================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ________________________

                                   FORM 10-KSB
(MARK ONE)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934

         For the Fiscal Year Ended December 31, 2004

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

         For the transition period __________ to __________

                           Commission File No. 0-50322

                          COMMUNITY FIRST BANCORP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

         MARYLAND                                           36-4526348
--------------------------------                         ------------------
(State or Other Jurisdiction of                          (I.R.S. Employee
Incorporation or Organization                            Identification No.)


2420 NORTH MAIN STREET, MADISONVILLE, KENTUCKY                 42431
----------------------------------------------              ----------
(Address of Principal Executive Offices)                    (Zip Code)

                    Issuer's Telephone Number (270) 326-3500

       Securities Registered Under Section 12(b) of the Exchange Act: NONE

         Securities Registered Under Section 12(g) of the Exchange Act:

                          COMMON STOCK, $.01 PAR VALUE
                          ----------------------------
                                (Title of class)

     Check  whether  the issuer:  (l) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 90 days.

  YES   X      NO
       ---        ---
     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

     State issuer's revenues for its most recent fiscal year: $2.9 million

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was approximately  $3.0 million as of March 28, 2005 based on the
last sale ($12.75 per share) reported on the OTC Electronic Bulletin Board as of
that date. Solely for purposes of this calculation,  the term "affiliate" refers
to all directors and executive  officers of the registrant and all  stockholders
beneficially owning more than 10% of the registrant's common stock.

     As of March 28, 2005,  there were issued and outstanding  277,725 shares of
the registrant's common stock.

     Transitional Small Business Disclosure Format: YES    NO X
                                                       ---   ---

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Registrant's definitive Proxy Statement for the 2005 Annual
     Meeting of Stockholders. (Part III)

================================================================================
<PAGE>

                                     PART I

FORWARD LOOKING STATEMENTS

     When used in this discussion and elsewhere in this Annual Report, the words
or phrases  "will  likely  result,"  "are  expected  to," "will  continue,"  "is
anticipated,"   "estimate,"  "project,"  "intend"  or  similar  expressions  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private  Securities  Litigation Reform Act of 1995. The Company cautions readers
not to place undue reliance on any such forward-looking statements,  which speak
only as of the date made, and to advise readers that various factors,  including
regional and  national  economic  conditions,  unfavorable  judicial  decisions,
substantial  changes in levels of market interest rates,  credit and other risks
of lending and investment  activities  and  competitive  and regulatory  factors
could affect the Bank's financial  performance and could cause the Bank's actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

     The Company does not undertake and  specifically  disclaims any obligations
to update any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

     THE COMPANY.  Community  First  Bancorp,  Inc. (the  "Company")  became the
holding  company  for  Community  First  Bank  (the  "Bank")  in June  2003 upon
completion of the Bank's  conversion to stock form.  The Company does not engage
in any  activities  other than  holding the stock of the Bank.  At December  31,
2004, the Company had total assets of $63.5 million,  loans  receivable of $51.9
million, total deposits of $46.5 million and total equity of $3.2 million.

     The  Company's  executive  offices are  located at 2420 North Main  Street,
Madisonville,  Kentucky and its main  telephone  number is (270)  326-3500.  The
Company also maintains a website at

     THE BANK.  The Bank is a federal stock savings bank  operating  through two
offices in Madisonville,  Kentucky. Founded in 1923 as the Madisonville Building
and Loan  Association,  the Bank  converted  to a federal  mutual  savings  bank
charter and adopted its current name in 2002. In June 2003,  the Bank  converted
to stock form and became a subsidiary  of the  Company.  The Bank is a member of
the Federal  Home Loan Bank  ("FHLB")  System.  Its  deposits  are insured up to
applicable  limits by the Savings  Association  Insurance  Fund  ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC").

     The Bank's  principal  business  consists of  attracting  deposits from the
general public and originating  residential mortgage loans. The Bank also offers
commercial and multi-family loans, various types of consumer loans and a limited
number of commercial business loans.

MARKET AREA

     We consider  our primary  market  area to be the City of  Madisonville  and
surrounding Hopkins County, Kentucky. Located in the Western Coalfield Region of
Kentucky,  Hopkins  County had a  population  of  approximately  46,600 in 2002.
Madisonville  is the county seat and largest city in Hopkins  County and is home
to one of the major healthcare facilities in the Commonwealth of Kentucky.

     The largest  employers  in  Madisonville  and the  surrounding  communities
include the Trover Regional Medical Center,  General  Electric  Aircraft Engine,
Carhartt,  Inc. and Lear  Corporation.  By industry,  the largest sectors of the
Madisonville  economy are healthcare and  manufacturing.  The 2003  unemployment
rate for  Hopkins  County  was 7.7%,  compared  to 6.0%  nationally.  The median
household  income of $32,222 in 2002 for Hopkins County was below the median for
Kentucky as a whole of $35,427 and for the United  States of $47,065.  While the
population of Madisonville grew by approximately 19% from 1990 to 2000,  Hopkins
County as a whole grew less than 1.0%. By comparison, the population of Kentucky
grew by 9.6%. The population of Hopkins County is projected to decline  slightly
during the next decade  according to projections by the Kentucky  Department for
Economic Development.

                                       2
<PAGE>

LENDING ACTIVITIES

     Our loan  portfolio  consists  primarily of mortgage loans secured by first
liens on one- to  four-family  residences.  We also make  consumer,  residential
construction and commercial real estate and commercial  business loans. While we
have  continued our historic  emphasis on one- to four-family  lending,  we have
also sought to grow our portfolio of commercial mortgages.

     At December 31, 2004, our gross loans totaled $51.9 million, of which $39.8
million were first mortgage loans secured by one- to four-family residences.  We
originate adjustable-rate mortgage ("ARM") loans with rates that adjust annually
after an initial  period of one,  three,  five or seven years  during  which the
interest  rate  is  fixed.   We  offer  similar  terms  on  our  commercial  and
multi-family  mortgages.  Our  consumer  loans may have either fixed or variable
rates.

     The following  table sets forth  information  concerning the types of loans
held by the Company at the dates indicated.
<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                                                            -----------------------------------------------
                                                                    2004                        2003
                                                            -----------------           -------------------
                                                             AMOUNT       %             AMOUNT         %
                                                            -------     -----           -------      ------
<S>                                                         <C>         <C>             <C>          <C>
     Real estate mortgage loans:
       One- to four-family residential first...             $39,758     76.09%          $29,719      83.57%
       One- to four-family residential second..               1,208      2.31               680        1.91
       Multi-family............................               1,075      2.06               440        1.24
       Commercial..............................               2,953      5.65             2,422        6.81
       Construction............................               1,900      3.64               547        1.54
     Other loans:
       Consumer installment....................                 252      0.48               166        0.47
       Commercial..............................               2,370      4.54               177        0.50
       Automobile..............................               1,905      3.64               993        2.79
       Passbook................................                 330      0.63               295        0.83
       Other...................................                 501      0.96               122        0.34
                                                             ------    ------           -------      ------
                                                             52,252    100.00%           35,561      100.00%
                                                                       ======                        ======
     Less:
       Unearned interest.......................                  --                          --
       Allowance for loan losses...............                 320                         181
       Loans in process........................                  --                         314
                                                            -------                     -------
          Total................................             $51,932                     $35,066
                                                            =======                     =======
</TABLE>

                                       3
<PAGE>

     The following table sets forth the estimated maturity of the Company's loan
portfolio  at  December  31,  2004.  The table does not  include  the effects of
possible  prepayments or scheduled  repayments.  All mortgage loans are shown as
maturing based on the date of the last payment required by the loan agreement.
<TABLE>
<CAPTION>

                                               DUE WITHIN            DUE AFTER             DUE OVER 5
                                             ONE YEAR AFTER      1 THROUGH 5 YEARS        YEARS AFTER
                                           DECEMBER 31, 2004     DECEMBER 31, 2004     DECEMBER 31, 2004         TOTAL
                                           -----------------     -----------------     -----------------         ------
                                                                           (IN THOUSANDS)
<S>                                            <C>                    <C>                   <C>                <C>
Real estate mortgage loans:
  One- to four-family residential first        $  1,000               $ 1,235               $ 37,523           $  39,758
  One- to four-family residential second              5                   294                    909               1,208
  Multi-family......................                  0                     0                  1,075               1,075
  Commercial........................                 13                   261                  2,679               2,953
  Construction......................              1,900                     0                      0               1,900
Other loans:
  Consumer installment..............                 82                   136                     34                 252
  Commercial........................              1,233                   684                    453               2,370
  Automobile........................                 73                 1,832                      0               1,905
  Passbook..........................                330                     0                      0                 330
  Other.............................                124                   377                      0                 501
                                               --------               -------               --------           ---------
      Total.........................           $  4,760               $ 4,819               $ 42,673           $  52,252
                                               ========               =======               ========           =========
</TABLE>

         The next table sets forth at December  31, 2004,  the dollar  amount of
all loans due one year or more after December 31, 2004 which have  predetermined
interest rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                  PREDETERMINED        FLOATING OR
                                                                      RATE           ADJUSTABLE RATES
                                                                  ------------       ----------------
                                                                             (IN THOUSANDS)
<S>                                                                 <C>                 <C>
     Real estate mortgage loans:
         One- to four-family residential first...........           $  5,784            $ 32,466
         One- to four-family residential second..........                325                 123
         Multi-family....................................                  0                 437
         Commercial......................................              4,854                 971
         Construction....................................                  0                   0
     Other loans:
         Consumer installment............................                122                   0
         Commercial......................................                443                   0
         Automobile......................................              1,690                   0
         Passbook........................................                  0                   0
         Other...........................................                277                   0
                                                                    --------            --------
              Total......................................           $ 13,495            $ 33,997
                                                                    ========            ========
</TABLE>

         ONE- TO FOUR-FAMILY  RESIDENTIAL  LOANS.  Our primary lending  activity
consists of the  origination of one- to four-family  residential  first mortgage
loans  secured by property  located in our primary  market  area.  We  generally
originate one- to four-family residential mortgage loans in amounts up to 80% of
the lesser of the  appraised  value or the  purchase  price with a maximum  loan
amount of  $500,000  and a maximum  term of 30 years.  We will make  residential
mortgage loans with loan-to-value ratios greater than 80% as long as they comply
with  secondary  market  standards.  Currently  we do not sell our  loans in the
secondary  market,  but  instead  act  as  an  originator  by  taking  the  loan
application  and then  forwarding it to a secondary  market lender.  Although we
make  loans  on one- to  four-family  rental  properties,  the  majority  of our
residential first mortgages are on owner-occupied properties.

                                       4
<PAGE>

         The first mortgage loans that we originate for our portfolio  generally
have rates that adjust annually after an initial period of one,  three,  five or
seven years during which the rate is fixed.  We do not  originate  30-year fixed
rate loans for our portfolio.

         The  interest  rate on ARM  loans is  based  on an index  plus a stated
margin.  ARM loans  provide for periodic  interest  rate  adjustments  upward or
downward of up to two percentage  points per year with a limit of six percentage
points  over the life of the loan.  Borrowers  on ARM loans must  qualify at the
fully  adjusted  rate.  The ratio on our ARM loans are generally  indexed to the
rates on one-year U.S. Treasury bills adjusted to a constant  maturity.  We also
have in our  portfolio  ARM loans which are indexed to the average cost of funds
for  savings  associations  in the 11th  Federal  Home  Loan Bank  District.  We
discontinued  using this  index in 1996  because it tended to lag the market and
such loans were less than 2.02% of the portfolio at December 31, 2004.

         In addition  to one- to  four-family  first  mortgage  loans,  we offer
second mortgage loans. We offer second  mortgages to customers on whose property
we hold the first mortgage and to other  customers as well. Our second  mortgage
loans have fixed  terms of up to 10 years and have fixed rates of  interest.  We
only originate a second  mortgage if the aggregate  indebtedness  secured by the
property will not exceed 80% of its appraised value. We do not offer home equity
lines of credit.

         ARM loans decrease the risk  associated  with changes in interest rates
by  periodically  repricing,  but involve other risks because as interest  rates
increase, the underlying payments by the borrower increase,  thus increasing the
potential for default by the borrower.  At the same time, the  marketability  of
the underlying  collateral may be adversely  affected by higher  interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates. At December 31, 2004, approximately 79% of the
one- to four-family residential loans we held had adjustable rates of interest.

         The mortgage loans we originate and hold generally include  due-on-sale
clauses.  These clauses give us the right to deem the loan  immediately  due and
payable in the event the borrower  transfers  ownership of the property securing
the mortgage loan without our consent.

         RESIDENTIAL CONSTRUCTION LOANS. We make a limited number of residential
construction  loans  on  one-  to  four-family  residential  properties  to  the
individuals   who  will  be  the  owners  and  occupants   upon   completion  of
construction.  Borrowers are required to pay interest on disbursed  funds during
the construction  period,  which may not last beyond 12 months. The borrower may
pay off the loan with a permanent  loan from us at completion  of  construction.
Loan proceeds are disbursed  according to a draw schedule and the appraiser must
inspect the progress of the construction  before additional funds are disbursed.
Construction loans are offered on either a fixed or adjustable basis.

         Construction lending is generally considered to involve a higher degree
of credit risk than long term financing of residential  properties.  Our risk of
loss on a  construction  loan is  dependent  largely  upon the  accuracy  of the
initial  estimate of the property's  value at completion of construction and the
estimated cost of  construction.  If the estimate of  construction  cost and the
marketability  of the  property  upon  completion  of the  project  prove  to be
inaccurate,  we may be  compelled  to advance  additional  funds to complete the
construction.  Furthermore, if the final value of the completed property is less
than the estimated amount,  the value of the property might not be sufficient to
assure the repayment of the loan.

         COMMERCIAL AND MULTI-FAMILY  REAL ESTATE LOANS. We offer commercial and
multi-family real estate loans secured by apartment buildings,  churches, office
buildings,  and other commercial  properties.  Commercial and multi-family  real
estate  loans are made for terms of up to 20 years  and have  rates of  interest
that  are  fixed  for a  period  of one  to  seven  years  and  adjust  annually
thereafter.  The interest rates on commercial and multi-family loans are indexed
to the prime rate. Loan amounts may not exceed 70% of the appraised value of the
property.  Over the past year, the Bank has sought to increase its  originations
of  commercial  and  multi-family  real estate loans in order to  diversify  the
portfolio and serve the needs of the market.

                                       5
<PAGE>

         At December 31, 2004,  the Bank's largest  commercial  real estate loan
was a $428,500  loan  secured  by a 28-unit  apartment  complex in  Madisonville
originated in December  2003.  The 20-year fully  amortizing  loan bears a fixed
rate of interest for seven years and floats with the prime rate thereafter.  The
loan-to-value ratio at origination was 64% and the loan is personally guaranteed
by the principals of the corporate borrower.  The Bank's second largest loan was
a  $393,900  loan  secured  by a  medical  office-complex  unit in  Madisonville
originated  in July 2004.  The loan has a  seven-year  amortization  and bears a
fixed  rate  of  interest.  The  loan-to-value  ratio  was  73% at the  date  of
origination.

         Commercial and  multi-family  real estate lending  entails  significant
additional risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related  borrowers.
The repayment of these loans typically is dependent on the successful  operation
of the real estate project  securing the loan.  These risks can be significantly
affected  by supply  and demand  conditions  in the market for office and retail
space and may also be subject to adverse conditions in the economy.  To minimize
these risks,  we generally  limit this type of lending to our market area and to
borrowers who are otherwise well known to us.

