SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


  [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [NO FEE REQUIRED]

       For the Fiscal Year Ended June 30, 1999.

  [ ]  TRANSITIONAL REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

       For the transition period from ______to_______
                         Commission File Number:  0-18832

                 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                Kentucky                                      61-1168311
(State or other jurisdiction of incorporation             (I.R.S. Employer
            or organization)                             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(b) of the Act:  None

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 [X] No

        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. [X]

        The  aggregate  market  value of the  outstanding  voting  stock held by
non-affiliates  of the  registrant,  based  on the  closing  sales  price of the
Registrant's  Common Stock as quoted on the National  Association  of Securities
Dealers,  Inc. Automated Quotation National Market System on September 15, 1999,
was  $97,368,912.  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 September 15, 1999,  there were issued and  outstanding  4,057,038
shares of the  registrant's  common  stock,  of which  directors  and  executive
officers  held 458,358  shares and more than 5%  beneficial  owners held 225,889
shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

   1.  Portions of Proxy Statement for the 1999 Annual Meeting of Stockholders.
       (Part III)


<PAGE>

                                     PART I

ITEM 1.  BUSINESS

The Corporation

        First Federal Financial  Corporation of Kentucky (the "Corporation") was
incorporated  in August 1989 under the laws of the  Commonwealth of Kentucky for
the purpose of becoming the holding  company for First  Federal  Savings Bank of
Elizabethtown   ("First   Federal"  or  the  "Bank")   pursuant  to  the  Bank's
reorganization into the holding company form of ownership, which was consummated
on June 1, 1990.  Prior to its acquisition of all the  outstanding  stock of the
Bank  in  connection  with  the  Bank's  holding  company  reorganization,   the
Corporation had no assets or liabilities and engaged in no business  activities.
Since its  acquisition  of First  Federal,  the  Corporation  has  engaged in no
significant activity other than holding the stock of First Federal and operating
the  business  of  a  savings  bank  through  First  Federal.  Accordingly,  the
information set forth in this report, including financial statements and related
data, relates primarily to First Federal and its subsidiary.

The Bank

        First Federal is a  federally-chartered  savings bank  headquartered  in
Elizabethtown,  Kentucky.  The business of First Federal  consists  primarily of
attracting  deposits from the general public and  originating  mortgage loans on
single family  residences,  and to a lesser extent on  multi-family  housing and
commercial property.  First Federal also makes home improvement loans,  consumer
loans and commercial  business loans and through its subsidiary offers insurance
products  and  brokerage  services  to its  customers.  In  April  1993 the Bank
established a full service trust  department to serve the fiduciary needs of its
customers. The principal sources of funds for First Federal's lending activities
include deposits  received from the general public,  borrowings from the Federal
Home Loan Bank of Cincinnati,  principal  amortization  and prepayment of loans.
First Federal's  primary sources of income are interest and origination  fees on
loans and interest on investments. First Federal also invests in various federal
and government agency obligations and other investment  securities  permitted by
applicable laws and regulations. First Federal's principal expenses are interest
paid on deposit accounts and operating expenses.

        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  Federal  Home  Loan  Bank  ("FHLB")  of
Cincinnati  and is subject to  regulation,  examination  and  supervision by the
Office of Thrift  Supervision  ("OTS").  The Bank's  deposits are insured by the
Savings Association  Insurance Fund ("SAIF") administered by the Federal Deposit
Insurance Corporation("FDIC").


LENDING ACTIVITIES

        GENERAL.  The  principal  lending  activity  of  First  Federal  is  the
origination  of  conventional   first  mortgage  loans  secured  by  residential
property.  Residential  mortgage loans are generally  underwritten  according to
Federal  National  Mortgage  Association  (FNMA) and Federal Home Loan  Mortgage
Corporation  (FHLMC)  guidelines.  To  a  lesser  extent  the  Bank  engages  in
commercial real estate,  consumer and commercial  business 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 located in Hardin, Nelson, Hart, Meade,
LaRue, and Bullitt counties in the state of Kentucky.


                                       2


<PAGE>

        The following  table  presents a summary of the Bank's loan portfolio by
category for each of the last five years.  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.
<TABLE>
<CAPTION>

                                                   June 30,
               ------------------------------------------------------------------------------------
                       1999            1998            1997              1996            1995
                       ----            ----            ----              ----            ----
                Amount     %     Amount     %     Amount     %     Amount     %     Amount     %
                ------     -     ------     -     ------     -     ------     -     ------     -
<S>            <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>         <C>
Type of Loan:
Real Estate:
   Mortgage    $325,099  78.93% $304,443  82.38% $283,926  83.73% $267,425  84.55% $254,406   87.07%
   Construction  18,104   4.39    15,689   4.25    15,444   4.55    15,766   4.98     8,159    2.79
   Commercial     7,956   1.93     3,254    .88     2,246    .66     2,406    .76     2,004     .69
Consumer and
 home equity     49,043  11.91    45,136  12.21    35,528  10.48    28,892   9.15    26,485    9.06
Commercial,
 other           11,692   2.84     1,020    .28     1,953    .58     1,785    .56     1,138     .39
               --------  ------ -------- ------- -------- ------  -------  -------  -------- -------
 Total loans   $411,894 100.00% $369,542 100.00% $339,097 100.00% $316,274 100.00% $292,192  100.00%
               ======== ======= ======== ======= ======== ======= ======== =======  ======== =======
</TABLE>


LOAN MATURITY  SCHEDULE.  The following table sets forth certain  information at
June 30, 1999,  regarding the dollar amount of loans maturing in the Bank's loan
portfolio based on their contractual terms to maturity.


                                              Due after
                              Due during      1 through     Due after 5
                            The year ended  5 years after   Years after
                               June 30,        June 30,      June 30,     Total
                                2000            1999          1999        Loans
                                ----            ----          ----        -----
                                              (Dollars in thousands)

Real estate mortgage          $ 1,060         $10,485       $313,554    $325,099
Real estate construction (1)        0               0         18,104      18,104
Consumer                        7,278          40,169          1,596      49,043
Commercial, financial and
  agricultural                  5,018           9,978          4,652      19,648
                                -----          ------         ------      ------

         Total                $13,356         $60,632       $337,906    $411,894
                              =======         =======       ========    ========
----------------------------
      (1) These loans will become permanent real estate loans upon completion of
construction.


        The following  table  reflects a breakdown of loans  maturing  after one
year, by fixed and adjustable rates.

                                                   Floating or
                                Fixed Rates     Adjustable Rates       Total
                                             (Dollars in thousands)

Real estate mortgage              $241,227         $ 82,812           $324,039
Real estate construction            16,329            1,775             18,104
Consumer                             4,537           37,228             41,765
Commercial, financial and
  Agricultural                       3,477           11,153             14,630
                                    ------           ------             ------
    Total                         $265,570         $132,968           $398,538
                                  ========         ========           ========


        RESIDENTIAL REAL ESTATE LENDING.  The Bank's primary lending activity is
the  origination  of  loans  on  single  family  residences,  which  consist  of
one-to-four  individual dwelling units. 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.

                                       3
<PAGE>

        In  recent  years,   the  Bank  has   emphasized   the   origination  of
adjustable-rate  mortgage loans ("ARMs").  The Bank offers an ARM with an annual
adjustment which is tied to various  national indeces with a maximum  adjustment
of 2% annually and a lifetime cap of 15%. As of June 30, 1999, approximately 26%
of the Bank's  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 mortgage loans 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 80% of the  appraised  value and 95% on certain
mortgages,  with the requirement that private mortgage insurance be obtained for
loans with loan-to-value  ratios in excess of 80%. The Bank generally limits the
loan-to-value ratio to 80% on second mortgages on one-to-four-family dwellings.

        First  Federal's  residential  lending  activities  also  include  loans
secured by multi-family residential property, consisting of properties with more
than four separate  dwelling units.  These loans amounted to $4.8 million of the
loan portfolio at June 30, 1999. 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.

        The Bank  maintains  a  secondary  mortgage  operation  designed to make
qualified VA and FHA loans for sale to investors,  thereby  providing  necessary
liquidity to the Bank and needed loan products to the Bank's  customers.  During
fiscal 1999, the Bank's secondary mortgage  operations  originated $43.4 million
in  loans  and  sold $42  million  to  investors.  Conventional  mortgage  loans
originated by the Bank do not meet certain  guidelines,  therefore,  they do not
qualify for sale on the secondary market.

        CONSTRUCTION   AND  COMMERCIAL  REAL  ESTATE   LENDING.   First  Federal
originates  loans secured by existing  commercial  properties  and  construction
loans primarily on residential real estate. The loans are secured by real estate
located in  Kentucky.  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 June 30,  1999,  the Bank had $18.1  million  in  outstanding
interim  construction  loans.  The  security  for  commercial  real estate loans
includes retail businesses,  warehouses and motels. Commercial real estate loans
originated by the Bank range in size from $40,000 to $1.9 million.

        Commercial  real estate loans  typically  involve large loan balances to
single borrowers or groups of related borrowers and may also involve higher loan
principal  amount to security  property  appraisal  value  ratios as compared to
loans secured by residential real estate. In addition, the payment experience of
loans  secured by income  producing  properties  is  typically  dependent on the
successful  operation  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.  Construction  loans involve additional risks as a result of the fact
that  loan  funds  are  advanced   upon  the  security  of  the  project   under
construction,   which  is  of  uncertain   value  prior  to  the  completion  of
construction.  Moreover,  because of the  uncertainties  inherent in  estimating
construction costs, delays arising from labor problems,  material shortages, and
other  unpredictable  contingencies,  it is  relatively  difficult  to  evaluate
accurately  the total loan funds  required  to  complete a project,  and related
loan-to-value  ratios.  The analysis of prospective  construction  loan projects
thus requires an expertise that varies in  significant  respects from that which
is required for 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.

        CONSUMER LOANS.  Federal  regulations permit federally  chartered thrift
institutions to make secured and unsecured  consumer loans of up to 35% of their
assets.  This limit may be exceeded  for certain  consumer  loans,  such as home
equity loans, property improvement loans, mobile home loans and loans secured by
savings accounts.  The consumer loans granted by the Bank have included 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 June 30, 1999, consumer loans outstanding were $28.3 million or
approximately  6.9% of the  Bank's  total  gross  loan  portfolio.  These  loans
involved 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 have
been helpful in maintaining a profitable  spread between the Bank's average loan
yield and its cost of funds.

                                       4
<PAGE>

        In  view of the  riskier  nature  of  consumer  lending,  the  Bank  has
developed what management believes are conservative  underwriting  standards. In
applying these standards,  the Bank obtains detailed  financial  information and
credit bureau reports concerning each applicant.  In addition,  the relationship
of the loans to the value of the  collateral  is  considered.  The Bank offers a
home equity line of credit,  which is a revolving  line of credit secured by the
equity in a customer's  home.  As of June 30, 1999,  these loans  totaled  $14.1
million.

        COMMERCIAL  BUSINESS LENDING.  The Bank is permitted to make 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  are  considered  to  involve  a higher  degree  of risk  than
residential  real estate loans.  However,  commercial  loans  generally  carry a
higher  yield and are made for a shorter term than real estate  loans.  The Bank
offers a commercial line of credit,  which is a revolving line of credit secured
by the equity in the property,  primarily real estate, of a business. As of June
30, 1999, these loans totaled approximately $7 million.

        LOAN  UNDERWRITING  POLICIES.  During the loan approval  process,  First
Federal assesses both the borrower's  ability to repay the loan and the adequacy
of  the  underlying  security.   Potential  residential  borrowers  complete  an
application  which is submitted to a salaried loan officer.  As part of the loan
application process,  qualified fee appraisers inspect and appraise the property
which is  offered  to  secure  the  loan.  The  Bank  also  obtains  information
concerning the income, financial condition, employment and credit history of the
applicant. First Federal's loan committee, consisting of certain officers of the
Bank,  analyzes the loan  application  and the property to be used as collateral
and  subsequently  approves or denies the loan  request.  If the  mortgage  loan
amount is less than $250,000, it must be approved by a loan committee consisting
of certain  members of  management.  The Board of  Directors  must  approve  all
mortgage  loans in excess of $250,000.  All consumer  loans under $25,000 may be
approved by authorized loan officers under Board approved lines of authority and
all loans under $100,000 may be approved by an officer loan committee.  Consumer
loans in excess of $100,000  must be approved by the  President.  In  connection
with the  origination  of single  family  residential  adjustable  rate mortgage
loans,  borrowers are qualified at a rate of interest equal to the fully accrued
index rate.  It is the policy of  management  to make loans to borrowers who not
only  qualify at the low initial  rate of  interest,  but who would also qualify
following an upward interest rate adjustment.

        ORIGINATION,  PURCHASES AND SALES.  Historically,  all  residential  and
commercial real estate loans have been  originated  directly by the Bank through
salaried loan officers. Residential loan originations are generally attributable
to  referrals  from real estate  brokers and  builders,  depositors  and walk-in
customers.  Commercial real estate and  construction  loan origination have been
obtained  by direct  solicitation,  and  consumer  loan  origination  by walk-in
customers  in  response  to  the  Bank's  advertising,  as  well  as  by  direct
solicitation.

        LOAN COMMITMENTS.  Conventional loan commitments by the Bank are granted
for periods of 30 days. The total amount of the Bank's  outstanding  commitments
to  originate  real  estate  loans at June 30,  1999,  was  approximately  $19.6
million. It has been the Bank's experience that few commitments expire unfunded.

        LOAN FEES.  In addition to interest  earned on loans,  certain  fees are
received for  committing  to and  ultimately  originating  loans.  The Bank also
receives  other fees and  charges  relating  to existing  loans,  which  include
prepayment penalties,  late charges and fees for loan modifications.  Management
believes that these fees and charges do not materially affect operating results.

     NON-PERFORMING  ASSETS.  Non-performing assets  consist  of  loans on which
interest is no longer accrued and real estate acquired through foreclosure.  The
Bank does not have any loans greater than 90 days past due still on accrual. All
loans considered  impaired under SFAS 114 are included in non-performing  loans.
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
increase,  such increase is reported in the provision for loan losses. 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 increase in  non-performing  real estate
loans will continue due to the growth of the Bank's loan portfolio.

                                       5
<PAGE>

        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.  When
interest  accrual is  discontinued,  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.  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 is charged to the allowance for loan losses.

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

                                                      At June 30,

                                      1999      1998     1997     1996     1995
                                      ----      ----     ----     ----     ----
                                                 (Dollars in thousands)

Loans on non-accrual status (1)(2)   $2,529    $2,057   $1,550   $1,252   $1,161
                                     ------    ------   ------   ------   ------
  Total non-performing loans          2,529    2,057    1,550     1,252    1,161

Real estate acquired
   through foreclosure                  109       134      184      375      260
  Total non-performing assets        $2,638    $2,191   $1,734   $1,627   $1,421
                                     ======    ======   ======   ======   ======
Ratios:  Non-performing
         loans to loans               .63%      .58%     .47%     .41%     .41%

         Non-performing
         assets to total assets       .54%      .53%     .46%     .46%     .43%

-------------------------------------------
(1) Loans on non-accrual  status include  impaired loans
(2) The interest income that would have been earned and
    received on non-accrual loans was not material.

ALLOWANCE  AND  PROVISION  FOR LOAN  LOSSES.  The  allowance  for loan losses is
regularly  evaluated by  management  and  maintained  at a level  believed to be
adequate  to absorb  loan  losses in the  Bank's  lending  portfolios.  Periodic
provisions to the allowance are made as needed.  The amount of the provision for
loan  losses  necessary  to  maintain  an  adequate  allowance  is based upon an
assessment of current economic  conditions,  analysis of periodic  internal loan
reviews, delinquency trends and ratios, changes in the mixture and levels of the
various  categories  of loans,  historical  charge-offs,  recoveries,  and other
information. Management believes, based on information presently available, that
it has adequately provided for loan losses at June 30, 1999. Although management
believes it uses the best  information  available to make allowance  provisions,
future  adjustments  which could be material may be  necessary  if  management's
assumptions differ significantly from the loan portfolio's actual performance.

                                       6

<PAGE>

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

                                                Year Ended June 30,

                                    1999      1998     1997    1996    1995
                                    ----      ----     ----    ----    ----
                                              (Dollars in thousands)

Balance at beginning of period     $1,853    $1,715   $1,613  $1,662  $1,406
                                   ------    ------   ------  ------  ------
Loans charged-off:
   Real estate mortgage                42        16       17       0      14
   Consumer                           248       132      114      50      21
   Commercial                           0         0        0      24      16
                                      ---       ---      ---     ---     ---
Total charge-offs                     290       148      131      74      51
                                      ---       ---      ---     ---     ---
Recoveries:
   Real estate mortgage                 5         0        0       1       0
   Consumer                            21        21       33       1       6
   Commercial                           0         0        0      23      16
                                      ---       ---      ---     ---     ---
Total recoveries                       26        21       33      25      22
                                      ---       ---      ---     ---     ---
Net loans charged-off                 264       127       98      49      29
                                      ---       ---      ---     ---     ---
Acquired reserves                     205         0        0       0     185
Provision for loan losses             314       265      200       0     100
                                      ---       ---      ---     ---     ---
Balance at end of period           $2,108    $1,853   $1,715  $1,613  $1,662
                                   ------    ------    -----  ------  ------

Net charge-offs to average
   loans outstanding
                                     .068%     .037%    .031%   .017%   .010%
Allowance for loan losses to
    total non-performing assets
                                       80%       85%      99%     99%    117%

        The following table is 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
are subject to change,  the allocation is not  necessarily  predictive of future
portfolio performance.
<TABLE>
<CAPTION>

                                                      At June 30,
                     --------------------------------------------------------------------------

                              1999                     1998                  1997
                              ----                     ----                  ----

                                  Percent of             Percent of               Percent of
                                   Loans to               Loans to                 Loans to
                        Amount   Total loans   Amount    Total loans    Amount   Total loans

                                                (Dollars in thousands)
<S>                     <C>      <C>           <C>       <C>           <C>       <C>
Real estate mortgage    $1,546       73%       $1,340        72%       $1,267        74%
Consumer                   472       22           451        24           391        23
Commercial                  90        5            62         4            57         3
                         -----    ------       -------   -------       ------    ------

      Total             $2,108   100.00%       $1,853    100.00%       $1,715    100.00%
                        ======   =======       =======   =======       ======    =======
</TABLE>

        There were no  material  changes in  estimation  methods or  assumptions
affecting allowance  allocation.  Any reallocation to the allowance is primarily
indicative of changes in loan portfolio mix, not changes in loan  concentrations
or terms.

        Federal regulations  require insured  institutions to classify their own
assets on a regular  basis.  In addition,  in connection  with  examinations  of
insured  institutions,  OTS examiners have authority to identify  problem assets
and,  if  appropriate,   classify  them.  The  regulations   provide  for  three
classifications  of asset  categories  --  substandard,  doubtful and loss.  The
regulations also contain a special mention category,  defined as assets which 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

                                       7
<PAGE>

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 June 30, 1999, on the basis of management's review of the Bank's loan
portfolio, the Bank had $2.6 million of assets classified substandard, no assets
classified as doubtful and $53,000 of assets classified as loss.

SECURITIES

        Interest on securities  provides the largest  source of income for First
Federal after interest on loans,  constituting  10% of the total interest income
for fiscal  year 1999.  First  Federal  maintains  its liquid  assets  above the
minimum  requirements imposed by regulation at a level believed adequate to meet
requirements of normal banking  activities and potential savings outflows.  Cash
flow  projections  are  regularly  reviewed and updated to assure that  adequate
liquidity is provided.  As of June 30, 1999,  First  Federal's  liquidity  ratio
(liquid assets as a percentage of deposits and short-term borrowings) was 8.85%.

        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,  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.  See Note 3 of Notes to Consolidated  Financial Statements for
further information concerning the Bank's investment portfolio.

        As a member of the Federal  Home Loan Bank  System,  First  Federal must
maintain  minimum  levels of liquid assets  specified by the OTS which vary from
time to time.  See  "Regulation  Federal Home Loan Bank  System."  Liquidity may
increase or decrease  depending upon the  availability  of funds and comparative
yields on investments in relation to return on loans.

        The table on the  following  page sets forth the  carrying  value of the
Bank's securities portfolio at the dates indicated. At June 30, 1999, the market
value of the Bank's securities portfolio was $46.5 million.


                                                        At June 30,
                                           -----------------------------------

                                            1999           1998           1997
                                            ----           ----           ----
                                                   (Dollars in thousands)
 Securities available-for-sale:
    Equity securities                    $ 1,948        $ 1,934        $ 5,192
    Obligations of states and political
       subdivisions                          988            -              -
                                          ------         ------         ------

    Total available-for-sale             $ 2,936        $ 1,934        $ 5,192
                                         =======        =======        =======

 Securities held-to-maturity:
    U.S. Treasury and agencies           $42,814        $22,693        $15,335
    Mortgage-backed securities             1,590          1,946          2,149
                                          ------         ------         ------

    Total held-to-maturity               $44,404        $24,639        $17,484
                                         =======        =======        =======


                                       8

<PAGE>

             The following table sets forth the scheduled maturities,  amortized
      cost, fair value and weighted average yields for the Bank's  securities at
      June 30, 1999.

