.3% of the Bank's deposits consisted of various savings and demand deposit accounts from which customers can withdraw funds at any time without penalty.
Interest rates paid, maturity terms, service fees and withdrawal penalties are established by management on a periodic basis.

First
Federal also offers certificates of deposit with a variety of terms and interest rates. These certificates have minimum deposit requirements as well. The variety of deposit
accounts allows First
Federal to compete more effectively in obtaining funds and to respond with more flexibility to the flow of funds away from depository institutions into direct investment vehicles such as government
and corporate securities. However, the ability of the Bank to attract and maintain deposits and its cost of funds have been, and will continue to be, significantly affected by market conditions.

The
holders of the Bank's certificates of deposits in amounts of $100,000 or more are all non-brokered depositors, most of whom reside within our service areas. The Bank does
not accept brokered deposits, which are funds deposited by an investment dealer on behalf of a third-party investor. The Bank's policy is to maintain certificate of deposit accounts in amounts of
$100,000 or more, to the extent practical, only when the depositor uses other bank products to increase the total customer relationship. The objective is to provide the Bank with a stable deposit base
of large account balances while increasing the fee income and lower funding costs through other products and services.

35

---

The
following table breaks down the Bank's deposits as of December 31, 2003.

Category

Balances

Percent
of DepositsNon-interest bearing demand accounts

$
28,632

5.41
%NOW demand accounts


67,504

12.76Savings accounts


86,419

16.33Money market deposit accounts


51,773

9.78Certificates of deposit


254,258

48.05Individual Retirement Accounts


40,576

7.67$
529,162

100.00
%


The
following table shows at December 31, 2003 the amount of the Bank's certificates of deposit of $100,000 or more by time remaining until maturity.

Maturity Period

Certificates
of Deposit(In Thousands)Three months or less

$
12,731Three through six months


15,337Six through twelve months


19,540Over twelve months


41,325Total

$
88,933


Borrowings

Deposits are the primary source of funds for First Federal's lending and investment activities and for its general business purposes. The Bank can also use
advances (borrowings) from the FHLB of Cincinnati to supplement its supply of lendable funds, meet deposit withdrawal requirements and extend the term
of its liabilities. Advances from the FHLB are secured by the Bank's stock in the FHLB and substantially all of the Bank's first mortgage loans. At December 31, 2003 First Federal had
$78.3 million in advances outstanding from the FHLB and the capacity to increase its borrowings an additional $58.5 million.

The
FHLB of Cincinnati functions as a central reserve bank providing credit for savings banks and other member financial institutions. As a member, First Federal is required to own
capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its home mortgages and other assets (principally, securities which are obligations of, or
guaranteed by, the United States) provided that it meets certain standards related to creditworthiness. For further information, see Note 6 of the Notes to Consolidated Financial Statements in
this Annual Report.

36

---

The
following table sets forth information about the Bank's FHLB advances during the periods indicated.

December 31,

June 30,2003

2002

2002

2001(Dollars in thousands)Average balance outstanding

$
77,726

$
77,736

$
77,709

$
91,418Maximum amount outstanding at any month-end during the period


78,283


77,767


80,377


111,026Year end balance


78,283


77,683


77,778


77,298Weighted average interest rate:At end of year


4.88
%

4.93
%

4.94
%

4.97
%During the year


4.84
%

4.81
%

4.81
%

5.80
%


LIQUIDITY

The Bank must maintain sufficient liquidity to fund loan demand and routine deposit withdrawal activity. Liquidity is managed by retaining sufficient liquid
assets in the form of cash and cash equivalents. Additional sources of funding and cash flows include the sale of securities in the available-for-sale portion of the investment
portfolio, principal paydowns on loans and mortgage-backed securities and proceeds realized from loans held for sale. The Corporation's banking centers also provide access to retail deposit markets.
If large certificate depositors shift to the Bank's competitors or the stock market in response to interest rate changes, the Bank has the ability to replenish those deposits through alternative
funding sources. Traditionally, the Bank has also utilized borrowings from the FHLB to supplement its funding requirements. At December 31, 2003, the Bank had an unused approved line of credit
in the amount of $74.1 million and sufficient collateral available to borrow, approximately, an additional $58.5 million in advances from the FHLB.

CAPITAL

During the year ended December 31, 2003, the Corporation purchased 309,991 shares of its own common stock. As a result, total capital decreased by
$9.6 million, which in turn reduced consolidated regulatory capital. The Corporation and the Bank continued to qualify as well capitalized under regulatory guidelines after the transaction. The
Corporation's stock repurchase programs have generally authorized the repurchase of up to 10% of the Corporation's outstanding stock from time to time in the open market or private transactions during
an 18-month period. Management considers repurchasing shares when the financial and other terms of the purchase and its impact on earnings per share and other financial measures offer an
attractive return to stockholders. The Corporation adopted its most recent plan on March 18, 2003.

Regulatory
agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. The
Corporation on a consolidated basis and the Bank continue to exceed the regulatory requirements for Tier I, Tier I leverage and total risk-based capital. Management intends to maintain a
capital position that meets or exceeds the "well capitalized" requirements as defined by the FDIC. The Bank's average stockholders' equity to average assets ratio declined to 8.26% for the year ended
December 31, 2003 compared to 8.92% for 2002 period due principally to stock repurchases.

On
March 26, 2002, a trust formed by of the Corporation completed the private placement of 10,000 shares of cumulative trust preferred securities with a liquidation preference of
$1,000 per security. The proceeds of the offering were loaned to the Corporation in exchange for floating rate junior subordinated deferrable interest debentures. Distributions on the securities are
payable quarterly at a rate per annum equal to the 3-month LIBOR plus 3.60%. The Corporation undertook the issuance

37

---

of
these securities to enhance its regulatory capital position as they are considered as Tier I capital under current regulatory guidelines. The Corporation intends to utilize the proceeds for general
business purposes and to support the Bank's future opportunities for growth.

Kentucky
banking laws limit the amount of dividends that may be paid to the Corporation by the Bank without prior approval of the KDFI. Under these laws, the amount of dividends that may
be paid in any calendar year is limited to current year's net income, as defined in the laws, combined with the retained net income of the preceding two years, less any dividends declared during those
periods. At December 31, 2003, the Bank had approximately $10.7 million of retained earnings that could be utilized for payment of dividends if authorized by its board of directors
without prior regulatory approval.

OFF BALANCE SHEET ARRANGEMENTS & AGGREGATE CONTRACTUAL OBLIGATIONS

|December 31, 2003                  |                           | Total |   | Less than
one year |  | Greater than
one year to
3 years |        | Greater than
3 years to
5 years |   | More than
5 years
|---------------------------------- | ------------------------- | ----- | - | ------------------ |  | -------------------------------- | ------ | ------------------------------- | - | -----------------
|
|Off Balance Sheet Items:           |                           |       |   |                    |  |                                  |        |                                 |   |                  
|                                   | Commitments to make loans |       | $ |                   |  | $                                |       |                                 | $ |                 
|                                   | Unused lines of credit    |       |   | 74,085             |  |                                  | 36,152 |                                 |   | 18,370           
|                                   | Standby letters of credit |       |   | 9,209              |  |                                  | 8,812  |                                 |   | 267              
|                                   | FHLB letters of credit    |       |   | 53,550             |  |                                  | 53,550 |                                 |   |                 
|Aggregate Contractual Obligations: |                           |       |   |                    |  |                                  |        |                                 |   |                  
|                                   | FHLB borrowings           |       |   | 78,283             |  |                                  | 146    |                                 |   | 303              
|                                   | Subordinated debentures   |       |   | 10,000             |  |                                  |       |                                 |   |                 
|                                   | Lease commitments         |       |   | 1,841              |  |                                  | 253    |                                 |   | 456              

Commitments
to make loans and unused lines of credit assure the borrower of financing for a specified period of time at a specified rate as long as there is no violation
of any condition established in the contract such as deterioration of the borrower's financial condition. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.

Standby
letters of credit represent conditional commitments issued by the Bank to guarantee the performance of a third party. The credit risk involved in issuing these letters of credit
is essentially the same as the risk involved in issuing loan commitments and extending credit.

The
Bank obtained letters of credit from the FHLB to be used to collateralize public deposits. These letters of credit are secured by a blanket pledge of eligible
one-to-four family residential mortgage loans.

FHLB
borrowings represent the amounts that are due to the FHLB of Cincinnati. These amounts have fixed maturity dates. Some of these borrowings, although fixed, are subject to conversion
provisions at the option of the FHLB or the Company can prepay these advances without a penalty. Management does not believe these advances will be converted in the near term.

The
subordinated debentures, which mature March 26, 2032, are redeemable prior to the maturity date at the option of the Corporation on or after March 26, 2007 at their
principal amount plus accrued interest. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust
debenture. The Corporation has the option to defer distributions on the subordinated debentures from time to time for a period not to exceed 20 consecutive quarters.

Lease
commitments represent the total future minimum lease payments under noncancelable operating leases.

38

---



IMPACT OF INFLATION & CHANGING PRICES

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in historical dollars without considering changes in the relative purchasing power of money over time due to inflation.

The
Bank has an asset and liability structure that is essentially monetary in nature. As a result, interest rates have a more significant impact on the Bank's performance than the
effects of general levels of inflation. Periods of high inflation are often accompanied by relatively higher interest rates, and periods of low inflation are accompanied by relatively lower interest
rates. As market interest rates rise or fall in relation to the rates earned on the Bank's loans and investments, the value of these assets decreases or increases respectively.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

ASSET/LIABILITY MANAGEMENT AND MARKET RISK

To minimize the volatility of net interest income and exposure to economic loss that may result from fluctuating interest rates, the Bank manages its exposure to
adverse changes in interest rates through asset and liability management activities within guidelines established by its Asset Liability Committee ("ALCO"). The ALCO, which includes senior management
representatives, has the responsibility for approving and ensuring compliance with asset/liability management polices of the Corporation. Interest rate risk is the exposure to adverse changes in the
net interest income as a result of market fluctuations in interest rates. The ALCO, on an ongoing basis, monitors interest rate and liquidity risk in order to implement appropriate funding and balance
sheet strategies. Management considers interest rate risk to be the Bank's most significant market risk.

The
Bank utilizes an earnings simulation model to analyze net interest income sensitivity. Potential changes in market interest rates and their subsequent effects on net interest income
are then evaluated. The model projects the effect of instantaneous movements in interest rates of both 100 and 200 basis points. Assumptions based on the historical behavior of the Bank's deposit
rates and balances in relation to changes in interest rates are also incorporated into the model. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure future
net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing,
magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

The
Bank's interest sensitivity profile was asset sensitive at both December 31, 2003 and December 31, 2002. Given a sustained 100 basis point decrease in rates, the Bank's
base net interest income would decrease by an estimated 4.34% at December 31, 2003 compared to a decrease of 2.83% at December 31, 2002. Given a 100 basis point increase in interest
rates the Bank's base net interest income would increase by an estimated 1.63% at December 31, 2003 compared to an increase of 1.70% at December 31, 2002.