         COMMERCIAL  BUSINESS LOANS. We engage in a limited amount of commercial
business  lending  primarily for the  accommodation of existing  customers.  Our
commercial  business loans  generally are secured by equipment or other tangible
assets. Our largest commercial  business loan at December 31, 2004 had a balance
of approximately $84,900 and was made to a local hydraulic hose and pipe-fitting
company.

         Unlike  residential  mortgage  loans,  which  generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property whose value tends to be more
easily ascertainable,  commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself and the general economic environment.

         CONSUMER  LOANS.  We offer various types of consumer  loans in order to
provide a wider range of financial  services to our  customers.  Consumer  loans
totaled $3.0  million,  or 5.7%,  of our total loans at December  31, 2004.  Our
consumer loans consist of automobile,  personal unsecured loans, passbook,  home
improvement  loans and  equipment  loans.  Passbook and  certificate  of deposit
secured  loans are offered up to the maximum of the deposit  balance and are due
on demand.

         We offer loans for both new and used  automobiles with maximum terms of
five years and maximum  loan amounts up to 90% of the  manufacturer's  suggested
retail  price on new cars or fair market value of the  automobile  on used cars.
Personal  unsecured  loans  generally are made for amounts of $2,000 or less and
terms of 6 months and may have fixed or variable interest rates.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         LOAN  SOLICITATION,  APPROVAL AND  UNDERWRITING.  The Bank obtains loan
customers   from  a  variety  of  sources,   including   advertising,   personal
solicitation,  repeat customers and referrals from existing customers, realtors,
builders  and  others.  The Bank  also  solicits  applications  for  residential
mortgages  through its website.  Although the President and Vice Presidents have
authority to originate loans up to the loans-to-one borrower limits, loans other
than single-family  owner-occupied  mortgages and residential  mortgage loans in
excess  of  $250,000  are  generally  submitted  to the Board of  Directors  for
approval.

         Upon  receipt  of a  completed  loan  application  from  a  prospective
borrower,  a credit report is ordered.  Income and certain other  information is
verified. If necessary,  additional financial  information may be requested.  An
appraisal or other  estimate of value of the real estate  intended to be used as
security for the proposed loan is obtained.  Appraisals  are prepared by outside
fee appraisers who are approved by the Board of Directors.

                                       6
<PAGE>

         A title  opinion or title  insurance is generally  required on all real
estate  loans.  Borrowers  also must obtain fire and casualty  insurance.  Flood
insurance is also  required on loans  secured by property  which is located in a
flood zone.

         LOAN ORIGINATIONS.  The following table sets forth certain  information
with respect to our loan  originations  for the periods  indicated.  We have not
purchased or sold any loans in the secondary market in recent years.
<TABLE>
<CAPTION>

                                                         YEAR ENDED DECEMBER 31,
                                                         -----------------------
                                                            2004          2003
                                                         ---------      --------
                                                               (IN THOUSANDS)
<S>                                                        <C>           <C>
Loans originated:
  Real estate mortgage loans:
     One- to four-family residential first ...........     $16,696       $16,475
     One- to four-family residential second ..........         231           507
     Multi-family ....................................         269          --
     Commercial ......................................       4,208         1,675
     Construction ....................................       3,043         1,031
  Other loans:
     Consumer installment ............................         419           200
     Commercial ......................................       1,167            98
     Automobile ......................................       1,810           891
     Passbook ........................................         353           283
     Other ...........................................         109           208
                                                           -------       -------
        Total loans originated .......................     $28,305       $21,368
                                                           =======       =======
</TABLE>

         LOANS TO ONE BORROWER. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000 or 15% of our unimpaired
capital and unimpaired  surplus without  approval by our Board of Directors.  We
may lend an additional 10% of our unimpaired  capital and unimpaired  surplus if
the  loan is  fully  secured  by  readily  marketable  collateral.  Our  maximum
loans-to-one-borrower  limit without Board approval was $500,000 at December 31,
2004. However, with the approval of the Board, at December 31, 2004 we had loans
totaling more than $500,000 to three different customers.  At December 31, 2004,
our largest loan concentration outstanding had a balance of $907,300.

NONPERFORMING AND PROBLEM ASSETS

         LOAN DELINQUENCIES. Generally when a mortgage loan becomes 15 days past
due,  a notice  of  nonpayment  is sent to the  borrower.  If  payment  is still
delinquent after 30 days, the borrower will receive a formal delinquency notice.
The borrower  will be contacted by telephone or visited  personally  if the loan
remains  delinquent after 45 days. If the loan continues in a delinquent  status
for 120 days  past due and no  repayment  plan is in  effect,  the loan  will be
referred to an attorney for collection, with foreclosure commenced no later than
180 days.  The customer  will be notified  when  foreclosure  is  commenced.  At
December  31,  2004,  our loans  past due  between 30 and 89 days  totaled  $1.6
million.

         Loans are  reviewed on a monthly  basis and are  generally  placed on a
non-accrual  status when the loan becomes more than 90 days  delinquent or when,
in our opinion,  the  collection  of additional  interest is doubtful.  Interest
accrued and unpaid at the time a loan is placed on nonaccrual  status is charged
against  interest  income.  Subsequent  interest  payments,  if any,  are either
applied to the  outstanding  principal  balance or recorded as interest  income,
depending on the assessment of the ultimate collectibility of the loan.

                                       7
<PAGE>

         NONPERFORMING  ASSETS.  The  following  table  sets  forth  information
regarding  non-accrual  loans,  accruing loans past due 90 days or more and real
estate owned. The Bank did not have any troubled debt restructurings  within the
meaning of  Statement  of  Financial  Accounting  Standards  No. 15 at the dates
indicated below.
<TABLE>
<CAPTION>
                                                               AT DECEMBER 31,
                                                          -------------------------
                                                           2004               2003
                                                          ------             ------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                        <C>               <C>
Loans accounted for on a non-accrual basis:(1)
 Real estate:
    One- to four-family residential first..........        $  119            $   28
    One- to four-family residential second.........             3                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --
     Commercial....................................            --                --
     Automobile....................................             9                --
     Passbook......................................            --                --
     Other.........................................            --                --
                                                           ------            ------
     Total.........................................        $  131            $   28
                                                           ======            ======
Accruing loans which are contractually
 past due 90 days or more:
  Real estate:
    One- to four-family residential first..........        $  158            $   20
    One- to four-family residential second.........            --                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --                --
     Commercial....................................            --                --
     Automobile....................................             6                --
     Passbook......................................            --                --
     Other.........................................             1                 2
                                                           ------            ------
     Total.........................................        $  165            $   20
                                                           ======            ======

     Total nonperforming loans.....................        $  296            $   48
                                                           ======            ======
  Percentage of total loans........................          0.57%             0.13%
                                                           ======            ======

  Other non-performing assets(2)...................        $  --             $   --
                                                           ======            ======
<FN>
_______________
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a  nonaccrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         management's assessment of the collectibility of the loan.
(2)      Other  nonperforming  assets  represents  property acquired by the Bank
         through  foreclosure or  repossession.  This property is carried at the
         lower of its fair market value or the principal  balance of the related
         loan, whichever is lower.
</FN>
</TABLE>

         During the year ended  December  31,  2004,  gross  interest  income of
approximately  $2,000  would  have been  recorded  on loans  accounted  for on a
nonaccrual  basis if the  loans  had been  current  throughout  the  period.  No
interest on such loans was included in income during 2004.

                                       8
<PAGE>

         Loans which are not currently  classified as non-accrual,  90 days past
due or restructured but where known  information  about possible credit problems
of borrowers causes management to have serious concerns as to the ability of the
borrowers  to  comply  with  present  loan  repayment  terms  and may  result in
disclosure as non-accrual,  90 days past due or restructured  amounted to $2,000
at December 31, 2004.

         CLASSIFIED ASSETS. OTS regulations provide for a classification  system
for problem  assets of savings  institutions  which  covers all problem  assets.
Under this classification system, problem assets of savings institutions such as
ours  are  classified  as  "substandard,"  "doubtful,"  or  "loss."  An asset is
considered  substandard if it is inadequately protected by the current net worth
and paying  capacity  of the  borrower  or of the  collateral  pledged,  if any.
Substandard  assets include those  characterized  by the "distinct  possibility"
that the savings  institution  will sustain "some loss" if the  deficiencies are
not corrected. Assets classified as doubtful have all of the weaknesses inherent
in  those  classified  substandard,  with  the  added  characteristic  that  the
weaknesses  present make  "collection  or  liquidation  in full, on the basis of
currently  existing facts,  conditions,  and, values,  "highly  questionable and
improbable." Assets classified as loss are those considered  "uncollectible" and
of such little value that their  continuance as assets without the establishment
of a specific loss reserve is not warranted.  Assets may be designated  "special
mention"   because  of  potential   weakness  that  do  not  currently   warrant
classification in one of the aforementioned categories.

         When  a  savings  institution   classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets.  When a savings  institution  classifies
problem assets as loss, it is required either to establish a specific  allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings institution's  determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS,  which may order the  establishment  of additional  general or specific
loss  allowances.  A portion of general  loss  allowances  established  to cover
possible  losses related to assets  classified as substandard or doubtful may be
included in determining a savings  institution's  regulatory  capital.  Specific
valuation  allowances  for loan losses  generally  do not qualify as  regulatory
capital.

         At  December  31,  2004,  we  had  $343,000  in  loans   classified  as
substandard and $2,000 in loans classified as doubtful.  The Bank's  substandard
assets at December 31, 2004 consisted of 10  residential  first  mortgages.  The
doubtful  assets  consisted  of 2  unsecured  loans with a  combined  balance of
$2,000.  Reserves of $51,000 have been allocated to the  substandard  assets and
$1,000 have been allocated to the doubtful assets.

         FORECLOSED REAL ESTATE.  Real estate acquired in settlement of loans is
carried at the lower of the  unpaid  loan  balance or fair value less  estimated
costs to sell.  Write-downs  from the unpaid  loan  balance to fair value at the
time of  foreclosure  are charged to the allowance  for loan losses.  Subsequent
write-downs to fair value, net of disposal costs, are charged to other expenses.
At  December  31,  2004,  we had no  properties  which  we  received  in lieu of
foreclosure.

         ALLOWANCE   FOR  LOAN  LOSSES.   The   allowance  for  loan  losses  is
management's  estimate of probable  inherent credit losses in the loan portfolio
at the balance sheet date. The Bank  determines  the allowance  based on ongoing
evaluations.  This  evaluation  is  inherently  subjective  because it  requires
material  estimates,  including the amounts and timing of cash flows expected to
be received on impaired loans. Those estimates may be susceptible to significant
change. Increases to the allowance are made by charges to the provision for loan
losses,  which is reflected in the statements of operations.  Loans deemed to be
uncollectible are charged against the allowance.  Recoveries of loans previously
charged off are credited to the  allowance.  See  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations -- Critical Accounting
Policies" for further  discussion of the Bank's  methodology for determining the
allowance.

         We monitor  our  allowance  for loan losses and make  additions  to the
allowance as economic  and other  conditions  dictate.  Although we maintain our
allowance for loan losses at a level that we consider  adequate for the inherent
risk of loss in our loan  portfolio,  actual  losses could exceed the balance of
the allowance for loan losses and

                                       9
<PAGE>

additional  provisions  for loan losses  could be  required.  In  addition,  our
determination  as to the amount of its  allowance  for loan losses is subject to
review by the OTS,  as part of its  examination  process.  After a review of the
information available,  the OTS might require the establishment of an additional
allowance.

         The  following  table sets forth an analysis of our  allowance for loan
losses for the periods indicated.
<TABLE>
<CAPTION>

                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               2004              2003
                                                              -------            ------
                                                               (DOLLARS IN THOUSANDS)

<S>                                                           <C>                <C>
Balance at beginning of period.....................           $   181            $  106
                                                              -------            ------
Loans charged-off:
  Real estate mortgage loans:
    One- to four-family residential first..........                 9                --
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                --                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                --                 7
    Commercial.....................................                --                --
    Automobile.....................................                12                --
    Passbook.......................................                --                --
    Other..........................................                 4                 2
                                                              -------            ------
Total charge-offs..................................                25                 9
                                                              -------            ------

Recoveries:
  Real estate mortgage loans:
    One- to four-family residential first..........                --                --
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                                  --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                 1                 2
    Commercial.....................................                --                --
    Automobile.....................................                --                --
    Passbook.......................................                --                --
    Other..........................................                --                --
                                                              -------            ------
Total recoveries...................................                 1                 2
                                                              -------            ------

Net loans charged-off..............................                24                 7
                                                              -------            ------
Provision for loan losses..........................               163                82
                                                              -------            ------
Balance at end of period...........................           $   320            $  181
                                                              =======            ======
Ratio of net charge-offs to average
   loans outstanding during the period.............              0.05%             0.02%
                                                              =======            ======
</TABLE>

                                       10
<PAGE>

         The following  table  illustrates  the  allocation of the allowance for
loan losses for each category of loan.  The  allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not  restrict our use of the  allowance to absorb  losses in other loan
categories.
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31,
                                            --------------------------------------------------
                                                  2004                        2003
                                            ------------------------    ----------------------
                                                       PERCENT OF                 PERCENT OF
                                                       LOANS IN EACH              LOANS IN EACH
                                                       CATEGORY TO                CATEGORY TO
                                            AMOUNT     TOTAL LOANS      AMOUNT    TOTAL LOANS
                                            ------     -----------      ------    ------------
                                                            (DOLLARS IN THOUSANDS)
<S>                                          <C>        <C>             <C>         <C>
Real estate mortgage loans:
    One- to four-family residential first    $257       80.25%          $111       83.57%
    One- to four-family residential second      3        0.89             --        1.91
    Multi-family .........................      2        0.58              5        1.24
    Commercial ...........................     22        6.81             20        6.81
    Construction .........................      8        2.57             --        1.54
Other loans:
    Consumer installment .................      6        1.90             25        0.47
    Commercial ...........................      8        2.55              4        0.50
    Automobile ...........................     14        4.45             13        2.79
    Passbook .............................      0           0             --        0.83
    Other ................................      0           0              3        0.34
                                             ----      ------           ----      ------
     Total allowance for loan losses .....   $320      100.00%          $181      100.00%
                                             ====      ======           ====      ======
</TABLE>

INVESTMENT ACTIVITIES

         INVESTMENT  SECURITIES.  We are  required  by  federal  regulations  to
maintain a minimum  amount of liquid  assets  which may be invested in specified
short-term securities and certain other investments.  The level of liquid assets
varies depending upon several factors,  including:  (i) the yields on investment
alternatives;  (ii) our  judgment  as to the  attractiveness  of the yields then
available in relation to other opportunities;  (iii) expectation of future yield
levels;  and (iv) our  projections as to the  short-term  demand for funds to be
used in loan  origination  and other  activities.  At  December  31,  2004,  our
investment  securities  portfolio  consisted  primarily of FHLB bonds of various
maturities.

         Our  securities at December 31, 2004 did not contain  securities of any
issuer with an  aggregate  book value in excess of 10% of our equity,  excluding
those issued by the United States Government or its agencies.

         MORTGAGE-BACKED  SECURITIES.  We  have  invested  from  time to time in
residential mortgage-backed securities.  Mortgage-backed securities can serve as
collateral for borrowings  and,  through  repayments,  as a source of liquidity.
Mortgage-backed  securities represent a participation interest in a pool of one-
to four-family or other type of mortgages.  Principal and interest  payments are
passed  from  the  mortgage  originators,   through  intermediaries   (generally
quasi-governmental agencies) that pool and repackage the participation interests
in the  form  of  securities,  to  investors  such  as us.  Our  mortgage-backed
securities  portfolio  consists  primarily  of  participations  or  pass-through
certificates  issued by the Government National Mortgage  Association  ("GNMA").
GNMA  certificates are guaranteed as to principal and interest by the full faith
and credit of the United States. Our  mortgage-backed  securities  portfolio was
classified as "held-to-maturity" at December 31, 2004.