                                                                        Weighted
                                                 Amortized     Fair      Average
                                                   Cost        Value      Yield
                                                      (Dollars in thousands)
      Securities available-for-sale:
         Due in one year or less                   $ -         $ -          - %
         Due after one year through five years       -           -          -
         Due after five years through ten years     785         772       4.33
         Due after ten years                        225         216       4.60
         Equity securities                          262       1,948       1.39
                                                   ----      ------

                Total available-for-sale         $1,272      $2,936
                                                 ======      ======

      Securities held-to-maturity:
         Due in one year or less                $ 1,000     $ 1,001       6.00%
         Due after one year through five years    6,834       6,933       6.43
         Due after five years through ten years  33,980      33,029       6.34
         Due after ten years                      1,000         951       6.75
         Mortgage-backed securities               1,590       1,611       6.50


                   Total held-to-maturity       $44,404     $43,525
                                                =======     =======


SOURCES OF FUNDS

        GENERAL. Savings accounts and other types of deposits have traditionally
been an  important  source of the Bank's  funds for use in lending and for other
general business  purposes.  In addition to deposit  accounts,  the Bank derives
funds from loan  repayments,  FHLB advances,  other  borrowings and  operations.
Borrowings  may be used on a short-term  basis to compensate  for  reductions in
deposits or deposit  inflows at less than projected  levels and may be used on a
longer term basis to support expanded lending activities.

        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.  First Federal
offers  regular  savings  accounts,  NOW  accounts,  money  market  accounts and
fixed-interest-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.  The Bank  relies  primarily  on  customer  service  and
long-standing relationships with customers to attract and retain these deposits;
however,  market  interest  rates  and  rates  offered  by  competing  financial
institutions  significantly  affect  the Bank's  ability  to attract  and retain
deposits.

        As of June 30, 1999,  approximately  32.9% of First  Federal's  deposits
consisted of various  savings and demand deposit  accounts from which  customers
are permitted to withdraw funds at any time without penalty.

        Interest earned on savings  accounts is paid from the date of deposit to
the date of withdrawal and compounded quarterly. Interest earned on NOW accounts
is paid  from the date of  deposit  to the date of  withdrawal,  compounded  and
credited  monthly.  Interest  rates  paid,  maturity  terms,  service  fees  and
withdrawal penalties are established by First Federal's management on a periodic
basis.

        First  Federal  also  makes  available  to its  depositors  a  number of
certificates  of deposit with various terms and interest rates to be competitive
in its market area.  These  certificates  have minimum  deposit  requirements as
well.

                                       9
<PAGE>

        The  following  table sets forth the change in dollar  amount of savings
deposits in the various  types of savings  accounts  offered by the Bank between
the dates indicated.

<TABLE>
<CAPTION>

                    Balance                      Balance                      Balance                      Balance
                    June 30,  % of     Increase  June 30,  % of     Increase  June 30,  % of     Increase  June 30,   % of
                      1999   Deposits (Decrease)  1998    Deposits (Decrease)  1997    Deposits (Decrease)   1996    Deposits
                      ----   --------  --------   ----    --------  --------  ------   --------  ---------  ------   --------


                                                        (Dollars in thousands)
<S>                  <C>      <C>     <C>       <C>       <C>      <C>      <C>        <C>       <C>       <C>       <C>
Non-interest bearing
   demand accounts   $38,257    9.58% $ 8,075   $12,743     4.15%  $ (617)  $ 9,813      3.49%   $  833    $ 8,980    3.39%
NOW demand accounts   15,223    3.81    6,027    33,468    10.92    3,875    33,140     11.78     2,702     30,438   11.49
Savings accounts      54,896   13.74   17,881    30,182     9.84   (1,004)   31,186     11.08      (112)    31,298   11.81
Money marketdeposit
    accounts          22,984    5.75   13,128     9,856     3.21     (604)   10,460      3.72       191     10,269    3.88
Certificate accounts:
    3 month CD's       1,398     .35      473       925      .30     (108)    1,033       .37       (64)     1,097     .41
    6 month CD's      24,898    6.23     (798)   25,696     8.38   13,297    12,399      4.41    (5,132)    17,531    6.62
    12 month CD's     80,617   20.18   37,162    43,455    14.17  (13,377)   56,832     20.20     3,935     52,897   19.96
    18 month CD's      9,097    2.28  (29,041)   38,138    12.43    2,635    35,503     12.62    27,905      7,598    2.87
    24 month CD's     76,536   19.16   22,852    53,684    17.50   28,699    24,985      8.88    (8,673)    33,658   12.70
    30 month CD's      1,788     .45     (307)    2,095      .68   (1,075)    3,170      1.13      (605)     3,775    1.42
    36 month CD's     10,987    2.75    2,786     8,201     2.67   (3,501)   11,702      4.16       (26)    11,728    4.43
    48 month CD's     16,238    4.07    3,883    12,355     4.04    4,469    16,824      5.98     5,509     22,333    8.43
    6 to 8 year CD's  14,743    3.69    3,276    11,467     3.74      218    11,249      3.99      (291)    11,540    4.36
IRA accounts          31,781    7.69    7,343    24,438     7.97    1,392    23,046      8.19     1,242     21,804    8.23
                    -------- -------  -------  --------   ------- -------   -------   -------  -------   --------  -------
         Total      $399,443 100.00%  $92,740  $306,703   100.00% $25,361  $281,342    100.00%  $16,396   $264,946  100.00%
                    ======== =======  =======  ========   ======= =======  ========   =======  =======   ========  =======
</TABLE>

        The variety of deposit  accounts by First Federal has permitted it to be
more  competitive  in  obtaining  funds and has allowed it to respond  with more
flexibility  to  disintermediation  (the  flow of  funds  away  from  depository
institutions such as savings  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 money market conditions.

                                       10

<PAGE>

        The  following  table sets forth the amount of  deposits  as of June 30,
1999 by various interest rate categories.
<TABLE>
<CAPTION>

     Weighted
      Average                                                                       Percent
     Interest                                           Minimum                       of
       Rate                   Category                  Amount     Balances(1)     Deposits
      <S>       <C>                                     <C>         <C>             <C>

         -  %    Non-interest bearing demand accounts   $1,000      $ 15,223          3.81%
       1.53      NOW demand accounts                     1,000        54,896         13.74
       2.56      Savings accounts                          100        38,257          9.58
       3.67      Money market deposit accounts           1,000        22,984          5.75
       3.18      3 month certificate                     1,000         1,398           .35
       4.27      6 month certificate                     1,000        24,898          6.23
       5.03      12 month certificate                    1,000        80,617         20.18
       4.68      18 month certificate                    1,000         9,097          2.28
       5.54      24 month certificate                    1,000        76,536         19.16
       5.65      30 month certificate                    1,000         1,788           .45
       5.46      36 month certificate                    1,000        10,987          2.75
       5.75      48 month certificate                    1,000        16,238          4.07
       6.02      Other certificates                      1,000        14,743          3.69
       5.64      IRA accounts                            1,000        31,781          7.96
                                                                    --------         ------
                                                                    $399,443        100.00%
        (1) Dollars in thousands.                                   ========        =======
</TABLE>

        The following  table indicates at June 30, 1999 the amount of the Bank's
certificates of deposit of $100,000 or more by time remaining until maturity.

                                                 Certificates
             Maturity Period                      of Deposit
             ---------------                     ------------
                                                (In Thousands)

            Three months or less                    $12,100
            Three through six months                 10,651
            Six through twelve months                22,747
            Over twelve months                       29,514
                                                    -------
                Total                               $75,012
                                                    =======


        The following  table sets forth the average  balances and interest rates
based on month-end  balances for various deposit  categories  during the periods
indicated.


                                            Year Ended June 30,
                          ------------------------------------------------------
                                1999              1998              1997
                                ----              ----              ----
                         Average  Average   Average  Average   Average  Average
                         Balance Rate Paid  Balance Rate Paid  Balance Rate Paid
                         ------- ---------  ------- ---------  ------- ---------
                                           (Dollars in thousands)

Non-interest bearing
   demand accounts      $ 14,651     -  %  $ 12,289    -  %    $ 9,104     -  %
Demand deposit accounts   51,174    1.53     34,171   1.52      32,056    1.57
Savings deposits          38,494    2.56     30,696   2.64      31,259    2.62
Money market accounts     21,050    3.67      9,424   3.31      10,287    3.38
Certificates of deposit  266,575    5.50    207,333   5.78     187,974    5.52

                                       11

<PAGE>

        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 to extend the term of its liabilities.  Advances from the FHLB are typically
secured  by the  Bank's  stock in the FHLB and a  portion  of the  Bank's  first
mortgage  loans.  At June 30, 1999 First  Federal had $25.9  million in advances
outstanding  from  the FHLB and the  capacity  to  increase  its  borrowings  an
additional $167 million.

        The FHLB of  Cincinnati  functions as a central  reserve bank  providing
credit for savings banks and certain 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 certain  standards
related to credit-worthiness have been met.

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

                                                     At June 30,
                                        -------------------------------------

                                         1999           1998           1997
                                         ----           ----           ----

                                                 (Dollars in thousands)


 Average balance outstanding            $23,560       $41,990         $41,482
 Maximum amount outstanding at
    any month-end during the period      25,894        43,441          47,716
 Year end balance                        25,894        43,249          41,514
 Weighted average interest rate:
    At end of year                         5.25%         5.39%           5.62%
    During the year                        5.52%         5.68%           5.61%




                                       12

<PAGE>

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.  Such yields and costs are derived by
dividing  income  or  expense  by the  average  monthly  balance  of  assets  or
liabilities, respectively, for the periods presented
<TABLE>
<CAPTION>

                                                                Year Ended June 30,
                               ----------------------------------------------------------------------------------------
                                          1999                         1998                         1997
                                          ----                         ----                         ----

                               Average            Average    Average            Average    Average            Average
                               Balance  Interest Yield/Cost  Balance  Interest Yield/Cost  Balance  Interest Yield/Cost
                               -------  -------- ----------  -------  -------- ----------  -------  -------- ----------
<S>                            <C>       <C>       <C>     <C>        <C>        <C>    <C>        <C>        <C>
ASSETS
Interest earning assets:
 Equity securities            $  2,109   $    28    1.33%  $  2,492    $   73    2.93%  $  4,856   $  228      4.70%
 State and political
  subdivision securities           992        45    4.54        -          -        -       -          -         -
 U.S. Treasury and agencies     40,506     2,730    6.74     16,475     1,058     6.42    15,133      976      6.45
 Mortgage-backed securities      1,786       124    6.94      2,090       147     7.03     2,514      178      7.08
 Loans receivable (1) (2)      386,132    31,896    8.26    343,822    29,339     8.53   319,187   26,945      8.44
 FHLB stock                      3,082       216    7.01      2,875       207     7.20     2,674      188      7.03
 Interest bearing deposits       8,635       457    5.29      6,689       358     5.35     4,895      267      5.45
                               -------    ------    ----    -------    ------     ----   -------   ------      ----
 Total interest earning assets 443,242    35,496    8.01    374,443    31,182     8.33   349,259   28,782      8.24
Less: Allowance for loan
 losses                         (2,071)                      (1,725)                      (1,622)
Non-interest earning assets     37,636                       21,284                       18,892
                              --------                     --------                     --------
     TOTAL ASSETS             $478,807                     $394,002                     $366,529
                              ========                     ========                     ========

LIABILITIES AND STOCKHOLDERS'
   EQUITY
Interest bearing liabilities:
   Savings accounts            $38,494     $ 984    2.56%   $30,696    $  809    2.64%   $31,259   $  818      2.62%
   NOW and money market
     accounts                   72,224     1,522    2.11     43,595       887    2.03     42,343      875      2.07
   Certificates of deposit and
      other time deposits      266,575    14,674    5.50    207,333    11,980    5.78    187,974   10,376      5.52
   FHLB Advances                23,560     1,301    5.52     41,990     2,383    5.68     41,482    2,306      5.56
                               -------    ------    ----    -------    ------    ----    -------   ------
   Total interest bearing
    liabilities                400,853    18,481    4.61    323,614    16,059    4.96    303,058   14,375      4.74
Non-interest bearing
liabilities:
   Non-interest bearing
    deposits                    14,651                       12,289                        9,104
   Other liabilities             6,542                        4,697                        3,879
                               -------                      -------                      -------
   Total liabilities           422,046                      340,600                      316,041
Stockholders' equity            56,761                       53,402                       50,488
                               -------                      -------                      -------
 TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY        $478,807                     $394,002                     $366,529
                              ========                     ========                     ========
NET INTEREST INCOME                       $17,015                      $15,123                     $14,407
                                          =======                      =======                     =======
NET INTEREST SPREAD                                  3.40%                        3.37%                        3.50%
                                                     =====                        =====                        =====
NET INTEREST MARGIN                                  3.84%                        4.04%                        4.13%
                                                     =====                        =====                        =====

Ratio of average interest
  earning assets to average
  interest bearing liabilities                     110.57%                      115.71%                      115.24%
                                                   =======                      =======                      =======

------------------------------------------------------
(1) Includes loan fees,  immaterial in amount,  in both interest  income and the
calculation of yield on loans.
(2) Calculations  include  non-accruing  loans  in  the  average  loan  amounts
outstanding.
</TABLE>


                                       13
<PAGE>


RATE/VOLUME ANALYSIS

        The table  below sets forth  certain  information  regarding  changes in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning  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.
<TABLE>
<CAPTION>

                                                              Year Ended June 30,
                               ---------------------------------------------------------------------------------

                                    1999 vs. 1998                1998 vs. 1997               1997 vs. 1996
                                 Increase (decrease)          Increase (decrease)         Increase (decrease)
                                   Due to change in             Due to change in            Due to change in

                                                   Net                         Net                          Net
                                 Rate    Volume   Change      Rate   Volume   Change      Rate    Volume   Change
                                                            (Dollars in Thousands)
<S>                             <C>      <C>      <C>        <C>     <C>      <C>        <C>      <C>      <C>
INTEREST INCOME:
 Loans                          $(885)   $3,442   $2,557      $159   $2,288   $2,447     $(89)    $2,038   $1,949
 Equity securities                (35)      (10)     (45)     (104)    (135)    (239)     (15)        12       (3)
 State and political
   subdivision securities          13        32       45        -        -        -        -          -        -
 U.S. Treasury and agencies        55     1,617    1,672        (5)      87       82      (11)       460      449
 Mortgage-backed securities        (2)      (21)     (23)       (1)     (31)     (32)      (7)       (39)     (46)
 FHLB stock                        (5)       14        9         5       14       19        2         12       14
 Interest bearing deposits         (4)      103       99        45       78      123      (57)      (450)    (507)
                                 -----   ------   ------       ---   ------   ------    ------    ------   ------
  Total interest earning assets $(863)   $5,177   $4,314       $99   $2,301   $2,400    $(177)    $2,033   $1,856
                                 =====   ======   ======       ===   ======   ======    ======    ======   ======

INTEREST EXPENSE:
   Savings accounts              $(24)     $199     $175        $7     $(14)     $(7)     $(9)      $(15)   $(24)
   NOW and money market
     accounts                      36       599      635       (77)      48      (29)      16        100     116
   Certificates of deposit
    and other time deposits      (550)    3,244    2,694       503    1,136    1,639       (4)       105     101
   FHLB advances                  (65)   (1,017)  (1,082)       52       29       81      (32)       538     506
                                -----    ------   ------      ----   ------   ------      ----      ----    ----
    Total interest bearing
      liabilities               $(603)   $3,025   $2,422      $485   $1,199   $1,684     $(29)      $728    $699
                                ======   ======   ======      ====   ======   ======      ====      ====    ====
</TABLE>


SUBSIDIARY ACTIVITIES

        As a  federally-chartered  savings bank, the Bank is permitted to invest
an  amount  equal  to 2% of  its  assets  in  subsidiaries  with  an  additional
investment of 1% of assets where such  investment  serves  primarily  community,
intercity, and community development purposes.  Under such limitations,  on June
30, 1999, the Bank was authorized to invest up to approximately $14.6 million in
the  stock  of or loans  to  subsidiaries.  In  addition,  institutions  meeting
regulatory  capital  requirements,  which the Bank does, may invest up to 50% of
their  regulatory  capital in conforming first mortgage loans to subsidiaries in
which they own 10% or more of the capital stock. As of June 30, 1999, the Bank's
investment  in and  loans  to its  subsidiary  was  approximately  $1.4  million
consisting of investment in common stock and earnings.

        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.  In March,  1998 First  Service  entered into a contract  with Robert
Thomas Securities,  Inc. to provide investment  services to the Bank's customers
in the area of tax  deferred  annuities,  government  securities  and stocks and
bonds.  First  Service  employs  three  full-time  employees  to  perform  these
services.  This  investment  function  operates  under  licenses  held by  First
Service. The net earnings of First Service was $209,000 during fiscal year 1999.

                                       14
<PAGE>

        Savings   associations,   in   determining   compliance   with   capital
requirements,  are required to deduct from capital an  increasing  percentage of
their  debt and equity  investments  in, and  extensions  of credit to,  service
corporations  in  activities  not  permissible  for  a  national  bank.  Certain
activities of the Bank's service  corporations  are not permissible for national
banks.  Accordingly,  on June 30, 1999, the Bank deducted 100% of its investment
in  its  service   corporation   from  its  core  and  tangible   capital.   See
"Regulation--Regulatory  Capital Requirements." Because the Bank's investment in
its subsidiary is  insignificant,  management does not believe that the required
deductions  from  capital will have a material  effect on the Bank's  regulatory
capital position.

COMPETITION

        First Federal experiences substantial competition both in attracting and
retaining  deposits  and in the  making  of  mortgage  and other  loans.  Direct
competition  for  deposits  comes from other  savings  institutions,  commercial
banks,  and  credit  unions  located  in  north-central   Kentucky.   Additional
significant  competition  for deposits  comes from money market mutual funds and
corporate and government debt securities.

        The primary  factors in competing for loans 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 other savings institutions,  commercial banks,  mortgage bankers,  mortgage
brokers, and insurance  companies.  First Federal is 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  which have offices in these  counties,
First Federal competes with several commercial banks and savings institutions in
surrounding  counties,  many of which have assets which are substantially larger
than First Federal's. 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.

EMPLOYEES

        The  Corporation  and its subsidiary had 143 full-time  employees and 23
part-time employees as of June 30, 1999. None of these employees are represented
by a collective bargaining agreement and the Corporation believes that it enjoys
good relations with its personnel.

REGULATION

        GENERAL. As a federally chartered savings association,  First Federal is
subject to extensive  regulation  by the OTS. The lending  activities  and other
investments   of  the  Bank  must  comply  with   various   federal   regulatory
requirements. The OTS periodically examines the Bank for compliance with various
regulatory  requirements  and the FDIC also has the authority to conduct special
examinations  of  institutions  insured by the SAIF.  The Bank must file reports
with the OTS describing its activities and financial condition. The Bank is also
subject to certain reserve requirements promulgated by the Board of Governors of
the Federal Reserve System (the "Federal Reserve  Board").  This supervision and
regulation is intended primarily for the protection of depositors.  As a savings
and loan holding  company,  the  Corporation is subject to the OTS'  regulation,
examination, supervision and reporting requirements.

        FEDERAL HOME LOAN BANK SYSTEM.  The Bank is a member of the FHLB System,
which consists of 12 regional Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHLB").  The Federal Home Loan
Banks provide a Central Credit facility primarily for member institutions.  As a
member of the FHLB,  the Bank is  required to acquire and hold shares of capital
stock in the FHLB in an  amount  at least  equal to 1% of the  aggregate  unpaid
principal of its home  mortgage  loans,  home  purchase  contracts,  and similar
obligations at the beginning of each year, or 1/20 of its advances  (borrowings)
from the FHLB,  whichever is greater.  First Federal was in compliance with this
requirement with investment in the FHLB stock at June 30, 1999, of $3.2 million.

        The FHLB serves as a reserve or central bank for its member institutions
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations of the FHLB System.  It makes advances to
members in accordance  with policies and procedures  established by the FHFB and
the Board of Directors of the FHLB. As of June 30, 1999, First Federal had $25.9
million in advances  outstanding from the FHLB. See "Business Sources of Funds -
Borrowings."