The
interest sensitivity of the Corporation at any point in time will be affected by a number of factors. These factors include the mix of interest sensitive assets and liabilities as
well as their relative pricing schedules. It is also influenced by market interest rates, decay rates and prepayment speed assumptions. Our previous disclosures of sensitivity included growth rates
for loans and deposits. To provide improved period-to-period comparisons, the tables are now presented without these growth estimates.

As
demonstrated by the December 31, 2003 and December 31, 2002 sensitivity tables presented below, the Bank is transitioning from a liability sensitive to an asset
sensitive position as compared to

39

---

prior
periods. The change in the Bank's asset sensitivity is a result of changes in the loan portfolio to a greater extent than changes in the investment portfolio. While lending practices have
shifted to shorter term, variable rate commercial and consumer loans, that impact will be evidenced in smaller degrees over time.

The
Corporation's sensitivity to interest rate changes is presented based on data as of December 31, 2003 and December 31, 2002.

|                           |                | December 31, 2003 |       
|-------------------------- | -------------- | ----------------- | ------
|
|
|
|Projected interest income  |                |                   |       
|                           | Loans          |                   | $     
|                           | Investments    |                   |       
|                           |                |                   |       
|Total interest income      |                |                   | 33,808
|Projected interest expense |                |                   |       
|                           | Deposits       |                   |       
|                           | Borrowed funds |                   |       
|                           |                |                   |       
|Total interest expense     |                |                   | 10,976
|                           |                |                   |       
|Net interest income        |                | $                 | 22,832
|                           |                |                   |       
|Change from base           |                | $                 | (1,817
|                           |                |                   |       
|% Change from base         |                |                   | (7.37 

|                           |                | December 31, 2002 |       
|-------------------------- | -------------- | ----------------- | ------
|
|
|
|Projected interest income  |                |                   |       
|                           | Loans          |                   | $     
|                           | Investments    |                   |       
|                           |                |                   |       
|Total interest income      |                |                   | 36,294
|Projected interest expense |                |                   |       
|                           | Deposits       |                   |       
|                           | Borrowed funds |                   |       
|                           |                |                   |       
|Total interest expense     |                |                   | 12,182
|                           |                |                   |       
|Net interest income        |                | $                 | 24,112
|                           |                |                   |       
|Change from base           |                | $                 | (1,604
|                           |                |                   |       
|% Change from base         |                |                   | (6.24 

40

---



Item 8.    Financial Statements and Supplementary Data

FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY

Table of Contents

|Audited Consolidated Financial Statements |                                                                 | 
|----------------------------------------- | --------------------------------------------------------------- | 
|                                          |     Report of Independent Auditors                             | 
|                                          |     Consolidated Statements of Financial Condition             | 
|                                          |     Consolidated Statements of Income                          | 
|                                          |     Consolidated Statements of Comprehensive Income            | 
|                                          |     Consolidated Statements of Changes in Stockholders' Equity | 
|                                          |     Consolidated Statements of Cash Flows                      | 
|                                          |     Notes to Consolidated Financial Statements                 | 

41

---



[LOGO]

REPORT OF INDEPENDENT AUDITORS

Board
of Directors and Stockholders
First Federal Financial Corporation of Kentucky
Elizabethtown, Kentucky

We
have audited the accompanying consolidated statements of financial condition of First Federal Financial Corporation of Kentucky as of December 31, 2003 and 2002, and
June 30, 2002 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2003, the six month
period ended December 31, 2002 and each of the two years in the period ending June 30, 2002. These financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these 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 First Federal Financial Corporation of
Kentucky as of December 31, 2003 and 2002, and June 30, 2002 and the results of its operations and its cash flows for the year ended December 31, 2003, the six month period ended
December 31, 2002 and each of the two years in the period ending June 30, 2002 in conformity with accounting principles generally accepted in the United States of America.



Louisville,
Kentucky
January 16, 2004

42

---



FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY        Consolidated Statements of Financial Condition

|                                                                                                                                                                                     |                           | December 31, |                                            |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------- | ------------ | ------------------------------------------ | -------
|
|
|
|ASSETS                                                                                                                                                                               |                           |              |                                            |        
|Cash and due from banks                                                                                                                                                              |                           | $            | 28,030                                     |        
|Federal funds sold                                                                                                                                                                   |                           |              | 20,000                                     |        
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     | Cash and cash equivalents |              |                                            | 48,030 
|Interest bearing deposits                                                                                                                                                            |                           |              |                                           |        
|Securities available-for-sale                                                                                                                                                        |                           |              | 4,009                                      |        
|Securities held-to-maturity, fair value of $30,919 Dec (2003) $16,655 Dec (2002) and $21,750 Jun (2002)                                                                              |                           |              | 30,929                                     |        
|Loans held for sale                                                                                                                                                                  |                           |              | 1,021                                      |        
|Loans receivable, less allowance for loan losses of $5,568 Dec (2003), $4,576 Dec (2002) and $3,735 Jun (2002)                                                                       |                           |              | 549,132                                    |        
|Federal Home Loan Bank stock                                                                                                                                                         |                           |              | 6,570                                      |        
|Cash surrender value of life insurance                                                                                                                                               |                           |              | 7,067                                      |        
|Premises and equipment, net                                                                                                                                                          |                           |              | 15,466                                     |        
|Real estate owned:                                                                                                                                                                   |                           |              |                                            |        
|Acquired through foreclosure                                                                                                                                                         |                           |              | 387                                        |        
|Held for development                                                                                                                                                                 |                           |              | 446                                        |        
|Other repossessed assets                                                                                                                                                             |                           |              | 62                                         |        
|Goodwill                                                                                                                                                                             |                           |              | 8,384                                      |        
|Accrued interest receivable                                                                                                                                                          |                           |              | 1,931                                      |        
|Other assets                                                                                                                                                                         |                           |              | 2,901                                      |        
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     |                           |              | TOTAL ASSETS                               |        
|                                                                                                                                                                                     |                           |              |                                            |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                 |                           |              |                                            |        
|LIABILITIES:                                                                                                                                                                         |                           |              |                                            |        
|Deposits:                                                                                                                                                                            |                           |              |                                            |        
|                                                                                                                                                                                     | Non-interest bearing      |              | $                                          | 28,632 
|                                                                                                                                                                                     | Interest bearing          |              |                                            | 500,530
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     |                           |              | Total deposits                             |        
|Advances from Federal Home Loan Bank                                                                                                                                                 |                           |              | 78,283                                     |        
|Subordinated debentures                                                                                                                                                              |                           |              | 10,000                                     |        
|Accrued interest payable                                                                                                                                                             |                           |              | 416                                        |        
|Accounts payable and other liabilities                                                                                                                                               |                           |              | 1,027                                      |        
|Deferred income taxes                                                                                                                                                                |                           |              | 1,126                                      |        
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     |                           |              | TOTAL LIABILITIES                          |        
|                                                                                                                                                                                     |                           |              |                                            |        
|STOCKHOLDERS' EQUITY:                                                                                                                                                                |                           |              |                                            |        
|Serial preferred stock, 5,000,000 shares authorized and unissued                                                                                                                     |                           |              |                                           |        
|Common stock, $1 par value per share; authorized 10,000,000 shares; issued and outstanding, 3,705,438 shares Dec (2003), 3,643,706 shares Dec (2002) and 3,729,400 shares Jun (2002) |                           |              | 3,705                                      |        
|Additional paid-in capital                                                                                                                                                           |                           |              | 9,726                                      |        
|Retained earnings                                                                                                                                                                    |                           |              | 42,092                                     |        
|Accumulated other comprehensive income, net of tax                                                                                                                                   |                           |              | 798                                        |        
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     |                           |              | TOTAL STOCKHOLDERS' EQUITY                 |        
|                                                                                                                                                                                     |                           |              |                                            |        
|                                                                                                                                                                                     |                           |              | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |        
|                                                                                                                                                                                     |                           |              |                                            |        

See
notes to consolidated financial statements.

43

---

FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY        Consolidated Statements of Income

|                                                    |                                                     |         |                            |        |      | Year Ended
|--------------------------------------------------- | --------------------------------------------------- | ------- | -------------------------- | ------ | ---- | ----------
|
|
|Interest Income:                                    |                                                     |         |                            |        |      |           
|                                                    | Interest and fees on loans                          |         | $                          | 37,413 |      | $         
|                                                    | Interest and dividends on inverstments and deposits |         |                            | 1,926  |      |           
|                                                    |                                                     |         |                            |        |      |           
|                                                    |                                                     |         | Total interest income      |        |      | 39,339    
|                                                    |                                                     |         |                            |        |      |           
|Interest Expense:                                   |                                                     |         |                            |        |      |           
|                                                    | Deposits                                            |         |                            | 12,124 |      |           
|                                                    | Federal Home Loan Bank advances                     |         |                            | 3,738  |      |           
|                                                    | Subordinated debentures                             |         |                            | 503    |      |           
|                                                    |                                                     |         |                            |        |      |           
|                                                    |                                                     |         | Total interest expense     |        |      | 16,365    
|                                                    |                                                     |         |                            |        |      |           
|Net interest income                                 |                                                     |         | 22,974                     |        |      | 12,162    
|Provision for loan losses                           |                                                     |         | 1,656                      |        |      | 1,161     
|                                                    |                                                     |         |                            |        |      |           
|Net interest income after provision for loan losses |                                                     |         | 21,318                     |        |      | 11,001    
|                                                    |                                                     |         |                            |        |      |           
|Non-interest Income:                                |                                                     |         |                            |        |      |           
|                                                    | Customer service fees on deposit accounts           |         |                            | 4,556  |      |           
|                                                    | Gain on sale of mortgage loans                      |         |                            | 1,564  |      |           
|                                                    | Gain on sale of investments                         |         |                            |       |      |           
|                                                    | Gain on sale of real estate held for development    |         |                            | 437    |      |           
|                                                    | Brokerage and insurance commissions                 |         |                            | 353    |      |           
|                                                    | Other income                                        |         |                            | 1,071  |      |           
|                                                    |                                                     |         |                            |        |      |           
|                                                    |                                                     |         | Total non-interest income  |        |      | 7,981     
|                                                    |                                                     |         |                            |        |      |           
|Non-interest Expense:                               |                                                     |         |                            |        |      |           
|                                                    | Employee compensation and benefits                  |         |                            | 9,446  |      |           
|                                                    | Office occupancy expense and equipment              |         |                            | 1,534  |      |           
|                                                    | FDIC insurance premiums                             |         |                            | 83     |      |           
|                                                    | Marketing and advertising                           |         |                            | 568    |      |           
|                                                    | Outside services and data processing                |         |                            | 1,826  |      |           
|                                                    | State franchise tax                                 |         |                            | 623    |      |           
|                                                    | Goodwill amortization                               |         |                            |       |      |           
|                                                    | Other expense                                       |         |                            | 3,212  |      |           
|                                                    |                                                     |         |                            |        |      |           
|                                                    |                                                     |         | Total non-interest expense |        |      | 17,292    
|                                                    |                                                     |         |                            |        |      |           
|Income before income taxes                          |                                                     |         | 12,007                     |        |      | 6,581     
|Income taxes                                        |                                                     |         | 4,004                      |        |      | 2,199     
|                                                    |                                                     |         |                            |        |      |           
|Net Income                                          |                                                     | $       | 8,003                      |        | $    | 4,382     
|                                                    |                                                     |         |                            |        |      |           
|Earnings per share:                                 |                                                     |         |                            |        |      |           
|                                                    |                                                     | Basic   |                            | $      | 2.12 |           
|                                                    |                                                     | Diluted |                            | $      | 2.10 |           

See
notes to consolidated financial statements.