         Expected  maturities  will differ from  contractual  maturities  due to
scheduled  repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate or adjustable
mortgage loans. Mortgage-backed securities are generally referred to as mortgage
participation certificates or pass-through certificates.  The interest rate risk
characteristics  of the  underlying  pool  of  mortgages  (i.e.,  fixed-rate  or
adjustable-rate)  and the  prepayment  risk,

                                       11
<PAGE>

are  passed  on  to  the  certificate  holder.  The  life  of a  mortgage-backed
pass-through security is equal to the life of the underlying mortgages.

         The  following  table sets forth the carrying  value of our  investment
securities and mortgage-backed portfolio at the dates indicated.
<TABLE>
<CAPTION>
                                                           AT DECEMBER 31,
                                                        -------------------
                                                         2004         2003
                                                        ------       ------
                                                       (DOLLARS IN THOUSANDS)
<S>                                                     <C>          <C>
Securities available-for-sale:
   U.S. government and agency securities .............  $2,215       $1,976
Securities held-to-maturity:
   U.S. government and agency securities .............       0        1,300
   Mortgage-backed securities ........................      89          124
                                                        ------       ------
      Total investments ..............................  $2,304       $3,400
                                                        ======       ======
</TABLE>

                                       12
<PAGE>
         The  following  table sets  forth the  scheduled  maturities,  carrying
values,  market  values and  average  yields  for our  investment  portfolio  at
December  31,  2004.  The  amortized  cost  and fair  value  of  mortgage-backed
securities  are  presented  in  the  held-to-maturity  category  by  contractual
maturity in the following table.  Expected maturities may differ from contracted
maturities  because  borrowers may have the right to call or prepay  obligations
without call or prepayment penalties.
<TABLE>
<CAPTION>

                                              ONE YEAR OR LESS          ONE TO FIVE YEARS       FIVE TO TEN YEARS
                                             --------------------    ---------------------    --------------------
                                                         WEIGHTED                 WEIGHTED                WEIGHTED
                                             CARRYING    AVERAGE     CARRYING     AVERAGE     CARRYING    AVERAGE
                                               VALUE      YIELD        VALUE       YIELD        VALUE       YIELD
                                             --------    --------    ---------    --------    --------    --------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                          <C>         <C>         <C>             <C>      <C>
Securities available for sale:
  U.S. government and agency securities...   $    504    2.50%       $ 1,754         2.51%    $      0         --  %

Securities held to maturity:
  Mortgage-backed securities..............          0      --             29         8.00            0         --
                                             --------                -------                  --------
     Total................................   $    504                $ 1,783                  $      0
                                             ========                =======                  ========

<CAPTION>

                                                MORE THAN TEN YEARS      TOTAL  INVESTMENT SECURITIES
                                                ---------------------   -------------------------------
                                                            WEIGHTED
                                                CARRYING    AVERAGE     CARRYING    MARKET      AVERAGE
                                                  VALUE       YIELD       VALUE     VALUE        YIELD
                                                --------    ---------   --------   -------      -------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                             <C>                     <C>         <C>           <C>
Securities available for sale:
  U.S. government and agency securities...      $      0         -- %   $  2,258    $  2,215      2.51%

Securities held to maturity:
  Mortgage-backed securities..............            60        8.38          89          95      8.26
                                                --------                --------    --------
     Total................................      $     60                $  2,347    $  2,310
                                                ========                ========    ========
</TABLE>


                                       13
<PAGE>
SOURCES OF FUNDS

         Deposits are our major  external  source of funds for lending and other
investment  purposes.  Funds are also  derived  from the  receipt of payments on
loans and  prepayment  of loans and,  to a much  lesser  extent,  maturities  of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.

         DEPOSITS.  We attract  deposits  principally  from  within our  primary
market area through the offering of a selection of deposit instruments including
regular savings accounts,  money market accounts, and term certificate accounts.
Deposit account terms vary according to the minimum balance  required,  the time
period the funds must remain on deposit,  and the  interest  rate.  The interest
rates  we pay  on  deposits  are  set  weekly  at the  direction  of our  senior
management.  Interest rates are determined based on our liquidity  requirements,
interest  rates paid by our  competitors,  and our growth  goals and  applicable
regulatory restrictions and requirements.

         Like  most  savings  institutions,  the  Bank has  historically  relied
primarily on certificates  of deposit for funding.  In order to attract funds in
prior years, the Bank had paid higher rates on certificate accounts which caused
its cost of funds to increase.  Recently,  the Bank has  attempted to reduce its
reliance on certificate accounts by attracting more transaction  accounts,  such
as checking,  NOW and money market accounts. As higher rate certificates mature,
the Bank expects to reduce its cost of funds.

         At December 31, 2004, time  certificates in amounts of $100,000 or more
constituted  $9.6 million,  or 20.8%, of our total deposit base. The majority of
these certificates represent deposits from long-standing customers.
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                             ---------------------------------------------
                                                    2004                     2003
                                             -------------------      --------------------
                                             AVERAGE     AVERAGE      AVERAGE      AVERAGE
                                             BALANCE       RATE       BALANCE        RATE
                                             -------     -------      -------      -------
                                                        (DOLLARS IN THOUSANDS)
<S>                                           <C>                     <C>
Non interest-bearing demand............       $  4,047      --  %     $  1,674         --%
Interest-bearing demand................          5,652      0.33%        4,259       0.26%
Passbook savings.......................          4,091      0.30%        4,068       0.37%
Certificates of deposit................         32,676      3.24%       23,191       3.47%
                                              --------                --------
     Total.............................       $ 46,466                $ 33,192
                                              ========                ========
</TABLE>


     The following table classifies our time certificates of $100,000 or more by
time remaining to maturity as of December 31, 2004.

                                                           CERTIFICATES
MATURITY PERIOD                                             OF DEPOSIT
---------------                                            -------------
                                                          (IN THOUSANDS)

Three months or less..............................          $     514
Over three through six months.....................                842
Over six through 12 months........................              4,296
Over 12 months....................................              3,995
                                                            ---------
                                                            $   9,647
                                                            =========

         BORROWINGS.  Advances  (borrowings)  may be  obtained  from the FHLB of
Cincinnati to supplement our supply of lendable funds. Advances from the FHLB of
Cincinnati  are  typically  secured  by a  pledge  of our  stock  in the FHLB of
Cincinnati and a portion of our first mortgage  loans.  Each FHLB credit program
has its own  interest  rate,  which  may be fixed or  adjustable,  and  range of
maturities.  At December 31, 2004, our borrowings from the FHLB consisted of $13
million in short-term, fixed-rate advances.

                                       14
<PAGE>

         The following table sets forth certain information at the dates and for
the periods  indicated  regarding the Bank's FHLB  advances  which were its only
category of borrowings outstanding during the past two fiscal years.
<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                             ----------------------------
                                                                               2004                 2003
                                                                             -------              --------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                          <C>                  <C>
Amounts outstanding at end of period.................................        $13,000              $  5,000
Weighted average rate paid ..........................................           1.76%                 1.22%
Maximum amount of borrowings outstanding at any month end............        $13,000              $  5,000
Average borrowings outstanding ......................................        $ 7,717              $  4,016
Approximate weighted average rate paid ..............................           1.76%                 1.22%
</TABLE>

COMPETITION

         We compete for deposits with other insured financial  institutions such
as local commercial banks,  thrift  institutions,  credit unions and multi-state
regional  banks in our market  area.  We also  compete for funds with  insurance
products sold by local agents and  investment  products such as mutual funds and
other securities sold by local and regional brokers.  According to data from the
FDIC, we held approximately 7.33% of FDIC-insured  deposits in Hopkins County as
of June 30, 2004, the latest date for which such data was  available.  Such data
does not cover deposits held by credit unions. We have historically competed for
deposits by paying higher rates than our local competitors.

         Our competition for loans depends on market  conditions and the type of
lending. Our competition for residential mortgages comes primarily from mortgage
bankers and brokers who primarily originate long-term fixed-rate loans on behalf
of secondary market  investors.  While we also originate  long-term,  fixed-rate
loans on  behalf  of  secondary  market  investors,  our  principal  residential
mortgage  loan  offerings  are our various  ARM loans  which we market  based on
flexibility of terms and superior  service.  We compete  primarily against other
local depository institutions for commercial and multi-family real estate loans.
We  compete  for  these  lending  opportunities  primarily  on the  basis of our
flexibility and  responsiveness as a locally owned and oriented  community bank.
We compete  against other local  financial  institutions  and a variety of other
lenders including  finance  companies and automobile  dealers for consumer loans
and second mortgages.  We generally compete for these loans based on our variety
of lending solutions, customer relationships and quality of service.

                                   REGULATION

GENERAL

         As a federally chartered, SAIF-insured savings institution, the Bank is
subject to  extensive  regulation  by the OTS and the FDIC.  The Bank's  lending
activities  and other  investments  must comply with  various  federal and state
statutory and regulatory  requirements,  and the OTS  periodically  examines the
Bank for  compliance  with various  regulatory  requirements.  The FDIC also has
authority to conduct  periodic  examinations.  We must file reports with the OTS
describing  our  activities  and our  financial  condition,  and we must  obtain
approvals from regulatory authorities before entering into certain transactions,
such as the conversion or mergers with other financial institutions. We are also
subject to certain reserve requirements promulgated by the Board of Governors of
the Federal Reserve System ("Federal Reserve System"). Our relationship with our
depositors  and  borrowers  is also  regulated  to a great extent by federal and
state law,  especially in such matters as the ownership of savings  accounts and
the form and content of our mortgage documents.  This supervision and regulation
is primarily intended to protect depositors. The regulatory structure also gives
the  regulatory  authorities  extensive  discretion  in  connection  with  their
supervisory  and  enforcement  activities and  examination  policies,  including
policies with respect to the  classification  of assets and the establishment of
adequate loan loss reserves for regulatory purposes.  Any change in regulations,
whether  by the OTS,  the FDIC or any  other  government  agency,  could  have a
material adverse impact on our operations.

                                       15
<PAGE>

REGULATION OF THE BANK

         INSURANCE OF DEPOSIT  ACCOUNTS.  The FDIC  maintains two separate funds
for the  insurance  of  deposits up to  prescribed  statutory  limits.  The Bank
Insurance  Fund ("BIF")  insures the deposits of  commercial  banks and the SAIF
insures the deposits of savings  associations.  We are a member of the SAIF. The
FDIC is authorized to establish  separate  annual  assessment  rates for deposit
insurance for members of the BIF and the SAIF. The FDIC may increase  assessment
rates for either fund if  necessary  to restore the fund's  ratio of reserves to
insured  deposits to its target level within a reasonable  time and may decrease
such  assessment  rates  if such  target  level  has  been  met.  The  FDIC  has
established a risk-based assessment system for both SAIF and BIF members.  Under
this  system,  assessments  are set  within  a  range,  based  on the  risk  the
institution  poses to its deposit  insurance fund. This risk level is determined
based on the  institution's  capital  level and the FDIC's level of  supervisory
concern about the institution.

         REGULATORY  CAPITAL  REQUIREMENTS.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to at least 1.5% of total  adjusted  assets,  (2) core capital equal to at least
4.0% of total  adjusted  assets (3.0% for the strongest  institutions),  and (3)
total risk-based capital equal to at least 8.0% of total  risk-weighted  assets.
In  addition,  the OTS may require a savings  institution  that has a risk-based
capital ratio 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% (3.0% if the  institution  has received the highest rating on its most
recent  examination) take certain actions to increase its capital ratios. If the
institution's  capital is significantly  below the minimum required levels or if
it is unsuccessful in increasing its capital ratios,  the OTS may  significantly
restrict its activities.

         Core  capital  is  defined as common  stockholders'  equity  (including
retained  earnings),  non-cumulative  perpetual  preferred  stock  and  minority
interests  in  the  equity  accounts  of  consolidated   subsidiaries,   certain
non-withdrawable  accounts and pledged  deposits of mutual savings  associations
and qualifying  supervisory  goodwill,  less intangible  assets (other than core
deposit intangibles,  servicing assets,  purchased credit card relationships and
other  qualifying  intangible  assets) and investments in certain  subsidiaries.
Tier 1 has the same definition as core capital.  Tangible  capital is defined as
core  capital  less  supervisory  goodwill,  non-mortgage  servicing  assets and
purchased   credit  card   relationships   and  less  certain   investments   in
subsidiaries.

         Total   risk-based   capital  equals  the  sum  of  core  capital  plus
supplementary  capital. The components of supplementary  capital include,  among
other items,  cumulative perpetual preferred stock, perpetual subordinated debt,
mandatory convertible subordinated debt,  intermediate-term preferred stock, and
the portion of the  allowance for loan losses not  designated  for specific loan
losses.  Overall,  supplementary  capital is limited to 100% of core capital.  A
savings institution must calculate its risk-weighted  assets by multiplying each
asset and  off-balance  sheet item by various risk factors as  determined by the
OTS,  which  range  from 0% for  cash to 100%  for  delinquent  loans,  property
acquired through  foreclosure,  commercial  loans, and other assets. At December
31, 2004, we were in compliance with all regulatory  capital  requirements as is
shown in the table below.


                                       16
<PAGE>
<TABLE>
<CAPTION>
                                                                             PERCENT
                                                            AMOUNT         OF ASSETS(1)
                                                            ------         ------------
<S>                                                         <C>               <C>
Tangible capital ...................................        $3,842            6.05%
Tangible capital requirement .......................           953            1.50
                                                            ------           -----
    Excess .........................................        $2,889            4.55%
                                                            ======           =====

Core capital .......................................        $3,842            6.05%
Core capital requirement(2) ........................         2,542            4.00
                                                            ------           -----
    Excess .........................................        $1,300            2.05%
                                                            ======           =====

Total risk-based capital ...........................        $4,161           11.78%
Total risk-based capital requirement ...............         2,826            8.00
                                                            ------           -----
    Excess .........................................        $1,335            3.88%
                                                            ======           =====
<FN>
_________________
(1)      Based on adjusted total assets for purposes of the tangible capital and
         core capital  requirements and risk-weighted  assets for purpose of the
         total risk-based capital requirement.
(2)      Reflects the capital  requirement  which the Bank must satisfy to avoid
         regulatory   restrictions  that  may  be  imposed  pursuant  to  prompt
         corrective action regulations.
</FN>
</TABLE>

         The Bank currently meets the criteria to be treated as well capitalized
under  OTS  regulations.  As a well  capitalized  institution,  the  Bank is not
subject  to  various   sanctions   that  may  be  imposed  on   undercapitalized
institutions. As long as the Bank is well capitalized or adequately capitalized,
it may be eligible for expedited  treatment of its regulatory  applications  and
lower examination and deposit insurance assessment rates.

         DIVIDEND AND OTHER CAPITAL  DISTRIBUTION  LIMITATIONS.  OTS regulations
will  require the Bank to give the OTS 30 days  advance  notice of any  proposed
declaration  of dividends  to the  Company.  The OTS may prohibit the payment of
dividends  to the Company.  In addition,  the Bank may not declare or pay a cash
dividend  on its  capital  stock  if the  effect  would  be to  reduce  the Bank
regulatory  capital below the amount required for the liquidation  account to be
established at the time of the conversion.