                                       15

        LIQUIDITY  REQUIREMENTS.  As a member of the FHLB  System,  the Bank has
been  required to  maintain  average  daily  balances  of liquid  assets  (cash,
deposits  maintained  pursuant to Federal Reserve Board  requirements,  time and
savings  deposits in certain  institutions,  obligations of states and political
subdivisions thereof,  shares in mutual funds with certain restricted investment
policies,  highly rated corporate debt, and mortgage loans and  mortgage-related
securities with less than one year to maturity or subject to purchase within one
year) equal to the monthly  average of not less than a specified  percentage  of
its net withdrawable savings deposits plus short-term borrowings. This liquidity
requirement,  which is currently 4%, may be changed from time to time by the OTS
to any amount within the range of 4% to 10% depending  upon economic  conditions
and the savings flows of member institutions. Member institutions have also been
required to maintain  average daily  balances of  short-term  liquid assets at a
specified  percentage  (currently  1%) of the  total of their  net  withdrawable
savings accounts and borrowings payable in one year or less.  Monetary penalties
may be imposed for failure to meet  liquidity  requirements.  The Bank's average
liquidity ratio for June 1999 was 8.85% which exceeded the applicable  liquidity
requirements.  The Bank's average  liquidity ratio for June 1999 was 8.85% which
exceeded the applicable liquidity  requirement.  The Bank has never been subject
to monetary penalties for failure to meet its liquidity requirements.

        QUALIFIED  THRIFT  LENDER  TEST.  The Bank is  currently  subject to OTS
regulations  which use the  concept  of a  qualified  thrift  lender  ("QTL") to
determine  eligibility for Federal Home Loan Bank advances and for certain other
purposes.  To qualify as a QTL, a savings association must maintain at least 65%
of its "portfolio" assets in qualified thrift investments.  Portfolio assets are
defined as total assets less intangibles, property used by a savings association
in its business and  liquidity  investments  in an amount not  exceeding  20% of
assets. Qualified thrift investments consist of: (i) loans, equity positions, or
securities related to domestic, residential real estate or manufactured housing,
credit card and education loans;  (ii) property used by the savings  association
in the conduct of its  business;  and (iii) stock in a Federal Home Loan Bank or
the Federal  National  Mortgage  Association  or the Federal Home Loan  Mortgage
Corporation. Qualified thrift investments may also include liquidity investments
and 50% of the dollar amount of residential mortgage loans subject to sale under
certain conditions. To qualify as a QTL, a savings association must maintain its
status as a QTL on a monthly  basis in nine out of every 12  months.  Failure to
qualify as a QTL results in a number of sanctions,  including the  imposition of
certain  operating  restrictions  imposed on national banks and a restriction on
obtaining  additional  advances  from the Federal  Home Loan Bank  System.  Upon
failure to qualify as a QTL for two years, a savings association must convert to
a commercial bank. At June 30, 1999,  approximately  93.44% of the Bank's assets
were invested in qualified thrift investments.

        LENDING  LIMITS.  Under  regulations of the OTS, loans and extensions of
credit  to a person  outstanding  at one time and not  fully  secured  shall not
exceed 15% of the unimpaired capital, surplus and the loan loss allowance of the
savings  association.  Loans and  extensions  of credit fully secured by readily
marketable  collateral (as defined) may comprise an additional 10% of unimpaired
capital and surplus.  At June 30, 1999,  the Bank complied  with its  regulatory
lending limits.

        The  aggregate  amount  of loans  which a  federally  chartered  savings
association may make on the security of liens on  non-residential  real property
may not exceed 400% of the institution's capital, though the Director of OTS has
the authority to permit savings associations to exceed the 400% of capital limit
in certain circumstances.

        REGULATORY  CAPITAL   REQUIREMENTS.   OTS  regulations  require  savings
associations  to satisfy three  different  capital  requirements.  Specifically,
savings  associations  must  maintain  a 3% Tier 1 leverage  ratio,  a 4% Tier 1
capital ratio and an 8% risk-based  capital  standard.  OTS  regulations  impose
certain  restrictions  on  savings  associations  that  have a total  risk-based
capital ratio that is less than 8.0%, a ratio of Tier 1 capital to risk-weighted
assets of less than 4.0% or a ratio of Tier 1 capital to adjusted  total  assets
of less than 4.0% (or 3.0% if the institution is rated composite 1 under the OTS
examination  rating  system).  As of June 30, 1999,  the Bank's  actual  capital
percentages  for Tier 1 leverage of 9.0%,  Tier 1 capital of 13.9%,  and current
risk-based capital of 14.6%, significantly exceed the regulatory requirement for
each  category.   For  additional  information  See  Note  9  of  the  Notes  to
Consolidated Financial Statements in the Annual Report.

        For purposes of the OTS's regulatory capital  regulations,  core capital
is  defined  as  common  stockholders'  equity  (including  retained  earnings),
noncumulative perpetual preferred stock and related surplus,  minority interests
in  the   equity   accounts   of  fully   consolidated   subsidiaries,   certain
nonwithdrawable  accounts  and  pledged  deposits  and  "qualifying  supervisory
goodwill."  Core  capital is  generally  reduced  by the  amount of the  savings
association's  intangible assets for which no market exists.  Limited exceptions
to the  deduction  of  intangible  assets are provided  for  purchased  mortgage
servicing rights and qualifying supervisory goodwill held by an eligible savings
association.

                                       16
<PAGE>

        Adjusted  total  assets  are a  savings  association's  total  assets as
determined under generally accepted accounting principles,  adjusted for certain
goodwill  amounts,  and  increased  by a pro  rata  portion  of  the  assets  of
subsidiaries  in which the savings  association  holds a minority  interest  and
which are not  engaged in  activities  for which the capital  rules  require the
savings  association to net its debt and equity investments  against capital, as
well as a pro rata portion of the assets of other subsidiaries for which netting
is not fully  required  under the  phase-in  rules.  Adjusted  total  assets are
reduced  by the  amount of assets  that have been  deducted  from  capital,  the
portion of savings association's investments in subsidiaries that must be netted
against  capital  under the capital  rules and, for purposes of the core capital
requirement, qualifying supervisory goodwill.

        In determining  compliance with the risk-based  capital  requirement,  a
savings  association  is  allowed to use both Tier 1 capital  and  supplementary
capital  provided the amount of  supplementary  capital used does not exceed the
savings  association's  Tier 1  capital.  Supplementary  capital  is  defined to
include  certain  preferred stock issues,  nonwithdrawable  accounts and pledged
deposits that do not qualify as Tier 1 capital,  certain  approved  subordinated
debt,   certain  other  capital   instruments  and  a  portion  of  the  savings
association's  general loss allowances.  Total Tier 1 and supplementary  capital
are reduced by an amount equal to the savings  association's  high loan-to-value
ratio  land  loans and  non-residential  construction  loans  and the  amount of
capital instruments held by other depository institutions pursuant to reciprocal
arrangements as well as by an increasing percentage of the savings association's
equity investments.

        The risk-based  capital  requirement is measured  against  risk-weighted
assets  which equals the sum of each asset and the  credit-equivalent  amount of
each  off-balance  sheet item after being multiplied by an assigned risk weight.
Under the OTS risk-weighted  system, one-to four-family first mortgages not more
than 90 days past due with  loan-to-value  ratios  under 80% are assigned a risk
weight  of  50%.   Consumer   loans  are   assigned  a  risk   weight  of  100%.
Mortgage-backed  securities  issued,  or fully  guaranteed  as to principal  and
interest,  by the FNMA or FHLMC are  assigned a 20% risk  weight.  Cash and U.S.
Government securities backed by the full faith and credit of the U.S. Government
are  given  a 0%  risk  weight.  The  risk-based  capital  requirement  is 8% of
risk-weighted assets.

        In  determining  compliance  with  capital  standards,  all of a savings
association's  investments  in, and  extensions  of credit  to,  any  subsidiary
engaged  in  activities  not  permissible  for a  national  bank  are also to be
deducted  from the  savings  association's  capital.  Certain  subsidiaries  are
exempted from this treatment,  including any subsidiary engaged in impermissible
activities  solely  as agent  for its  customers  (unless  the  FDIC  determined
otherwise),  subsidiaries  engaged  solely in mortgage  banking,  and depository
institution subsidiaries acquired prior to May 1, 1989. In addition, the capital
deduction is not applied to federal savings  associations  existing as of August
9, 1989 that were either chartered as a state savings bank or state  cooperative
bank prior to October 10, 1982 or that acquired their principal assets from such
an  association.  The  required  reduction  of capital for this purpose is being
phased in over a period of  approximately  five  years.  At June 30,  1999,  the
Bank's  investment  in First  Service,  a wholly  owned  subsidiary  of the Bank
engaged in activities  which are not permitted for a national bank,  amounted to
$1.4  million.  Accordingly,  on June 30, 1999,  the Bank  deducted 100% of this
investment from its core and tangible capital.

        The OTS risk-based  capital  requirements  require savings  institutions
with more than a "normal"  level of interest  rate risk to  maintain  additional
total capital. A savings  institution's  interest rate risk is measured in terms
of the  sensitivity of its "net portfolio  value" to changes in interest  rates.
Net portfolio value is defined, generally, as the present value of expected cash
inflows from existing  assets and  off-balance  sheet contracts less the present
value of expected cash outflows from existing liabilities. A savings institution
is  considered  to have a "normal"  level of interest  rate risk exposure if the
decline in its net portfolio  value after an immediate 200 basis point  increase
or decrease in market interest rates (whichever  results in the greater decline)
is less than two percent of the current estimated  economic value of its assets.
A savings  institution with a greater than normal interest rate risk is required
to deduct from total capital, for purposes of calculating its risk-based capital
requirement,  an amount (the "interest rate risk  component")  equal to one-half
the difference  between the  institution's  measured  interest rate risk and the
normal level of interest  rate risk,  multiplied  by the  economic  value of its
total assets.

        The OTS will calculate the  sensitivity of a savings  institution's  net
portfolio  value based on data submitted by the institution in a schedule to its
quarterly  Thrift  Financial Report and using the interest rate risk measurement
model  adopted by the OTS. The amount of the interest  rate risk  component,  if
any, for any quarter is based on the institution's Thrift Financial Report filed
three  quarters  earlier.  The Bank does not have  more  than a normal  level of
interest  rate risk under the new rule and is not required to increase its total
capital as a result of the rule.

                                       17
<PAGE>

        Presented  below  as of June  30,  1999  is an  analysis  of the  Bank's
interest rate risk ("IRR") as measured by changes in NPV for  instantaneous  and
sustained parallel shifts of 100 basis points in market interest rates.

                               As of June 30, 1999

                        Net Portfolio Value            NPV as % of PV of Assets
 Change                 -------------------            ------------------------
 In Rates    $ Amount      $ Change     % Change       NPV Ratio       Change
 --------    --------      --------     --------       ---------       ------
 +300 bp       35,951      (23,286)         (39)          7.85        (430 bp)
 +200 bp       44,082      (15,155)         (26)          9.41        (273 bp)
 +100 bp       52,123       (7,114)         (12)         10.90        (125 bp)
    0 bp       59,237                                    12.15
 -100 bp       64,333        5,096            9          12.99          84 bp
 -200 bp       68,072        8,835           15          13.57         142 bp
 -300 bp       71,824       12,587           21          14.12         198 bp


        While  the  Bank  complies  with  its   currently   applicable   capital
requirements  and  expects to  continue  to comply  with the  requirements,  any
failure to comply with the capital  requirements  in the future  would result in
severe  penalties.   In  addition  to  requiring  generally  applicable  capital
standards  for  savings  associations,   applicable  regulations  authorize  the
Director  of OTS to  establish  the  minimum  level  of  capital  for a  savings
institution at such amount or at such ratio of capital-to-assets as the Director
determines to be necessary or appropriate  for such  institution in light of the
particular  circumstances of the institution.  The Director of OTS may treat the
failure of any savings institution to maintain capital at or above such level as
an unsafe or unsound  practice and may issue a directive  requiring  any savings
institution  which  fails to  maintain  capital  at or above the  minimum  level
required by the Director to submit and adhere to a plan for increasing  capital.
Such an order may be enforced in the same manner as an order issued by the FDIC.

        The OTS staff policies specify that savings institutions failing any one
of their minimum  regulatory  capital  requirements may not increase their total
assets during any quarter in excess of an amount equal to net interest  credited
during the  quarter.  Under these  policies,  institutions  that have  submitted
capital  plans  that are  rejected  by the  District  Director  or that have had
capital  plans  approved  but do not meet the  targets  or  requirements  of the
capital  plan may not make any new loans or  investments  except  with the prior
written  approval of the District  Director.  Such approval will only be granted
when the  proposed  loan or  investment  is  reasonable  in the  context  of the
institution's operations and does not significantly increase the risk profile of
the savings institution.

        The  Director  of  OTS  must   restrict  the  asset  growth  of  savings
associations  not  in  regulatory  capital  compliance,  subject  to  a  limited
exception  for growth not  exceeding  interest  credited.  In addition,  savings
associations  not in full  compliance  with  applicable  capital  standards  are
subject to a capital  directive which may include such  restrictions,  including
restrictions  on the  payment  of  dividends  and  on  compensation,  as  deemed
appropriate  by the Director of OTS. The Director of OTS is directed to treat as
an unsafe and unsound practice any material failure by a savings  association to
comply with a capital plan or capital  directive.  The  sanctions  and penalties
that could be imposed range from  restrictions on branching or on the activities
of the institution,  to restrictions on the ability to obtain FHLB advances,  to
termination of insurance of accounts following appropriate  proceedings,  to the
appointment of a conservator or receiver.

PROMPT CORRECTIVE REGULATORY ACTION

        Under the Federal Deposit Insurance Corporation  Improvement Act of 1991
("FDICIA"),   the  federal  banking  regulators  are  required  to  take  prompt
corrective action if an insured depository  institution fails to satisfy certain
minimum  capital  requirements.  All  institutions,  regardless of their capital
levels,  are  restricted  from  making any  capital  distribution  or paying any
management fees if the institution  would thereafter fail to satisfy the minimum
levels for any of its capital  requirements.  An institution  that fails to meet
the  minimum  level  for any  relevant  capital  measure  (an  "undercapitalized
institution")  may be: (i) subject to increased  monitoring  by the  appropriate
federal  banking  regulator;  (ii)  required  to  submit an  acceptable  capital

                                       18
<PAGE>

restoration plan within 45 days; (iii) subject to asset growth limits;  and (iv)
required to obtain prior regulatory approval for acquisitions, branching and new
lines of businesses.  The capital  restoration  plan must include a guarantee by
the institution's holding company that the institution will comply with the plan
until  it has been  adequately  capitalized  on  average  for  four  consecutive
quarters, under which the holding company would be liable up to the lesser of 5%
of the  institution's  total  assets  or  the  amount  necessary  to  bring  the
institution into capital  compliance as of the date it failed to comply with its
capital  restoration plan. A "significantly  undercapitalized"  institution,  as
well as any  undercapitalized  institution  that did not  submit  an  acceptable
capital   restoration   plan,   may  be  subject  to   regulatory   demands  for
recapitalization,  broader  application of  restrictions  on  transactions  with
affiliates,  limitations  on interest  rates paid on deposits,  asset growth and
other  activities,   possible   replacement  of  directors  and  officers,   and
restrictions on capital  distributions  by any bank holding company  controlling
the institution.  Any company controlling the institution could also be required
to divest the  institution or the  institution  could also be required to divest
subsidiaries.  The senior executive officers of a significantly undercapitalized
institution may not receive  bonuses or increases in compensation  without prior
approval and the  institution is prohibited from making payments of principal or
interest on its  subordinated  debt. In their  discretion,  the federal  banking
regulators  may also  impose  the  foregoing  sanctions  on an  undercapitalized
institution if the regulators determine that such actions are necessary to carry
out the purposes of the prompt corrective action provisions. If an institution's
ratio of  tangible  capital to total  assets  falls  below a  "critical  capital
level,"  the  institution  will be subject to  conservatorship  or  receivership
within 90 days unless periodic  determinations  are made that  forbearance  from
such action would better protect the deposit insurance fund. Unless  appropriate
findings and certifications are made by the appropriate  federal bank regulatory
agencies,   a  critically   undercapitalized   institution  must  be  placed  in
receivership  if it remains  critically  undercapitalized  on average during the
calendar  quarter  beginning  270  days  after  the  date it  became  critically
undercapitalized.  If a savings  association  is in compliance  with an approved
capital  plan on the  date of  enactment  of  FDICIA,  however,  it will  not be
required  to  submit a capital  restoration  plan if it is  undercapitalized  or
become subject to the statutory prompt corrective  action provisions  applicable
to significantly and critically  undercapitalized  institutions prior to July 1,
1995.

        Under FDICIA,  regulations  implementing  the prompt  corrective  action
provisions  of a depository  institution's  capital  adequacy is measured on the
basis of the  institution's  total  risk-based  capital  ratio (the ratio of its
total capital to  risk-weighted  assets),  Tier 1 risk-based  capital ratio (the
ratio of its core capital to risk-weighted assets) and leverage ratio (the ratio
of its core capital to adjusted total assets). Under the regulations,  a savings
association  that is not  subject  to an order or written  directive  to meet or
maintain a specific  capital level will be deemed "well  capitalized" if it also
has:  (i) a total  risk-based  capital  ratio of 10% or  greater;  (ii) a Tier 1
risk-based capital ratio of 6.0% or greater;  and (iii) a leverage ratio of 5.0%
or  greater.  An  "adequately  capitalized"  savings  association  is a  savings
association that does not meet the definition of well capitalized and has: (i) a
total  risk-based  capital  ratio  of 8.0%  or  greater;  (ii) a Tier 1  capital
risk-based  ratio of 4.0% or  greater;  and  (iii) a  leverage  ratio of 4.0% or
greater (or 3.0% or greater if the  savings  association  has a  composite  of 1
MACRO rating). An  "undercapitalized  institution" is a savings association that
has (i) a total  risk-based  capital  ratio  less  than  8.0%;  or (ii) a Tier 1
risk-based  capital ratio of less than 4.0%;  or (iii) a leverage  ratio of less
than  4.0%  (or 3.0% if the  association  has a  composite  1 MACRO  rating).  A
"significantly undercapitalized" institution is defined as a savings association
that has: (i) a total risk-based capital ratio of less than 6.0%; or (ii) a Tier
1 risk-based  capital ratio of less than 3.0%; or (iii) a leverage ratio of less
than 3.0%. A  "critically  undercapitalized"  savings  association  defined as a
savings  association  that has a ratio of core  capital to total  assets of less
than 2.0%.  The OTS may  reclassify a well  capitalized  savings  association as
adequately   capitalized   and  may  require  an   adequately   capitalized   or
undercapitalized  association to comply with the supervisory  actions applicable
to  associations in the next lower  opportunity for a hearing,  that the savings
association  is in an unsafe or unsound  condition or that the  association  has
received and not corrected a less-than-satisfactory  rating for any MACRO rating
category.  First  Federal  is  classified  as "well  capitalized"  under the new
regulations.


DEPOSIT INSURANCE

        Under FDICIA,  the FDIC has established a risk-based  assessment  system
for insured depository  institutions.  Under the system, 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.  Institutions  are
assigned  to  one  of  three  capital  groups;   well  capitalized,   adequately
capitalized  or  undercapitalized,  based on the data reported to regulators for
date  closest to the last day of the seventh  month  preceding  the  semi-annual
assessment period. Well capitalized institutions are institutions satisfying the
following capital ratio standards;  (i) total risk-based  capital ratio of 10.0%
or greater;  (ii) Tier 1 risk-based capital ratio of 6.0% or greater;  and (iii)
Tier 1 leverage ratio of 5.0% or greater.  Adequately  capitalized  institutions
are   institutions   that  do  not  meet  the  standards  for  well  capitalized
institutions but which satisfy the following capital ratio standards:  (i) total
risk-based  capital  ratio of 8.0% or greater;  (ii) Tier 1  risk-based  capital
ratio of 4.0% or  greater;  and (iii) Tier 1 leverage  ratio of 4.0% or greater.
Undercapitalized  institutions  consist of  institutions  that do not qualify as
either  "well  capitalized"  or  "adequately  capitalized."  Within each capital
group,  institutions  are assigned to one of the three subgroups on the basis of

                                       19
<PAGE>

supervisory  evaluations by the institution's  primary supervisory authority and
such  other   information  as  the  FDIC   determines  to  be  relevant  to  the
institution's  financial  condition and the risk posed to the deposit  insurance
fund.  Subgroup A consists of  financially  sound  institutions  with only a few
minor   weaknesses.   Subgroup  B  consists  of  institutions  that  demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the  fund.   Subgroup  C  consists  of  institutions  that  pose  a  substantial
probability of loss to the deposit  insurance fund unless  effective  corrective
action is taken.