44

---



FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY        Consolidated Statements of Comprehensive Income

|                                   |                                                               |   |       |      |   | Year Ended
June 30, |   
|---------------------------------- | ------------------------------------------------------------- | - | ----- | ---- | - | ------------------- | --
|
|
|
|Net Income                         |                                                               | $ | 8,003 |      | $ | 4,382               |   
|Other comprehensive income (loss): |                                                               |   |       |      |   |                     |   
|                                   | Change in unrealized gain (loss) on securities                |   |       | 606  |   |                     | 21
|                                   | Reclassification of realized amount                           |   |       |     |   |                     |  
|                                   |                                                               |   |       |      |   |                     |   
|                                   | Net unrealized gain (loss) recognized in comprehensive income |   |       | 606  |   |                     | 21
|                                   | Tax effect                                                    |   |       | (206 | ) |                     | (7
|                                   |                                                               |   |       |      |   |                     |   
|                                   | Total other comphrehensive income (loss)                      |   |       | 400  |   |                     | 13
|                                   |                                                               |   |       |      |   |                     |   
|Comphrehensive Income              |                                                               | $ | 8,403 |      | $ | 4,395               |   
|                                   |                                                               |   |       |      |   |                     |   

See
notes to consolidated financial statements.

45

---

FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY        Consolidated Statements of Changes in Stockholders' Equity        Years Ending June 2002 and 2001        Six Months Ended
December 31, 2002        Year Ended December 31, 2003

|                                                                                     |  | Common Stock |   |   |       |   |   |        |   |   |        
|------------------------------------------------------------------------------------ |  | ------------ | - | - | ----- | - | - | ------ | - | - | -------
|
|
|
|Balance, June 30, 2000                                                               |  | 3,756        |   | $ | 3,756 |   | $ |       |   | $ | 47,481 
|Net income                                                                           |  |              |   |   |       |   |   |        |   |   | 5,649  
|Exercise of stock options                                                            |  | 4            |   |   | 4     |   |   | 28     |   |   |        
|Net change in unrealized gains (losses) on securities available-for-sale, net of tax |  |              |   |   |       |   |   |        |   |   |        
|Cash dividends declared ($.65 per share)                                             |  |              |   |   |       |   |   |        |   |   | (2,704 
|Stock repurchased                                                                    |  | (2           | ) |   | (2    | ) |   | (7     | ) |   | (21    
|                                                                                     |  |              |   |   |       |   |   |        |   |   |        
|Balance, June 30, 2001                                                               |  | 3,758        |   |   | 3,758 |   |   | 21     |   |   | 50,405 
|Net income                                                                           |  |              |   |   |       |   |   |        |   |   | 7,458  
|Exercise of stock options, net of redemptions                                        |  | 3            |   |   | 3     |   |   | (3     | ) |   |        
|Net change in unrealized gain (losses) on securities available-for-sale, net of tax  |  |              |   |   |       |   |   |        |   |   |        
|Cash dividends declared ($.65 per share)                                             |  |              |   |   |       |   |   |        |   |   | (2,700 
|Stock repurchased                                                                    |  | (32          | ) |   | (32   | ) |   |        |   |   | (680   
|                                                                                     |  |              |   |   |       |   |   |        |   |   |        
|Balance, June 30, 2002                                                               |  | 3,729        |   |   | 3,729 |   |   | 18     |   |   | 54,483 
|Net income                                                                           |  |              |   |   |       |   |   |        |   |   | 4,382  
|Exercise of stock options, net of redemptions                                        |  | 2            |   |   | 2     |   |   | (2     | ) |   |        
|Net change in unrealized gains (losses) on securities available-for-sale, net of tax |  |              |   |   |       |   |   |        |   |   |        
|Cash dividends declared ($.33 per share)                                             |  |              |   |   |       |   |   |        |   |   | (1,316 
|Stock repurchased                                                                    |  | (87          | ) |   | (87   | ) |   | (16    | ) |   | (1,944 
|                                                                                     |  |              |   |   |       |   |   |        |   |   |        
|Balance, December 31, 2002                                                           |  | 3,644        |   |   | 3,644 |   |   |       |   |   | 55,605 
|Net income                                                                           |  |              |   |   |       |   |   |        |   |   | 8,003  
|Stock dividend-10%                                                                   |  | 337          |   |   | 337   |   |   | 10,213 |   |   | (10,550
|Exercise of stock options, net of redemptions                                        |  | 34           |   |   | 34    |   |   | 525    |   |   |        
|Net change in unrealized gains (losses) on securities available-for-sale, net of tax |  |              |   |   |       |   |   |        |   |   |        
|Cash dividends declared ($.70 per share)                                             |  |              |   |   |       |   |   |        |   |   | (2,660 
|Stock repurchased                                                                    |  | (310         | ) |   | (310  | ) |   | (1,012 | ) |   | (8,306 
|                                                                                     |  |              |   |   |       |   |   |        |   |   |        
|Balance, December 31, 2003                                                           |  | 3,705        |   | $ | 3,705 |   | $ | 9,726  |   | $ | 42,092 
|                                                                                     |  |              |   |   |       |   |   |        |   |   |        

See
notes to consolidated financial statements.

46

---



FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY        Consolidated Statements of Cash Flows

|                                                                                  |                                                       |                                        |         |         |      | Year Ended |        
|--------------------------------------------------------------------------------- | ----------------------------------------------------- | -------------------------------------- | ------- | ------- | ---- | ---------- | -------
|
|
|Operating Activities:                                                             |                                                       |                                        |         |         |      |            |        
|Net income                                                                        |                                                       | $                                      | 8,003   |         | $    | 4,382      |        
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                       |                                        |         |         |      |            |        
|                                                                                  | Provision for loan losses                             |                                        |         | 1,656   |      |            | 1,161  
|                                                                                  | Depreciation on premises and equipment                |                                        |         | 981     |      |            | 505    
|                                                                                  | Federal Home Loan Bank stock dividends                |                                        |         | (256    | )    |            | (144   
|                                                                                  | Goodwill amortization                                 |                                        |         |        |      |            |       
|                                                                                  | Net amortization (accretion)                          |                                        |         | (204    | )    |            | 13     
|                                                                                  | Gain on sale of investments available-for-sale        |                                        |         |        |      |            |       
|                                                                                  | Gain on sale of real estate held for development      |                                        |         | (437    | )    |            |       
|                                                                                  | Gain on sale of mortgage loans                        |                                        |         | (1,564  | )    |            | (518   
|                                                                                  | Origination of loans held for sale                    |                                        |         | (87,233 | )    |            | (33,536
|                                                                                  | Proceeds on sale of loans held for sale               |                                        |         | 91,452  |      |            | 31,889 
|                                                                                  | Deferred taxes                                        |                                        |         | 95      |      |            | (212   
|                                                                                  | Changes in:                                           |                                        |         |         |      |            |        
|                                                                                  |                                                       | Interest receivable                    |         |         | (189 | )          |        
|                                                                                  |                                                       | Other assets                           |         |         | (587 | )          |        
|                                                                                  |                                                       | Interest payable                       |         |         | (88  | )          |        
|                                                                                  |                                                       | Accounts payable and other liabilities |         |         | 79   |            |        
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Net cash from operating activities                                                |                                                       |                                        | 11,708  |         |      | 2,663      |        
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Investing Activities:                                                             |                                                       |                                        |         |         |      |            |        
|                                                                                  | Change in interest bearing deposits                   |                                        |         |        |      |            | 64,000 
|                                                                                  | Sales of securities available-for-sale                |                                        |         |        |      |            |       
|                                                                                  | Purchases of securities available-for-sale            |                                        |         | (1,415  | )    |            |       
|                                                                                  | Purchases of securities held-to-maturity              |                                        |         | (46,078 | )    |            | (29,000
|                                                                                  | Maturities of securities held-to-maturity             |                                        |         | 31,940  |      |            | 34,126 
|                                                                                  | Investment in cash surrender value of life insurance  |                                        |         | (7,000  | )    |            |       
|                                                                                  | Net increase in loans                                 |                                        |         | (25,750 | )    |            | (7,120 
|                                                                                  | Purchase of Federal Home Loan Bank stock              |                                        |         |        |      |            |       
|                                                                                  | Net purchases of premises and equipment               |                                        |         | (4,603  | )    |            | (690   
|                                                                                  | Sales of real estate held for development             |                                        |         | 540     |      |            |       
|                                                                                  | Purchase of real estate held for development          |                                        |         |        |      |            |       
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Net cash from investing activities                                                |                                                       |                                        | (52,366 | )       |      | 61,316     |        
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Financing Activities                                                              |                                                       |                                        |         |         |      |            |        
|                                                                                  | Net change in deposits                                |                                        |         | 8,041   |      |            | (8,761 
|                                                                                  | Advances from Federal Home Loan Bank                  |                                        |         | 844     |      |            |       
|                                                                                  | Repayments to Federal Home Loan Bank                  |                                        |         | (244    | )    |            | (95    
|                                                                                  | Proceeds from stock options exercised                 |                                        |         | 559     |      |            |       
|                                                                                  | Net proceeds from issuance of subordinated debentures |                                        |         |        |      |            |       
|                                                                                  | Dividends paid                                        |                                        |         | (2,660  | )    |            | (1,316 
|                                                                                  | Common stock repurchased                              |                                        |         | (9,628  | )    |            | (2,047 
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Net cash from financing activities                                                |                                                       |                                        | (3,088  | )       |      | (12,219    | )      
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Increase (decrease) in cash and cash equivalents                                  |                                                       |                                        | (43,746 | )       |      | 51,760     |        
|Cash and cash equivalents, beginning of year                                      |                                                       |                                        | 91,776  |         |      | 40,016     |        
|                                                                                  |                                                       |                                        |         |         |      |            |        
|Cash and cash equivalents, end of year                                            |                                                       | $                                      | 48,030  |         | $    | 91,776     |        
|                                                                                  |                                                       |                                        |         |         |      |            |        

See notes to consolidated financial statements.

47

---

FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a description of the significant accounting policies which First Federal Financial Corporation of Kentucky follows in preparing and presenting
its consolidated financial statements:

Principles of Consolidation and BusinessThe consolidated financial statements include the accounts of First Federal Financial
Corporation of Kentucky (the Corporation) and its wholly owned subsidiary, First Federal Savings Bank of Elizabethtown (the Bank). As further discussed in Note 7, a trust that had previously
been consolidated with the Bank is now reported separately. The Bank has three wholly owned subsidiaries, First Service Corporation of Elizabethtown, First Heartland Mortgage Company and First Federal
Office Park, LLC. All significant intercompany transactions and balances have been eliminated.