         Savings  associations  must submit  notice to the OTS prior to making a
capital  distribution (which includes  dividends,  stock repurchases and amounts
paid to stockholders in another  institution in a cash merger) if (a) they would
not be well  capitalized  after the  distribution,  (b) the  distribution  would
result in the retirement of any of the  association's  common or preferred stock
or  debt  counted  as its  regulatory  capital,  or  (c)  the  association  is a
subsidiary of a holding company. A savings  association must make application to
the OTS to pay a  capital  distribution  if (x)  the  association  would  not be
adequately  capitalized following the distribution,  (y) the association's total
distributions  for the calendar year exceed the association's net income for the
calendar year to date plus its net income (less distributions) for the preceding
two years, or (z) the  distribution  would otherwise  violate  applicable law or
regulation or an agreement with or condition imposed by the OTS.

         A savings institution is prohibited from making a capital  distribution
if,  after  making  the   distribution,   the  savings   institution   would  be
undercapitalized  (i.e.,  not meet  any one of its  minimum  regulatory  capital
requirements).  Further,  a savings  institution  cannot  distribute  regulatory
capital that is needed for its liquidation account.

         QUALIFIED  THRIFT  LENDER  TEST.  Savings   institutions  must  meet  a
Qualified  Thrift  Lender  test.  To satisfy the test,  the Bank must either (i)
qualify as a "domestic building and loan association" under the Internal Revenue
Code by  maintaining  at least 60% of our total  assets  in  specified  types of
assets,  including cash,  certain  government  securities,  loans secured by and
other  assets  related  to  residential  real  property,  educational  loans and
investments in premises of the  institution or (ii) maintain at least 65% of the
Bank's portfolio assets (total assets less intangible assets, property we use in
conducting  our business  and liquid  assets in an amount not  exceeding  20% of
total assets) in Qualified  Thrift  Investments.  Qualified  Thrift  Investments
consist primarily of residential  mortgage loans and  mortgage-backed  and other
securities related to domestic, residential real estate or manufactured housing.
The  shares

                                       17
<PAGE>

of stock the Bank  owns in the FHLB of  Cincinnati  also  qualify  as  Qualified
Thrift Investments. Subject to an aggregate limit of 20% of portfolio assets, we
may also count the  following as Qualified  Thrift  Investments:  (i) 50% of the
dollar  amount  of  residential   mortgage  loans   originated  for  sale,  (ii)
investments in the capital stock or  obligations  of any service  corporation or
operating  subsidiary  as long as such  subsidiary  derives  at least 80% of its
revenues  from domestic  housing  related  activities,  (iii) 200% of the dollar
amount of loans and  investments  to  purchase,  construct  or develop  "starter
homes," subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase,  construction  or  development  of domestic  residential
housing  or  community  centers  in  "credit  needy"  areas or loans  for  small
businesses  located in such areas,  (v) loans for the purchase,  construction or
development of community centers, (vi) loans for personal,  family, household or
educational purposes, subject to a maximum of 10% of portfolio assets, and (vii)
shares of the Federal Home Loan  Mortgage  Corporation  or the Federal  National
Mortgage Association stock.

         If the Bank  satisfies  the test,  the Bank will continue to enjoy full
borrowing  privileges from the FHLB of Cincinnati.  If the Bank does not satisfy
the test,  it may lose its borrowing  restrictions  and be subject to activities
and branching  restrictions  applicable to national  banks.  Compliance with the
Qualified  Thrift  Lender test is  determined  on a monthly basis in nine out of
every 12 months.  As of December 31, 2004,  the Bank was in compliance  with the
Qualified Thrift Lender requirement.

         TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
institution  and  its  affiliates  are  subject  to  certain  limitations.  Such
transactions  must be on  terms  as  favorable  to the  savings  institution  as
comparable  transactions  with  non-affiliates.  In addition,  certain  types of
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. The Bank's
affiliates  include  the Company  and any  company  which would be under  common
control with the Bank. In addition,  a savings institution may not extend credit
to any  affiliate  engaged in  activities  not  permissible  for a bank  holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS  has  the  discretion  to  treat  subsidiaries  of  savings  institution  as
affiliates on a case-by-case basis.

         LOANS TO DIRECTORS,  EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS. The
Bank's loans to its directors, executive officers and our principal stockholders
may not be made on terms more favorable than those afforded to other  borrowers,
except loans made as part of a benefit or compensation  program widely available
to the  Bank's  employees  and which  does not give more  preferential  terms to
directors, executive officers or principal stockholders than to other employees.
In  addition,  the Bank  cannot  make  loans in  excess  of  certain  levels  to
directors,  executive  officers or 10% or greater  stockholders (or any of their
affiliates) unless the loan is approved in advance by a majority of the Board of
Directors with any "interested" director not voting. We are also prohibited from
paying any overdraft of any of our executive officers or directors.  We are also
subject  to  certain  other  restrictions  on the  amount  and  type of loans to
executive  officers and  directors  and must  annually  report such loans to our
regulators.

         FEDERAL  HOME  LOAN  BANK  SYSTEM.  The Bank is a member of the FHLB of
Cincinnati,  which is one of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region.  It is funded primarily
from funds deposited by savings  institutions and proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the Board of
Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Cincinnati  in an amount equal to at least 1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year, or 1/20 of its advances from the FHLB of Cincinnati,
whichever is greater. At December 31, 2004, the Bank had $687,000 in FHLB stock,
at cost, which was in compliance with this requirement.

         FEDERAL  RESERVE  SYSTEM.  The  Federal  Reserve  System  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time certificates. At December 31, 2004, the
Bank's reserves met the minimum level required by the Federal Reserve System.

                                       18
<PAGE>

REGULATION OF THE COMPANY

         GENERAL.  The Company is  registered  and required to file reports with
the OTS and is subject to regulation  and  examination  by the OTS. In addition,
the  OTS  has  enforcement  authority  over  the  Company  and  any  non-savings
institution  subsidiaries.   This  permits  the  OTS  to  restrict  or  prohibit
activities  that it determines to be a serious risk to the Bank. This regulation
is intended  primarily for the  protection of the Bank's  depositors and not for
the  benefit of  stockholders.  The  Company is also  required  to file  certain
reports with,  and comply with the rules and  regulations  of, the SEC under the
federal securities laws.

         ACTIVITIES  RESTRICTIONS.  As a savings and loan holding company formed
after May 4, 1999, the Company and its non-savings association  subsidiaries are
subject to statutory and regulatory  restrictions on their business  activities.
Under the Home Owners' Loan Act, as amended by the  Gramm-Leach-Bliley  Act (the
"GLB Act"), the non-banking  activities of the Company are restricted to certain
activities  specified by statute or OTS  regulation,  which  include  performing
services  and  holding  properties  used by a  savings  association  subsidiary,
activities  authorized  for multiple  savings and loan  holding  companies as of
March 5, 1987, and non-banking activities permissible for bank holding companies
pursuant to the Bank Holding  Company Act of 1956 (the "BHC Act") or  authorized
for financial holding companies pursuant to the GLB Act. Furthermore, no company
may  acquire  control of the Bank  unless the  acquiring  company  was a unitary
savings and loan holding company on May 4, 1999 (or became a unitary savings and
loan holding company pursuant to an application  pending as of that date) or the
company is only engaged in activities  that are  permitted for multiple  savings
and loan holding  companies or for financial holding companies under the BHC Act
as amended by the GLB Act.

         RESTRICTIONS ON ACQUISITIONS. The Company must obtain approval from the
OTS before  acquiring  control of any other savings  institution  or savings and
loan holding company, substantially all the assets thereof or in excess of 5% of
the  outstanding  shares of another  savings  institution  or  savings  and loan
holding  company.  The  Company's  directors  and officers or persons  owning or
controlling  more than 25% of the Company's  stock must also obtain  approval of
the OTS before acquiring control of any savings  institution or savings and loan
holding company.

         The OTS may only approve acquisitions that will result in the formation
of  a  multiple   savings  and  loan  holding  company  which  controls  savings
institutions  in more than one  state  if:  (i) 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;  (ii) the  acquiror  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit  Insurance  Act;  or (iii)  the  statutes  of the  state  in  which  the
institution to be acquired is located  specifically  permit  institutions  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).

                                       19
<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY
---------------------------------

         The following  table sets forth certain  information  regarding our two
offices.
<TABLE>
<CAPTION>

                                                        BOOK VALUE AT
                               YEAR       OWNED OR       DECEMBER 31,       APPROXIMATE
                              OPENED       LEASED           2004          SQUARE FOOTAGE
                              ------      --------      --------------    --------------
                                           (DOLLARS IN THOUSANDS)
<S>                           <C>           <C>             <C>                <C>
MAIN OFFICE:
2420 North Main Street
Madisonville, KY  42431        2004         Owned           $1,528             8,400

BRANCH OFFICE:
240 South Main Street
Madisonville, KY 42431         1959         Owned           $1,267             4,200
</TABLE>

         The book value of the Bank's  investments  in  premises  and  equipment
totaled  $2,795  at  December  31,  2004.  See Note 5 of  Notes to  Consolidated
Financial Statements.


ITEM 3.   LEGAL PROCEEDINGS
---------------------------

         We are, from time to time, a party to legal proceedings  arising in the
ordinary  course of our business,  including  legal  proceedings  to enforce our
rights against borrowers.  We are not currently a party to any legal proceedings
which  are  expected  to  have  a  material  adverse  effect  on  our  financial
statements.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
-------------------------------------------------------------

         There  were no  matters  submitted  to a vote of the  security  holders
during the fourth quarter of fiscal year 2004.

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------

         (a) MARKET  INFORMATION.  The  Company's  common stock is traded on the
Over-the-Counter  Electronic Bulletin Board ("OTCBB") under the symbol:  "CFBC."
The following  table sets forth high and low sales  information  reported on the
OTCBB for the Common Stock for each quarter since the Common Stock began trading
on June 26, 2003.  These quotes reflect  inter-dealer  prices without  mark-ups,
mark-downs or commissions and may not necessarily reflect actual transactions.

                  2004                                   HIGH             LOW
                  ----                                  ------           ------
                  Fourth Quarter                        $14.25           $13.25
                  Third Quarter                          15.00            13.40
                  Second Quarter                         18.44            15.00
                  First Quarter                          20.00            13.85

                  2003                                   HIGH             LOW
                  ----                                  ------           ------
                  Fourth Quarter                        $13.90           $12.25
                  Third Quarter                          13.00            12.00
                  Second Quarter                         12.00            12.00

         HOLDERS.  As of December 31, 2004, there were 135 record holders of the
Common Stock.


                                       20
<PAGE>


         DIVIDENDS.  The Company has not paid any dividends on the Common Stock.
The Company's  ability to pay dividends is dependent on the receipt of dividends
from the Bank.  The Bank is subject to certain  restrictions  on the  payment of
dividends pursuant to federal banking law.

     (b) USE OF PROCEEDS. Not applicable.


                                       21
<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
<TABLE>
<CAPTION>
                                                                 AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                               ----------------------------------------
                                                                  2004          2003            2002
                                                               ----------     ----------     ----------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                            <C>            <C>            <C>
SELECTED FINANCIAL CONDITION DATA:
     Assets ................................................   $   63,503     $   42,541     $   29,968
     Loans receivable, net .................................       51,932         35,066         25,710
     Cash and cash equivalents .............................        5,793          1,109            758
     Investment securities:
         Available-for-sale ................................        2,215          1,976             --
         Held-to-maturity ..................................           89          1,424          1,902
     Deposits ..............................................       46,466         33,172         28,128
     Advances from Federal Home Loan Bank ..................       13,000          5,000             --
     Stockholders' equity ..................................        3,164          4,209          1,749

SELECTED OPERATIONS DATA:
     Interest income .......................................   $    2,692     $    2,182     $    1,941
     Interest expense ......................................        1,079            833            961
                                                               ----------     ----------     ----------
         Net interest income ...............................        1,613          1,349            980
     Provision for loan losses .............................          164             82             18
                                                               ----------     ----------     ----------
         Net interest income after provision for
             loan losses ...................................        1,449          1,267            962
     Other income ..........................................          216            195             73
     Other expenses ........................................        2,581          1,564          1,109
                                                               ----------     ----------     ----------
         Income (loss) before federal income tax
             expense (benefit) .............................         (916)          (102)           (74)
     Federal income tax expense (benefit) ..................          116           (116)            10
                                                               ----------     ----------     ----------
         Net income (loss) .................................   $   (1,032)    $       14     $      (84)
                                                               ==========     ==========     ==========
PER SHARE DATA:
     Earnings per share - Basic ............................   $    (3.71)    $     0.05             na
     Earnings per share - Diluted ..........................        (3.71)          0.05             na
     Book value per share ..................................        11.40          15.15             na

PERFORMANCE RATIOS:
     Return on average assets ..............................        (2.00)%         0.03%         (0.28)%
     Return on average equity ..............................       (27.85)          0.33          (4.50)
     Interest rate spread ..................................         3.41           3.20           3.44
     Net interest margin ...................................         3.48           3.43           3.54
     Ratio of average interest-earning assets to average
        interest-bearing liabilities .......................       103.09         110.83         102.59
     Ratio of noninterest expense to average total assets ..         5.00           3.78           3.66

ASSET QUALITY RATIOS:
     Nonperforming assets to total assets at end of period .         0.46           0.11           0.29
     Nonperforming loans to total loans at end of period ...         0.57           0.13           0.33
     Allowance for loan losses to total loans at end
        of period ..........................................         0.61           0.51           0.44
     Allowance for loan losses to nonperforming loans
        at end of period ...................................       108.09         376.99         123.26
     Net charge-offs to average loans outstanding ..........         0.06           0.02           0.07

CAPITAL RATIOS:
     Equity to total assets at end of period ...............         4.95           9.89           5.84
     Average equity to average assets ......................         7.18          10.03           6.16
     Tangible capital ......................................         6.05           9.73           5.83
     Core capital ..........................................         6.05           9.73           5.83
     Total risk-based capital ..............................        11.78          18.91          11.12
</TABLE>

                                       22
<PAGE>

         Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations.  The  information in this section should also be read
with  our  Consolidated  Financial  Statements  and  Notes  to the  Consolidated
Financial Statements, which are included elsewhere in this document.

OVERVIEW

         The Bank's  results of  operations  depend  primarily  on net  interest
income,  which is determined by (i) the difference between rates of interest the
Bank earns on interest-earning  assets and the rates it pays on interest-bearing
liabilities   (interest  rate  spread),   and  (ii)  the  relative   amounts  of
interest-earning assets and interest-bearing  liabilities. The Bank's results of
operations  are also  affected  by  non-interest  expense,  including  primarily
compensation and employee benefits,  federal deposit insurance premiums,  office
occupancy costs and data processing costs. The Bank's results of operations also
are affected  significantly by general and economic and competitive  conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities, all of which are beyond our control.

         The Bank historically followed a conservative business strategy,  using
local deposits to fund residential first mortgages on properties in Madisonville
and the  surrounding  area. Like many  traditional  thrifts,  however,  the Bank
experienced ever-increasing competition for the more credit-worthy borrowers who
had been its principal customers, as the standardization of mortgage lending has
drawn numerous non-bank competitors to the field. The increased  competition for
mortgage loans not only eroded the Bank's share of the mortgage  market but also
squeezed the overall profitability of its mortgage lending.