The Bank  insures  its  customers'  deposits  through  the  Savings  Association
Insurance  Fund  ("SAIF").  On September  30, 1996,  Federal  Deposit  Insurance
Corporation  ("FDIC")  legislation was signed into law to recapitalize  the SAIF
due to a substantial disparity that existed between the premiums assessed by the
SAIF as compared to premiums  assessed to  commercial  banks.  All  SAIF-insured
savings institutions were required to pay a one-time special assessment of $.657
for every $100 of customer deposits held as of March 31, 1995. This has resulted
in a charge to earnings of $1,095,000,  net of tax,  during the first quarter of
fiscal 1997.  On January 1, 1997,  the Bank began paying  insurance  premiums of
$.064 per $100 of deposits as compared to a previous premium of $.23 per $100 of
deposits.

FEDERAL RESERVE SYSTEM

        Pursuant  to  regulations  of  the  Federal   Reserve  Board,  a  thrift
institution  must maintain average daily reserves equal to 3% on the first $51.9
million of transaction accounts,  plus 10% on the remainder.  This percentage is
subject to adjustment by the Federal Reserve Board.  Because  required  reserves
must be  maintained  in the  form of  vault  cash or in a  non-interest  bearing
account at a Federal  Reserve Bank, the effect of the reserve  requirement is to
reduce the amount of the institution's  interest-earning  assets. As of June 30,
1999, the Bank met its reserve requirements.

        SAVINGS AND LOAN  HOLDING  COMPANY  REGULATIONS.  The  Corporation  is a
savings and loan  holding  company  within the meaning of the Home  Owners' Loan
Act, as amended.  As such, it is  registered  with the OTS and is subject to OTS
regulations,   examinations,   supervision  and  reporting  requirements.  As  a
subsidiary  of a savings and loan holding  company,  First Federal is subject to
certain  restrictions  in its  dealings  with  the  Corporation  and  affiliates
thereof.

        The Home Owners' Loan Act, as amended, generally prohibits a savings and
loan holding  company,  without prior  approval of the Director of OTS, from (i)
acquiring  control of any other savings  institution or savings and loan holding
company or  controlling  the assets  thereof or (ii) acquiring or retaining more
than 5% of the voting shares of a savings institution or holding company thereof
which is not a subsidiary.  Additionally, under certain circumstances, a savings
and loan  holding  company is  permitted  to acquire,  with the  approval of the
Director  of  OTS,  up  to  15%  of  previously  unissued  voting  shares  of an
under-capitalized  savings association for cash without that savings association
being deemed  controlled by the holding company.  Except with the prior approval
of the  Director of OTS,  no  director or officer of a savings and loan  holding
company or person owning or  controlling  by proxy or otherwise more than 25% of
such company's stock may also acquire control of any savings institution,  other
than a subsidiary institution or any other savings and loan holding company.

        The Bank Holding Company Act of 1956 specifically authorizes the Federal
Reserve  Board and the Director of the OTS to approve an  application  by a bank
holding company to acquire control of any savings institution. Pursuant to rules
promulgated  by the Federal  Reserve Board,  owning,  controlling or operating a
savings institution is a permissible activity for bank holding companies, if the
savings  institution  engages only in deposit-taking  activities and lending and
other  activities  that are  permissible  for the  bank  holding  companies.  In
approving  such as  application,  the Federal  Reserve  Board may not impose any
restriction  on  transaction  between  the savings  institution  and its holding
company  affiliates  except as required  by Sections  23A and 23B of the Federal
Reserve Act.

        A bank holding company that controls a savings  institution may merge or
consolidate  the assets and  liabilities  of the savings  institution  with,  or
transfer assets and liabilities to, any subsidiary bank which is a member of the
BIF with the approval of the appropriate  federal banking agency and the Federal
Reserve  Board.  The  resulting  bank  will  be  required  to  continue  to  pay
assessments to the SAIF at the rates prescribed for SAIF members on the deposits
attributable to the merged savings institution plus an annual growth increment.

        Transactions between savings associations and any affiliate are governed
by Sections  23A and 23B of the Federal  Reserve  Act. An affiliate of a savings
association  is any company or entity which  controls,  is  controlled  by or is
under common control with the savings association. In a holding company context,
the parent holding company of a savings  association  (such as the  Corporation)
and any  companies  which are  controlled  by such  parent  holding  company are
affiliates of the savings association. Generally, Sections 23A and 23B (i) limit
the extent to which the savings  institution or its  subsidiaries  may engage in

                                       20
<PAGE>

"covered  transactions" with any one affiliate to an amount equal to 10% of such
institution's  capital stock and surplus,  and contain an aggregate limit on all
such  transactions with all affiliates to an amount equal to 20% of such capital
stock  and  surplus  and (ii)  require  that all such  transactions  be on terms
substantially  the  same,  or at  least  as  favorable,  to the  institution  or
subsidiary as those provided to a non-affiliate.  The term "covered transaction"
includes the making of loans,  purchase of assets,  issuance of a guarantee  and
similar  other  types  of  transactions.   Additionally,   in  addition  to  the
restrictions  imposed by Sections  23A and 23B, no savings  association  may (i)
loan or otherwise extend credit to an affiliate,  except for any affiliate which
engages only in activities which are permissible for bank holding companies,  or
(ii)  purchase  or invest in any  stocks,  bonds,  debentures,  notes or similar
obligations of any affiliate,  except for affiliates  which are  subsidiaries of
the savings association.

        Savings  associations are also subject to the restrictions  contained in
Section  22 (h) of the  Federal  Reserve  Act on  loans to  executive  officers,
directors  and  principal  shareholders.  Under  Section  22  (h),  loans  to an
executive officer and to a greater than 10% shareholder of a savings association
(18% in the case of  institutions  located  in an area with less than  30,000 in
population),  and certain affiliated entities of either, may not exceed together
with all other  outstanding  loans to such person and  affiliated  entities  the
association's  loan to one borrower limit as  established  by FIRREA  (generally
equal to 15% of the  institution's  unimpaired  capital and  surplus,  for loans
fully secured by certain readily marketable collateral, an additional 10% of the
institution's  unimpaired  capital and surplus).  Section  22(h) also  prohibits
loans,  above amounts  prescribed by the appropriate  federal banking agency, to
directors,  executive  officers  and greater  than 10%  shareholders  of savings
association,  and their respective  affiliates,  unless such loan is approved in
advance by a majority  of the board of  directors  of the  association  with any
"interested" director not participating in the voting. The Federal Reserve Board
has prescribed the loan amount (which  includes all other  outstanding  loans to
such person), as to which such prior board of director approval if required,  as
being the  greater of $25,000 or 5% of capital  and  surplus  (up to  $500,000).
Further, the Federal Reserve Board pursuant to Section 22(h) requires that loans
to directors,  executive  officers and principal  shareholders  be made on terms
substantially the same as offered in comparable transactions to other persons.

        The Board of Directors of the Corporation  presently  intends to operate
the  Corporation  as a  unitary  savings  and loan  holding  company.  There are
generally  no  restrictions  on the  activities  of a unitary  savings  and loan
company.  However,  if the director of OTS  determines  that there is reasonable
cause to believe that the  continuation by a savings and loan holding company of
an activity  constitutes  a serious risk to the financial  safety,  soundness or
stability of its subsidiary savings association,  the Director of OTS may impose
such  restrictions  as deemed  necessary  to address  such risk and limiting (i)
payment of dividends by the savings  association,  (ii) transactions between the
savings association and its affiliates,  and (iii) any activities of the savings
association that might create a serious risk that the liabilities of the holding
company and its affiliates may be imposed on the savings association.

        Notwithstanding the above rules as to permissible business activities of
unitary  savings  and  loan  holding  companies,   if  the  savings  association
subsidiary  of such a holding  company fails to meet (in three out to every four
quarters and two out of every three years) the QTL test, see  "Qualified  Thrift
Lender Test" above,  then such unitary holding company shall also become subject
to  the  activities   restrictions  applicable  to  multiple  holding  companies
(additional restrictions on securing advances from the FHLB also apply).

        If  the   Corporation   were  to  acquire  control  of  another  savings
institution other than through merger or other business  combinations with First
Federal,  the  Corporation  would thereupon  become a multiple  savings and loan
holding  company.  Except where such acquisition is pursuant to the authority to
approve  emergency  thrift   acquisitions  and  where  each  subsidiary  savings
institution meets the QTL test, the activities of the Corporation and any of its
subsidiaries (other than First Federal or other subsidiary savings institutions)
would thereafter be subject to further restrictions.  The Home Owners' Loan Act,
as amended,  provides  that,  among other things,  no multiple  savings and loan
holding company or subsidiary  thereof which is not a savings  institution shall
commence or  continue  for more than a limited  period of time after  becoming a
multiple  savings and loan holding company or subsidiary  thereof,  any business
activity  other than (i)  furnishing  or  performing  management  services for a
subsidiary  savings  institution,  (ii) conducting an insurance agency or escrow
business,  (iii) holding,  managing,  or liquidating assets owned by or acquired
from a subsidiary savings institution,  (iv) holding or managing properties used
or occupied by a subsidiary  savings  institution,  (v) acting as trustee  under
deeds of trust,  (vi) those  activities  previously  directly  authorized by the
FSLIC by  regulations  as of March 5, 1987 to be engaged in by multiple  holding
companies or (vii) those  activities  authorized by the Federal Reserve Board as
permissible for bank holding companies, unless the Director of OTS by regulation
prohibits  or limits such  activities  for savings and loan  holding  companies.
Those activities  described in (vii) above must also be approved by the Director
of OTS prior to being engaged in by a multiple holding company.

                                       21
<PAGE>

        The  Director  of OTS may only  approve  acquisitions  resulting  in the
formation of a multiple  savings and loan holding company which controls savings
institutions  in more than one state,  if the multiple  savings and loan holding
company involved controls a savings  institution which operated a home or branch
office in the state of the institution to be acquired as of March 5, 1987, or if
the  laws of the  state in which  the  institution  to be  acquired  is  located
specifically  permit institution to be acquired by state-chartered  institutions
or savings and loan holding  companies  located in the state where the acquiring
entity is located (or by a holding  company that controls  such  state-chartered
savings institutions).  The Director of OTS may approve an acquisition resulting
in a multiple savings and loan holding company controlling savings  institutions
in more than one state in the case of certain emergency thrift acquisitions.

        No subsidiary savings  association of a savings and loan holding company
may declare or pay a dividend on its permanent or  nonwithdrawable  stock unless
it first gives the Director of OTS 30 day advance notice of such declaration and
payment.  Any dividend declared during such period or without the giving of such
notice shall be invalid.


FEDERAL AND STATE TAXATION

        The Corporation and the Bank currently file consolidated  federal income
tax returns based on a fiscal year ending June 30.

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

        Earnings  appropriated  to the Bank's bad debt  reserve and claimed as a
tax  deduction  will not be allowable  for the payment of cash  dividends or for
distribution to  shareholders  (including  distributions  made on dissolution or
liquidation),  without  payment of federal  income  taxes on such  dividends  or
distributions  by the Bank at the then  current  tax rates on the amount  deemed
removed to the Bank would include not only the amount actually distributed,  but
would also be increased  (subject to certain  limitations)  by the amount of the
tax payable by reason of such distribution.

        The   Commonwealth  of  Kentucky   imposes  no  income  tax  on  savings
institutions.  Nonetheless,  First  Federal  must pay a Kentucky ad valorem tax.
This tax is 1/10th  of 1% of First  Federal's  total  savings  accounts,  common
stock,  capital and retained income with certain deductions for amounts borrowed
by depositors and for securities guaranteed by the U.S. Government or certain of
its agencies.  The Bank's  subsidiary  must pay a state income tax, as well as a
tax on capital. The tax on income is 4% for the first $25,000 of taxable income,
5% for the next $25,000,  6% for the next $50,000,  7% for the next $150,000 and
8.25% for all  income  over  $250,000.  The tax on  capital  is .0021  times the
capital  employed with a credit of .0014 times the first $350,000 of capital for
those corporations with gross income of under $500,000.

        For information  regarding federal income taxes, see Note 8 of the Notes
to Consolidated Financial Statements in the Annual Report.

                                       22

<PAGE>

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 12
banking centers, their form of occupancy and their respective approximate square
footage is set forth in the following table.

                                                               Approximate
                                                                 Square
               Banking Centers            Owned or Leased        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

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


        As of June  30,  1999,  the net  book  value of  office  properties  and
equipment owned or leased by the Bank and its subsidiary was $11.6 million.  For
further  information,  see  Note  5  of  the  Notes  to  Consolidated  Financial
Statements in the Annual Report.

        The Bank utilizes the services of an outside data processing  center for
most of its savings and loan  operations.  All  accounting  and internal  record
keeping functions are handled by the Bank's in-house computer system.

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 subsidiary 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  to a vote of  security  holders  during the
fourth quarter of the fiscal year ended June 30, 1999.


                                       23
<PAGE>




                                     PART II

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

        The Common Stock of First Federal  Financial  Corporation of Kentucky is
traded over the counter and quoted on the NASDAQ system under the symbol "FFKY."
The stock began trading on July 20, 1987. The registered  number of stockholders
as of  September  15,  1999,  was  808.  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.

QUARTERLY STOCK PRICES                                                   TWO
                                                                    MONTHS ENDED
                                     QUARTER ENDED
FISCAL 1999:          9/30         12/31        3/31        6/30       8/31/99

High               $  28.50     $  29.75     $  28.50      $24.94      $25.00
Low                   23.13        23.36        23.25       19.88       22.50
Cash dividends         0.15         0.15         0.15        0.18


FISCAL 1998:          9/30         12/31        3/31        6/30

High               $  23.25     $  22.75     $  23.00    $  28.75
Low                   21.00        22.00        20.50       21.50
Cash dividends         0.14         0.14         0.14        0.14


ITEM 6.     SELECTED FINANCIAL DATA

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

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>

                                                            AT JUNE 30,
                              ---------------------------------------------------------------
                                 1999         1998          1997          1996         1995
                                 ----         ----          ----          ----         ----
FINANCIAL CONDITION DATA:                              (Dollars in thousands)
<S>                           <C>           <C>          <C>           <C>           <C>
Total assets                  $488,304      $409,651     $377,380      $352,671      $331,375
Interest bearing deposits        1,634         4,157          481         7,753         6,601
Net loans outstanding          400,360       354,935      327,502       301,987       282,399
Investments                     47,340        26,574       22,677        16,742        17,068
Deposits                       399,443       306,703      281,342       264,946       260,503
Borrowings                      25,894        43,249       41,514        34,979        21,238
Stockholders' equity            57,862        54,688       51,665        49,946        47,310

Number of:
Real estate loans outstanding    6,968         6,709        6,380         5,914         5,858
Deposit accounts                45,425        37,764       36,378        35,140        35,933
Offices                             12             8            8             8             7
</TABLE>


                                       24

<PAGE>

                                            YEAR ENDED JUNE 30,
                             --------------------------------------------------
                               1999     1998      1997      1996      1995
                               ----     ----      ----      ----      ----
OPERATIONS DATA:                          (Dollars in thousands)

Interest income              $35,496  $31,182   $28,782    $26,926  $22,635
Interest expense             (18,481) (16,059)  (14,375)   (13,676) (10,515)
Net interest income           17,015   15,123    14,407     13,250   12,120
Provision for loan losses       (314)    (265)     (200)         0     (100)
Other income                   3,954    2,860     2,468      2,648    2,464
General and administrative
   expense (1)               (11,706)  (8,082)   (9,472)    (7,547)  (6,428)
Income tax expense            (2,970)  (3,302)   (2,429)    (2,864)  (2,626)
Net income                     5,979    6,334     4,774      5,487    5,430

Earnings per share:**
    Basic                       1.45     1.53      1.14       1.30     1.24
    Diluted                     1.44     1.52      1.13       1.29     1.23
Book value per share**         14.04    13.24     12.39      11.87    11.17
Dividends paid per share**      0.63     0.56      0.50       0.46     0.41

Dividend payout ratio             43%      37%       44%        35%      33%
Return on average assets        1.25%    1.60%     1.30%      1.60%    1.85%
Average equity to average
   assets                      11.85%   13.55%    13.77%     14.27%   16.37%
Return on average equity       10.53%   11.81%     9.46%     11.22%   11.30%

--------------------------------------------
(1)     1997  general and  administrative  expenses  include the  non-recurring
special assessment paid to the FDIC in the amount of $1.7 million, pretax.
        1999 general and  administrative  expenses  include one time acquisition
and conversion costs in the amount of $789,000, pretax.

** All per share  information  has been adjusted for a 2-for-1 stock split which
was effective June 10, 1996.


QUARTERLY FINANCIAL DATA
(Unaudited) (Dollars in thousands except per share data)

FISCAL 1999:               September 30  December 31     March 31      June 30
                           ------------  -----------     --------      -------

Total interest income         $8,711        $8,964        $8,967        $8,854
Total interest expense         4,626         4,791         4,556         4,508
Net interest income            4,085         4,173         4,411         4,346
Provision for loan losses         60            60            60           134
Net income                     1,373         1,538         1,476         1,592
Earnings per share:
    Basic                       0.33          0.37          0.36          0.39
    Diluted                     0.33          0.37          0.36          0.38

FISCAL 1998:               September 30  December 31     March 31      June 30
                           ------------  -----------     --------      -------

Total interest income         $7,522        $7,693        $7,889        $8,078
Total interest expense         3,829         3,993         4,047         4,190
Net interest income            3,693         3,700         3,842         3,888
Provision for loan losses         60            30            30           145
Net income                     1,604         1,452         1,650         1,628
Earnings per share:
    Basic                       0.39          0.35          0.40          0.39
    Diluted                     0.39          0.35          0.40          0.38

                                       25
<PAGE>


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

The following discussion and analysis covers the primary factors affecting First
Federal Financial Corporation of Kentucky's (the "Corporation")  performance and
financial  condition.  It should be read in  conjunction  with the  accompanying
audited   consolidated   financial  statements  included  in  this  report.  The
Corporation is the parent to its wholly owned subsidiary,  First Federal Savings
Bank of Elizabethtown  (the "Bank").  All dollar amounts (except per share data)
are presented in thousands unless otherwise noted.

FORWARD - LOOKING STATEMENTS

Management's  discussion and analysis contains  forward-looking  statements that
are provided to assist in the  understanding  of  anticipated  future  financial
performance.  However,  such performance  involves risks and uncertainties,  and
there are certain  important  factors  that may cause  actual  results to differ
materially from those  anticipated.  The important factors include,  but are not
limited to, fluctuations in the economy;  changes in interest rates;  government
legislation and regulation;  the Corporation's  success in assimilating acquired
branches and operations into its existing operations;  the Corporation's ability
to offer competitive banking products and services;  the continued growth of the
markets in which the Corporation  operates;  the Corporation's ability to expand
into new markets and to maintain profit margins in the face of pricing pressure,
all of  which  are  difficult  to  predict  and  many of which  are  beyond  the
Corporation's control.

ACQUISITION

On July 24, 1998,  the Bank  completed  its  acquisition  of three bank branches
located in Meade County, Kentucky from Bank One Corporation.  Two of the banking
centers are located in Brandenburg,  Kentucky and the third banking center is in
Flaherty, Kentucky.

In the  transaction,  the Bank  acquired  certain  assets  and  assumed  certain
liabilities associated with the acquisition of the Meade County banking centers.
The  transaction  resulted in  recording of  approximately  $11,000 of loans and
$72,000 of deposits.  The net  deposits  assumed  exceeded the cash  received by
$8,670.  Any ratios or analysis  comparing years before  acquisition will not be
comparable.

BRANCH EXPANSION

On April 26,  1999,  the Bank opened a new banking  center  within the  Hillview
Wal-Mart  Supercenter.  The cost of  construction  for the 650  square  feet was
approximately  $212.  This new banking center is open 58 hours per week and adds
extended hours for our new and existing customers.  In addition,  our associates
are  allowed  to  utilize  the   Wal-Mart's   customers   to  create  new  sales
opportunities.  Since  opening in April,  the new banking  center has  attracted
approximately $240 in new deposits from customers.

RESULTS OF OPERATIONS

Net income was $5,979 or $1.44 per share diluted in 1999 compared with $6,334 or
$1.52 per share diluted in 1998.  Acquisition-related  costs in connection  with
the purchase of three banking  centers  during the quarter  ended  September 30,
1998, in the amount of $292 ($193,  net of tax) were charged  against  earnings.
Also, the Corporation incurred data and computer conversion costs of $497 ($328,
net of tax) relating to its conversion to a new data  processor.  In addition to
these expenses, amortization of intangibles increased to $781 ($597, net of tax)
in 1999 from $240 ($240,  net of tax) in 1998.  Excluding these  acquisition and
conversion  costs and  amortization  of  intangibles,  net earnings for the 1999
period  would  have  increased  approximately  $523 to $7,097 or $1.71 per share
diluted  for the fiscal  year ended June 30, 1999 from $6,574 or $1.57 per share
diluted for the fiscal year ending June 30, 1998.