On
January 8, 2003, the Bank converted from a federal savings bank, regulated by the Office of Thrift Supervision (OTS), to a commercial bank chartered under Kentucky banking laws
regulated by the Federal Deposit Insurance Corporation (FDIC) and the Kentucky Department of Financial Institutions (KDFI). At the same time, the Corporation became a bank holding company regulated by
the Federal Reserve and changed its fiscal year from June 30 to December 31.

The
business of the Bank consists primarily of attracting deposits from the general public and origination of mortgage loans on single-family residences, multi-family housing and
commercial property. The Bank also makes home improvement loans, consumer loans and commercial business loans. The Bank's primary lending area is a region within North Central Kentucky. The economy
within this region is based in agriculture, a variety of manufacturing industries and Fort Knox, a military installation.

The
principal sources of funds for the Bank's lending and investment activities are deposits, repayment of loans and Federal Home Loan Bank advances. The Bank's principal source of
income is interest on loans. In addition, other income is derived from loan origination fees, service charges, returns on investment securities, gain on sale of mortgage loans, and brokerage and
insurance commissions.

First
Service Corporation acts as a broker for the purpose of selling mortgage life, credit life and accident and disability insurance to the Bank's customers as well as investment
services to the Bank's customers in the area of tax-deferred annuities, government securities and stocks and bonds. First Heartland Mortgage Company, through the secondary market lending
department, originates qualified VA, KHC, RHC and conventional secondary market loans on the behalf of the investors, thereby providing necessary liquidity to the Bank and needed loan products to the
Bank's customers. First Federal Office Park, LLC holds commercial lots adjacent to the Bank's home office on Ring Road in Elizabethtown, which are available for sale.

Estimates and AssumptionsThe preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The allowance for loan losses and the fair value of financial instruments are particularly subject to change.

48

---

Cash FlowsFor purposes of the statement of cash flows, the Corporation considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and certain interest bearing
deposits. Net cash flows are reported for interest-bearing deposits, loans, premises and equipment and deposits.

Interest Bearing DepositsDeposits with original maturities of greater than 90 days are reported separately from cash
and cash equivalents. At June 30, 2002, interest-bearing deposits included time deposits with the Federal Home Loan Bank with original maturities of 60 to 180 days at rates of 1.65% to
2.03%. At December 31, 2003 and 2002 there were no interest bearing deposits reported.

SecuritiesThe Corporation classifies its investments into held-to-maturity and
available-for-sale. Debt securities in which the Corporation has a positive intent and ability to hold are classified as held-to-maturity and are
carried at cost adjusted for the amortization of premiums and discounts using the interest method over the terms of the securities. Debt and equity
securities, which do not fall into this category, nor held for the purpose of selling in the near term, are classified as available-for-sale. Unrealized holding gains and
losses, net of tax, on available-for-sale securities are reported as a net amount in a separate component of stockholders' equity until realized.

Loans ReceivableLoans receivable are stated at unpaid principal balances, less undistributed construction loans, net deferred
loan origination fees and the allowance for loan losses. The Bank defers loan origination fees and discounts net of certain direct origination costs. These net deferred fees are amortized using the
level yield method on a loan-by-loan basis over the lives of the underlying loans.

The
allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any
underlying collateral, and current economic conditions.

The
allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as
substandard or doubtful. The general component covers non-classified and is based on historical loss experience adjusted for current factors.

Loans
are considered impaired if full principal or interest payments are not anticipated in accordance with the contractual loan terms. Impaired loans are carried at the present value of
expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is
allocated to impaired loans if the value of such loans is less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such increase is reported in
the provision for loan losses.

Interest
income on loans is recognized on the accrual basis except for those loans in nonaccrual status. The accrual of interest is discontinued when a loan becomes 90 or more days
delinquent. When interest accrual is discontinued, interest income is subsequently recognized only to the extent cash payments are received.

49

---

Mortgage Banking ActivitiesMortgage loans originated and intended for sale in the secondary market are carried at the lower
of aggregate cost or market value. To deliver closed loans to the secondary market and to control its interest rate risk prior to sale, the Corporation enters "best
efforts" agreements to sell loans. The aggregate market value of mortgage loans held for sale considers the price of the sales contracts. The loans are sold with servicing released.

On
July 1, 2002, the Corporation became subject to new accounting guidance for certain commitments to originate loans. The new guidance requires loan commitments related to the
origination of mortgage loans held for sale to be accounted for as derivative instruments. The Corporation's commitments are for fixed rate mortgage loans, generally lasting 60 to 90 days and
are at market rates when initiated. Considered derivatives, the Corporation had commitments to originate $2.2 million and $7.5 million in loans at December 31, 2003 and 2002 which
it intends to sell after the loans are closed.

The
impact of adopting this guidance was not material and substantially all of the gain on sale generated from mortgage banking activities continues to be recorded when closed loans are
delivered into the sales contracts.

Federal Home Loan Bank StockInvestment in stock of Federal Home Loan Bank is carried at cost.

Cash Surrender Value of Life InsuranceThe Bank has purchased life insurance policies on certain key executives. The life
insurance is recorded at its cash surrender value, or the amount that can be realized.

Premises and EquipmentLand is carried cost. Premises and equipment are stated at cost less accumulated depreciation.
Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 50 years. Furniture, fixtures and equipment are depreciated using
the straight-line method with useful lives ranging from 3 to 15 years.

Real Estate OwnedReal estate properties acquired through foreclosure and in settlement of loans are stated at lower of cost
or fair value less estimated selling costs at the date of foreclosure. The excess of cost over fair value less the estimated costs to sell at the time of foreclosure is charged to the allowance for
loan losses. Costs relating to development and improvement of property are capitalized, whereas costs relating to holding property are not capitalized and are charged against operations in the current
period.

Real
estate properties held for development and sale are carried at the lower of cost, including cost of development and improvement subsequent to acquisition, or fair value less
estimated selling costs. The portion of interest costs relating to the development of real estate is capitalized.

Other Repossessed AssetsConsumer assets acquired through repossession and in settlement of loans, typically automobiles, are
carried at lower of cost or fair value at the date of repossession. The excess cost over fair value at time of repossession is charged to the allowance for loan losses.

Stock DividendThe Corporation declared a 10% stock dividend on April 16, 2003 to its shareholders of record as of
April 28, 2003, payable on May 14, 2003. The payment of this dividend is in addition to the regular quarterly cash dividends. Per share amounts have been restated for the impact of the
stock dividend.

50

---

Brokerage and Insurance CommissionsBrokerage commissions are recognized as income on settlement date. Insurance commissions
on loan products (credit life, mortgage life, accidental death, and guaranteed auto protection) are recognized as income over the life of the loan.

Stock Option PlansEmployee compensation expense under stock option plans is reported using the intrinsic value method. No
stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to the market price of the underlying common stock at date of grant. The following table
illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation.

|                    |             |           |             |       |      | Six Months Ended December 31, 2002 |       | Year Ended June 30,
|------------------- | ----------- | --------- | ----------- | ----- | ---- | ---------------------------------- | ----- | -------------------
|
|
|
|Net income:         |             |           |             |       |      |                                    |       |                    
|                    | As reported |           | $           | 8,003 |      | $                                  | 4,382 |                    
|                    | Pro-forma   |           |             | 7,895 |      |                                    | 4,328 |                    
|Earnings per share: |             |           |             |       |      |                                    |       |                    
|                    | Basic       |           | As Reported |       | $    | 2.12                               |       | $                  
|                    |             | Pro-forma |             |       | 2.09 |                                    |       | 1.07               
|                    | Diluted     |           | As Reported |       | $    | 2.10                               |       | $                  
|                    |             | Pro-forma |             |       | 2.07 |                                    |       | 1.07               

The weighted-average assumptions for options granted during the year and the resulting estimated weighted average fair values per share used in computing pro
forma disclosures is presented below. There were no options granted for the year ended December 31, 2003 and the six-month period ended December 31, 2002.

June 30,2002

2001Assumptions:Risk-free interest rate


4.94
%

5.88
%Expected dividend yield


4.44
%

4.20
%Expected life (years)


10


10Expected common stock market price volatility


28
%

31
%Estimated fair value per share

$
3.79

$
4.71


Income TaxesDeferred income tax assets and liabilities are determined using the liability method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects of the differences between the book and tax basis of the various balance sheet assets and liabilities.

Employee Stock Ownership PlanCompensation expense is based on the market price of shares as they are committed to be released
to participant accounts. Dividends on allocated ESOP shares reduce retained earnings. Since the ESOP has not acquired shares in advance of allocation to participant accounts, the plan has no
unallocated shares.

51

---

Earnings Per Common ShareBasic earnings per common share is net income divided by the weighted average number of common
shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options.

Comprehensive IncomeComprehensive income consists of net income and other comprehensive income. Other comprehensive income
includes unrealized gains and losses on securities available-for-sale, which are also recognized as a separate component of equity, net of tax.

DerivativesThe Corporation only uses derivative instruments as described in "Mortgage Banking Activities."

New Accounting PronouncementsOn October 1, 2002, new guidance was issued on the accounting for financial institution
acquisitions. Under this new guidance, if certain criteria are met, the amount of the unidentifiable intangible asset resulting from prior financial institutions acquisitions is to be reclassified to
goodwill commensurate with the previously adopted business combination standards. Accordingly, the Corporation reclassified $6.6 million of previously recognized unidentifiable intangible
assets to goodwill effective July 1, 2002. Thus, the acquisition intangibles consist solely of goodwill, which is no longer amortized. Instead, goodwill is assessed at least annually for
impairment and any such impairment is recognized in the period identified. The effect on pre-tax income of ceasing goodwill amortization for the year ended December 31, 2003 and the
six months ended December 31, 2002 was $832,000 and $416,000.

The
effect of not amortizing goodwill, net of tax effects, is summarized as follows:

|                                |                       |   |       |      |   | Year Ended June 30,
|------------------------------- | --------------------- | - | ----- | ---- | - | -------------------
|
|
|
|Reported net income             |                       | $ | 8,003 |      | $ | 4,382              
|Add back: goodwill amortization |                       |   |      |      |   |                   
|                                |                       |   |       |      |   |                    
|Adjusted net income             |                       | $ | 8,003 |      | $ | 4,382              
|                                |                       |   |       |      |   |                    
|Basic earnings per share:       |                       |   |       |      |   |                    
|                                | Reported net income   |   | $     | 2.12 |   | $                  
|                                | Goodwill amortization |   |       |     |   |                    
|                                |                       |   |       |      |   |                    
|                                | Adjusted net income   |   | $     | 2.12 |   | $                  
|                                |                       |   |       |      |   |                    
|Diluted earnings per share:     |                       |   |       |      |   |                    
|                                | Reported net income   |   | $     | 2.10 |   | $                  
|                                | Goodwill amortization |   |       |     |   |                    
|                                |                       |   |       |      |   |                    
|                                | Adjusted net income   |   | $     | 2.10 |   | $                  
|                                |                       |   |       |      |   |                    

On January 1, 2003, the Corporation adopted Interpretation 45, Guarantor's Accounting and Disclosure Requirements for Guarantees. On July 1, 2003,
the Corporation adopted Statement 149, amendment of Statement 133 on Derivative Instruments and Hedging Activities, and Statement 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equities. On

52

---

October 1,
2003, the Corporation adopted Interpretation 46, Consolidation of Variable Interest Entities. Adoption of the new standards did not materially affect the Corporation's operating
results or financial condition.