         As its mortgage  lending volume  declined in the 1990s,  the Bank began
devoting a larger percentage of its assets to investments in U.S. government and
federal agency securities. Because these investments generally have lower yields
than  residential  mortgages,  the Bank found its net interest income  shrinking
until it was no longer adequate to cover its non-interest expenses, and starting
in 1998, the Bank began  experiencing  progressively  larger  operating  losses.
These losses  significantly eroded the Bank's capital base to the point that the
Board did not believe that the Bank had adequate  capital  resources for further
growth.

         The Bank has sought to improve the yield on its interest-earning assets
by shifting a greater percentage of assets from lower yielding  investments into
higher  yielding loans and has begun to diversify the portfolio into  commercial
and  multi-family  real estate loans.  These loans  generally have higher yields
than one- to  four-family  mortgages  but often  involve  more  credit and other
risks. The Bank has similarly sought to control interest expense by reducing its
reliance on higher rate,  long-term  certificates of deposit.  In 2003, the Bank
converted to the stock form and raised approximately $2.5 million in new capital
which has allowed the Bank to  significantly  grow its assets.  As the result of
these  efforts,  net interest  income has improved from $1.3 million in the year
ended December 31, 2003 to $1.6 million in 2004.

         During the past year,  the Company  has sought to  position  itself for
future  growth.  In March  2004,  the Bank opened a new main office in a growing
part of Madisonville. In 2004, the Bank also switched to a new data processor to
improve the quality of information.  These investments,  however,  significantly
increased expenses during 2004.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

       ALLOWANCE  FOR  LOAN  LOSSES.   The  Company's   consolidated   financial
statements  are prepared in  accordance  with  accounting  principles  generally
accepted in the United States and follow general  practices within the financial
services  industry.  The most significant  accounting  policies  followed by the
Company are presented in Note 1 to the consolidated financial statements.  These
policies,  along with the disclosures presented in the other financial statement
notes and in this  financial  review,  provide  information  on how  significant
assets and  liabilities  are valued in the  financial  statements  and how those
values  are  determined.   Based  on  the  valuation  techniques  used  and  the
sensitivity  of financial  statement  amounts to the methods,  assumptions,  and
estimates underlying those amounts,  management has identified the determination
of the  allowance  for loan losses to be the  accounting  area that requires the
most  subjective  or complex  judgments,  and as such  could be most  subject to
revision as new information becomes available.

                                       23
<PAGE>

         The  allowance  for loan  losses  represents  management's  estimate of
probable credit losses inherent in the loan portfolio. Determining the amount of
the  allowance  for loan losses is  considered  a critical  accounting  estimate
because it requires significant judgment and the use of estimates related to the
amount and timing of expected  future cash flows on  impaired  loans,  estimated
losses on loans  based on  historical  loss  experience,  and  consideration  of
current  economic  trends and  conditions,  all of which may be  susceptible  to
significant change.

         The loan  portfolio  also  represents  the  largest  asset  type on the
consolidated  balance sheet.  Note 1 to the  consolidated  financial  statements
describes the methodology used to determine the allowance for loan losses, and a
discussion  of the factors  driving  changes in the amount of the  allowance for
loan losses is included under Asset Quality below.

         Loans that exhibit  probable or observed credit  weaknesses are subject
to individual review.  Where  appropriate,  reserves are allocated to individual
loans based on management's estimate of the borrower's ability to repay the loan
given the  availability  of  collateral,  other  sources  of cash flow and legal
options available to the Company. Included in the review of individual loans are
those that are  impaired as provided in SFAS No. 114,  "Accounting  by Creditors
for  Impairment  of a Loan." The Company  evaluates the  collectibility  of both
principal and interest when assessing the need for a loss accrual. Historical or
industry  loss  rates  are  applied  to  other  loans  not  subject  to  reserve
allocations.  These  historical  or  industry  loss  rates may be  adjusted  for
significant  factors that, in management's  judgment,  reflect the impact of any
current  conditions on loss recognition.  Factors which management  considers in
the analysis include the effects of the national and local economies,  trends in
the  nature  and  volume of loans  (delinquencies,  charge-offs  and  nonaccrual
loans),  changes  in  mix,  asset  quality  trends,  risk  management  and  loan
administration,  changes in internal lending policies and credit standards,  and
examination  results  from bank  regulatory  agencies  and our  internal  credit
examiners.

         An  unallocated  reserve is maintained to recognize the  imprecision in
estimating and measuring loss when evaluating  reserves for individual  loans or
pools of loans.  Reserves on  individual  loans and  historical or industry loss
rates are  reviewed  quarterly  and  adjusted  as  necessary  based on  changing
borrower  and/or  collateral  conditions  and actual  collection  and charge-off
experience.

         The  Company  has not  substantively  changed any aspect of its overall
approach in the determination of the allowance for loan losses.  There have been
no material changes in assumptions or estimation techniques as compared to prior
periods that impacted the determination of the current period allowance.

         Based on the procedures  discussed above,  management is of the opinion
that the  reserve  of  $320,000  was  adequate,  but not  excessive,  to  absorb
estimated credit losses associated with the loan portfolio at December 31, 2004.

       DEFERRED  INCOME  TAXES.  We have a  deferred  tax asset of  $14,500.  We
evaluate  this asset on a quarterly  basis.  To the extent we believe it is more
likely than not that it will not be utilized, we establish a valuation allowance
to reduce  its  carrying  amount to the  amount  we  expect to be  realized.  At
December  31, 2004,  the  valuation  allowance is $418,500.  The estimate of the
realizable amount of this asset is a critical accounting policy.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2004 AND DECEMBER 31, 2003

         The Company's  total assets as of December 31, 2004 were $63.5 million,
an increase of $21.0  million or 50.3% from  December 31,  2003's level of $42.5
million.  The increase was due primarily to growth in the loan  portfolio,  more
specifically an increase in one-to-four  family first mortgage loans.  Net loans
receivable  increased by $16.9 million,  or 48.1%, which reflected our continued
marketing  efforts.  Commercial  loans  increased  $2.7  million  or 104.8%  and
increased  to 10.2%  of the  portfolio  from  6.8% at  December  31,  2003.  The
Company's  investment  securities  decreased by $1.1 million,  or 32.2%, to $2.3
million at December  31, 2004 due to  maturities  of  securities.  Premises  and
equipment  increased $543,000,  or 27.8%,  primarily due to the opening of a new
main office and the purchase of equipment for the new office. The Company's cash
and cash  equivalents as of December 31, 2004 were $5.8 million,  an increase of
$4.7 from  December  31,  2003's  level of $1.1  million.  This  increase is due
primarily to the  purchase of $3 million in Federal Home Loan Bank  certificates
of deposit that serve as pledged  collateral  for several new accounts  with the
Hopkins County Sheriff's Department. The Sheriff's Department accounts house the
collection of county property taxes.

         Liabilities  increased by $22.0 million, or 57.4%, to $60.3 million due
primarily  to a $13.3  million,  or  40.1%,  increase  in  deposits  as the Bank
continued  to attract  deposits  locally at  favorable  rates.  The  increase in

                                       24
<PAGE>

deposits came  primarily  from checking  accounts and  certificates  of deposit.
Federal  Home Loan  Bank  advances  increased  $8.0  million  or 160.0% to $13.0
million at December 31, 2004 from $5.0  million at December  31, 2003.  The Bank
has used proceeds from the advances to help meet loan demand.

         Stockholders'  equity  decreased  to $3.2  million at December 31, 2004
from $4.2  million at December 31, 2003.  The decrease in  stockholders'  equity
principally reflects $1.03 million in losses during the period.

COMPARISON  OF RESULTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2004 AND
2003

         GENERAL.  Net loss for the year ended  December 31, 2004 was $1,032,000
($(3.71) per diluted share) compared to net income of $14,000 ($0.05 per diluted
share)  for the year  ended  December  31,  2003.  The net  loss  was  primarily
attributable  to  expenses  incurred  as a  result  of  the  establishment  of a
valuation  allowance  for deferred tax assets and opening a new main office,  as
well as expenses associated with a computer conversion which offset improvements
in net interest income and  noninterest  income.  Net interest income  increased
approximately $263,000, or 19.5%, to $1.6 million compared to approximately $1.3
million for the 2003 fiscal year. The increase in net interest income was driven
by growth in the loan portfolio.

         NET INTEREST INCOME.  The primary component of the Bank's net income is
its net interest income,  which is the difference between interest income earned
on  loans  and  investments  and  interest  expense  paid  on the  deposits  and
borrowings  used to fund the interest  earning  assets.  Net interest  income is
determined   by  the   spread   between   the   yields   earned  on  the  Bank's
interest-earning  assets and the rates paid on  interest-bearing  liabilities as
well as the relative amounts of such assets and liabilities. Net interest income
divided by average  interest-earning  assets  represents the Bank's net interest
margin.

         For the year ended  December 31, 2004,  net interest  income  increased
approximately  $263,000,  or 19.5%,  compared to the prior year. The increase in
net interest income during the 2004 periods was  attributable to a higher volume
of loans.  Interest income increased  approximately  $510,000, or 23.4%, for the
year ended December 31, 2004,  while interest  expense  increased  approximately
$246,000,  or 29.6%. The increase in interest income reflects a higher volume of
interest-earning   assets   and  a  shift  in   interest-earning   assets   into
higher-yielding  loans.  During  the year ended  December  31,  2004,  net loans
averaged  $42.6 million as compared to $34.5 million during fiscal year 2003, an
increase of $8.1 million or 23.7%.  While interest rates  decreased  during this
period,   interest  income  increased  by  $510,000   primarily  due  to  higher
outstanding  loan  balances.  Net interest  income also  benefited  from reduced
deposit  costs  in  the  lower  interest  rate  environment  as  higher  costing
certificates  of deposit  matured.  With  increased  deposits of $13.3  million,
interest expense increased by $246,000 for the year ended December 31, 2004. The
Bank's interest rate spread increased to 3.41% for fiscal 2004 compared to 3.20%
for fiscal  2003 Net  interest  margin  increased  to 3.48% for the 2004  period
compared to 3.43% for the 2003 period.

         During the year ended December 31, 2004, the Bank reported net interest
income,  before  provision  for loan losses,  of $1.6 million.  Interest  income
consisted of $2.6 million in interest and fees on loans,  $90,000 in interest on
investment  securities,  and $27,000 in dividends on FHLB stock,  totaling  $2.7
million,  while  interest  expense,  which  consisted of $950,000 in interest on
deposits and $129,000 in interest on FHLB advances and other borrowings, totaled
$1.1 million.

         During the year ended December 31, 2003, the Bank reported net interest
income,  before  provision  for loan losses,  of $1.3 million.  Interest  income
consisted of $2.0 million in interest and fees on loans, $116,000 in interest on
investment  securities,  and $26,000 in dividends on FHLB stock,  totaling  $2.2
million,  while  interest  expense,  which  consisted of $815,000 in interest on
deposits and $18,000 in interest on FHLB advances and other borrowings,  totaled
$833,000.

                                       25
<PAGE>



         The  following  table sets forth  certain  information  relating to our
average  balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid at the date and for the  periods  indicated.  Such  yields  and  costs  are
derived by dividing  income or expense by the average daily balance of assets or
liabilities, respectively, for the periods presented.
<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                      -------------------------------------------------------------------------
                                                                    2004                                    2003
                                                      ----------------------------------      ---------------------------------
                                                                                 AVERAGE                                AVERAGE
                                                      AVERAGE                    YIELD/       AVERAGE                   YIELD/
                                                      BALANCE      INTEREST        COST       BALANCE      INTEREST       COST
                                                      -------      --------      -------      -------      --------     -------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                     <C>         <C>          <C>          <C>          <C>          <C>
   Interest-earning assets:
    Loans receivable, net(1)..................          $42,637     $2,575       6.04%        $34,470      $2,040       5.92%
    Investment securities.....................            3,140         90       2.87           3,425         116       3.39
    Other investments.........................              564         27       4.79           1,489          26       1.75
                                                        -------     ------                    -------      ------
       Total interest-earning assets..........           46,341      2,692       5.81          39,384       2,182       5.54
   Non-interest-earning assets................            5,279                                 2,307
                                                        -------                               -------
       Total assets...........................          $51,620                               $41,691
                                                        =======                               =======

   Interest-bearing liabilities:
    Deposits..................................          $37,236        950       2.55         $31,518         815       2.59
    Borrowings................................            7,717        129       1.67           4,016          18       0.45
                                                        -------     ------                    -------      ------

       Total interest-bearing liabilities.....           44,953      1,079       2.40          35,534         833       2.34
   Non-interest-bearing liabilities...........            2,963                                 1,845
       Total liabilities......................           47,916                                37,379
   Total equity...............................            3,705                                 4,312
                                                        -------                               -------
       Total liabilities and equity...........          $51,620                               $41,691
                                                        =======                               =======
   Net interest income........................                      $1,613                                 $1,349
                                                                    ======                                 ======
   Interest rate spread.......................                                   3.41%                                  3.20%
                                                                               ======                                 ======
   Net interest margin........................                                   3.48%                                  3.43%
                                                                               ======                                 ======
   Ratio of average interest-earning assets to
      average interest-bearing liabilities....                                 103.09%                                110.83%
                                                                               ======                                 ======
<FN>
________________
(1)  Non-accrual loans are included in average balances, less allowance for loan
     losses and deferred fees.
</FN>
</TABLE>

         The table below sets forth  certain  information  regarding  changes in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  multiplied by old rate); and (ii) changes in rate (change in
rate  multiplied  by old  volume).  Changes  in  rate-volume  (changes  in  rate
multiplied by the changes in volume) are allocated  between  changes in rate and
changes in volume proportionately.
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,    YEAR ENDED DECEMBER 31,
                                                  2004 VS. 2003              2003 VS. 2002
                                            --------------------------    ----------------------
                                                INCREASE (DECREASE)        INCREASE (DECREASE)
                                                       DUE TO                   DUE  TO
                                            --------------------------    ----------------------
                                            VOLUME      RATE     TOTAL    VOLUME  RATE     TOTAL
                                            -------     -----    -----    ------  ----    ------
                                                              (IN THOUSANDS)
<S>                                           <C>       <C>      <C>      <C>     <C>      <C>
Interest income:
   Loans.................................     $492      $  43    $ 535    $ 546   $(237)   $ 309
   Investment securities.................       (9)       (17)     (26)      51    (104)     (53)
   Other investments.....................       (1)         2        1        1     (16)     (15)
                                              ----      -----    -----    -----   -----    -----
      Total interest-earning assets......      482         28      510      598    (357)     241
                                              ----      -----    -----    -----   -----    -----

Interest expense:
   Deposits..............................     $146      $ (11)   $ 135    $ 124   $(258)   $(134)
   Borrowings............................       28         81      109       18     (11)       7
                                              ----      -----    -----    -----   -----    -----

      Total interest-bearing
        liabilities......................      174         70      244      142    (269)    (128)
                                              ----      -----    -----    -----   -----    -----
Change in net interest income............     $308      $ (42)   $ 266    $ 456   $ (88)   $ 369
                                              ====      =====    =====    =====   =====    =====
</TABLE>

                                       26
<PAGE>


         PROVISION  FOR LOAN LOSSES.  The provision for loan losses for the year
ended  December  31, 2004 was  $164,000,  compared to $82,000 for the year ended
December 31, 2003.  Net  charge-offs  for the year ended  December 31, 2004 were
$24,000  (0.05% of average  loans),  compared to $7,000 (0.02% of average loans)
during the year ended  December 31, 2003.  The ratio of the  allowance  for loan
losses to total  loans was  0.61% at  December  31,  2004  compared  to 0.51% at
December 31, 2003.  The  allowance for loan losses is  management's  estimate of
probable inherent credit losses in the loan portfolio at the balance sheet date.
The Bank determines the allowance based on ongoing evaluations. Increases to the
allowance  are  made by  charges  to the  provision  for loan  losses,  which is
reflected in the statement of operations.  Loans deemed to be uncollectible  are
charged against the allowance.  Recoveries of loans  previously  charged off are
credited  to the  allowance.  The Bank  increased  the  amount of the  allowance
allocated  to various  forms of  consumer  loans,  and  reduced  the  proportion
allocated to residential  first mortgages  reflecting  changes in the portfolio.
Reserves are provided for consumer and  residential  loans based on average loss
experience,  applied  to the  outstanding  balance  in each  category.  Specific
reserves are determined for loans classified as special mention,  substandard or
doubtful.  Specific reserves are determined on a loan by loan basis. As the loan
portfolio  diversifies to include more commercial and  multi-family  real estate
loans,  future charge-off rates may differ from historical rates,  necessitating
revisions to the estimate.