                                       26
<PAGE>

                         Including acquisition and    Excluding acquisition and
                           conversion costs and         conversion costs and
                              amortization of             amortization of
                                intangibles                 intangibles

                              1999         1998           1999          1998
                              ----         ----           ----          ----

Net Income                 $5,978,801   $6,334,217     $7,097,011    $6,574,288

Diluted earnings per share       1.44         1.52           1.71          1.57



NET INTEREST  INCOME - Net interest  income  increased by $1,892  during 1999 to
$17,015 as compared to $15,123 in 1998 in spite of the  declining  net  interest
margin. The Bank's net interest margin declined to 3.86% for the year ended June
30, 1999  compared to 4.04% for the 1998  period.  The  acquisition  contributed
approximately  $1,137 to the total increase in net interest  income for the 1999
period.

Average  interest-earning  assets increased by $70 million from $371 million for
the 1998 period to $441 million for the 1999 period due to the normal  growth of
the Bank and  interest-earning  assets  acquired  from the  three  Meade  County
banking centers. Average loans were $42 million higher and averaged $386 million
during 1999,  while the average  yield on loans  decreased by 27 basis points to
8.26%. The acquisition  contributed  approximately $10 million to the total loan
growth.

Average  interest-bearing  liabilities  increased  by $80  million to an average
balance of $416 million for 1999. Customer deposits averaged $392 million during
1999, a $98 million increase from the 1998 average balance of $294 million.  The
acquisition  contributed  approximately $72 million to the total deposit growth.
The cost of funds on these  deposits  averaged  4.38%  during  1999  which was a
decrease of 28 basis points from the 1998  average cost of funds of 4.66%.  This
decrease is attributable to lower rates paid on short-term customer deposits.

PROVISION  FOR LOAN LOSSES - Management  periodically  evaluates the adequacy of
the  allowance  for loan losses  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 and other factors.

The  provision  for loan  losses was $314 for 1999.  Net  charge-offs  were $264
during  1999 as  compared to $127 during  1998.  The Bank's  allowance  for loan
losses was $2.1 million or .52% of loans  outstanding  at June 30, 1999 compared
to $1.9 million or .52% of loans  outstanding  at June 30, 1998.  Non-performing
loans   represented  .63%  of  the  loans  outstanding  at  June  30,  1999.  As
demonstrated in the summary table below, 62% of the Bank's non-performing assets
are collateralized by one-to-four  family  residential  mortgages on real estate
located in central Kentucky.


                                       27

<PAGE>

                                                            YEAR ENDED JUNE 30,
                                                 1999        1998        1997
                                                     (Dollars in thousands)
Allowance for loan losses:
   Balance, July 1                              $ 1,853     $ 1,715     $ 1,613
   Provision for loan losses                        314         265         200
   Acquired                                         205          -           -
   Charge-offs                                     (290)       (148)       (131)
   Recoveries                                        26          21          33
                                                -------     -------     -------
   Balance, June 30                             $ 2,108     $ 1,853     $ 1,715
                                                =======     =======     =======

Loans outstanding at year end                  $402,468    $356,788    $329,217
Non-performing loans at year end:
   Collateralized by one-to-four family homes   $ 1,633     $ 1,487     $ 1,172
   Other non-performing loans                       896         566         378
                                                  -----       -----       -----
       Total non-performing loans                 2,529       2,053       1,550
   Real estate acquired through foreclosure         109         134         184
                                                  -----       -----       -----
       Total non-performing assets                2,638       2,187       1,734
                                                  =====       =====       =====

Ratios: Non-performing loans to loans               .63%        .58%        .47%
            Allowance for loan losses to
                non-performing loans                 83%         90%        111%
            Allowance for loan losses to
                net loans                           .52%        .52%        .52%
            Non-performing assets to total
                assets                              .54%        .53%        .46%

NON-INTEREST  INCOME AND EXPENSE -  Non-interest  income was $3,954 in 1999,  an
increase of $1,094 or 38% over 1998.  The 23% growth in deposits  resulting from
the  acquisition  was the largest  contributing  factor to the increase in other
income.  Fee income in connection with loans originated for the secondary market
increased  by  $153  or 31%  during  the  fiscal  year  due to a  better  market
penetration,  as opposed to higher refinancing activity.  Fee income from trust,
brokerage  and  other   services  also   increased  due  to  growth  in  deposit
relationships with existing  customers.  Through a subsidiary of the Bank, gains
on sales of real estate held for  development  of $255 were  reported due to the
sale of commercial lots in an office park currently under development.

Non-interest  expense  (excluding the one-time  acquisition  related charges and
information technology upgrades) increased by $2.8 million or 35% during 1999 as
compared to 1998.  The largest  contributing  factor to higher  expenses was the
operating costs of the three acquired  branches coupled with a $541 amortization
charge  on  the  intangible  assets  associated  with  the  acquisition.   Other
contributing  factors are expenses  resulting from higher loan  originations and
the opening of a new  banking  center  located in the  Wal-Mart  Supercenter  in
Hillview, Kentucky.

Compensation  and  employee  benefits,  the largest  component  of  non-interest
expense,  increased  by $801 or 22% in  1999  compared  to  1998.  The  increase
includes  salary  increases  and  reflects  increases in the number of full time
equivalent  employees from 110 at June 30, 1998, to 155 at June 30, 1999, due to
acquisitions and expansion of the Bank's business activity.

Occupancy and equipment  expense increased by $339 or 36% in 1999 as compared to
1998 primarily due to the expansion in the number of banking locations from 8 at
June 30, 1998, to 12 at June 30, 1999.

Marketing and advertising  expense  increased by $150 or 40% in 1999 compared to
1998 due to the increase in marketing  activities  associated with the expansion
in the  number of  banking  centers  and the  development  of new  products  and
services.

                                       28

<PAGE>

All other  non-interest  expenses increased by $1,004 or 36% in 1999 compared to
1998. This increase includes the acquisition of the Meade County banking centers
and their respective operating expenses.  The increase is also a result of asset
growth, new services provided by the Bank and general inflation.

LIQUIDITY AND CAPITAL RESOURCES

The Bank is  required  to  maintain  levels of liquid  assets as  defined by the
Office  of  Thrift  Supervision  regulations.  This  requirement  is  based on a
percentage of deposits and short-term borrowings and is currently 4%. The Bank's
liquidity  ratio was 8.85% at June 30, 1999.  The Bank's primary source of funds
for meeting its  liquidity  needs are  customer  deposits,  borrowings  from the
Federal  Home  Loan  Bank,  principal  and  interest  payments  from  loans  and
mortgage-backed securities, and earnings from operations retained by the Bank.

Loan demand  continued to be strong  during the fiscal year ended June 30, 1999,
as net loans  increased  from $355 million at June 30, 1998,  to $400 million at
June 30, 1999. The acquisition of the Meade County banking  centers  contributed
$11 million to the total loan growth of $45 million,  while the Bank  achieved a
10% growth rate in its existing  loan  customer  base, or $34 million in net new
loans. The Meade County acquisition also contributed $72 million in new customer
deposits.  The  acquisition  coupled  with a $20  million  growth in the  Bank's
customer deposits resulted in a total deposit increase of $92 million during the
fiscal year ended June 30, 1999.

The Bank intends to continue to fund loan growth  (outstanding  loan commitments
were $19.6  million at June 30,  1999) and any  declines  in  customer  deposits
through  additional  advances from the FHLB.  At June 30, 1999,  the Bank has an
unused  approved  line of credit in the  amount of $21  million  and  sufficient
collateral to borrow an additional $167 million in advances from the FHLB.

The  Office  of  Thrift   Supervision's   capital  regulations  require  savings
institutions to meet three capital  standards:  a 3% Tier I leverage ratio; a 4%
Tier I capital  ratio;  and an 8% risk-based  capital  standard.  As of June 30,
1999, the Bank's actual capital  percentages for Tier I leverage of 9.0%, Tier I
capital of 13.9%, and current risk-based capital of 14.6%,  significantly exceed
the regulatory requirement for each category.

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.

REGULATORY MATTERS

The Bank  insures  its  customers'  deposits  through  the  Savings  Association
Insurance  Fund  ("SAIF").  On September  30, 1996,  Federal  Deposit  Insurance
Corporation  ("FDIC")  legislation was signed into law to recapitalize the SAIF.
As was anticipated,  all SAIF- insured savings institutions were required to pay
a one-time special assessment of $.657 for every $100 of customer deposits. This
resulted in a charge to earnings of $1,095, net of tax, during the first quarter
of 1997. On January 1, 1997, the Bank began paying  insurance  premiums of $.064
per $100 of  deposits  as  compared  to a  previous  premium of $.23 per $100 of
deposits.

                                       29
<PAGE>

YEAR 2000

As always, you can be proud of the banking industry, which has been consistently
rated by experts as one of the foremost  industries in addressing  the Year 2000
date change.

What is the Year 2000 problem?  Simply put, the Year 2000 problem is a result of
cost-cutting  effort.  The computer  programmers in the 1960's and 1970's used a
year's last two-digits instead of the whole four digit to identify dates. Memory
was a premium  commodity in computer  programming  at that time and  programmers
could save space by deleting the first two digits of a year.  The concern now is
that date sensitive  automated  systems could  malfunction  or stop  functioning
completely  come  January 1, 2000  because they would read "00" as the year 1900
instead of 2000.

Status

First  Federal  Savings  Bank's  Board of  Directors  and senior  management  is
committed to be Year 2000 ready. Therefore,  management created a Year 2000 team
in April  1997 to study the issue  and to guide the Bank  through  the Year 2000
process.  The first steps  involved an evaluation of the effects Year 2000 could
have on our information  systems and other important aspects of our business.  A
formal  Year 2000 Plan was then  established  and filed with the bank's  federal
regulators,  the Office of Thrift Supervision.  The Plan is continuously updated
with the primary focus on achieving  compliance within  established time frames.
The Bank's plan has five phases: awareness, assessment,  renovation, validation,
and  implementation.  All phases of the Bank's Year 2000 plan were substantially
completed as of June 30, 1999.

Efforts  for the  remaining  portion  of the year  will be  customer  awareness,
liquidity  needs  and  contingency  planning.  First  Federal  Savings  Bank has
developed  a  business  resumption  or  contingency  plan,  which  the Bank will
implement in the event  certain  critical  systems  failed  despite  affirmative
representations  from vendors and favorable  test  results.  These plans will be
updated  regularly and should enable the Bank to function at a level  sufficient
to serve the majority of our  customer's  needs until any Year 2000 problems are
resolved. The Plan will be validated in the fall of 1999.

Cost

Capital  outlays for becoming Year 2000 compliant  through June 30, 1999 totaled
$497 ($328,  net of tax) all of which was  expensed as  incurred.  As the Bank's
initiatives are substantially  complete,  management anticipates future costs to
be minimal and expensed as incurred.

Risk

First  Federal  Savings  Bank  relies  upon  numerous  third-party  vendors  and
infrastructures  to provide  complete  service to our customers,  and failure on
their  part to not become  Year 2000  compliant  could  have a material  adverse
effect on the Bank.  Monitoring  of the mission  critical  vendors will continue
through the remaining half of the calendar year.

COMPARISON OF FISCAL 1998 TO 1997

Net  income for the fiscal  year  ended June 30,  1998,  was $6,334 or $1.52 per
share diluted as compared to net income of $4,774 or $1.13 per share diluted for
the same period in 1997. During the quarter ended September 30, 1996, net income
was affected by a one-time special assessment of $1.7 million ($1.1 million, net
of tax) paid to the FDIC to recapitalize the Savings Association  Insurance Fund
("SAIF").  Net earnings for the 1997 period would have been approximately  $5.87
million or $1.39 per share  diluted had it not been for the special  assessment.
See further discussion under "Regulatory Matters."

In addition  to the higher net  income,  the 9% increase in net income per share
was also  attributable to the  Corporation's  stock  repurchase plans which have
reduced the weighted average number of shares outstanding from 4,182,060 for the

                                       30
<PAGE>

1997 period to 4,145,039 for 1998.  Total  interest  income  increased by $2,400
from fiscal 1997 to 1998 due to the strong growth of the Bank's loan  portfolio.
Interest income on loans accounts for the majority of the Bank's interest income
as average  loan  balances,  which  comprise  93% of the total  interest-earning
assets,  were $344 million  during 1998 as compared to $318 million during 1997,
or an increase of $26 million.  The average yield on loans  increased by 5 basis
points to 8.53% during 1998 as compared to 8.48% during 1997.

Total  interest  expense  increased  by $1,683  from  fiscal  1997 to 1998.  The
weighted average interest rate paid on customer  deposits  averaged 4.66% during
1998,  which was an increase of 20 basis  points from the 1997  average  cost of
funds of 4.46%. The increase was attributable to higher rates paid on short-term
customer deposits.  Customer deposit balances averaged $294 million during 1998,
a $23 million  increase from the 1997 average balance of $271 million.  Interest
expense  paid on deposits  increased by $1,607  while  interest  expense paid on
Federal Home Loan Bank advances increased by $76.

As a result of the foregoing  discussion,  net interest income increased by $716
to $15,123 in 1998 form $14,407 in 1997.

Management  periodically  evaluates  the adequacy of the reserve for loan losses
based on the Bank's past loan loss  experience,  known and inherent risks in the
portfolio,  adverse  situations that may effect the borrower's  ability to repay
and other factors.  During fiscal 1998, the Bank's provision for loan losses was
$265.  The  allowance  for  loan  losses  was  $1.9  million  or .52%  of  loans
outstanding  at June  30,  1998,  compared  to  $1.7  million  or .52% of  loans
outstanding  at June 30, 1997. Net loan  charge-offs  have been $127 and $98 for
fiscal 1998 and 1997, respectively.

Other income was $2,860 in 1998, an increase of $392 over 1997. Customer service
fees  increased  by $43  during  the 1998  period  due to a growth  in  customer
checking  accounts.  Gains reported from  investment  sales were $375 in 1998 as
compared  to $317  reported  in the 1997  period.  Fees  associated  with  loans
originated for the secondary  market increased by $172 from $314 in 1997 to $486
in  1998  due  to a  growth  in  VA  and  FHA  originations.  Other  sources  of
miscellaneous income such as brokerage commissions, loan fees and other customer
transaction fees increased by $119 due to growth in deposit  relationships  with
existing customers.

Other expense was $8,082 in 1998, compared to $9,472 in 1997. If it had not been
for the SAIF special assessment of $1.7 million recorded in the first quarter of
1997 (See  "Regulatory  Matters"),  other expense would have been  approximately
$7,787 for the 1997 period.  Associate  compensation  and benefits  increased by
$184 or 5.2% in 1998 as compared to 1997 due to the  addition of new  associates
required to offer expanded  services to the Bank's  customers.  Office occupancy
and equipment expenses increased by $36 or 4% in 1998 as compared to 1997 due to
inflationary  increases in other occupancy and equipment related  expenses.  All
other expenses increased by $285 in 1998 as compared to 1997.  Expenses directly
related  to  customer  checking  accounts  increased  due to a higher  volume of
accounts.  Expenses  directly  related to postage,  telephone,  data  processing
costs,  marketing  and  supplies  increased  due to asset  growth,  new  service
provided by the Bank and general inflation.


ITEM 7A.       DISCLOSURES ABOUT 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 ("ALOC"). The ALCO, which includes senior management  representatives,
has  the   responsibility   for   approving   and   ensuring   compliance   with
asset/liability  management policies of the Corporation,  which include managing
the  sensitivity  repricing  characteristics  of the  balance  sheet  components
consistent with maintaining  acceptable levels of changes in net portfolio value
("NPV") and net interest income. A primary purpose of the Corporation's  ALCO is
to manage interest rate risk to effectively invest the Corporation's capital and
to preserve the value created by its core business operations.  As such, certain
management  monitoring  processes  are designed to minimize the impact of sudden
and sustained changes in interest rates on NPV and net interest income.

        The Corporation's exposure to interest rate risk is reviewed on at least
a quarterly  basis by the Board of Directors  and the ALCO.  Interest  rate risk
exposure is measured using interest rate  sensitivity  analysis to determine the

                                       31
<PAGE>

Corporation's  change in NPV in the event of  hypothetical  changes in  interest
rates and  interest  rate  sensitivity  gap  analysis is used to  determine  the
repricing  characteristics  of the  Bank's  assets and  liabilities.  The table,
presented on page 18, under Item 1 "Regulatory Capital  Requirements",  presents
the  Corporation's  projected change in NPV for the various rate shock levels as
of June 30, 1999. All market risk sensitive  instruments presented in this table
are held to maturity  or  available  for sale.  The  Corporation  has no trading
securities.

        NPV is calculated by the Corporation pursuant to guidelines estimated by
the  OTS.  The  calculation  is  based on the net  present  value  of  estimated
discounted cash flows utilizing market  prepayment  assumptions and market rates
of interest  provided by independent  broker quotations and other public sources
as of June 30, 1998, with  adjustments made to reflect the shift in the Treasury
yield curve as appropriate.  Computation of prospective  effects of hypothetical
interest  rate  changes are based on numerous  assumptions,  including  relative
levels of market  interest rates,  loan  prepayments,  and deposits  decay,  and
should  not be  relied  upon as  indicative  of  actual  results.  Further,  the
computations do not contemplate any actions the ALCO could undertake in response
to changes in interest rates.

        Certain shortcomings are inherent in the method of analysis presented in
the  computation  of NPV.  Actual  values  may  differ  from  those  projections
presented,   should  market   conditions  vary  from  assumptions  used  in  the
calculation of the NPV.  Certain assets,  such as adjustable  rate loans,  which
represent one of the  Corporation's  primary loan products,  have features which
restrict  changes in interest  rates on a short-term  basis and over the life of
the  assets.  In  addition,  the  proportion  of  adjustable  rate  loans in the
Corporation's  portfolio  could  decrease in future  periods if market  interest
rates remain at or decrease  below  current  levels due to  refinance  activity.
Further,  in the  event of a change  in  interest  rates,  prepayment  and early
withdrawal levels would likely deviate  significantly  from those assumed in the
NPV.  Finally,  the ability of many  borrowers  to repay  their  adjustable-rate
mortgage loans may decrease in the event of interest rate increases.

        Another tool of evaluating the institution's sensitivity to net interest
income to changes in interest rates is to examine the extent to which its assets
and liabilities are "interest rate sensitive" and by monitoring an institution's
interest rate  sensitivity  "gap".  An asset or liability is said to be interest
rate sensitive within a specific time period if it will mature or reprice within
that time period. The interest rate sensitivity gap is defined as the difference
between the amount of  interest-earning  assets  maturing or repricing  within a
specific time period and the amount of interest-bearing  liabilities maturing or
repricing within that same time period.

The   following   interest  rate   sensitivity   table  sets  forth  the  Bank's
interest-earning assets and interest-bearing liabilities at June 30, 1999, which
are anticipated to reprice or mature in each of the future time periods shown.