Industry SegmentsSegments are parts of a company evaluated by management with separate financial information. The
Corporation's internal information is reported and evaluated in three lines of business-banking, mortgage banking, and brokerage and insurance. These segments are dominated by banking at a magnitude
for which separate individual segment disclosures are not required.

ReclassificationsCertain amounts for prior periods have been reclassified to conform to the December 31, 2003
presentation.

2.    SECURITIES

The amortized cost basis and fair values of securities are as follows:

|                               |                    | Amortized Cost      |       | Gross Unrealized Gains |       | Gross Unrealized Losses |   | Fair Value
|------------------------------ | ------------------ | ------------------- | ----- | ---------------------- | ----- | ----------------------- | - | ----------
|
|Securities available-for-sale: |                    |                     |       |                        |       |                         |   |           
|                               | December 31, 2003: |                     |       |                        |       |                         |   |           
|                               |                    | Equity              |       | $                      | 1,801 |                         | $ | 1,138     
|                               |                    | State and municipal |       |                        | 999   |                         |   | 71        
|                               |                    |                     |       |                        |       |                         |   |           
|                               |                    |                     | Total |                        | $     | 2,800                   |   | $         
|                               |                    |                     |       |                        |       |                         |   |           
|                               | December 31, 2002: |                     |       |                        |       |                         |   |           
|                               |                    | Equity              |       | $                      | 385   |                         | $ | 532       
|                               |                    | State and municipal |       |                        | 1,010 |                         |   | 75        
|                               |                    |                     |       |                        |       |                         |   |           
|                               |                    |                     | Total |                        | $     | 1,395                   |   | $         
|                               |                    |                     |       |                        |       |                         |   |           
|                               | June 30, 2002:     |                     |       |                        |       |                         |   |           
|                               |                    | Equity              |       | $                      | 385   |                         | $ | 545       
|                               |                    | State and municipal |       |                        | 1,010 |                         |   | 38        
|                               |                    |                     |       |                        |       |                         |   |           
|                               |                    |                     | Total |                        | $     | 1,395                   |   | $         
|                               |                    |                     |       |                        |       |                         |   |           

53

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FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                             |                    | Amortized Cost             |       | Gross Unrealized Gains |        | Gross Unrealized Losses |   | Fair Value
|---------------------------- | ------------------ | -------------------------- | ----- | ---------------------- | ------ | ----------------------- | - | ----------
|
|Securities held-to-maturity: |                    |                            |       |                        |        |                         |   |           
|                             | December 31, 2003: |                            |       |                        |        |                         |   |           
|                             |                    | U.S. Treasury and agencies |       | $                      | 19,999 |                         | $ | 77        
|                             |                    | Corporate                  |       |                        | 2,000  |                         |   |          
|                             |                    | Mortgage-backed            |       |                        | 8,930  |                         |   | 9         
|                             |                    |                            |       |                        |        |                         |   |           
|                             |                    |                            | Total |                        | $      | 30,929                  |   | $         
|                             |                    |                            |       |                        |        |                         |   |           
|                             | December 31, 2002: |                            |       |                        |        |                         |   |           
|                             |                    | U.S. Treasury and agencies |       | $                      | 13,986 |                         | $ | 65        
|                             |                    | Corporate                  |       |                        | 2,000  |                         |   |          
|                             |                    | Mortgage-backed            |       |                        | 590    |                         |   | 14        
|                             |                    |                            |       |                        |        |                         |   |           
|                             |                    |                            | Total |                        | $      | 16,576                  |   | $         
|                             |                    |                            |       |                        |        |                         |   |           
|                             | June 30, 2002:     |                            |       |                        |        |                         |   |           
|                             |                    | U.S. Treasury and agencies |       | $                      | 20,964 |                         | $ | 58        
|                             |                    | Mortgage-backed            |       |                        | 751    |                         |   | 7         
|                             |                    |                            |       |                        |        |                         |   |           
|                             |                    |                            | Total |                        | $      | 21,715                  |   | $         
|                             |                    |                            |       |                        |        |                         |   |           

The amortized cost and fair value of securities at December 31, 2003, by contractual maturity, are shown below.

|                                       |  | Available for Sale |       | Held-to-Maturity
|-------------------------------------- |  | ------------------ | ----- | ----------------
|
|
|Due in one year or less                |  | $                  |      |                 
|Due after one year through five years  |  |                    | 885   |                 
|Due after five years through ten years |  |                    | 114   |                 
|Due after ten years                    |  |                    |      |                 
|Mortgage-backed                        |  |                    |      |                 
|Equity                                 |  |                    | 1,801 |                 
|                                       |  |                    |       |                 
|                                       |  | $                  | 2,800 |                 
|                                       |  |                    |       |                 

The following schedule sets forth the proceeds from sales of available-for-sale securities and the gross realized gains on those sales:

|                     |  |   |  |   |  | Year Ended June 30,
|-------------------- |  | - |  | - |  | -------------------
|
|
|
|
|Proceeds from sales  |  |  |  |  |  |                   
|Gross realized gains |  |  |  |  |  |                   

54

---

Investment securities having an amortized cost of $18.8 million and fair value of $18.9 million at December 31, 2003 were pledged to secure
public deposits.

Securities
with unrealized losses at year end 2003 not recognized in income are as follows:

|                           |  | Less than 12 Months |       | 12 Months or More |   | Total
|-------------------------- |  | ------------------- | ----- | ----------------- | - | -----
|
|Mortgage-backed            |  | $                   | 8,843 |                   | $ | 96   
|                           |  |                     |       |                   |   |      
|Total temporarily impaired |  | $                   | 8,843 |                   | $ | 96   
|                           |  |                     |       |                   |   |      

All unrealized losses are reviewed to determine whether the losses are other than temporary. Factors considered include whether the securities are backed by the
U.S. Government or its agencies and collectibility of principal. Management believes the unrealized losses are market driven and full principal will be recovered.

3.    LOANS RECEIVABLE

Loans receivable are summarized as follows:

|                         |                                    | December 31, |         |        |  
|------------------------ | ---------------------------------- | ------------ | ------- | ------ | -
|
|
|
|Commercial               |                                    | $            | 30,943  |        | $
|Real estate commercial   |                                    |              | 239,406 |        |  
|Real estate construction |                                    |              | 9,952   |        |  
|Residential mortgage     |                                    |              | 194,000 |        |  
|Consumer and home equity |                                    |              | 53,566  |        |  
|Indirect consumer        |                                    |              | 28,279  |        |  
|                         |                                    |              |         |        |  
|                         |                                    |              | 556,146 |        |  
|                         |                                    |              |         |        |  
|Less:                    |                                    |              |         |        |  
|                         | Net deferred loan origination fees |              |         | (1,446 | )
|                         | Allowance for loan losses          |              |         | (5,568 | )
|                         |                                    |              |         |        |  
|                         |                                    |              | (7,014  | )      |  
|                         |                                    |              |         |        |  
|Loans Receivable         |                                    | $            | 549,132 |        | $
|                         |                                    |              |         |        |  

The Bank utilizes eligible real estate loans to collateralize advances and letters of credit from the Federal Home Loan Bank. For all periods presented the Bank
had substantially all residential mortgage loans pledged under this arrangement.

55

---



The
allowance for loan loss is summarized as follows:

|                           |  | As of and For the Year Ended December 31, 2003 |       |   |   | As of and For the Years Ended June 30, |  
|-------------------------- |  | ---------------------------------------------- | ----- | - | - | -------------------------------------- | -
|
|
|
|Balance, beginning of year |  | $                                              | 4,576 |   | $ | 3,735                                  |  
|Provision for loan losses  |  |                                                | 1,656 |   |   | 1,161                                  |  
|Charge-offs                |  |                                                | (857  | ) |   | (424                                   | )
|Recoveries                 |  |                                                | 193   |   |   | 104                                    |  
|                           |  |                                                |       |   |   |                                        |  
|Balance, end of year       |  | $                                              | 5,568 |   | $ | 4,576                                  |  
|                           |  |                                                |       |   |   |                                        |  

Impaired loans are summarized below. There were no impaired loans for the periods presented without an allowance allocation.

|                                            |  | As of and For the Year Ended December 31, 2003 |       |  |   | As of and For the Years Ended June 30,
|------------------------------------------- |  | ---------------------------------------------- | ----- |  | - | --------------------------------------
|
|
|
|Year-end impaired loans                     |  | $                                              | 5,318 |  | $ | 4,584                                 
|Amount of allowance for loan loss allocated |  |                                                | 911   |  |   | 751                                   
|Average impaired loans outstanding          |  |                                                | 4,804 |  |   | 4,066                                 
|Interest income recognized                  |  |                                                | 227   |  |   | 126                                   
|Interest income received                    |  |                                                | 227   |  |   | 126                                   

Non-performing loans were as follows:

December 31,(Dollars in thousands)

2003

2002

June 30, 2002(Dollars in thousands)Restructured

$
3,037

$
3,325

$
3,350Loans past due over 90 days still on accrual








Non accrual loans


2,281


1,259


386


56

---

4.    PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

December 31,2003

2002

June 30, 2002(Dollars in thousands)Land

$
3,067

$
1,300

$
1,126Buildings


12,491


10,374


10,206Furniture, fixtures and equipment


7,209


7,202


6,85422,767


18,876


18,186Less accumulated depreciation


(7,301
)

(7,032
)

(6,527
)$
15,466

$
11,844

$
11,659


Certain premises are leased under various operating leases. Rental expense was $278,000, $134,000, $263,000 and $256,000 for the year ended December 31,
2003, six months ended December 31, 2002 and the years ended June 30, 2002, and 2001, respectively. Future minimum commitments under these leases are:

Year Ended December 31,(Dollars in thousands)2004

$
2532005


2432006


2132007


1722008


181Thereafter


779$
1,841


5.    DEPOSITS

Time Deposits of $100,000 or more were $88.9 million, $94.4 million and $100.1 million at December 31, 2003 and 2002 and
June 30, 2002, respectively. At December 31, 2003, scheduled maturities of time deposits are as follows:

Amount(Dollars in thousands)2004

$
176,5802005


88,2332006


13,3852007


10,720Thereafter


5,916$
294,834


57

---

6.    ADVANCES FROM FEDERAL HOME LOAN BANK

Advances and letters of credit from the Federal Home Loan Bank (FHLB) of Cincinnati are collateralized by FHLB stock and a blanket pledge of
one-to-four family residential mortgage loans equivalent to 135 percent of the outstanding advances and letters of credit. At December 31, 2003, the Bank has
available collateral to borrow an additional $58.5 million from the FHLB. During January 2001, the Bank entered into $75 million in convertible fixed rate advances with a maturity
of ten years. These advances are fixed for periods of two to three years. At the end of the fixed term and quarterly thereafter, the FHLB has the right to convert these advances to variable rate
advances tied to the three-month LIBOR index or the Corporation can prepay the advance at no penalty. There is a substantial penalty if the Corporation prepays the advance before the FHLB exercises
its right. Advances from the FHLB at year-end are as follows:

|                     |                                                                   | December 31, |      |   |   |       
|-------------------- | ----------------------------------------------------------------- | ------------ | ---- | - | - | ------
|
|
|
|Fixed rate advances: |                                                                   |              |      |   |   |       
|                     | Mortgage matched advances with interest rates from 5.30% to 7.80% |              | 6.48 | % | $ | 170   
|                     | Convertible fixed rate advances                                   |              | 4.92 | % |   | 75,000
|                     | Other fixed rate advances                                         |              | 5.04 | % |   | 3,113 
|                     |                                                                   |              |      |   |   |       
|                     | Total borrowings                                                  |              |      |   | $ | 78,283
|                     |                                                                   |              |      |   |   |       