         OTHER  INCOME.  Other  income for the year ended  December 31, 2004 was
$216,000, compared to $195,000 for the year ended December 31, 2003, an increase
of approximately  $21,000,  or 10.8%. Other income increased primarily due to an
approximate $39,000 increase in non-sufficient funds and overdraft fees.

         OTHER  EXPENSES.  Other  expenses for the year ended  December 31, 2004
were $2.6 million compared to $1.6 million for the year ended December 31, 2003,
an increase of  approximately  $1.0  million,  or 65.0%.  The  increase in other
expenses is  attributable  to the  addition of a new main  office,  the costs of
operating as a public company and expenses  associated  with the conversion to a
new  data  processor.  The  opening  of the new  main  office  and  its  related
renovations and improvements created increased occupancy expenses of $130,000 or
69.7%,  to $316,000  for fiscal year 2004.  Compensation  and  benefits  expense
increased  approximately  $490,000,  or 84.5%, as the Bank added staff. Salaries
for  officers  increased by $215,000 or 95.8% to $439,000 due to the addition of
four new loan  officers,  two of whom also serve as branch  managers for our two
locations. Salaries for employees increased by $174,000 or 70.8% to $419,000 due
to the addition of five to six new employees  hired to help with staffing of the
new main office. Advertising expenses increased $77,000 or 84.8% to $169,000 for
the year ended December 31, 2004 compared to $91,000 for the year ended December
31, 2003. The change was due primarily to increased overall marketing  expenses,
marketing  the new main  office  and the  activities  associated  with its grand
opening  on March 5, 2004,  as well as  marketing  efforts  to explain  our data
processor  conversion  and its effects to our  customers.  Office  supplies  and
postage  expenses  increased  $108,000 or 161.1% to $176,000  for the year ended
December 31, 2004 compared to $67,000 for the year ended  December 31, 2003. The
Bank  experienced  increases in expenses  related to payroll and other taxes (up
approximately  $39,000,  or 53.0%)  and  insurance  premiums  (up  approximately
$12,000,  or  43.0%)  due to Bank  growth.  Data  processing  expense  increased
approximately  $1,000,  or 0.31%,  which the Bank  attributes  to growth and the
increase in the number of  customers  since the  opening of the new office.  The
Company  also  incurred  approximately  $103,000  in  expenses  related  to  the
conversion to a new data processor.  Data processor conversion expenses totaling
$103,000  for the year ended  December 31, 2004  included  billed items from our
previous  data  processor  of $23,000 for data test tapes and $31,000 for online
deconversion services. Also included were items from our new data processor such
as data mapping and converting,  parameter setup,  item processing  setup,  data
communication installation fees, and software license fees. Also contributing to
increased expenses were higher  professional fees (up approximately  $29,000, or
52.3%)  reflecting  the increased  costs of operating as a public  company,  and
increased other operating expenses (up approximately $126,000, or 109.4%).

         INCOME TAX EXPENSE (BENEFIT). For the year ended December 31, 2004, the
Company  incurred a federal  tax  expense of  $116,000,  compared  to a $116,000
federal tax benefit during 2003.  The Company  provides for both the current and
deferred tax effects of the  transactions  reported in its financial  statements
and   established   deferred  tax  assets  and  liabilities  for  the  temporary
differences and establishes  financial reporting and tax bases of its assets and
liabilities.  The Company establishes  valuation allowances for its net deferred
tax assets  unless it is more likely than not that these net deferred tax assets
will be realized.  Based on current period losses and other factors, the Company
has established a valuation  allowance for its deferred tax assets in the amount
of $418,500.  The valuation  allowance  will be reduced as the Company begins to
become profitable.

                                       27
<PAGE>

MARKET/INTEREST RATE RISK DISCLOSURE

         QUALITATIVE  DISCLOSURE.  The  Bank's  assets  and  liabilities  may be
analyzed  by  examining  the  extent to which its  assets  and  liabilities  are
interest-rate  sensitive and by monitoring the expected effects of interest rate
changes on our net portfolio value.

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

         The  Bank's  primary  method  of  managing  interest  rate  risk  is to
emphasize the  origination  of ARM loans.  The Bank's ARM loans provide that the
interest  rate will  adjust  every 1, 3, 5 or 7 years.  The terms of these loans
generally limit the amount of any single rate change to a maximum of 2% and also
provide that the rate may not increase above a "ceiling" rate established at the
time the loan is made,  nor below a floor rate which is the initial  rate on the
loan.  At December 31, 2004,  approximately  70.6% of the Bank's  mortgage  loan
portfolio had adjustable  rates. It also purchases,  investment  securities with
relatively short maturities, normally three years or less. At December 31, 2004,
approximately  97.4% of the Bank's  investment  portfolio had a maturity of five
years or less.  The Bank  monitors its deposit rates on a weekly basis to ensure
that it remains competitive.

         QUANTITATIVE   DISCLOSURE.   The  Bank   measures  its  interest   rate
sensitivity   using  the  OTS's   measurement   system.   The  OTS  measures  an
institution's  interest  rate  risk by  computing  the  amount  by which the net
present value of cash flow from assets,  liabilities and off balance sheet items
(the  institution's net portfolio value or "NPV") would change in the event of a
range of assumed changes in market interest rates. These  computations  estimate
the effect on an  institution's  NPV from  instantaneous  and permanent 1% to 3%
(100 to 300 basis  points)  increases and  decreases in market  interest  rates.
Because of the current level of interest  rates,  the OTS does not calculate the
effect of a decline in interest rates greater than 100 basis points.

         The Board of Directors has  established a policy  setting forth maximum
NPV  variances  as a result  of such  instantaneous  and  permanent  changes  in
interest rates.  At December 31, 2004, the Bank's interest rate  sensitivity was
within the policy established by the Board.

         While we cannot predict  future  interest rates or their effects on the
Bank's NPV or net interest  income,  we do not expect current  interest rates to
have a material  adverse effect on the Bank's NPV or net interest  income in the
near future.  Computations of prospective effects of hypothetical  interest rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates,  prepayments and deposit runoff and should not be relied upon as
indicative  of  actual  results.  Certain  shortcomings  are  inherent  in  such
computations.  Although certain assets and liabilities may have similar maturity
or periods of  repricing,  they may react at  different  times and in  different
degrees to changes in the market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while rates on other types of assets and  liabilities  may lag
behind changes in market  interest  rates.  Certain  assets,  such as ARM loans,
generally have features which restrict changes in interest rates on a short-term
basis and over the life of the loan. In the event of a change in interest rates,
prepayments and early withdrawal levels could deviate  significantly  from those
assumed in making  calculations  set forth above.  Although the Bank underwrites
its  adjustable-rate  borrowers on the basis of the maximum  rate allowed  under
their loan  agreements,  an  increased  credit risk may result as the ability of
many  borrowers  to service  their debt may decrease in the event of an interest
rate increase.

         The Board of Directors reviews the Bank's asset and liability policies.
The Board of Directors  meets regularly to review interest rate risk and trends,
as well as liquidity and capital ratios and requirements. Management administers
the policies and  determinations  of the Board of Directors  with respect to the
Bank's asset and liability goals and strategies. We expect that the Bank's asset
and  liability  policies and  strategies  will  continue as described so long as
competitive and regulatory  conditions in the financial institution industry and
market interest rates continue as they have in recent years.

                                       28
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         The Company currently has no operating  business other than that of the
Bank and does not have material  funding needs.  In the future,  the Company may
require funds for dividends and tax payments for which it will rely on dividends
and other distributions from the Bank. The Bank is subject to various regulatory
restrictions on the payment of dividends.

         The Bank's  primary  sources of funds are deposits,  repayment of loans
and mortgage-backed  securities,  maturities of investments and interest-bearing
deposits and funds  provided  from  operations.  The Bank is also able to obtain
advances from the FHLB of Cincinnati,  although  historically  the Bank has done
this rarely. While scheduled repayments of loans and mortgage-backed  securities
and maturities of investment  securities are relatively  predictable  sources of
funds,  deposit flows and loan prepayments are greatly influenced by the general
level of interest rates, economic conditions and competition.  The Bank uses its
liquidity resources principally to fund existing and future loan commitments, to
fund maturing time  certificates  and demand deposit  withdrawals,  to invest in
other  interest-earning  assets,  to maintain  liquidity,  and to meet operating
expenses.

         Liquidity  may be adversely  affected by unexpected  deposit  outflows,
higher interest rates paid by  competitors,  adverse  publicity  relating to the
savings and loan industry,  and similar matters.  Management  monitors projected
liquidity  needs  and  determines  the  level  desirable,  based  in part on our
commitments to make loans and management's assessment of our ability to generate
funds.

         A major portion of our liquidity consists of cash and cash equivalents,
which include cash and  interest-bearing  deposits in other banks.  The level of
these assets is dependent upon our operating,  investing,  lending and financing
activities  during  any  given  period.  At  December  31,  2004,  cash and cash
equivalents totaled $5.8 million.

         The Bank's primary investing  activities  include  origination of loans
and purchases of investment  and  mortgage-backed  securities.  During the years
ended December 31, 2004 and 2003,  purchases of investment  and  mortgage-backed
securities  totaled  $250,000  and  $2.0  million,   respectively,   while  loan
originations  totaled  $28.3  million  and $21.4  million,  respectively.  These
investments were funded in part by proceeds from repayments of loans, maturities
and calls of  investment  and  mortgage-backed  securities  and an  increase  in
deposits for the years ended December 31, 2004 and 2003.

         At December 31, 2004, we had $1,948,000 in  outstanding  commitments to
originate  loans.  We  anticipate  that  the Bank  will  have  sufficient  funds
available to meet its current loan origination  commitments.  Time  certificates
which are  scheduled  to mature in one year or less  totaled  $19.8  million  at
December 31, 2004. Based on historical  experience,  management  believes that a
significant  portion of such deposits will remain with the Bank,  although there
can be no  assurance  that it will do so.  In the  event  the Bank is  unable to
retain  these  deposits,  it may seek  replacement  funding  through the FHLB of
Cincinnati or other sources.

                                       29
<PAGE>
         The Bank relies  primarily on local deposits for its funding needs.  In
order  to  finance  loan  growth,  the Bank  may  also  borrow  from the FHLB of
Cincinnati. At December 31, 2004, the Bank had $14.0 million in unused borrowing
capacity at the FHLB of Cincinnati.

         The Bank is subject to federal  regulations that impose certain minimum
capital  requirements.  For a discussion on such capital levels, see "Regulation
-- Regulation of the Bank -- Regulatory Capital Requirements."

         During the year ended  December 31, 2004, the Company opened a $750,000
line of  credit  with The  Banker's  Bank of  Tennessee  to  provide  additional
liquidity at the holding  company  level and for capital  contributions  for the
Bank. The line of credit  provides for an interest rate at the prime rate and is
secured by the  Company's  stock in the Bank.  At year end December 31, 2004 the
entire $750,000 had been drawn and infused into the Bank's capital.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS

         In December  2003, the FASB issued FASB  Interpretation  No. ("FIN") 46
(revised),  "Consolidation of Variable Interest Entities," which addresses how a
business  enterprise  should  evaluate  whether it has a  controlling  financial
interest in an entity  through means other than voting rights and,  accordingly,
should consolidate the variable interest entity ("VIE"). FIN 46R replaces FIN 46
that was issued in January 2003.  For any VIEs that must be  consolidated  under
FIN 46R and were created  before January 1, 2004,  the assets,  liabilities  and
non-controlling  interest  of the VIE  initially  would  be  measured  at  their
carrying amounts, and any difference between the net amount added to the balance
sheet and any previously  recognized  interest would be recorded as a cumulative
effect of an accounting change.


         In  December  of 2003,  the  American  Institute  of  Certified  Public
Accountants  issued  Statement  of Position  ("SOP") No. 03-3,  "Accounting  for
Certain Loans or Debt Securities Acquired in a Transfer." SOP No. 03-3 addresses
accounting  for  differences  between  contractual  cash  flows  and cash  flows
expected to be collected from an investor's  initial investment in loans or debt
securities  acquired in a transfer if those  differences  are  attributable,  at
least in part, to credit quality. This SOP prohibits "carry over" or creation of
valuation  allowances  in the  initial  accounting  of  all  loans  acquired  in
transfers  within the scope of SOP No. 03-3,  which includes loans acquired in a
purchase business  combination.  SOP No. 03-3 is effective for loans acquired in
fiscal years beginning after December 15, 2004.


         In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of Statement
133 on Derivative  Instruments and Hedging Activity".  This Statement amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities under SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities".  This amendment  should promote more consistency as to
the reporting of contracts  that fall under the scope of derivatives or hybrids.
SFAS No.  149 is to be  applied  prospectively  to all  hedging  activities  and
contracts  revised or created after September 30, 2003. The Company adopted this
Statement  effective  October  1,  2003  and it had no  material  impact  on its
Financial Statements.


         At its March 2004  meetings,  the Emerging  Issues Task Force  ("EITF")
revisited EITF Issue No. 03-1, "The Meaning of  Other-than-Temporary  Impairment
and its  Application  to Certain  Investments"  (EITF No. 03-1).  Effective with
reporting  periods  beginning after June 15, 2004,  companies  carrying  certain
types of debt and equity  securities  whose  amortized  cost is higher  than the
securities'  fair  values  will have to use more  detailed  criteria to evaluate
whether to record a loss and will have to disclose additional  information about
unrealized  losses.   The  additional   disclosure  has  been  included  in  the
accompanying  financial  statements but the  application of the new  measurement
provisions  was delayed by the EITF on  September  30, 2004 to give the FASB and
EITF more time to study this issue.

         On December 16, 2004, the FASB issued SFAS 123 (revised),  "Share-Based
Payment" ("SFAS 123 (R)"). This standard requires expensing of stock options and
other share-based payments beginning in 2005, and supersedes FASB's earlier rule
(the original SFAS 123) that had allowed  companies to choose between  expensing
stock options or showing pro forma disclosure only.  Public entities (other than
those  filing as small  business  issuers)  will be required to apply  Statement
123(R) as of the first interim or annual reporting period that begins after June
15, 2005.  Public entities that file as small business  issuers will be required
to apply Statement  123(R) in the first interim or annual

                                       30
<PAGE>

reporting  period that begins after  December 15, 2005. The Company is currently
evaluating the effect of the adoption of this statement.

         These  re  cently  issued  pronouncements  are not  expected  to have a
material impact on the Bank as the GAAP  requirements  either are not applicable
to the Bank or the impact is insignificant.