                                 Interest Rate Sensitivity (Gap Analysis)
                                           As of June 30, 1999
                                          (Dollars in thousands)
<TABLE>
<CAPTION>

                                        0-3            4-12           1-5         Over 5
                                       Months         Months         Years         Years         Total
<S>                                   <C>           <C>          <C>             <C>           <C>
Interest earning assets:
   Loans                              $ 69,054       $143,873      $158,697       $31,563       $403,187
   Securities                           41,124          2,251         5,776         1,482         50,633
                                       -------        -------       -------        ------        -------
    Total rate sensitive assets        110,178        146,124       164,473        33,045        453,820
                                       -------        -------       -------        ------        -------
Interest bearing liabilities:
   NOW, money market and
      savings                           23,971         72,173        25,329         8,572        130,045
   Time deposits                        70,800        142,170        50,721         6,203        269,894
   Borrowed funds                        5,015             57           366        22,451         27,889
                                        ------        -------        ------        ------        -------
    Total rate sensitive liabilities    99,786        214,400        76,416        37,226        427,828
                                        ------        -------        ------        ------        -------
Interest sensitivity gap               $10,392      $ (68,276)     $ 88,057      $ (4,181)      $ 25,992
                                       =======       ========      ========       =======        =======

Cumulative interest sensitivity gap    $10,392      $ (57,884)     $ 30,173      $ 25,992
                                       =======        =======       =======       =======
Cumulative interest sensitivity gap
   as a percentage of total assets        2.13%        (11.85%)        6.18%         5.32%
                                          =====        =======         =====         =====
</TABLE>

                                       32

<PAGE>

        As the  preceding  table  indicates,  the Bank has a  moderate  negative
cumulative gap for assets and liabilities  maturing or repricing within one year
in the amount of ($57,884) million or 11.85% of total assets. Thus, decreases in
interest  rates  during this time period would  generally  increase net interest
income,  while increases in interest rates would generally decrease net interest
income.  However, even though the periodic gap analysis provides management with
a method  of  measuring  current  interest  rate  risk,  it only  measures  rate
sensitivity  at a  specific  point  in time.  Gap  analysis  does not take  into
consideration that assets and liabilities with similar repricing characteristics
may not reprice at the same time or to the same degree and, therefore,  does not
necessarily predict the impact of changes in general levels of interest rates on
net  interest  income.  Additionally,  certain  assets such as  adjustable  rate
mortgage  loans have  features  which  restrict  changes in interest  rates on a
short-term  basis  and over  the life of the  asset.  Further,  in the  event of
changes in interest rates,  prepayment and decay rates may deviate significantly
from  those  assumed in  calculating  the table.  Finally,  the  ability of many
borrowers to afford the payments on their  adjustable  rate  mortgage  loans may
decrease in the event of an interest rate increase.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                                TABLE OF CONTENTS



                                                                      Page
Audited Consolidated Financial Statements:
        Report of Independent Auditors-Crowe, Chizek and Company LLP   34
        Report of Independent Auditors-Whelan, Doerr & Company PSC     35
        Consolidated Statement of Financial Condition                  36
        Consolidated Statement of Income                               37
        Consolidated Statement of Comprehensive Income                 38
        Consolidated Statement of Changes in Stockholders' Equity      39
        Consolidated Statement of Cash Flows                           40
        Notes to Consolidated Financial Statements                    41-57



                                       33
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



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

We have audited the accompanying  consolidated  statement of financial condition
of First Federal Financial Corporation of Kentucky and subsidiary as of June 30,
1999, and the related consolidated  statements of income,  comprehensive income,
changes in  stockholders'  equity and cash flows for the year then ended.  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 audit.  The  consolidated  financial  statements of First Federal  Financial
Corporation of Kentucky and subsidiary as of June 30, 1998 and 1997 were audited
by other  auditors  whose report dated August 17, 1998  expressed an unqualified
opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 and  subsidiary  as of June 30, 1999 and the
results  of their  operations  and their  cash flows for the year ended June 30,
1999, in conformity with generally accepted accounting principles.




                                                  Crowe, Chizek and Company LLP

Louisville, Kentucky
August 20, 1999



                                       34

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
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 and Subsidiaries as of June
30,  1998  and  1997,  and  the  related  consolidated   statements  of  income,
stockholders'  equity,  and cash  flows for each of the two years in the  period
ended June 30,1998.  These financial  statements are the  responsibility  of the
Bank's  management.  Our  responsibility  is to  express  an  opinion  on  these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of First  Federal  Financial
Corporation of Kentucky and  Subsidiaries  as of June 30, 1998 and 1997, and the
results  of its  operations  and its cash flows for each of the two years in the
period ended June 30, 1998, in conformity  with  generally  accepted  accounting
principles.



Whelan, Doerr & Company PSC
Elizabethtown, Kentucky
August 17, 1998



                                       35

<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                           JUNE 30,
                                 ASSETS             1999              1998
                                                    ----              ----

Cash and due from banks                        $  10,257,162     $   4,992,588
Interest bearing deposits                          1,634,475         4,157,124
                                                  ----------         ---------
    Total cash and cash equivalents               11,891,637         9,149,712
Securities available-for-sale                      2,935,979         1,934,412
Securities held-to-maturity                       44,404,392        24,639,484
Loans receivable, less allowance for loan losses
   of $2,107,994 (1999) and $1,852,576 (1998)    400,360,402       354,934,659
Federal Home Loan Bank stock                       3,200,000         2,983,800
Premises and equipment                            11,594,369        10,747,145
Real estate owned:
  Acquired through foreclosure                       108,610           133,584
  Held for development                               445,683           642,491
Excess of cost over net assets acquired           10,878,972         2,784,409
Accrued interest                                   1,603,514           834,052
Other assets                                         880,216           867,521
                                                 -----------       -----------
     TOTAL ASSETS                               $488,303,774      $409,651,269
                                                ============      ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Deposits:
   Non-interest bearing                        $  15,223,267     $ 12,742,723
   Interest bearing                              384,220,172      293,959,926
                                                 -----------      -----------
      Total Deposits                             399,443,439      306,702,649
Advances from Federal Home Loan Bank              25,894,127       43,248,855
Accrued interest payable                             868,840          553,148
Accounts payable and other liabilities             2,336,503        2,382,126
Deferred income taxes                              1,898,703        2,076,104
                                                 -----------      -----------
     TOTAL LIABILITIES                           430,441,612      354,962,882
                                                 -----------      -----------
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, 4,121,112 shares in 1999 and
    4,129,612 shares in 1998                       4,121,112        4,129,612
 Additional paid-in capital                        3,055,644        3,253,664
 Retained earnings                                49,587,422       46,208,807
 Accumulated other comprehensive
    income, net of tax                             1,097,984        1,096,304
                                                   ---------        ---------

   TOTAL STOCKHOLDERS' EQUITY                     57,862,162       54,688,387
                                                ------------     ------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $488,303,774     $409,651,269
                                                ============     ============

                 See notes to consolidated financial statements.

                                       36
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                           YEAR ENDED JUNE 30,
                                                               --------------------------------------
                                                                  1999           1998         1997
                                                                  ----           ----         ----
<S>                                                            <C>          <C>           <C>
INTEREST INCOME:
  Interest and fees on loans                                   $31,895,805  $29,338,526   $26,944,715
  Interest and dividends on investments and deposits             3,600,283    1,843,413     1,837,661
                                                                ----------   ----------    ----------
          Total interest income                                 35,496,088   31,181,939    28,782,376
                                                                ----------   ----------    ----------
INTEREST EXPENSE:
  Deposits                                                      17,180,146   13,676,525    12,069,782
  Federal Home Loan Bank advances                                1,301,096    2,382,084     2,305,725
                                                                ----------   ----------    ----------
          Total interest expense                                18,481,242   16,058,609    14,375,507
                                                                ----------   ----------    ----------
Net interest income                                             17,014,846   15,123,330    14,406,869
Provision for loan losses                                          314,000      265,000       200,000
                                                                ----------   ----------    ----------
Net interest income after provision for loan losses             16,700,846   14,858,330    14,206,869
                                                                ----------   ----------    ----------
NONINTEREST INCOME:
  Customer service fees on deposit accounts                       1,720,542   1,274,298     1,231,149
  Secondary mortgage market closing fees                            638,877     485,564       313,795
  Gain on sale of investments                                       351,753     375,356       316,927
  Brokerage and insurance commissions                               394,070     402,986       353,764
  Gain on sale of real estate held for development                  254,688        -              -
  Other income                                                      594,364     322,166       252,384
                                                                  ---------   ---------     ---------
          Total other noninterest income                          3,954,294   2,860,370     2,468,019
                                                                  ---------   ---------     ---------
NONINTEREST EXPENSE:
  Employee compensation and benefits                              4,506,758   3,706,255     3,522,340
  Office occupancy expense and equipment                          1,274,885     935,972       899,855
  FDIC insurance premiums                                           207,298     178,476     2,014,218
  Marketing and advertising                                         527,110     377,135       373,117
  Outside services and data processing                            1,001,612     663,667       600,367
  State franchise tax                                               357,776     308,691       292,880
  Acquisition related expense                                       291,869       -              -
  Data and equipment conversion expense                             497,368       -              -
  Amortization of intangibles                                       781,347     240,071       240,072
  Other expense                                                   2,260,025   1,672,219     1,529,085
                                                                 ----------   ---------     ---------
          Total other noninterest expense                        11,706,048   8,082,486     9,471,934
                                                                 ----------   ---------     ---------
  Income before income taxes                                      8,949,092   9,636,214     7,202,954
  Income taxes                                                    2,970,291   3,301,997     2,428,892
                                                                 ----------   ---------     ---------
NET INCOME                                                      $ 5,978,801  $6,334,217    $4,774,062
                                                                ===========  ==========    ==========
Earnings per share:
          Basic                                                 $      1.45  $     1.53    $     1.14
          Diluted                                               $      1.44  $     1.52    $     1.13
</TABLE>


                 See notes to consolidated financial statements.

                                       37
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>


                                                         YEAR ENDED JUNE 30,

                                                   1999         1998        1997
                                                   ----         ----        ----
<S>                                            <C>          <C>          <C>
NET INCOME                                     $5,978,801   $6,334,217   $4,774,062
Other comprehensive income (loss), net of tax:
     Change in unrealized gain (loss)
       on securities                              233,837      373,449      417,696
     Reclassification of realized amount         (232,157)    (247,735)    (209,172)
                                                ---------   ----------   ----------
     Net unrealized gain recognized in
        comprehensive income                        1,680      125,714      208,524
                                                ---------   ----------   ----------
COMPREHENSIVE INCOME                           $5,980,481   $6,459,931   $4,982,586
                                               ==========   ==========   ==========
</TABLE>
                See notes to consolidated financial statements.

                                       38

<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                   YEARS ENDING JUNE 30, 1999, 1998, AND 1997

<TABLE>
<CAPTION>
                                                                                      ACCUMULATED
                                                                                         OTHER
                                                        ADDITIONAL                   COMPREHENSIVE
                                 COMMON STOCK           PAID - IN      RETAINED         INCOME,
                           SHARES         AMOUNT         CAPITAL       EARNINGS       NET OF TAX         TOTAL
                           ------         ------        ---------      --------      ------------        -----
<S>                       <C>           <C>            <C>            <C>             <C>             <C>
BALANCE, JULY 1, 1996     4,208,490     $4,208,490     $5,466,700     $39,509,189      $762,066       $49,946,445
Net income                    -             -               -           4,774,062         -             4,774,062
Exercise of stock
  options                    26,930         26,930         92,576          -              -               119,506
Stock tendered as
  payment for options
  exercised                  (3,018)        (3,018)       (55,937)         -              -               (58,955)
Net change in unrealized
  gains (losses) on
  securities available-
  for-sale, net of tax        -             -               -              -            208,524           208,524
Cash dividends declared
   ($.50 per share)           -             -               -          (2,089,642)        -            (2,089,642)
Stock repurchased           (62,399)       (62,399)    (1,172,791)         -              -            (1,235,190)
                          ---------      ---------     ----------     -----------      --------        ----------
BALANCE, JUNE 30, 1997    4,170,003      4,170,003      4,330,548      42,193,609       970,590        51,664,750
Net income                    -             -               -           6,334,217         -             6,334,217
Exercise of stock
  options                    21,000         21,000        220,875         -               -               241,875
Stock tendered as
  payment for options
  exercised                 (10,994)       (10,994)      (230,841)        -               -              (241,835)
Net change in unrealized
  gains  (losses) on
  securities available-
  for-sale, net of tax        -             -               -             -             125,714           125,714
Cash dividends declared
   ($.56 per share)           -             -               -          (2,319,019)         -           (2,319,019)
Stock repurchased           (50,397)       (50,397)    (1,066,918)        -                -           (1,117,315)
                          ---------      ---------     ----------      ----------      ---------       ----------
BALANCE, JUNE 30, 1998    4,129,612      4,129,612      3,253,664      46,208,807      1,096,304       54,688,387
Net income                    -             -               -           5,978,801          -            5,978,801
Net change in unrealized
  gains (losses) on
  securities available-
  for-sale, net of tax        -             -               -              -               1,680            1,680
Cash dividends declared
   ($.63 per share)           -             -               -          (2,600,186)         -           (2,600,186)
Stock repurchased            (8,500)       (8,500)       (198,020)         -               -             (206,520)
                          ---------    ----------      ----------     -----------     ----------      -----------
BALANCE, JUNE 30, 1999    4,121,112    $4,121,112      $3,055,644     $49,587,422     $1,097,984      $57,862,162
                          =========    ==========      ==========     ===========     ==========      ===========
</TABLE>

                 See notes to consolidated financial statements.

                                       39

<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                      YEAR ENDED JUNE 30,
                                                         -----------------------------------------

                                                             1999           1998           1997
                                                             ----           ----           ----
<S>                                                     <C>             <C>            <C>
OPERATING ACTIVITIES:
 Net income                                              $ 5,978,801     $6,334,217     $4,774,062
 Adjustments to reconcile net income to net
  cash provided by operating activities:
    Provision for loan losses                                314,000        265,000        200,000
    Depreciation  of premises and equipment                  825,483        605,955        550,488
    Net change in deferred loan fees and costs               238,711        195,066        178,756
    Federal Home Loan Bank stock dividends                  (216,200)      (206,600)      (187,300)
    Amortization of acquired intangible assets               781,347        240,071        240,072
    Amortization and accretion on securities                (137,369)      (147,972)      (151,218)
    Gain on sale of investments available-for-sale          (351,753)      (375,356)      (316,927)
    Gain on sale of real estate held for development        (254,688)          -              -
    Interest receivable                                     (769,462)      (198,960)       (84,330)
    Other assets                                               3,293       (370,482)       314,278
    Interest payable                                        (328,249)       350,166        (15,302)
    Accounts payable and other liabilities                  (286,766)     1,675,234       (392,401)
    Deferred taxes                                          (178,266)       126,743        466,891
                                                           ---------      ---------      ---------
Net cash provided by operating activities                  5,618,882      8,493,082      5,577,069
                                                           ---------      ---------      ---------
INVESTING ACTIVITIES:
  Sales of securities available-for-sale                     362,459      3,808,207        455,831
  Purchases of securities available-for-sale               1,010,000)       (36,082)      (221,543)
  Purchases of securities held-to-maturity               (49,855,000)   (14,000,000)    (5,993,995)
  Maturities of  securities held-to-maturity              30,227,733      6,979,771        654,582
  Net increase in loans                                  (34,934,161)   (27,853,848)   (25,839,533)
  Net purchases of premises and equipment                 (1,545,933)    (1,131,872)    (1,087,549)
  Purchases of real estate held for development                -              -           (182,000)
  Sales of real estate held for development                  451,496         44,770           -
  Net cash received in acquisition                        52,456,754          -               -
                                                          ----------    -----------    -----------
Net cash used in investing activities                     (3,846,652)   (32,189,054)   (32,214,207)
                                                          ----------    -----------    -----------
FINANCING ACTIVITIES:
  Net increase in deposits                                21,131,129     25,360,475     16,396,430
  Net advances from (repayments to) FHLB                 (17,354,728)     1,734,661      6,535,115
  Proceeds from stock options exercised                        -                 40         60,551
  Dividends paid                                          (2,600,186)    (2,319,019)    (2,089,642)
  Common stock repurchased                                  (206,520)    (1,117,315)    (1,235,190)
  Collection on advance to ESOP                                -             11,129           -
  Advance to ESOP                                              -              -            (14,685)
                                                          ----------     ----------     ----------
Net cash provided by financing activities                    969,695     23,669,971     19,652,579
                                                          ----------     ----------     ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           2,741,925        (26,001)    (6,984,559)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR               9,149,712      9,175,713     16,160,272
                                                         -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                   $11,891,637    $ 9,149,712    $ 9,175,713
                                                         ===========    ===========    ===========
</TABLE>


                 See notes to consolidated financial statements.

                                       40
<PAGE>



          FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDARY

                   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), and its wholly-owned subsidiary,  First
               Service  Corp. of  Elizabethtown.  All  significant  intercompany
               transactions and balances have been eliminated.

               The  business  of  the  Bank  consists  primarily  of  attracting
               deposits from the general public and  originating  mortgage loans
               on single family  residences.  To a lesser extent,  the Bank also
               originates loans on multi-family housing and commercial property.
               The Bank's primary  lending area is a region within North Central
               Kentucky. The economy within this region is based on agriculture,
               a variety of  manufacturing  industries  and Ft. 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,   and  trust  department  and  brokerage
               services.

               ESTIMATES  AND  ASSUMPTIONS  - The  preparation  of  consolidated
               financial   statements  in  conformity  with  generally  accepted
               accounting  principles  requires management to make estimates and
               assumptions  that  affect  the  reported  amounts  of assets  and
               liabilities  and disclosure of contingent  assets and liabilities
               at the  date of the  consolidated  financial  statements  and the
               reported  amounts 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.

               CASH FLOWS - For  purposes of the  statement  of cash flows,  the
               Corporation   considers  all  highly   liquid  debt   instruments
               purchased  with a  maturity  of three  months  or less to be cash
               equivalents.  Cash and  cash  equivalents  include  cash on hand,
               amounts due from banks, and interest bearing  deposits.  Net cash
               flows are  reported for loans,  interest  bearing  deposits,  and
               deposits.

               SECURITIES - The  Corporation  classifies  its  investments  into
               held-to-maturity  and  available-for-sale.  Based upon a periodic
               review of the investment portfolio,  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 income 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 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.  Unearned  discounts on consumer
               loans are  recognized  over the lives of the loans using  methods
               that approximate the interest method.

                                       41
<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBISIDARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICES - (CONTINUED)

               LOANS  RECEIVABLE - (CONTINUED) -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.

               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  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 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.  When
               interest accrual is discontinued, interest income is subsequently
               recognized only to the extent cash payments are received.

               PREMISES  AND  EQUIPMENT - Premises and  equipment  are stated at
               cost less accumulated  depreciation.  Depreciation is computed by
               the  straight-line  method for  buildings  and  improvements  and
               furniture  and fixtures,  over the estimated  useful lives of the
               related assets.

               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.

               GOODWILL - The  unamortized  costs in excess of the fair value of
               acquired net tangible  assets are included in goodwill.  Goodwill
               is amortized on a straight-line basis over 15 years.

               STOCK OPTION PLANS - Although the Corporation applies APB No. 25,
               SFAS No. 123, "Accounting for Stock Based Compensation"  requires
               proforma  disclosure  of net income and  earnings per share as if
               the  Corporation  had  accounted  for its employee  stock options
               under that  Statement.  The fair value of each  option  grant was
               estimated on the grant date using an option-pricing  model. Under
               SFAS No. 123,  compensation  cost is  recognized in the amount of
               the estimated  fair value of the options and amortized to expense
               over the options' vesting period.

                                       42
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

               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.

               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 includes the dilutive effect of additional potential common
               shares  issuable under stock options.  Earnings and dividends per
               share are  restated  for all  stock  splits  through  the date of
               issuance of the financial statements.

               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.
               The  accounting  standard that requires  reporting  comprehensive
               income  first  applies for the year ending  June 30,  1999,  with
               prior information restated to be comparable.

               NEW  ACCOUNTING  PRONOUNCEMENTS  - Beginning  July 1, 2000, a new
               accounting  standard will require all  derivatives to be recorded
               at fair value. Unless designated as hedges, changes in these fair
               values  will be  recorded  in the  income  statement.  Fair value
               changes involving hedges will generally be recorded by offsetting
               gains and losses on the hedge and on the hedged item, even if the
               fair value of the hedged item is not otherwise recorded.  This is
               not  expected  to have a  material  effect  on the  Corporation's
               financial  statements,  but the effect will depend on  derivative
               holdings when this standard applies.

               INDUSTRY  SEGMENTS  - All of  the  Corporation's  operations  are
               considered by management  to be  aggregated  into one  reportable
               operating segment.

               RECLASSIFICATIONS  - Certain  amounts for 1998 and 1997 have been
               reclassified to conform to the presentation for 1999.


2.      BRANCH ACQUISITIONS

               On July 24, 1998,  the Bank  completed its  acquisition  of three
               Bank  One  banking   centers.   Included  in  the   purchase  was
               approximately  $11,000,000 of loans and  $72,000,000 of deposits.
               The  net  deposits   assumed   exceeded  the  cash   received  by
               $8,670,000.