The aggregate minimum annual repayments of borrowings as of December 31, 2003 is as follows:

(Dollars in thousands)2004

$
1462005


1502006


1532007


1442008


138Thereafter


77,552$
78,283


7.    SUBORDINATED DEBENTURES AND TRUST PREFERRED SECURITIES

On March 26, 2002, a trust formed by the Corporation, First Federal Statutory Trust I (Trust), issued $10.0 million of Floating Rate Capital
Securities (Trust Preferred Securities). The proceeds of the offering were loaned by the Trust to the Corporation in exchange for subordinated debentures with terms that are identical to the Trust
Preferred Securities. Issuance costs of $302,000 paid from the proceeds are being amortized to maturity. The subordinated debentures and deferred issue costs are the sole assets of the Trust. The
Corporation has guaranteed that the Trust will make distributions to the holders of the Trust Preferred Securities if the Trust has available funds to make such distribution. Distributions on the
Trust Preferred Securities are payable quarterly in arrears at the annual rate

58

---

(adjusted
quarterly) of three-month LIBOR plus 3.60% (4.74% as of the last adjustment), and are included in interest expense. The annual rate cannot exceed 11% prior to March 26, 2007.

The
subordinated debentures, which mature March 26, 2032, are redeemable prior to the maturity date at the option of the Corporation on or after March 26, 2007 at their
principal amount plus accrued interest. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust
debenture. The Corporation has the option to defer distributions on the subordinated debentures from time to time for a period not to exceed 20 consecutive quarters. The Trust Preferred Securities are
subject to mandatory redemption, in whole or in part, upon repayment of the subordinated debentures.

Prior
to 2003, the trust was consolidated in the Corporation's financial statements, with the trust preferred securities issued by the trust reported in liabilities as "trust preferred
securities" and the subordinated debentures eliminated in consolidation. Under new accounting guidance, FASB Interpretation No. 46, as revised in December 2003, the trust is no longer
consolidated with the Corporation. Accordingly, the Corporation does not report the securities issued by the trust as liabilities, and instead reports as liabilities the subordinated debentures issued
by the Corporation and held by the trust, as these are no longer eliminated in consolidation. Accordingly, the amounts previously reported as "trust preferred securities" in liabilities have been
recaptioned "subordinated debentures" and continue to be presented in liabilities on the balance sheet. Since the amount of the subordinated debentures and the trust preferred securities was the same,
the effect of no longer consolidating the trust does not significantly change the amounts reported as the Corporation's assets, liabilities, equity, or interest expense.

Trust
Preferred Securities are considered as Tier I capital for the Corporation under current regulatory guidelines.

8.    INCOME TAXES

The Corporation and its subsidiaries file a consolidated federal income tax return and income tax is apportioned among all companies based on their taxable
income or loss. Provision for income taxes is as follows:

|                         |  |   |       |  |   | Year Ended June 30, |  
|------------------------ |  | - | ----- |  | - | ------------------- | -
|
|
|
|
|Current                  |  | $ | 3,909 |  | $ | 2,411               |  
|Deferred                 |  |   | 95    |  |   | (212                | )
|                         |  |   |       |  |   |                     |  
|Total income tax expense |  | $ | 4,004 |  | $ | 2,199               |  
|                         |  |   |       |  |   |                     |  

59

---

The provision for income taxes differs from the amount computed at the statutory rates as follows:

|                       |                                                    |      |      |      |      | Year Ended June 30, |     
|---------------------- | -------------------------------------------------- | ---- | ---- | ---- | ---- | ------------------- | ----
|
|
|
|
|Federal statutory rate |                                                    | 34.0 | %    | 34.0 | %    | 34.0                | %   
|                       | Tax-exempt interest income                         |      | (0.2 | )    | (0.2 | )                   | (0.2
|                       | Increase in cash surrender value of life insurance |      | (0.2 | )    |     |                     |    
|                       | Acquisition intangibles                            |      |     |      |     |                     | 0.7 
|                       | Dividends to ESOP                                  |      | (0.4 | )    | (0.3 | )                   | (0.4
|                       | Other                                              |      | 0.1  |      | (0.1 | )                   | (0.8
|                       |                                                    |      |      |      |      |                     |     
|Effective rate         |                                                    | 33.3 | %    | 33.4 | %    | 33.3                | %   
|                       |                                                    |      |      |      |      |                     |     

Temporary differences between the financial statements carrying amounts and tax bases of assets and liabilities that give rise to significant portions of deferred
income taxes relate to the following:

|                           |                                                      | December 31, |       |      
|-------------------------- | ---------------------------------------------------- | ------------ | ----- | -----
|
|
|
|Deferred tax assets:       |                                                      |              |       |      
|                           | Allowance for loan losses                            |              | $     | 1,893
|                           | Investment securities                                |              |       |     
|                           | Accrued liabilities and other                        |              |       | 285  
|                           |                                                      |              |       |      
|                           |                                                      |              | 2,178 |      
|                           |                                                      |              |       |      
|Deferred tax liabilities:  |                                                      |              |       |      
|                           | Depreciation                                         |              | $     | 995  
|                           | Net unrealized gain on securities available-for-sale |              |       | 411  
|                           | Federal Home Loan Bank stock                         |              |       | 1,091
|                           | Intangibles                                          |              |       | 302  
|                           | Deferred gain on like-kind exchange                  |              |       | 196  
|                           | Other                                                |              |       | 309  
|                           |                                                      |              |       |      
|                           |                                                      |              | 3,304 |      
|                           |                                                      |              |       |      
|Net deferred tax liability |                                                      | $            | 1,126 |      
|                           |                                                      |              |       |      

Federal income tax laws provided savings banks with additional bad debt deductions through 1987, totaling $9.3 million for the Bank. Accounting standards
do not require a deferred tax liability to be recorded on this amount, which would otherwise total $3.2 million at December 31, 2003 and 2002 and June 30, 2002. If the Bank was
liquidated or otherwise ceased to be a bank or if tax laws were to change, the $3.2 million would be recorded as a liability with an offset to expense.

60

---



9.    STOCKHOLDERS' EQUITY

|                         |                                                    | Actual       |  | For Capital Adequacy Purposes |        | To Be Considered Well Capitalized Under Prompt Correction Action Provisions |     
|------------------------ | -------------------------------------------------- | ------------ |  | ----------------------------- | ------ | --------------------------------------------------------------------------- | ----
|
|
|As of December 31, 2003: |                                                    |              |  |                               |        |                                                                             |     
|                         | Total risk-based capital (to risk-weighted assets) |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  | $                             | 63,094 |                                                                             | 12.0
|                         |                                                    | Bank         |  |                               | 60,602 |                                                                             | 11.6
|                         | Tier I capital (to risk-weighted assets)           |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 57,305 |                                                                             | 10.9
|                         |                                                    | Bank         |  |                               | 54,813 |                                                                             | 10.5
|                         | Tier I capital (to average assets)                 |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 57,305 |                                                                             | 8.6 
|                         |                                                    | Bank         |  |                               | 54,813 |                                                                             | 8.2 
|                         |                                                    |              |  |                               |        |                                                                             |     

61

---

|                         |                                                    | Actual       |  | For Capital Adequacy Purposes |        | To Be Considered Well Capitalized Under Prompt Correction Action Provisions |     
|------------------------ | -------------------------------------------------- | ------------ |  | ----------------------------- | ------ | --------------------------------------------------------------------------- | ----
|
|
|As of December 31, 2002: |                                                    |              |  |                               |        |                                                                             |     
|                         | Total risk-based capital (to risk-weighted assets) |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  | $                             | 64,566 |                                                                             | 13.1
|                         |                                                    | Bank         |  |                               | 56,713 |                                                                             | 11.7
|                         | Tier I capital (to risk-weighted assets)           |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 59,752 |                                                                             | 12.2
|                         |                                                    | Bank         |  |                               | 51,913 |                                                                             | 10.7
|                         | Tier I capital (to average assets)                 |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 59,752 |                                                                             | 8.9 
|                         |                                                    | Bank         |  |                               | 51,913 |                                                                             | 7.9 
|
|
|
|As of June 30, 2002:     |                                                    |              |  |                               |        |                                                                             |     
|                         | Total risk-based capital (to risk-weighted assets) |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  | $                             | 62,770 |                                                                             | 13.5
|                         |                                                    | Bank         |  |                               | 53,049 |                                                                             | 11.5
|                         | Tier I capital (to risk-weighted assets)           |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 58,773 |                                                                             | 12.6
|                         |                                                    | Bank         |  |                               | 49,082 |                                                                             | 10.6
|                         | Tier I capital (to average assets)                 |              |  |                               |        |                                                                             |     
|                         |                                                    | Consolidated |  |                               | 58,773 |                                                                             | 8.9 
|                         |                                                    | Bank         |  |                               | 49,082 |                                                                             | 7.4 

62

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10.    EARNINGS PER SHARE

The reconciliation of the numerators and denominators of the basic and diluted EPS is as follows:

|                                            |                                                |   |       | Six Months Ended December 31, 2002 |   | Year Ended June 30,
|------------------------------------------- | ---------------------------------------------- | - | ----- | ---------------------------------- | - | -------------------
|
|
|
|Net income available to common shareholders |                                                | $ | 8,003 |                                    | $ | 4,382              
|                                            |                                                |   |       |                                    |   |                    
|Basic EPS:                                  |                                                |   |       |                                    |   |                    
|                                            | Weighted average common shares                 |   |       | 3,780                              |   |                    
|                                            |                                                |   |       |                                    |   |                    
|Diluted EPS:                                |                                                |   |       |                                    |   |                    
|                                            | Weighted average common shares                 |   |       | 3,780                              |   |                    
|                                            | Dilutive effect of stock options               |   |       | 35                                 |   |                    
|                                            |                                                |   |       |                                    |   |                    
|                                            | Weighted average common and incremental shares |   |       | 3,815                              |   |                    
|                                            |                                                |   |       |                                    |   |                    
|Earnings Per Share:                         |                                                |   |       |                                    |   |                    
|                                            | Basic                                          |   | $     | 2.12                               |   | $                  
|                                            |                                                |   |       |                                    |   |                    
|                                            | Diluted                                        |   | $     | 2.10                               |   | $                  
|                                            |                                                |   |       |                                    |   |                    

Stock options for 8,250, 66,000, and 87,450 shares of common stock were not included in the December 31, 2002, June 30, 2002, and 2001
computation of diluted earning per share because their impact was anti-dilutive. All of the outstanding stock options for the year ended December 31, 2003 were included in the
computation of diluted earnings per share.