IMPACT OF INFLATION AND CHANGING PRICES

         The Bank's financial  statements and the  accompanying  notes presented
elsewhere in this  document,  have been prepared in accordance  with  accounting
principles generally accepted in the United States of America, which require the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased  cost of our  operations.  As a result,  interest rates have a greater
impact on our  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the prices of goods and services.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

         The Company's financial  statements are contained in this Annual Report
on Form 10-KSB immediately following Item 14.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

         Not applicable.

ITEM 8A.  CONTROLS AND PROCEDURES
---------------------------------

         The  Company's  management  evaluated,  with the  participation  of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report.  Based on that evaluation,  the Chief Executive  Officer
and Chief Financial  Officer  concluded that,  except for the items noted below,
the Company's  disclosure  controls and  procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits  under the  Securities  Exchange Act of 1934 is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  There were no changes in the Company's
internal  control over financial  reporting  that occurred  during the Company's
last fiscal quarter that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

         In connection with their audit of our financial statements for the year
ended December 31, 2004, our independent  registered public accounting firm, BKD
LLP,  identified  certain  material  weaknesses,  as defined  in Public  Company
Accounting  Oversight  Board  Standard  No.  2,  in our  internal  control  over
financial  reporting.  Specifically,  BKD LLP noted a failure to timely  perform
various account  reconciliations and to segregate certain reconciliation duties.
Management  believes that these  weaknesses are primarily  attributable to human
resource  limitations within our accounting and financial reporting function and
has  reallocated   reconciliation   responsibilities  within  the  function  and
instituted a schedule for accomplishing these tasks. In addition,  BKD LLP noted
the absence of processes to compute  deferred  loan fees and costs and calculate
deferred tax assets and  liabilities.  Management has instituted  procedures for
the calculation of these accounts.


ITEM 8B.  OTHER INFORMATION
---------------------------

         Not applicable.

                                       31
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I --  Election of
Directors"  in the  Company's  definitive  Proxy  Statement  for the 2005 Annual
Meeting of Stockholders are incorporated herein by reference.

         The Company has adopted a Code of Ethics that applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions. A copy of the Company's Code
of Ethics will be provided to any person without charge upon written  request to
Michael D. Wortham, Chief Financial Officer, Community First Bancorp, Inc., 2420
North Main Street, Madisonville, Kentucky 42431.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

         The information  contained under the section  captioned  "Proposal I --
Election of  Directors  -  Executive  Compensation"  in the Proxy  Statement  is
incorporated herein by reference.

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
--------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------

          (A)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

               Information  required  by this  item is  incorporated  herein  by
               reference  to the Section  captioned  "Principal  Holders" of the
               Proxy Statement.

          (B)  SECURITY OWNERSHIP OF MANAGEMENT

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

          (C)  CHANGES IN CONTROL

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

          (D)  SECURITIES  AUTHORIZED  FOR ISSUANCE  UNDER  EQUITY  COMPENSATION
               PLANS

               The information required by this item is set forth below.


                                       32
<PAGE>
<TABLE>
<CAPTION>
                                           EQUITY COMPENSATION PLAN INFORMATION
                                                   (a)                 (b)                          (c)
                                                                                             NUMBER OF SECURITIES
                                          NUMBER OF SECURITIES      WEIGHTED-AVERAGE       REMAINING AVAILABLE FOR
                                            TO BE ISSUED UPON      EXERCISE PRICE OF     FUTURE ISSUANCE UNDER EQUITY
                                               EXERCISE OF            OUTSTANDING       COMPENSATION PLANS (EXCLUDING
                                          OUTSTANDING OPTIONS,     OPTIONS, WARRANTS       SECURITIES REFLECTED IN
                                           WARRANTS AND RIGHTS         AND RIGHTS                COLUMN (A))
                                          --------------------     -----------------    ----------------------------
<S>                                            <C>                     <C>                       <C>
    Equity compensation plans
     approved by security holders:
        2004 Stock Option Plan . . .           16,442                  $16.00                    11,330
    Equity compensation plans
      not approved by security
      holders  . . . . . . . . . . . .             na                      na                        na
                                               ------                  ------                    ------
         TOTAL                                 16,442                  $16.00                    11,330
                                               ======                  ======                    ======

</TABLE>

ITEM 12.   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  --
Certain Relationships and Related Transactions" in the Proxy Statement.

ITEM 13.   EXHIBITS
-------------------

         The  following  exhibits are either filed as part of this Annual Report
on Form 10-KSB or incorporated herein by reference:

         NO.      DESCRIPTION
         ---      -----------

         3.1      Articles of Incorporation*
         3.2      Bylaws*
         4        Form of Common Stock Certificate*
         10.1     Employment Agreement between Community First Bank and William
                     M. Tandy + **
         10.2     2004 Stock Option Plan  + ***
         21       Subsidiaries of the Registrant
         23       Consent of Independent Registered Public Accounting Firm
         31.1     Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
                    Officer
         31.2     Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
                    Officer
         32       Section 1350 Certification

______________________
+    Management  contract or  compensatory  plan or  arrangement  required to be
     filed as an exhibit.
*    Incorporated by reference from the Registrant's  Registration  Statement on
     Form SB-2 (File No.  333-104226)  originally  filed with the Securities and
     Exchange Commission on April 1, 2003.
**   Incorporated by reference from Registrant's  Pre-Effective  Amendment No. 1
     to Registration Statement on Form SB-2 (File No. 333-104226) filed with the
     Securities and Exchange Commission on May 5, 2003.
***  Incorporated by reference from Registrant's  Registration Statement on Form
     S-8 (File No. 333-116450) filed with the Securities and Exchange Commission
     on June 14, 2004.


ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES
-------------------------------------------------

         The information set forth under the caption  "Independent  Auditors" in
the Proxy Statement is incorporated herein by reference.

                                       33
<PAGE>


                          COMMUNITY FIRST BANCORP, INC.

                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                        PAGE
Report of Independent Registered Public Accounting Firm................. F-1
Consolidated Financial Statements
   Balance Sheets....................................................... F-2
   Statements of Operations............................................. F-3
   Statements of Stockholders' Equity................................... F-4
   Statements of Cash Flows............................................. F-5
   Notes to Financial Statements........................................ F-6

                                       34
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Audit Committee, Board of Directors
   and Stockholders
Community First Bancorp, Inc.
Madisonville, Kentucky


We have audited the accompanying  consolidated balance sheets of Community First
Bancorp,  Inc. as of December  31, 2004 and 2003,  and the related  consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Community  First
Bancorp,  Inc.  as of  December  31,  2004  and  2003,  and the  results  of its
operations  and its cash flows for each of the years  then  ended in  conformity
with accounting principles generally accepted in the United States of America.

                                               BKD, LLP



Louisville, Kentucky
February 25, 2005


                                      F-1
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
ASSETS

                                                                               2004             2003
                                                                            ----------------------------

<S>                                                                        <C>             <C>
        Cash and due from banks                                            $    614,155    $  1,068,146
        Interest-bearing demand deposits                                      2,179,041          15,916
        Interest-bearing time deposits                                        3,000,000          25,000
                                                                           ------------    ------------
               Cash and cash equivalents                                      5,793,196       1,109,062

        Held-to-maturity securities                                              88,965       1,424,067
        Available-for-sale securities                                         2,215,285       1,975,718

        Loans receivable, net of the allowance for loan loss of $319,937
          and $180,955, for December 31, 2004 and 2003, respectively         51,931,555      35,066,142
        Premises and equipment, net                                           2,495,324       1,952,549
        Federal Home Loan Bank (FHLB) stock                                     687,000         659,600
        Interest receivable                                                     227,066         159,150
        Deferred income taxes                                                    14,521         127,677
        Other assets                                                             50,467          67,499
                                                                           ------------    ------------
               Total assets                                                $ 63,503,379    $ 42,541,464
                                                                           ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

    LIABILITIES
        Deposits                                                           $ 46,466,036    $ 33,171,526
        FHLB advances                                                        13,000,000       5,000,000
        Advances under line of credit                                           750,000            --
        Interest payable and other liabilities                                  123,848         161,171
                                                                           ------------    ------------
               Total liabilities                                             60,339,884      38,332,697
                                                                           ------------    ------------

    STOCKHOLDERS' EQUITY
        Preferred stock, $.01 par value, authorized 1,000,000 shares               --              --
        Common stock, $.01 par value; authorized 5,000,000 shares
          authorized; 277,725 shares, issued and outstanding                      2,777           2,777
        Additional paid-in capital                                            2,457,428       2,466,428
        Retained earnings - substantially restricted                            731,477       1,763,045
        Accumulated other comprehensive loss                                    (28,187)        (23,483)
                                                                           ------------    ------------

               Total stockholders' equity                                     3,163,495       4,208,767
                                                                           ------------    ------------

               Total liabilities and stockholders' equity                  $ 63,503,379    $ 42,541,464
                                                                           ============    ============
</TABLE>

See Notes to Consolidated Financial Statements


                                      F-2
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                          2004          2003
                                                      --------------------------
<S>                                                   <C>            <C>
INTEREST AND DIVIDEND INCOME
    Loans                                             $ 2,574,729    $ 2,039,805
    Investment securities                                  89,988        116,391
    Dividends on FHLB stock                                26,931         25,743
                                                      -----------    -----------
           Total interest and dividend income           2,691,648      2,181,939
                                                      -----------    -----------
INTEREST EXPENSE
    Deposits                                              950,342        814,722
    FHLB advances                                         126,856         17,848
    Other borrowings                                        1,751           --
                                                      -----------    -----------
           Total interest expense                       1,078,949        832,570
                                                      -----------    -----------
NET INTEREST INCOME                                     1,612,699      1,349,369
PROVISION FOR LOAN LOSSES                                 163,500         82,000
                                                      -----------    -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     1,449,199      1,267,369
                                                      -----------    -----------
NONINTEREST INCOME
    Service charges and fees                              215,602        177,013
    Loss on sale of fixed assets                          (12,702)        (3,277)
    Loss on sale of other real estate                        (449)          --
    Foreclosed real estate expense, net                    (4,739)          (595)
    Insurance commissions and premiums                      3,484          4,645
    Other income                                           14,601         17,593
                                                      -----------    -----------
           Total noninterest income                       215,797        195,379
                                                      -----------    -----------
NONINTEREST EXPENSE
    Compensation and benefits                           1,070,113        580,014
    Directors fees                                         43,200         43,200
    Occupancy expense                                     316,300        186,413
    Insurance premiums                                     38,975         27,248
    Data processing                                       218,077        217,400
    Advertising                                           168,813         91,361
    Office supplies, telephone and postage                175,702         67,304
    Payroll and other taxes                               111,875         73,145
    Professional fees                                      85,791         56,315
    Data processor conversion expenses                    102,595        106,498
    Other operating expenses                              249,543        115,251
                                                      -----------    -----------
           Total noninterest expense                    2,580,984      1,564,149
                                                      -----------    -----------
LOSS BEFORE INCOME TAX                                   (915,988)      (101,401)

PROVISION (CREDIT) FOR INCOME TAXES                       115,580       (115,580)
                                                      -----------    -----------
NET INCOME (LOSS)                                     $(1,031,568)   $    14,179
                                                      ===========    ===========
BASIC EARNINGS (LOSS) PER SHARE                       $     (3.71)   $       .05

DILUTED EARNINGS (LOSS) PER SHARE                     $     (3.71)   $       .05

</TABLE>

See Notes to Consolidated Financial Statements


                                      F-3
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                   COMMON STOCK            ADDITIONAL
                                                            ----------------------------    PAID-IN         RETAINED
                                                                SHARES       AMOUNT         CAPITAL         EARNINGS
                                                            --------------------------------------------------------------
<S>                                                             <C>          <C>           <C>            <C>
    BALANCE, JANUARY 1, 2003                                          --     $       --    $       --     $ 1,748,866

      Comprehensive income
        Net income                                                    --             --            --          14,179
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes                 --             --            --              --

           Total comprehensive loss


      Issuance of stock                                          277,725          2,777     2,466,428              --
                                                                 -------      ---------    ----------     -----------
    BALANCE, DECEMBER 31, 2003                                   277,725          2,777     2,466,428       1,763,045

      Comprehensive income
        Net income                                                    --             --            --      (1,031,568)
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes                 --             --            --              --

           Total comprehensive loss

      Cost related to issuance of stock                               --             --        (9,000)             --
                                                                 -------      ---------    ----------     -----------
    BALANCE, DECEMBER 31, 2004                                   277,725      $   2,777    $2,457,428     $   731,477
                                                                 =======      =========    ==========     ===========

<CAPTION>
                                                              ACCUMULATED
                                                                  OTHER
                                                             COMPREHENSIVE        COMPREHENSIVE
                                                             INCOME (LOSS)        INCOME (LOSS)         TOTAL
                                                            ---------------------------------------------------------
<S>                                                           <C>                <C>                 <C>
    BALANCE, JANUARY 1, 2003                                  $     --                               $ 1,748,866

      Comprehensive income
        Net income                                                  --           $    14,179              14,179
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes          (23,483)              (23,483)            (23,483)
                                                                                 -----------
           Total comprehensive loss                                              $    (9,304)
                                                                                 ===========

      Issuance of stock                                             --                                 2,469,205
                                                              --------                               -----------
    BALANCE, DECEMBER 31, 2003                                 (23,483)                                4,208,767

      Comprehensive income
        Net income                                                  --           $(1,031,568)         (1,031,568)
        Change in unrealized depreciation on
          available-for-sale securities, net of taxes           (4,704)               (4,704)             (4,704)
                                                                                 -----------
           Total comprehensive loss                                              $(1,036,272)
                                                                                 ===========
      Cost related to issuance of stock                             --                                    (9,000)
                                                              --------                               -----------
    BALANCE, DECEMBER 31, 2004                                $(28,187)                              $ 3,163,495
                                                              ========                               ===========
</TABLE>

See Notes to Consolidated Financial Statements

                                      F-4
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                      2004          2003
                                                                 ----------------------------
<S>                                                              <C>             <C>
OPERATING ACTIVITIES
    Net income (loss)                                            $ (1,031,568)   $     14,179
    Items not requiring (providing) cash
       Provision for loan losses                                      163,500          82,000
       Depreciation, amortization and accretion                       191,776          76,862
       Loss on disposal of equipment                                   12,702           3,277
       Loss on sale of other real estate owned                            449              --
       Deferred income taxes                                          115,580        (115,580)
       FHLB stock dividends                                           (27,400)        (25,500)
    Changes in
       Interest receivable                                            (67,916)        (23,930)
       Other assets                                                     2,436         (11,302)
       Interest payable and other liabilities                         (37,323)         70,464
                                                                 ------------    ------------

           Net cash provided by (used in) operating activities       (677,764)         70,470
                                                                 ------------    ------------


INVESTING ACTIVITIES
    Net change in loans                                           (17,028,913)     (9,438,372)
    Purchases of available-for-sale securities                       (252,570)     (2,014,155)
    Proceeds from maturities of held-to-maturity securities         1,335,102         477,683
    Purchase of premises and equipment                               (741,378)     (1,257,419)
    Proceeds from the sale of foreclosed estate                        14,147              --
    Proceeds from sale of premises and equipment                           --             250
                                                                 ------------    ------------

           Net cash used in investing activities                  (16,673,612)    (12,232,013)
                                                                 ------------    ------------
FINANCING ACTIVITIES
    Net increase in deposits                                       13,294,510       5,043,274
    Repayment of FHLB advances                                     (4,500,000)     (4,500,000)
    Proceeds from FHLB advances                                    12,500,000       9,500,000
    Proceeds from line of credit                                      750,000              --
    Proceeds (costs) from issuance of stock                            (9,000)      2,469,205
                                                                 ------------    ------------

           Net cash provided by financing activities               22,035,510      12,512,479
                                                                 ------------    ------------

INCREASE IN CASH AND CASH EQUIVALENTS                               4,684,134         350,936

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                        1,109,062         758,126
                                                                 ------------    ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                           $  5,793,196    $  1,109,062
                                                                 ============    ============

SUPPLEMENTAL CASH FLOWS INFORMATION

    Interest paid                                                $  1,034,411    $    839,135

    Loans transferred to foreclosed real estate                  $     42,596    $          0

    Loans to facilitate sale of foreclosed real estate           $     28,000    $          0
</TABLE>

See Notes to Consolidated Financial Statements

                                      F-5
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     NATURE OF OPERATIONS

          Community  First Bancorp,  Inc.  (Company) is a thrift holding company
          whose principal activity is the ownership and management of its wholly
          owned subsidiary,  Community First Bank (Bank).  The Bank is primarily
          engaged in providing a full range of banking and financial services to
          individual  and  corporate   customers,   primarily  in  Madisonville,
          Kentucky and the surrounding  area. The Bank is subject to competition
          from  other  financial  institutions.  The  Bank  is  subject  to  the
          regulation  of  certain  federal  and  state  agencies  and  undergoes
          periodic examinations by those regulatory authorities.