                                       43
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)

3.      SECURITIES

        The amortized cost basis and fair values of securities at June 30 are as
        follows:
<TABLE>
<CAPTION>


                                                              Gross          Gross
                                          Amortized        Unrealized     Unrealized
                                             Cost             Gains         Losses        Fair Value
  <S>                                     <C>            <C>             <C>           <C>
  Securities available-for-sale:
    June 30, 1999:
        Equity securities                  $  262,281     $ 1,723,650    $ (37,569)     $ 1,948,362
        Obligation of states and
         political subdivisions             1,010,082           -          (22,465)         987,617
                                           ----------      ----------    ---------      -----------
             Total available-for-sale      $1,272,363     $ 1,723,650    $ (60,034)     $ 2,935,979
                                           ==========      ==========    =========      ===========
    June 30, 1998:
        Equity securities                  $  273,341     $ 1,688,883    $ (27,812)     $ 1,934,412
                                            ---------      ----------     ---------      ----------

             Total available-for-sale      $  273,341     $ 1,688,883    $ (27,812)     $ 1,934,412
                                            =========      ==========     =========      ==========
  Securities held-to-maturity:
    June 30, 1999:
       U.S. Treasury and agencies         $42,814,330       $   -        $(900,080)     $41,914,250
       Mortgage-backed securities           1,590,062         20,674          -           1,610,736
                                          -----------       --------     ---------      -----------

            Total held-to-maturity        $44,404,392       $ 20,674     $(900,080)     $43,524,986
                                          ===========       ========     =========      ===========
    June 30, 1998:
       U.S. Treasury and agencies         $22,693,407      $ 229,673     $    -         $22,923,080
       Mortgage-backed securities           1,946,077         66,004          -           2,012,081
                                          -----------      ---------     ---------      -----------

            Total held-to-maturity        $24,639,484      $ 295,677     $    -         $24,935,161
                                          ===========      =========     =========      ===========
 </TABLE>


        The  amortized  cost and fair value of  securities  at June 30, 1999, by
        contractual maturity, are shown below.
<TABLE>
<CAPTION>

                                             Available-for-Sale                Held-to-Maturity
                                         ---------------------------     ---------------------------
                                           Amortized        Fair           Amortized        Fair
                                             Cost           Value             Cost          Value
 <S>                                    <C>            <C>               <C>            <C>
  Due in one year or less                $    -         $     -           $   999,666   $ 1,001,410
  Due after one year through five years       -               -             6,834,400     6,932,570
  Due after five years through ten years    785,000        771,312         33,980,264    33,029,490
  Due after ten years                       225,000        216,305          1,000,000       950,780
  Mortgage-backed securities                  -               -             1,590,062     1,610,736
  Equity securities                         262,281      1,948,362              -              -
                                          ---------      ---------        -----------   -----------
                                         $1,272,363     $2,935,979        $44,404,392   $43,524,986
                                         ==========     ==========        ===========   ===========
</TABLE>

                                       44
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


3.      SECURITIES - (CONTINUED)

        The   following   schedule   sets  forth  the  proceeds  from  sales  of
        available-for-sale  securities  and the  gross  realized  gains on those
        sales for the fiscal years ended June 30:

                                              1999        1998         1997
                                              ----        ----         ----

         Proceeds from sales                $362,459   $3,808,207    $455,831
         Gross realized gains               $351,753    $ 375,356    $316,927
         Realized gains, net of tax         $232,157    $ 247,735    $209,172

        Investment  securities  having an amortized cost of $26,707,468 and fair
        value of  $26,355,925  at June 30,  1999 were  pledged to secure  public
        deposits.

4.      LOANS RECEIVABLE:

        Loans receivable at June 30 are summarized as follows:

                                                  1999            1998
                                                  ----            ----
     Commercial                              $ 19,647,672     $ 4,274,499
     Real estate construction                  18,104,220      15,689,170
     Real estate mortgage                     325,099,433     304,443,021
     Consumer and home equity                  49,042,678      45,135,754
                                              -----------     -----------
                                              411,894,003     369,542,444
     Less:                                    -----------     -----------
       Undisbursed construction loans          (6,674,224)     (9,728,902)
       Net deferred loan origination fees      (2,751,383)     (3,026,307)
       Allowance for loan losses               (2,107,994)     (1,852,576)
                                               ----------      ----------
                                              (11,533,601)    (14,607,785)
                                              -----------     -----------
                                             $400,360,402    $354,934,659
                                              ===========     ===========

        The Bank did not  materially  participate  in the servicing of loans for
        others on any of the dates presented in these financial statements.

        The allowance for losses on loans is summarized as follows:

                                                  Year Ended June 30,
                                       ----------------------------------------
                                           1999          1998          1997
                                           ----          ----          ----

        Balance, beginning of year      $1,852,576    $1,714,512    $1,612,627
        Provision for loan losses          314,000       265,000       200,000
        Acquired                           205,400         -             -
        Charge-offs                       (290,049)     (147,985)     (131,132)
        Recoveries                          26,067        21,049        33,017
                                        ----------    ----------    ----------
        Balance, end of year            $2,107,994    $1,852,576    $1,714,512
                                        ==========    ==========    ==========

                                       45
<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


4.      LOANS RECEIVABLE - (CONTINUED)

        Investment in impaired loans is summarized as follows:
                                                               June 30,
                                                    ---------------------------
                                                        1999            1998
                                                        ----            ----

        Year-end impaired loans with no related
          allowances                                 $2,500,000      $2,128,000
        Year-end impaired loans with related
          allowances                                      -              -
                                                     ----------      ----------
                 Total impaired loans                $2,500,000      $2,128,000
                                                     ==========      ==========

                                                          June 30,
                                         --------------------------------------
                                             1999          1998          1997
                                             ----          ----          ----
 Average impaired loans outstanding      $2,382,000    $1,934,000    $1,983,000
 Interest income recognized                 197,000       157,000       163,000
 Interest income received                   197,000       157,000       163,000


        The Bank has no loans  greater than 90 days past due and still  accruing
        as of June 30, 1999, 1998 and 1997.

5.      PREMISES AND EQUIPMENT

        Premises and equipment consist of the following:
                                                     June 30,
                                          ------------------------------
                                              1999               1998
                                              ----               ----

      Land                                $  816,265         $  816,265
      Buildings                            9,391,174          8,805,669
      Furniture, fixtures and equipment    5,180,745          4,680,069
                                           ---------          ---------
                                          15,388,184         14,302,003
      Less accumulated depreciation       (3,793,815)        (3,554,858)
                                          ----------          ---------
                                         $11,594,369        $10,747,145
                                          ==========         ==========

        Certain  premises  are leased under  various  operating  leases.  Rental
        expense was  $233,318,  $63,200 and $64,458 for the years ended June 30,
        1999,  1998 and 1997,  respectively.  Future minimum  commitments  under
        these leases are:

                     Year Ended
                      June 30
                        2000                  $ 256,000
                        2001                    256,000
                        2002                    198,067
                        2003                    195,633
                        2004                    198,833
                     Thereafter               1,562,817
                                             ----------
                                             $2,667,350
                                             ==========

                                       46
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)

6.      DEPOSITS

        Time Deposits of $100,000 or more were  $75,012,000  and  $54,332,000 at
        June 30, 1999 and 1998, respectively.

        At June 30, 1999, scheduled maturities of time deposits are as follows:
                                            Amount
                                           -------
                2000                     $203,444,760
                2001                       33,500,855
                2002                        7,106,942
                2003                        3,232,288
                Thereafter                 20,798,394
                                         ------------
                                         $268,083,239
                                         ============

7.      ADVANCES FROM FEDERAL HOME LOAN BANK

        Advances   from  the   Federal   Home  Loan  Bank  of   Cincinnati   are
        collateralized  by Federal Home Loan Bank stock and a blanket  pledge of
        one-to-four family residential  mortgage loans equivalent to 150 percent
        of the outstanding advances. The Bank has available collateral to borrow
        an additional $167 million from the Federal Home Loan Bank.
<TABLE>
<CAPTION>

                                                                     June 30,
                                                         1999                       1998
                                               -------------------------  -----------------------
                                                Weighted-                  Weighted-
                                                 Average                    Average
                                                   Rate        Amount        Rate         Amount
        <S>                                       <C>       <C>              <C>       <C>
          Federal Home Loan Bank:
            Variable rate advances                5.19%      $25,000,000     5.59%     $20,000,000
          Federal Home Loan Bank:
           Mortgage matched advances
            payable monthly through
            May, 2009 with interest
            rates from 5.30% to 7.80%             6.59%          894,127     6.72%       1,248,855
           Other fixed rate advances                               -         5.09%      22,000,000
           Lines of credit in the amount
             of $21 million (1999) and $12
             million (1998) maturing in 2003
             through 2005                         8.40%           -          8.43%           -
                                                             -----------               -----------
         Total borrowings                                    $25,894,127               $43,248,855
                                                             ===========               ===========
</TABLE>

        The aggregate  minimum annual  repayments of long-term  borrowings as of
        June 30, 1999 is as follows:

                           2000                  $ 3,078,126
                           2001                       83,499
                           2002                       89,248
                           2003                       95,407
                           2004                      101,992
                           Thereafter             22,445,855
                                                 -----------
                                                 $25,894,127
                                                 ===========

                                       47
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


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 for the years ended June 30, are as follows:

                                        1999           1998           1997
                                        ----           ----           ----

          Current                    $3,148,557     $3,175,254     $1,962,001
          Deferred                     (178,266)       126,743        466,891
                                      ---------      ---------     ----------

          Total income tax expense   $2,970,291     $3,301,997     $2,428,892
                                     ==========     ==========     ==========

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

                                               1999         1998         1997
                                               ----         ----         ----

          Federal statutory rate              34.0%        34.0%        34.0%
               Tax-exempt interest income      (.2)         (.2)         (.8)
               Purchase Accounting              .9          1.4          1.4
               Other                          (1.5)         (.9)         (.9)

          Effective rate                      33.2%        34.3%        33.7%
                                              =====        =====        =====

        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 at June 30, relate to the following:

                                                        1999           1998
                                                        ----           ----

   Deferred tax assets:
      Allowance for loan losses                      $ 261,200       $ 22,806
      Loan fees                                        114,839        229,679
      Investment securities                            127,481        149,937
      Accrued liabilities and other                    216,048        108,612
                                                       -------        -------
                                                       719,568        511,034
   Deferred tax liabilities:                           -------        -------
      Depreciation                                     837,234        762,591
      Net unrealized gain on securities
         available-for-sale                            565,632        564,767
      Federal Home Loan Bank stock                     633,473        559,965
      Other                                            581,932        699,815
                                                       -------        -------
                                                     2,618,271      2,587,138
                                                     ---------      ---------
   Net deferred tax liability                       $1,898,703     $2,076,104
                                                    ==========     ==========

                                       48

<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


8.      INCOME TAXES - (CONTINUED)

        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 liability  otherwise would total $3.2 million at June 30,
        1999 and 1998. 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 expense.

9.      STOCKHOLDERS' EQUITY

          (a)  LIQUIDATION  ACCOUNT - In connection  with the Bank's  conversion
               from  mutual to stock form of  ownership  during  1987,  the Bank
               established a "liquidation  account",  currently in the amount of
               $1,222,000  for the  purpose  of  granting  to  eligible  savings
               account  holders a priority  in the event of future  liquidation.
               Only in such an event,  an eligible  account holder who continues
               to  maintain  a savings  account  will be  entitled  to receive a
               distribution  from the liquidation  account.  The total amount of
               the liquidation  account  decreases in an amount  proportionately
               corresponding to decreases in the savings account balances of the
               eligible account holders.

          (b)  REGULATORY CAPITAL  REQUIREMENTS - The Bank is subject to various
               regulatory capital requirements  administered by the OTS. Failure
               to  meet  minimum  capital   requirements  can  initiate  certain
               mandatory and possibly  additional  discretionary  actions by the
               OTS that, if undertaken,  could have a direct  material effect on
               the Corporation's  financial  statements.  Under capital adequacy
               guidelines  and the  regulatory  framework for prompt  corrective
               action, a bank must meet specific capital guidelines that involve
               quantitative  measures  of  a  bank's  assets,  liabilities,  and
               certain  off-balance  sheet items as calculated  under regulatory
               accounting practices.  The amounts and classification of a bank's
               capital are also  subject to  qualitative  judgements  by the OTS
               about components, risk weightings, and other factors. Qualitative
               measures established by regulation to ensure capital adequacy and
               to be  classified  as  "well  capitalized"  require  the  Bank to
               maintain  minimum  amounts and ratios of Total and Tier I capital
               to risk-weighted assets, Tier I capital to adjusted total assets,
               and  Tier  I  capital  to  average  assets  as set  forth  in the
               following  table. In their  evaluation of capital  adequacy,  the
               regulators  assess  exposure to declines in the economic value of
               the  Bank's  capital,  as well as  exposure  to  declines  in the
               economic value of capital due to changes in interest rates. As of
               June  30,  1999,  the  most  recent  notification  from  the  OTS
               categorized the Bank as "well  capitalized"  under the regulatory
               framework for prompt corrective  action.  There are no conditions
               or events since that notification  that management  believes have
               changed the Bank's category.
<TABLE>
<CAPTION>
                                                                                  To Be Considered
                                                                                  Well Capitalized
                                                                                     Under Prompt
                                                               For Capital           Correction
                                             Actual         Adequacy Purposes     Action Provisions
  AS OF JUNE 30, 1999:                  Amount     Ratio     Amount     Ratio      Amount     Ratio
    <S>                             <C>            <C>     <C>            <C>    <C>           <C>
    Total risk-based capital (to
      risk- weighted assets)         $44,678,000   14.6%   $24,562,000    8.0%   $30,703,000   10.0%
    Tier I capital (to
      risk-weighted assets)          $42,570,000   13.9%   $12,281,000    4.0%   $18,422,000    6.0%
    Tier I capital (to adjusted
      total assets)                  $42,570,000    9.0%   $14,266,000    3.0%       N/A        N/A
    Tier I capital (to average       $42,570,000    8.9%   $19,152,000    4.0%   $23,940,000    5.0%
      assets)

</TABLE>

                                       49

<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


9.      STOCKHOLDERS' EQUITY - (CONTINUED)

<TABLE>
<CAPTION>
                                                                                  To Be Considered
                                                                                  Well Capitalized
                                                                                     Under Prompt
                                                               For Capital           Correction
                                              Actual        Adequacy Purposes    Action Provisions
                                        Amount      Ratio   Amount     Ratio      Amount     Ratio
   <S>                               <C>            <C>    <C>            <C>    <C>           <C>
   AS OF JUNE 30, 1998
    Total risk-based capital (to
        risk-weighted assets)        $50,096,000    18.5%  $21,658,000    8.0%   $27,073,000   10.0%
    Tier I capital (to
        risk-weighted assets)        $48,243,000    17.8%  $10,829,000    4.0%   $16,244,000    6.0%
    Tier I capital (to adjusted
        total assets)                $48,243,000    11.9%  $12,162,000    3.0%       N/A        N/A
    Tier I capital (to average       $48,243,000    12.2%  $15,670,000    4.0%   $19,700,000    5.0%
        assets)
</TABLE>

         (c)  DIVIDEND  RESTRICTIONS  -  Regulations  of the  Office  of  Thrift
        Supervision  limit the dividends that may be paid without prior approval
        of  the  Office  of  Thrift   Supervision.   The  Bank  is  currently  a
        "well-capitalized"  Tier 1 institution and can make distributions during
        a year of 100% of its net income to date  during the year plus  one-half
        its "surplus  capital ratio" (the excess over its capital  requirements)
        at the beginning of the calendar  year.  Accordingly,  at June 30, 1999,
        approximately $12.2 million of the Bank's retained earnings is available
        for distribution.

10.     EARNINGS PER SHARE

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

                                                  Year Ended June 30,
                                    -------------------------------------------
                                        1999            1998            1997
                                        ----            ----            ----
  Net income available to common
    Shareholders                     $5,978,801      $6,334,217      $4,774,062
                                     ==========      ==========      ==========

  Basic EPS:
    Weighted average common shares    4,127,804       4,145,039       4,182,060
                                      =========       =========       =========

  Diluted EPS:
    Weighted average common shares    4,127,804       4,145,039       4,182,060
    Dilutive effect of stock options     20,419          29,114          46,456
                                      ---------       ---------       ---------
    Weighted average common and
      Incremental shares              4,148,223       4,174,153       4,228,516
                                      =========       =========       =========

  Earnings Per Share:
    Basic                                 $1.45           $1.53           $1.14
                                      =========       =========       =========

    Diluted                               $1.44           $1.52           $1.13
                                      =========       =========       =========


                                       50

<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)

11.     EMPLOYEE BENEFIT PLANS:

        (a)    PENSION  PLANS  - The  Bank  is a  participant  in the  Financial
               Institutions Retirement Fund, a multiple-employer defined benefit
               pension plan covering substantially all employees.  Employees are
               100% vested at the completion of five years of  participation  in
               the plan. The Bank's policy is to contribute annually the minimum
               funding  amounts.   Employer   contributions  and  administrative
               expenses  charged to  operations  for 1999,  1998,  1997  totaled
               $4,486, $4,438, and $56,475, respectively.

               The  Bank  has  a   contributory   thrift   plan   which   covers
               substantially all of the employees.  Under the terms of the plan,
               voluntary  employee  contributions are matched by up to 6% of the
               employee base pay and employees are immediately vested.  Employer
               contributions  charged to operations for 1999, 1998 and 1997 were
               $142,465, $116,367, and $114,939, respectively.

        (b)    EMPLOYEE   STOCK   OWNERSHIP  PLAN  -  The   Corporation   has  a
               non-contributory  employee  stock  ownership plan (ESOP) in which
               employees are eligible to participate upon completion of one year
               of service.  Employees are vested in  accordance  with a schedule
               which provides for 100% vesting upon completion of seven years of
               service.

               Shares  of the  Corporation's  common  stock  are  acquired  in a
               non-leveraged  transaction.  At the time of purchase,  the shares
               are released and allocated to eligible employees  determined by a
               formula  specified in the plan  agreement.  Shares in the plan at
               June 30 and contributions  charged to compensation expense during
               the year were as follows:

                                                 1999       1998       1997
                                                 ----       ----       ----
                   Allocated ESOP shares        225,889    230,213    307,595
                   Contributions to ESOP        $50,000    $30,000    $30,000

         (c)   STOCK  OPTION  PLAN - Under the 1987 Stock  Option and  Incentive
               Plan, the Corporation may grant either incentive or non-qualified
               stock options to key employees for an aggregate of 423,200 shares
               of the  Corporation's  common  stock at not less than fair market
               value at the  date  such  options  are  granted.  The  option  to
               purchase  shares  expires  ten years  after the date of grant.  A
               summary of option transactions is as follows:
<TABLE>
<CAPTION>

                                                                 June 30,
                                      --------------------------------------------------------------
                                            1999                  1998                 1997
                                            ----                  ----                 ----
                                                 Weighted              Weighted             Weighted
                                      Number     Average     Number    Average     Number   Average
                                       of        Exercise     of       Exercise     of      Exercise
                                     Options      Price     Options      Price    Options    Price
     <S>                              <C>         <C>       <C>         <C>       <C>        <C>
     Outstanding, beginning of year    42,564     $12.88     71,314     $12.77     98,244    $10.49
     Granted during year               12,500      24.50        -          -         -          -
     Forfeited during year                -          -       (7,750)     15.60       -          -
     Exercised during the year            -          -      (21,000)     11.52    (26,930)     4.44
                                      -------               -------               -------
     Outstanding, end of year          55,064      15.52     42,564      12.88     71,314     12.77
                                      =======               =======               =======

     Eligible for exercise at year
      end                              26,564                26,564                42,564
     Weighted average fair value of
      options granted during the       $ 8.79               $   -                 $   -
      year
</TABLE>

                                       51
<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


11.     EMPLOYEE BENEFIT PLANS - (CONTINUED)


        The  following  table   summarizes   information   about  stock  options
        outstanding at June 30, 1999:
<TABLE>
<CAPTION>

                               Options Outstanding                Options Exercisable
                               -------------------                -------------------
                                                    Weighted                   Weighted
                                 Weighted Average   Average                    Average
     Range of         Number         Remaining      Exercise       Number      Exercise
  Exercise Prices   Outstanding  Contractual Life     Price      Exercisable     Price
  ---------------   -----------  ----------------   --------     -----------   --------
 <S>                  <C>             <C>            <C>         <C>          <C>
      $ 6.88           5,564           2.4  years    $ 6.88        5,564       $ 6.88
      $12.50          25,000           4.7           $12.50       20,000       $12.50
 $16.00 to $17.13     12,000           5.4           $16.45        1,000       $17.13
      $24.50          12,500           9.6           $24.50          -
                      ------                                      ------
                      55,064           5.3           $15.52       26,564       $11.50
                      ======                                      ======
</TABLE>

        The pro forma effect on net income and earnings per share is as follows:

                                                  Year Ended
                                                   June 30,
                                     1999           1998           1997
                                     ----           ----           ----

  Net income: As reported        $5,978,801     $6,334,217     $4,774,062
              Pro-forma          $5,968,780     $6,332,502     $4,762,347

  Earnings per share:
              Basic    As  reported  $ 1.45         $ 1.53         $ 1.14
                       Pro-forma     $ 1.45         $ 1.53         $ 1.14

              Diluted  As reported   $ 1.44         $ 1.52         $ 1.13
                       Pro-forma     $ 1.44         $ 1.52         $ 1.13

          The  fair value of each stock option  granted is estimated on the date
          of  grant  using  the  Black-Scholes  option-pricing  model  with  the
          following  assumptions  for  grants  in  1999:  1)  expected  dividend
          yields  at  2.6%,  2) risk-free interest rates  at  5.75%, 3) expected
          volatility  at 22%, and 4) expected  life of options at 10 years.