63

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11.    EMPLOYEE BENEFIT PLANS





|                     |  |   |         | Six Months Ended December 31, 2002 |   | Year Ended June 30,
|-------------------- |  | - | ------- | ---------------------------------- | - | -------------------
|
|
|ESOP shares (ending) |  |   | 185,291 |                                    |   | 200,413            
|Shares released      |  |   | 2,048   |                                    |   | 1,014              
|Compensation expense |  | $ | 54,000  |                                    | $ | 27,000             

64

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|                                    |  | Year Ended December 31, 2003 |   | Six Months Ended December 31, 2002
|----------------------------------- |  | ---------------------------- | - | ----------------------------------
|
|Outstanding, beginning of period    |  | 108,900                      |   | $                                 
|Exercised during the period         |  | (39,930                      | ) |                                   
|                                    |  |                              |   |                                   
|Outstanding, end of period          |  | 68,970                       |   | $                                 
|                                    |  |                              |   |                                   
|Eligible for exercise at period end |  | 49,390                       |   | $                                 
|
|
|
|Outstanding, beginning of period    |  | 114,950                      |   | $                                 
|Granted during period               |  | 11,000                       |   |                                   
|Forfeited during period             |  |                             |   |                                   
|Exercised during the period         |  | (10,450                      | ) |                                   
|                                    |  |                              |   |                                   
|Outstanding, end of period          |  | 115,500                      |   | $                                 
|                                    |  |                              |   |                                   
|Eligible for exercise at period end |  | 63,030                       |   | $                                 

The following table summarizes information about stock options outstanding at December 31, 2003:

|                 |  | Options Outstanding |  | Options Exercisable
|---------------- |  | ------------------- |  | -------------------
|
|$14.55 to $15.46 |  | 14,520              |  | 6.5 years          
|$20.34 to $20.57 |  | 52,800              |  | 5.6                
|$22.27           |  | 1,650               |  | 5.2                
|                 |  |                     |  |                    
|                 |  | 68,970              |  | 5.8                
|                 |  |                     |  |                    

65

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12.    CASH FLOW ACTIVITIES

The following information is presented as supplemental disclosures to the statement of cash flows.

(a)   Cash Paid for:

|                 |  |   |        | Six Months Ended December 31, 2002 |   | Year Ended June 30,
|---------------- |  | - | ------ | ---------------------------------- | - | -------------------
|
|
|
|Interest expense |  | $ | 16,453 |                                    | $ | 9,406              
|                 |  |   |        |                                    |   |                    
|Income taxes     |  | $ | 4,203  |                                    | $ | 2,615              
|                 |  |   |        |                                    |   |                    

(b)   Supplemental disclosure of non-cash activities:

|                                                                                        |  |   |       |  |   | Year Ended June 30,
|--------------------------------------------------------------------------------------- |  | - | ----- |  | - | -------------------
|
|
|
|
|Loans to facilitate sales of real estate owned and repossessed assets                   |  | $ | 1,123 |  | $ | 1,025              
|                                                                                        |  |   |       |  |   |                    
|Transfers from loans to real estate acquired through foreclosure and repossessed assets |  | $ | 944   |  | $ | 875                
|                                                                                        |  |   |       |  |   |                    

13.    CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

The following condensed statements summarize the financial position, operating results and cash flows of First Federal Financial Corporation of Kentucky (Parent
Company only).

66

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Condensed Statements of Financial Condition

|                                     |                                    | December 31, |        |       
|------------------------------------ | ---------------------------------- | ------------ | ------ | ------
|
|
|
|Assets                               |                                    |              |        |       
|                                     | Cash and interest bearing deposits |              | $      | 169   
|                                     | Investment in Bank                 |              |        | 63,568
|                                     | Securities available-for sale      |              |        | 2,438 
|                                     | Receivable from Bank               |              |        | 165   
|                                     | Other assets                       |              |        | 280   
|                                     |                                    |              |        |       
|                                     |                                    | $            | 66,620 |       
|                                     |                                    |              |        |       
|Liabilities and Stockholders' Equity |                                    |              |        |       
|                                     | Subordinated debentures            |              | $      | 10,000
|                                     | Other liabilities                  |              |        | 299   
|                                     | Stockholders' equity               |              |        | 56,321
|                                     |                                    |              |        |       
|                                     |                                    | $            | 66,620 |       
|                                     |                                    |              |        |       

Condensed Statements of Income

|                                                         |  |   |       |   |   | Year Ended June 30, |  
|-------------------------------------------------------- |  | - | ----- | - | - | ------------------- | -
|
|
|
|
|Dividend from Bank                                       |  | $ | 6,318 |   | $ | 1,680               |  
|Interest income                                          |  |   | 88    |   |   | 70                  |  
|Interest expense                                         |  |   | (487  | ) |   | (273                | )
|Other expenses                                           |  |   | (269  | ) |   | (116                | )
|                                                         |  |   |       |   |   |                     |  
|Income before income tax benefit                         |  |   | 5,650 |   |   | 1,361               |  
|Income tax benefit                                       |  |   | 286   |   |   | 136                 |  
|                                                         |  |   |       |   |   |                     |  
|Income before equity in undistributed net income of Bank |  |   | 5,936 |   |   | 1,497               |  
|Equity in undistributed net income of Bank               |  |   | 2,067 |   |   | 2,885               |  
|                                                         |  |   |       |   |   |                     |  
|Net income                                               |  | $ | 8,003 |   | $ | 4,382               |  
|                                                         |  |   |       |   |   |                     |  

67

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Condensed Statements of Cash Flows

|                                                      |                                                                               |                                            |         |        |        | Year Ended |       
|----------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------ | ------ | ---------- | ------
|
|
|
|Operating Activities:                                 |                                                                               |                                            |         |        |        |            |       
|                                                      | Net income                                                                    |                                            | $       | 8,003  |        | $          | 4,382 
|                                                      | Adjustments to reconcile net income to cash provided by operating activities: |                                            |         |        |        |            |       
|                                                      |                                                                               | Equity in undistributed net income of Bank |         |        | (2,067 | )          |       
|                                                      |                                                                               | Decrease (increase) in other assets        |         |        | 18     |            |       
|                                                      |                                                                               | (Decrease) increase in other liabilities   |         |        | (265   | )          |       
|                                                      |                                                                               |                                            |         |        |        |            |       
|Net cash from operating activities                    |                                                                               |                                            | 5,689   |        |        | 1,523      |       
|                                                      |                                                                               |                                            |         |        |        |            |       
|Investing Activities:                                 |                                                                               |                                            |         |        |        |            |       
|                                                      | Purchases of securities available-for-sale                                    |                                            |         | (1,415 | )      |            |      
|                                                      | Net change in receivable from Bank                                            |                                            |         | 433    |        |            | (332  
|                                                      |                                                                               |                                            |         |        |        |            |       
|Net cash from investing activities                    |                                                                               |                                            | (982    | )      |        | (332       | )     
|                                                      |                                                                               |                                            |         |        |        |            |       
|Financing Activities:                                 |                                                                               |                                            |         |        |        |            |       
|                                                      | Proceeds from stock options exercised                                         |                                            |         | 559    |        |            |      
|                                                      | Proceeds from issuance of subordinated debentures                             |                                            |         |       |        |            |      
|                                                      | Dividends paid                                                                |                                            |         | (2,660 | )      |            | (1,316
|                                                      | Common stock repurchases                                                      |                                            |         | (9,628 | )      |            | (2,047
|                                                      | Net change in payable to Bank                                                 |                                            |         |       |        |            |      
|                                                      |                                                                               |                                            |         |        |        |            |       
|Net cash from financing activities                    |                                                                               |                                            | (11,729 | )      |        | (3,363     | )     
|                                                      |                                                                               |                                            |         |        |        |            |       
|Net increase (decrease) in cash                       |                                                                               |                                            | (7,022  | )      |        | (2,172     | )     
|Cash and interest bearing deposits, beginning of year |                                                                               |                                            | 7,191   |        |        | 9,363      |       
|                                                      |                                                                               |                                            |         |        |        |            |       
|Cash and interest bearing deposits, end of year       |                                                                               | $                                          | 169     |        | $      | 7,191      |       
|                                                      |                                                                               |                                            |         |        |        |            |       

68

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14.    FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Corporation's financial instruments are as follows:

|                       |                                      | December 31, 2003 |   | December 31, 2002
|---------------------- | ------------------------------------ | ----------------- | - | -----------------
|
|
|Financial assets:      |                                      |                   |   |                  
|                       | Cash and cash equivalents            |                   | $ | 48,030           
|                       | Securities available-for-sale        |                   |   | 4,009            
|                       | Securities held-to-maturity          |                   |   | 30,929           
|                       | Loans held for sale                  |                   |   | 1,021            
|                       | Loans, net                           |                   |   | 549,132          
|                       | Federal Home Loan Bank stock         |                   |   | 6,570            
|                       | Accrued interest receivable          |                   |   | 1,931            
|Financial liabilities: |                                      |                   |   |                  
|                       | Deposits                             |                   |   | 529,162          
|                       | Advances from Federal Home Loan Bank |                   |   | 78,283           
|                       | Subordinated debentures              |                   |   | 10,000           
|                       | Accrued interest payable             |                   |   | 416              
|
|
|Financial assets:      |                                      |                   |   |                  
|                       | Cash and cash equivalents            |                   | $ | 40,016           
|                       | Interest bearing deposits            |                   |   | 64,000           
|                       | Securities available-for-sale        |                   |   | 1,978            
|                       | Securities held-to-maturity          |                   |   | 21,715           
|                       | Loans held for sale                  |                   |   | 1,511            
|                       | Loans, net                           |                   |   | 518,750          
|                       | Federal Home Loan Bank stock         |                   |   | 6,170            
|                       | Accrued interest receivable          |                   |   | 1,925            
|Financial liabilities: |                                      |                   |   |                  
|                       | Deposits                             |                   |   | 529,882          
|                       | Advances from Federal Home Loan Bank |                   |   | 77,778           
|                       | Subordinated debentures              |                   |   | 10,000           
|                       | Accrued interest payable             |                   |   | 516              

The methods and assumptions used by the Corporation in estimating its fair value disclosures for financial instruments are presented below:

Carrying
amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, Federal Home Loan Bank stock, accrued interest receivable and payable, demand
deposits and variable rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes and if no such information is available, on the rate
and term of the security and information about the issuer. The value of loans held for sale is based on the underlying

69

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sale
commitments. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent reprising or reprising limits, fair value is based on discounted cash flows using current
market rates applied to the estimated life and credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair values of advances
from Federal Home Loan Bank are based on current rates for similar financing. The principal amount of the subordinated debentures is the estimated fair value. The fair value of
off-balance-sheet items is based on the current fees or cost that would be charged to enter into or terminate such arrangements and is not material.

15.    CONTINGENCIES

In the normal course of business, there are various outstanding legal proceedings and claims. In the opinion of management, after consultation with legal counsel,
the disposition of such legal proceedings and claims will not materially affect the Corporation's consolidated financial position, results of operations or liquidity.

16.    FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The 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. These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of those instruments reflect the extent of the Bank's involvement in particular classes of financial instruments.

The
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. Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Bank's credit policies. The Bank uses the
same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Collateral from the customer may be required based on
management's credit evaluation of the customer and may include business assets of commercial customers as well as personal property and real estate of individual customers or guarantors.

Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.

70

---

Commitments
to make loans for the Corporation's portfolio, excluding mortgage banking activities discussed in Note 1 and undisbursed portions of loans in process, were as follows:

|                          |  | December 31, 2003 |     | December 31, 2002
|------------------------- |  | ----------------- | --- | -----------------
|
|
|Commitments to make loans |  | $                 |    |                  
|Unused lines of credit    |  |                   |    |                  
|Standby lines of credit   |  |                   |    |                  
|                          |  |                   |     |                  
|                          |  | $                 |    |                  
|                          |  |                   |     |                  
|
|
|Commitments to make loans |  | $                 | 628 |                  
|Unused lines of credit    |  |                   |    |                  
|Standby lines of credit   |  |                   |    |                  
|                          |  |                   |     |                  
|                          |  | $                 | 628 |                  
|                          |  |                   |     |                  

Unused lines of credit at December 31, 2003 were at current rates ranging from 4.00% to 18.00% and primarily at the national prime rate of interest plus .5
to 2% for standby letters of credit.

At
December 31, 2003, a reserve of $6.4 million was required as deposits with the Federal Reserve or as cash on hand. The reserve does not earn interest.

At
December 31, 2003 and 2002 and June 30, 2002, the Bank had $53.5 million, $52.3 million and $22.2 in letters of credit from the Federal Home Loan Bank
issued to collateralize public deposits. These letters of credit are secured by a blanket pledge of eligible one-to-four family residential mortgage loans. (For additional
information see Note 3 on Loans Receivable and Note 6 on Advances from the Federal Home Loan Bank.)

17.    RELATED PARTY TRANSACTIONS

Certain directors, executive officers and principal shareholders of the Corporation, including associates of such persons, are loan and deposit customers of the
Bank. Related party deposits at December 31, 2003 and 2002 and June 30, 2002 were $1.2 million, $1.1 million and $1.1 million. A

71

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summary
of the related party loan activity, for loans aggregating $60,000 or more to any one related party, is as follows:

|                  |               | Year Ended December 31, 2003 |       | Six Months Ended December 31, 2002 |  
|----------------- | ------------- | ---------------------------- | ----- | ---------------------------------- | -
|
|Beginning of year |               | $                            | 1,264 |                                    | $
|                  | New loans     |                              |       | 148                                |  
|                  | Repayments    |                              |       | (77                                | )
|                  | Other changes |                              |       | (1,030                             | )
|                  |               |                              |       |                                    |  
|End of year       |               | $                            | 305   |                                    | $
|                  |               |                              |       |                                    |  

Other changes include adjustments for loans applicable to one reporting period that are excludable from the other reporting period.

72

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18.    SUMMARY OF QUARTERLY FINANCIAL DATA(Unaudited)

|                                         |         | March 31, |        | June 30, |   | September 30, |      | December 31,
|---------------------------------------- | ------- | --------- | ------ | -------- | - | ------------- | ---- | ------------
|
|Year Ended December 31, 2003:            |         |           |        |          |   |               |      |             
|Total interest income                    |         | $         | 10,124 |          | $ | 9,971         |      | $           
|Total interest expense                   |         |           | 4,296  |          |   | 4,174         |      |             
|Net interest income                      |         |           | 5,828  |          |   | 5,797         |      |             
|Provision for loan losses                |         |           | 329    |          |   | 420           |      |             
|Non-interest income                      |         |           | 1,718  |          |   | 1,882         |      |             
|Non-interest expense                     |         |           | 4,044  |          |   | 4,333         |      |             
|Net income                               |         |           | 2,122  |          |   | 1,950         |      |             
|Earnings per share:                      |         |           |        |          |   |               |      |             
|                                         | Basic   |           |        | 0.54     |   |               | 0.52 |             
|                                         | Diluted |           |        | 0.53     |   |               | 0.52 |             
|
|Six Months Year Ended December 31, 2002: |         |           |        |          |   |               |      |             
|Total interest income                    |         | $         | 10,865 |          | $ | 10,691        |      |             
|Total interest expense                   |         |           | 4,830  |          |   | 4,564         |      |             
|Net interest income                      |         |           | 6,035  |          |   | 6,127         |      |             
|Provision for loan losses                |         |           | 726    |          |   | 435           |      |             
|Non-interest income                      |         |           | 1,532  |          |   | 1,645         |      |             
|Non-interest expense                     |         |           | 3,609  |          |   | 3,988         |      |             
|Net income                               |         |           | 2,154  |          |   | 2,228         |      |             
|Earnings per share:                      |         |           |        |          |   |               |      |             
|                                         | Basic   |           |        | 0.54     |   |               | 0.55 |             
|                                         | Diluted |           |        | 0.54     |   |               | 0.54 |             
|
|Year Ended June 30, 2002:                |         |           |        |          |   |               |      |             
|Total interest income                    |         | $         | 11,486 |          | $ | 11,046        |      | $           
|Total interest expense                   |         |           | 6,166  |          |   | 5,368         |      |             
|Net interest income                      |         |           | 5,320  |          |   | 5,678         |      |             
|Provision for loan losses                |         |           | 300    |          |   | 460           |      |             
|Non-interest income                      |         |           | 1,234  |          |   | 1,407         |      |             
|Non-interest expense                     |         |           | 3,623  |          |   | 3,657         |      |             
|Net income                               |         |           | 1,752  |          |   | 1,978         |      |             
|Earnings per share:                      |         |           |        |          |   |               |      |             
|                                         | Basic   |           |        | 0.43     |   |               | 0.48 |             
|                                         | Diluted |           |        | 0.43     |   |               | 0.48 |             

73

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Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.    Controls and Procedures

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the Exchange Act), as of the end of our 2003 fiscal year. Based on their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that the Corporation's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information
required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules
and forms. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in the Corporation's internal controls or in other
factors that could significantly affect its internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART III

Item 10.    Directors and Executive Officers of the Registrant

The information contained under the sections captioned "Proposal IElection of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Corporation's
definitive proxy statement for the Corporation's 2004 Annual Meeting of Shareholders (the "Proxy Statement") is incorporated herein by reference.





Item 11.    Executive Compensation

The information contained under the sections captioned "Summary Compensation Table," "Option Exercises and Year-end Value Table," "Directors
Compensation," and "Retirement Plan" in the Proxy Statement is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management







74

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Item 13.    Certain Relationships and Related Transactions

The information required by this item is incorporated herein by reference to the section captioned "Transactions with the Corporation and the Bank" in the Proxy
Statement.

Item 14.    Principal Accountant Fees and Services

The information required by this item is incorporated by reference to the section captioned "Independent Public Accountants" in the Proxy Statement.

75

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K



| |  | (a)(1) |  | Report of Independent Auditors-Crowe Chizek and Company LLC                                                                                                                         
| |  | ------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (b)    |  | Consolidated Statements of Financial Condition at December 31, 2003 and 2002, and June 30, 2002.                                                                                    
| |  | (c)    |  | Consolidated Statements of Income for the year ended December 31, 2003,the six-month period ended December 31, 2002 and the years ended June 30, 2002, and 2001.                    
| |  | (d)    |  | Consolidated Statements of Comprehensive Income for the year ended December 31, the six-month period ended December 31, 2002 and the years ended June 30, 2002, and 2001.           
| |  | (e)    |  | Consolidated Statements of Changes in Stockholders' Equity for the year ended December 31, the six-month period ended December 31, 2002 and the years ended June 30, 2002, and 2001.
| |  | (f)    |  | Consolidated Statements of Cash Flows for the year ended December 31, the six-month period ended December 31, 2002 and the years ended June 30, 2002, and 2001.                     
| |  | (g)    |  | Notes to Consolidated Financial Statements                                                                                                                                          





| |  | 3(a)  |  | Articles of Incorporation*                                                                                                                                                    
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 3(b)  |  | Bylaws*                                                                                                                                                                       
| |  | 10(b) |  | First Federal Savings Bank of Elizabethtown Stock Option and Incentive Plan, as amended**                                                                                     
| |  | 10(c) |  | Rights Agreement between First Financial Corporation of Kentucky and Illinois Stock Transer Company dated April 15,2003***                                                    
| |  | 21    |  | Subsidiaries of the Registrant                                                                                                                                                
| |  | 23(a) |  | Consent of Crowe Chizek and Company LLC, Certified Public Accountants                                                                                                         
| |  | 31.1  |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                        
| |  | 31.2  |  | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                        
| |  | 32    |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)





---

76

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SIGNATURES

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

|              | FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
|------------- | -----------------------------------------------
|Date: 3/12/04 | By:                                            

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

|By:           |  | /s/B. KEITH JOHNSONB. Keith Johnson
Principal Executive Officer & Director |  | By: |  | /s/BOB BROWNBob Brown
Director                               
|------------- |  | -------------------------------------------------------------------------- |  | --- |  | -------------------------------------------------------------
|Date: 3/12/04 |  | Date: 3/12/04                                                             
|By:           |  | /s/WRENO M. HALLWreno M. Hall
Director                                     |  | By: |  | /s/DIANE E. LOGSDONDiane E. Logsdon
Director                 
|Date: 3/12/04 |  | Date: 3/12/04                                                             
|By:           |  | /s/J. ALTON RIDERJ. Alton Rider
Director                                   |  | By: |  | /s/JOHN L. NEWCOMB, JR.John L. Newcomb, Jr.
Director         
|Date: 3/12/04 |  | Date: 3/12/04                                                             
|By:           |  | /s/WALTER D. HUDDLESTONWalter D. Huddleston
Director                       |  | By: |  | /s/MICHAEL THOMAS, DVMMichael Thomas, DVM
Director           
|Date: 3/12/04 |  | Date: 3/12/04                                                             
|By:           |  | /s/STEPHEN MOUSERStephen Mouser
Director                                   |  | By: |  | /s/DONALD SCHEERDonald Scheer
Director                       
|Date: 3/12/04 |  | Date: 3/12/04                                                             
|By:           |  | /s/GAIL SCHOMPGail Schomp
Director                                         |  | By: |  | /s/GREGORY SCHREACKEGregory Schreacke
Chief Financial Officer
|Date: 3/12/04 |  | Date: 3/12/04                                                             

77

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INDEX TO EXHIBITS

| | Exhibit No. |  | Description                                                                                                                                                                   
| | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3(a)        |  | Articles of Incorporation*                                                                                                                                                    
| | 3(b)        |  | Bylaws*                                                                                                                                                                       
| | 10(b)       |  | First Federal Savings Bank of Elizabethtown Stock Option and Incentive Plan, as amended**                                                                                     
| | 10(c)       |  | Rights Agreement between First Financial Corporation of Kentucky and Illinois Stock Tranfser Company dated April 15, 2003***                                                  
| | 21          |  | Subsidiaries of the Registrant                                                                                                                                                
| | 23(a)       |  | Consent of Crowe Chizek and Company LLC, Certified Public Accountants                                                                                                         
| | 31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                        
| | 31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act                                                                                        
| | 32          |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

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