 12. CASH FLOW ACTIVITIES

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

               (a)     Cash paid during the year ended June 30 for:

                                         1999            1998          1997
                                         ----            ----          ----

                   Interest expense   $18,165,549     $15,903,156   $14,390,809
                                      ===========     ===========   ===========

                   Income taxes       $ 2,946,000     $ 1,461,000   $ 2,482,000
                                      ===========     ===========   ===========

                                       52
<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)

12.     CASH FLOW ACTIVITIES - (CONTINUED)

               (b) Supplemental disclosure of non-cash activities:

                                                1999         1998         1997
                                                ----         ----         ----
                 Loans to facilitate sales of
                 real estate owned             $320,688    $716,448    $698,405
                                               ========    ========    ========


                 Transfers from loans to real
                 estate acquired through
                     foreclosure               $295,714    $666,463    $505,579
                                               ========    ========    ========


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).

                   CONDENSED STATEMENTS OF FINANCIAL CONDITION
                                                         June 30,
                                             ------------------------------
                                                 1999              1998
                                                  ---              ----
                       ASSETS
  Cash and interest bearing deposits        $   595,638       $    92,006
  Investment in subsidiary                   55,255,823        52,978,174
  Securities available-for-sale                 199,894           209,995
  Receivable from Bank                        1,787,705         1,393,810
  Other assets                                   23,102            14,402
                                            -----------       -----------
                                            $57,862,162       $54,688,387
                                            ===========       ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
  Other liabilities                         $    -            $    -
  Stockholders' equity                       57,862,162        54,688,387
                                             ----------        ----------
                                            $57,862,162       $54,688,387
                                            ===========       ===========


                         CONDENSED STATEMENTS OF INCOME

                                                 Year Ended June 30,
                                       ---------------------------------------
                                           1999          1998          1997
                                           ----          ----          ----
  Dividend from subsidiary              $4,000,000    $4,000,000    $3,000,000
  Interest income                           34,681        35,188        57,162
  Gain on sale of investments                 -           51,620        25,344
  Other expenses                          (547,656)      (65,329)      (47,044)
                                         ---------     ---------     ---------
  Net income before income tax benefit   3,487,025     4,021,479     3,035,462
  Income tax benefit                       222,473        56,535        39,635
                                         ---------     ---------     ---------
  Income before equity in undistributed
    net income of subsidiary             3,709,498     4,078,014     3,075,097
  Equity in undistributed net income of
    subsidiaries                         2,269,303     2,256,203     1,698,965
                                       -----------   -----------   -----------

  Net income                            $5,978,801    $6,334,217    $4,774,062
                                        ==========    ==========    ==========

                                       53
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


13.     CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) - (CONTINUED)

<TABLE>
<CAPTION>

                                                       Year Ended June 30,
                                            ----------------------------------------
                                                1999           1998          1997
                                                ----           ----          ----
<S>                                        <C>           <C>            <C>
 Operating Activities:
   Net income                               $5,978,801    $ 6,334,217    $4,774,062
   Adjustments to reconcile net income to
    cash provided by operating activities:
     Equity in undistributed net income
      from subsidiary                       (2,269,303)    (2,256,203)   (1,698,965)
     Gain on sale of investments
      available-for-sale                         -            (51,620)      (25,344)
     Decrease (increase) in other assets        (5,265)       150,908       (70,990)
     (Decrease) increase in other
      liabilities                                -            (51,620)      (57,080)
                                             ---------      ---------     ---------
 Net cash provided by operating activities   3,704,233      4,125,682     2,921,683
                                             ---------      ---------     ---------
 Investing Activities:
   Sale of securities available-for-sale          -              -          152,064
   Purchases of securities
    available-for-sale                            -              -          (17,463)
   Net change in receivable from Bank         (393,895)     (778,172)       152,301
                                              --------      --------        -------
 Net cash provided (used) by investing
   activities                                 (393,895)     (778,172)       286,902
                                              --------      --------        -------
 Financing Activities:
    Proceeds from stock options exercised         -               40         60,551
    Dividends paid                          (2,600,186)   (2,319,019)    (2,089,642)
    Common stock repurchases                  (206,520)   (1,117,315)    (1,235,190)
    Collection on advance to ESOP                  -          11,129           -
    Advance to ESOP                                -             -          (14,685)
                                            ----------    ----------     ----------
 Net cash used by financing activities      (2,806,706)   (3,425,165)    (3,278,966)
                                            ----------    ----------     ----------
 Net increase (decrease) in cash               503,632       (77,655)       (70,381)

 Cash and interest bearing deposits,
    beginning of year                           92,006       169,661        240,042
                                            ----------    ----------     ----------
 Cash and interest bearing deposits,
    end of  year                             $ 595,638     $  92,006      $ 169,661
                                             =========     =========      =========
</TABLE>



                                       54

<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


14.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        The estimated fair values of the Corporation's financial instruments are
        as follows:
<TABLE>
<CAPTION>

                                                      June 30, 1999                      June 30, 1998
                                               -----------------------------    ------------------------------
                                                Carrying           Fair           Carrying           Fair
                                                  Value            Value            Value            Value
        <S>                                   <C>             <C>               <C>              <C>

        Financial assets:
          Cash and interest bearing deposits  $ 11,891,637     $ 11,892,000      $ 9,149,712      $ 9,149,000
          Investment securities:
            Securities available-for-sale        2,935,979        2,936,000        1,934,412        1,934,000
            Securities held-to-maturity         44,404,392       43,525,000       24,639,484       24,935,000
          Loans, net                           400,360,402      397,967,000      355,306,342      352,805,000
          Federal Home Loan Bank stock           3,200,000        3,200,000        2,983,800        2,983,800
        Financial liabilities:
          Deposits                            (399,443,439)    (398,444,000)    (306,702,649)    (309,326,000)
          Advances from Federal
            Home Loan Bank                     (25,894,127)     (24,239,000)     (43,248,855)     (42,317,000)

</TABLE>

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

        CASH AND INTEREST  BEARING  DEPOSITS - The carrying amounts for cash and
        interest bearing deposits approximate their fair values.

        INVESTMENT  SECURITIES - Fair values for investment securities are based
        upon quoted market prices, where available.  If quoted market prices are
        not  available,  fair  values  are  based on  quoted  market  prices  of
        comparable instruments.

        LOANS, NET - For variable rate loans that reprice frequently and with no
        significant  change in credit  risk,  fair  values are based on carrying
        amounts.  The fair  values  of other  types of loans  are  estimated  by
        discounting the future cash flows using current  interest rates at which
        similar loans would be made to borrowers with similar credit quality and
        for the same remaining maturities.

        FEDERAL  HOME LOAN BANK STOCK - The  carrying  amounts for Federal  Home
        Loan Bank stock approximates fair value.

        DEPOSITS - The fair values for demand  deposits,  savings  accounts  and
        certain money market  deposits are the amounts  payable on demand at the
        reporting  date.  The carrying  amounts for  variable-rate  money market
        accounts and  certificates of deposit  approximate  their fair values at
        the reporting date.  Fair values for fixed-rate  certificates of deposit
        are  estimated  using a discounted  cash flow  calculation  that applies
        interest rates  currently being offered on certificates to a schedule of
        aggregated expected monthly maturities on time deposits.

        ADVANCES  FROM  FEDERAL  HOME LOAN BANK - The fair values for  long-term
        debt are estimated  using  discounted  cash flow analyses,  based on the
        Corporation's  current incremental  borrowing rates for similar types of
        borrowing arrangements.

                                       55
<PAGE>


         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


14.     FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

        COMMITMENTS  TO EXTEND  CREDIT AND STANDBY  LETTERS OF CREDIT - The fair
        values of commitments to extend credit is estimated using fees currently
        charged  to enter into  similar  agreements,  taking  into  account  the
        remaining  terms of the agreements and the present  creditworthiness  of
        the customer. For fixed-rate loan commitments, fair value also considers
        the  difference  between  current  levels  of  interest  rates  and  the
        committed  rates. The fair values of standby letters of credit are based
        on fees  currently  charged for similar  agreements  or on the estimated
        cost to terminate  them or  otherwise  settle the  obligations  with the
        counter  parties at the  reporting  date.  The value of these  financial
        instruments was not material at June 30, 1999 and 1998.

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.  Those  instruments  involve,  to varying  degrees,  elements of
        credit and interest-rate  risk in excess of the amount recognized in the
        balance  sheet.  The contract or notional  amounts of those  instruments
        reflect the extent of 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.
        The  Bank  uses the same  credit  policies  in  making  commitments  and
        conditional obligations as it does for on-balance-sheet instruments.

        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.  The Bank evaluates each customer's credit worthiness. The
        amount of  collateral  obtained,  if it is deemed  necessary by the Bank
        upon extension of credit, is based on management's  credit evaluation of
        the counterpart.

        Commitments to make loans,  excluding  undisbursed  portions of loans in
        process, at June 30 were as follows:


                                       1999                      1998
                             ------------------------  ------------------------
                                Fixed       Variable      Fixed      Variable
                                Rate          Rate         Rate        Rate
 Commitments to make loans   $16,146,055  $ 3,455,856   $4,182,800  $ 2,403,269

 Unused lines of credit           -        21,090,958       -        12,389,690

 Standby letters of credit        -         2,694,940       -           694,640
                             -----------  -----------   ----------   ----------


                             $16,146,055  $27,241,754   $4,182,800  $15,487,599
                             ===========  ===========   ==========  ===========


                                       56
<PAGE>

         FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (CONTINUED)


16.     FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - (CONTINUED)

        Fixed rate  loan  commitments  at June 30,  1999 were at  current  rates
        ranging from 6.75% to 9.50%.

        Variable  rate loan  commitments  at June 30, 1999 were at current rates
        ranging  from 6.50% to 9.25% for loan  commitments,  6.99% to 10.50% for
        unused  lines of credit  and  primarily  at the  national  prime rate of
        interest plus 50 to 200 basis points for standby letters of credit.

17.     RELATED PARTY TRANSACTIONS

        Certain directors,  executive officers and principal shareholders of the
        Company,  including  associates of such persons,  are loan customers.  A
        summary  of the  related  party  loan  activity,  for loans  aggregating
        $60,000 or more to any one related party, is as follows:


                                                     June 30,
                                         ------------------------------
                                            1999                1998
                                            ----                ----

               Beginning of year        $1,112,789         $  970,896


               New loans                   182,000            472,000

               Repayments                 (294,770)          (214,415)

               Other changes               668,611           (115,692)
                                           -------           --------

               End of year              $1,668,630         $1,112,789
                                        ==========         ==========

        Other changes include  adjustments for loans applicable to one reporting
        period that are excludable from the other reporting period.  These loans
        were made in the ordinary  course of business at market  interest  rates
        and normal credit terms.

                                       57

<PAGE>

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

       Information  required  by this item is incorporated herin by reference to
the Corporation's Form 8-K filed April 20,1999.

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        For  information  concerning the Board of Directors of the  Corporation,
the information contained under the section captioned "Proposal I -- Election of
Directors" in the Corporation's definitive proxy statement for the Corporation's
1999 Annual Meeting of  Stockholders  (the "Proxy  Statement")  is  incorporated
herein by reference.


ITEM 11.    EXECUTIVE COMPENSATION

        The  information   contained  under  the  section  captioned  "Executive
Compensation" in the Proxy Statement is incorporated herein by reference.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        (a)    Security Ownership of Certain Beneficial Owners

               Information  required  by this  item is  incorporated  herein  by
               reference  to  the  section  captioned  "Voting   Securities  and
               Principal Holders Thereof" in the Proxy Statement

        (b)    Security Ownership of Management

               Information  required  by this  item is  incorporated  herein  by
               reference  to the sections  captioned  "Proposal I -- Election of
               Directors" and "Voting  Securities and Principal Holders Thereof"
               in the Proxy Statement.

        (c)    Changes in Control

               Management of the Corporation knows of no arrangements, including
               any pledge by any person of  securities of the  Corporation,  the
               operation of which may at a subsequent date result in a change of
               control of the Corporation.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The  information  required  by  this  item  is  incorporated  herein  by
reference to the section captioned  "Proposal I -- Election of Directors" in the
Proxy Statement.

                                       58
<PAGE>

                                     PART IV


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

        1.     Financial Statements Filed

               (a)(1) Report of Independent Auditors
               (a)(2) Report of Independent Auditors
               (b)    Consolidated Statement of Financial  Condition at June 30,
                      1999 and 1998.
               (c)    Consolidated Statement of Income for the years ended June
                      30, 1999, 1998, and 1997.
               (d)    Consolidated  Statement  of  Comprehensive  Income for the
                      years ended June 30, 1999, 1998, and 1997.
               (e)    Consolidated  Statement of Changes in Stockholders' Equity
                      for the years ended June 30, 1999, 1998, and 1997.
               (f)    Consolidated  Statement  of Cash Flows for the years ended
                      June 30, 1999, 1998, and 1997.
               (g)    Notes to Consolidated Financial Statements

        2.     All  financial  statement  schedules  have  been  omitted  as the
               required  information is either  inapplicable  or included in the
               financial statements or related notes.

        3.     Exhibits
               (3)(a) Articles of Incorporation *
               (3)(b) Bylaws *
               10 (b) First  Federal  Savings  Bank of  Elizabethtown  Stock
                      Option and  Incentive  Plan,  as amended**
              (16)    Letter re Change in Auditor***
              (21)    Subsidiaries of the Registrant
              (99)    Undertakings
              (23)(a) Consent of Crowe, Chizek and Company LLP, Certified
                      Public Accountants
              (23)(b) Consent of Whelan, Doerr & Company PSC, Certified
                      Public Accountants
              (27)    Financial Data Schedule

        4.     The  Corporation  filed a Form 8-K on April 20, 1999  regarding a
               change in the registrant's certifying accountant.

-----------------------------------
*       Incorporated by reference to the Corporation's Form S-4 Registration
        Statement (No. 33-30582)
**      Incorporated by reference to Exhibit 10(b) of the Corporation's 1998
        definitive proxy statement.
***     Incorporated by reference to the Corporation's Form 8-K filed
        April 20, 1999.

                                       59
<PAGE>

                                   SIGNATURES

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

                                   FIRST FEDERAL FINANCIAL CORPORATION
                                   OF KENTUCKY

Date: 9/28/99                 By:  /s/ B. Keith Johnson
                                   --------------------
                                   B. Keith Johnson
                                   President and Chief Executive Officer
                                   Duly Authorized Representative

        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 Johnson                     By:   /s/ Irene B. Lewis
     ---------------------                           ------------------
     B. Keith Johnson                                Irene B. Lewis
     Principal Executive Officer                     Director
     and Director

Date: 9/28/99                                  Date:  9/28/99


By:  /s/  Wreno M. Hall                        By:   /s/ Bob Brown
     ------------------                              --------------
     Wreno M. Hall                                   Bob Brown
     Director                                        Director

Date: 9/28/99                                  Date:  9/28/99

By:  /s/  J. Alton Rider                       By:   /s/ Kennard Peden
     ---------------------                           -----------------
     J. Alton Rider                                  Kennard Peden
     Director                                        Director

Date: 9/28/99                                  Date:  9/28/99


By:  /s/  Burlyn Pike                          By:   /s/  Walter D. Huddleston
     -----------------                               -------------------------
     Burlyn Pike                                     Walter D. Huddleston
     Director                                        Director

Date: 9/28/99                                  Date:  9/28/99


By:  /s/  Stephen Mouser                       By:   /s/  Richard L. Muse
     -------------------                             --------------------
     Stephen Mouser                                  Richard L. Muse
     Director                                        Comptroller

Date: 9/28/99                                  Date:  9/28/99


By:  /s/  Michael Thomas
     ---------------------
     Michael Thomas, DVM
     Director

Date: 9/28/99

                                       60
<PAGE>

                                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 **

  (16)                Letter re Change in Auditor***

  (21)                Subsidiaries of the Registrant

  (99)                Undertakings

  (23)(a)             Consent of Crowe, Chizek and Company LLP, Certified Public
                      Accountants

  (23)(b)             Consent of Whelan,  Doerr &  Company PSC, Certified Public
                      Accountants

  (27)                Financial Data Schedule


------------------------------------------------
*  Incorporated  by reference to the  Corporation's  Form S-4  Registration
   Statement (No. 33-30582)
** Incorporated by reference to Exhibit 10(b) of the Corporation's 1998
   definitive proxy statement.
***Incorporated by reference to the Corporation's Form 8-K filed April 20, 1999.



                                       61

<PAGE>

                                   EXHIBIT 21


                         SUBSIDIARIES OF THE REGISTRANT



Parent
-------
First Federal Financial Corporation of Kentucky



                                               State of         Percentage
Subsidiaries                                Incorporation          Owned
------------                                -------------       ----------
First Federal Savings Bank                  United States           100%
  of Elizabethtown

First Service Corporation                     Kentucky              100%
  of Elizabethtown (a)

-----------------------------------
(a)     Wholly-owned subsidiary of First Federal Savings Bank of Elizabethtown.

                                       62

<PAGE>

EXHIBIT 99 - UNDERTAKINGS

(a)     The undersigned Registrant hereby undertakes:

        (1)    To file,  during  any  period in which  offers or sales are being
               made, a  post-effective  amendment  to its Form S-8  registration
               statement No. 33-30582

               (i)    To include any prospectus required by section 10(a)(3) of
                      the Securities Act of 1933;
               (ii)   To reflect in the  prospectus  any facts or events arising
                      after the effective date of the registration statement (or
                      the most recent  post-effective  amendment thereof) which,
                      individually or in the aggregate, represents a fundamental
                      change in the  information  set forth in the  registration
                      statement;
               (iii)  To include any  material  information  with respect to the
                      plan  of  distribution  not  previously  disclosed  in the
                      registration  statement  or any  material  change  to such
                      information in the registration statements;

        (2)    That,  for the purpose of  determining  any  liability  under the
               Securities Act of 1933, each such post-effective  amendment shall
               be  deemed to be a new  registration  statement  relating  to the
               securities  offered therein,  and the offering of such securities
               at that time shall be deemed to be the initial bona fide offering
               thereof.

        (3)    To  remove  from   registration  by  means  of  a  post-effective
               amendment any of the  securities  being  registered  which remain
               unsold at the termination of the offering.

     (b)  The undersigned  Registrant  hereby  undertakes  that, for purposes of
          determining  any  liability  under the  Securities  Act of 1933,  each
          filing of the Registrant's  Annual Report pursuant to section 13(a) or
          section  15(d) of the  Securities  Exchange  Act of 1934  (and,  where
          applicable,  each filing of an employee  benefit  plan's annual report
          pursuant to section 15(d) of the Securities  Exchange of 1934) that is
          incorporated by reference in the  registration  statement  relating to
          the securities offered therein, and the offering of such securities at
          that  time  shall be  deemed  to be the  initial  bona  fide  offering
          thereof.

     (h)  Insofar  as   indemnification   for  liabilities   arising  under  the
          Securities  Act of 1933 may be  permitted to  directors,  officers and
          controlling  persons  of the  registrant  pursuant  to  the  foregoing
          provisions,  or otherwise, the registrant has been advised that in the
          opinion of the Securities and Exchange Commission such indemnification
          is against  public  policy as expressed in the Act and is,  therefore,
          unenforceable.  In the event that a claim for indemnification  against
          such liabilities (other than the payment by the registrant of expenses
          incurred or paid by a director,  officer or controlling  person of the
          registrant  in  the  successful   defense  of  any  action,   suit  or
          proceeding)  is  asserted  by such  director,  officer or  controlling
          person  in  connection  with  the  securities  being  registered,  the
          registrant  will,  unless in the opinion of its counsel the matter has
          been  settled  by  controlling   precedent,   submit  to  a  court  of
          appropriate  jurisdiction the question whether such indemnification by
          it is  against  public  policy  as  expressed  in the Act and  will be
          governed by the final adjudication of such issue.

                                       63
<PAGE>

EXHIBIT 23(A) - CONSENT OF CROWE, CHIZEK & COMPANY LLP


We hereby  consent to the  inclusion  of our report dated August 20, 1999 in the
annual report on Form 10-K of First Federal Financial Corporation of Kentucky as
of June 30, 1999.




                                          /s/ Crowe, Chizek & Company LLP
                                          -------------------------------
                                          Crowe, Chizek & Company LLP



                                       64

<PAGE>

EXHIBIT 23(B) - CONSENT OF WHELAN, DOERR & COMPANY PSC


We consent to  incorporation  by reference  in the  Registration  Statement  No.
33-30582 on Form S-8 of First Federal  Financial  Corporation of Kentucky of our
report dated August 17, 1998,  relating to the  consolidated  balance  sheets of
First Federal  Financial  Corporation  of Kentucky and Subsidiary as of June 30,
1998 and 1997,  and  related  consolidated  statements  of  income,  changes  in
stockholders'  equity,  and cash  flows  for  each of the  years in the two year
period ended June 30,  1999,  which  reports  appear in the June 30, 1998 annual
report on Form 10-K of First Federal Financial Corporations of Kentucky.




                                           /s/ Whelan, Doerr & Company PSC
                                           -------------------------------
                                           Whelan, Doerr & Company PSC


                                       65