     PRINCIPLES OF CONSOLIDATION

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


     USE OF ESTIMATES

          The  preparation  of  the  financial  statements  in  conformity  with
          accounting  principles  generally  accepted  in the  United  States of
          America,  requires  management to make estimates and assumptions  that
          affect the reported  amounts of assets and  liabilities and disclosure
          of  contingent  assets and  liabilities  at the date of the  financial
          statements  and the reported  amounts of revenues and expenses  during
          the  reporting   period.   Actual  results  could  differ  from  those
          estimates.

          Material  estimates that are  particularly  susceptible to significant
          change  relate to the  determination  of the  allowance  for losses on
          loans,   valuation  allowance  related  to  deferred  taxes,  and  the
          valuation of real estate acquired in connection  with  foreclosures or
          in satisfaction of loans. In connection with the  determination of the
          allowances for losses on loans and foreclosed real estate,  management
          obtains independent appraisals for significant properties.


     CASH AND CASH EQUIVALENTS

          The Company considers all liquid investments with original  maturities
          of three months or less to be cash equivalents.


     INVESTMENT SECURITIES

          Available-for-sale  securities,  which  include any security for which
          the Bank has no  immediate  plan to sell but  which may be sold in the
          future,  are  carried at fair value.  Unrealized  gains and losses are
          recorded,  net of related income tax effects,  in other  comprehensive
          income.


                                      F-6
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

          Held-to-maturity  securities, which include any security for which the
          Bank has the positive intent and ability to hold until  maturity,  are
          carried at historical  cost adjusted for  amortization of premiums and
          accretion of discounts.

          Amortization  of premiums and  accretion of discounts  are recorded as
          interest  income  from  securities.  Realized  gains  and  losses  are
          recorded as net security gains (losses).  Gains and losses on sales of
          securities are determined on the specific-identification method.

     LOANS

          Loans  that  management  has the  intent  and  ability to hold for the
          foreseeable  future or until maturity or payoffs are reported at their
          outstanding  principal  balances  adjusted for any charge-offs and the
          allowance for loan losses. Interest income is reported on the interest
          method.  Generally,  loans are placed on nonaccrual  status at 90 days
          past due and interest is  considered  a loss,  unless the loan is well
          secured and in the process of collection.


     ALLOWANCE FOR LOAN LOSSES

          The allowance for loan losses is  established  as losses are estimated
          to have  occurred  through a  provision  for loan  losses  charged  to
          income.  Loan losses are charged against the allowance when management
          believes  the   uncollectibility  of  a  loan  balance  is  confirmed.
          Subsequent recoveries, if any, are credited to the allowance.

          The  allowance  for loan  losses is  evaluated  on a regular  basis by
          management  and is based  upon  management's  periodic  review  of the
          collectibility  of the loans in light of  historical  experience,  the
          nature and volume of the loan portfolio,  adverse  situations that may
          affect  the  borrower's  ability  to  repay,  estimated  value  of any
          underlying   collateral  and  prevailing  economic  conditions.   This
          evaluation is inherently subjective, as it requires estimates that are
          susceptible  to  significant  revision  as  more  information  becomes
          available.

          A loan is considered  impaired when, based on current  information and
          events,  it is  probable  that the Bank will be unable to collect  the
          scheduled  payments of principal or interest when due according to the
          contractual  terms  of  the  loan  agreement.  Factors  considered  by
          management  in  determining   impairment   include   payment   status,
          collateral value and the probability of collecting scheduled principal
          and interest  payments when due. Loans that  experience  insignificant
          payment delays and payment shortfalls  generally are not classified as
          impaired. Management determines the significance of payment delays and
          payment shortfalls on a case-by-case  basis, taking into consideration
          all of the  circumstances  surrounding  the  loan  and  the  borrower,
          including  the length of the delay,  the  reasons  for the delay,  the
          borrower's  prior  payment  record and the amount of the  shortfall in
          relation to the principal and interest owed. Impairment is measured on
          a loan-by-loan  basis for commercial and construction  loans by either
          the present  value of expected  future  cash flows  discounted  at the
          loan's effective  interest rate, the loan's obtainable market price or
          the fair value of the collateral if the loan is collateral dependent.

                                      F-7
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

          Large  groups of smaller  balance  homogenous  loans are  collectively
          evaluated for  impairment.  Accordingly,  the Bank does not separately
          identify  individual  consumer and  residential  loans for  impairment
          measurements.

     PREMISES AND EQUIPMENT

          Depreciable assets are stated at cost, less accumulated  depreciation.
          Depreciation is changed to expense  primarily using the  straight-line
          method  over the  estimated  useful  lives of the  related  assets  as
          follows:

                Buildings                                    39 - 50 years
                Building improvements                         7 - 40 years
                Furniture and equipment                       3 - 15 years

     FEDERAL HOME LOAN BANK STOCK

          Federal  Home Loan Bank  (FHLB)  stock is a  required  investment  for
          institutions  that  are  members  of the  FHLB  system.  The  required
          investment in the common stock is based on a predetermined formula.

     FORECLOSED REAL ESTATE

          Assets acquired through,  or in lieu of, loan foreclosure are held for
          sale  and  are  initially  recorded  at  fair  value  at the  date  of
          foreclosure, establishing a new cost basis. Subsequent to foreclosure,
          management periodically performs valuations and the assets are carried
          at the  lower of  carrying  amount  or fair  value  less cost to sell.
          Revenue and  expenses  from  operations  and changes in the  valuation
          allowance  are  included  in net  income or  expense  from  foreclosed
          assets.

     INCOME TAXES

          Deferred tax assets and liabilities are recognized for the tax effects
          of differences between the financial statement and tax basis of assets
          and  liabilities.  A  valuation  allowance  is  established  to reduce
          deferred  tax assets if it is more likely than not that a deferred tax
          asset will not be realized.  The Company files consolidated income tax
          returns with its subsidiary.

     STOCK OPTIONS

          At  December  31,  2004,  the  Company  has  a  stock-based   employee
          compensation  plan,  which  is  described  more  fully  in Note 8. The
          Company  accounts for this plan under the  recognition and measurement
          principles  of APB  Opinion  No. 25,  Accounting  for Stock  Issued to
          Employees,  and  related  Interpretations.   No  stock-based  employee
          compensation  cost is reflected in net income,  as all options granted
          under this plan had an exercise price equal to the market value of the
          underlying  common  stock  on the  grant  date.  The  following  table
          illustrates  the effect on net income  and  earnings  per share if the
          Company had applied the fair value  provisions  of FASB  Statement No.
          123, Accounting for Stock-Based Compensation,  to stock-based employee
          compensation.


                                      F-8
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                              YEAR ENDED
                                                                              DECEMBER 31
                                                                                 2004
                                                                              -------------

           <S>                                                                <C>
           Net income, as reported                                            $ (1,031,568)
           Less total stock-based employee compensation cost determined
              under the fair value based method, net of income taxes                 7,558
                                                                              ------------

           Pro forma net income                                               $ (1,039,126)
                                                                              ============

           Earnings per share:
               Basic - as reported                                            $      (3.71)
                                                                              ============
               Basic - pro forma                                              $      (3.74)
                                                                              ============
               Diluted - as reported                                          $      (3.71)
                                                                              ============
               Diluted - pro forma                                            $      (3.74)
                                                                              ============
</TABLE>

     EARNINGS PER SHARE

          Earnings per share have been computed based upon the  weighted-average
          common  shares  outstanding  during  2004 and  during  2003  since the
          conversion.  Since there are no dilutive securities, basic and diluted
          earnings per share is the same.


     RECLASSIFICATIONS

          Certain  reclassifications  have  been  made  to  the  2003  financial
          statements to conform to the 2004  financial  statement  presentation.
          These reclassifications had no effect on net income.



NOTE 2:  CONVERSION TO STOCK OWNERSHIP

          On June 26, 2003, the Bank consummated its conversion from a federally
          charted  mutual  savings bank to a federally  chartered  stock savings
          bank pursuant to the Bank's plan of  conversion.  Concurrent  with the
          formation of the Company,  the Company  acquired  100% of the stock of
          the Bank and issued 277,725 shares of the Company's common stock, with
          $.01 par value,  at $10.00 per share.  Net  proceeds of the  Company's
          stock  issuance,   after  costs  of   approximately   $308,000,   were
          approximately $2,469,000. Additional cost of approximately $9,000 were
          incurred during 2004.


                                      F-9
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

NOTE 3:  INVESTMENT SECURITIES

     The  amortized  cost and  approximate  fair  values  of  securities  are as
     follows:
<TABLE>
<CAPTION>
                                                               GROSS UNREALIZED  GROSS UNREALIZED  APPROXIMATE FAIR
                                              AMORTIZED COST        GAINS             LOSSES            VALUE
                                            -------------------------------------------------------------------------
<S>                                           <C>                <C>               <C>              <C>
           AVAILABLE-FOR-SALE SECURITIES
               December 31, 2004
                  U. S. Government
                     agencies                 $    2,257,993     $           0     $     42,708     $ 2,215,285
                                              ==============     =============     ============     ===========
           AVAILABLE-FOR-SALE SECURITIES
               December 31, 2003
                  U. S. Government
                     agencies                 $    2,011,298     $           0     $     35,580     $ 1,975,718
                                              ==============     =============     ============     ===========
           HELD-TO-MATURITY SECURITIES
               December 31, 2004
                 U. S. Government
                     agencies                 $           --     $          --     $         --     $         --
                  Mortgage-backed
                     securities                       88,965             6,060               --          95,025
                                              --------------     -------------     ------------     -----------
                                              $       88,965     $       6,060     $          0     $    95,025
                                              ==============     =============     ============     ===========

               December 31, 2003
                  U. S. Government
                     agencies                 $    1,300,000     $     100,045     $         --     $ 1,400,045
                  Mortgage-backed
                     securities                      124,067            11,048               --         135,115
                                              --------------     -------------     ------------     -----------
                                              $    1,424,067     $     111,093     $          0     $ 1,535,160
                                              ==============     =============     ============     ===========
</TABLE>

        The  amortized  cost  and  fair  value  of  debt  securities,  including
        mortgage-backed securities at December 31, 2004, by contractual maturity
        are shown  below.  Expected  maturities  will  differ  from  contractual
        maturities  because  borrowers  may  have the  right  to call or  prepay
        obligations with or without call or prepayment penalties.


                                      F-10
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                         AVAILABLE-FOR-SALE                 HELD-TO-MATURITY
                                                 ------------------------------------------------------------------
                                                      AMORTIZED           FAIR          AMORTIZED          FAIR
                                                        COST             VALUE            COST             VALUE
                                                 ------------------------------------------------------------------

<S>                                                <C>                <C>             <C>              <C>
                   Within one year                 $     504,096      $    497,815    $          --    $         --
                   One to five years                   1,753,897         1,717,470               --              --
                   Five to 10 years                          --                 --               --              --
                   Mortgage-backed securities                --                 --           88,965          95,025
                                                   -------------      ------------    -------------    ------------
                                                   $   2,257,993      $  2,215,285    $      88,965    $     95,025
                                                   =============      ============    =============    ============
</TABLE>

        Investment securities with a carrying value of approximately  $2,035,000
        and  $35,000  at  December   31,  2004  and  2003,   respectively,   and
        certificates  of deposit with a carrying value of $3,000,000 at December
        31, 2004, were pledged as collateral for certain customer deposits.

        Certain  investments  in debt  securities  are reported in the financial
        statements  at an amount  less than their  historical  cost.  Total fair
        value of these investments at December 31, 2004 and 2003, was $2,215,285
        and  $1,975,718,  which  is  approximately  95%  and  56% of the  Bank's
        available-for-sale  and  held-to-maturity  investment  portfolio.  These
        declines  primarily  resulted from recent  increases in market  interest
        rates and failure of certain  investments to maintain  consistent credit
        quality ratings.

        Based on evaluation of available  evidence,  including recent changes in
        market  interest  rates,   credit  rating  information  and  information
        obtained from regulatory  filings,  management  believes the declines in
        fair value for these securities are temporary.

        Should  the  impairment  of any of these  securities  become  other than
        temporary,  the cost basis of the  investment  will be  reduced  and the
        resulting   loss   recognized   in  net   income  in  the   period   the
        other-than-temporary impairment is identified.

        The following table shows our investments'  gross unrealized  losses and
        fair value,  aggregated by  investment  category and length of time that
        individual securities have been in a continuous unrealized loss position
        at December 31, 2004 and 2003:
<TABLE>
<CAPTION>
                                      LESS THAN 12 MONTHS          12 MONTHS OR MORE                 TOTAL
                                  ------------------------------------------------------------------------------------
           DESCRIPTION OF             FAIR       UNREALIZED       FAIR       UNREALIZED       FAIR       UNREALIZED
             SECURITIES               VALUE        LOSSES         VALUE        LOSSES         VALUE        LOSSES
        --------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>            <C>           <C>             <C>          <C>
         DECEMBER 31, 2004
         U. S. Government agencies  $2,215,285   $   42,708     $      --    $        --     $2,215,285   $   42,708
                                    ----------   ----------     ---------    -----------     ----------   ----------
             Total temporarily
                impaired
                securities          $2,215,285   $   42,708     $       0    $         0     $2,215,285   $   42,708
                                    ==========   ==========     =========    ===========     ==========   ==========
</TABLE>

                                      F-11
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                      LESS THAN 12 MONTHS          12 MONTHS OR MORE                 TOTAL
                                  ------------------------------------------------------------------------------------
           DESCRIPTION OF             FAIR       UNREALIZED       FAIR       UNREALIZED       FAIR       UNREALIZED
             SECURITIES               VALUE        LOSSES         VALUE        LOSSES         VALUE        LOSSES
        --------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>            <C>           <C>             <C>          <C>
         DECEMBER 31, 2003
         U. S. Government agencies  $1,975,718   $   35,580     $      --    $       --      $1,975,718   $   35,580
                                    ----------   ----------     ---------    ----------      ----------   ----------
             Total temporarily
                impaired
                securities          $1,975,718   $   35,580     $       0    $        0      $1,975,718   $   35,580
                                    ==========   ==========     =========    ==========      ==========   ==========
</TABLE>


NOTE 4:  LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

        Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                                             2004           2003
                                                                         ---------------------------
                    <S>                                                  <C>             <C>
                    Real estate mortgage loans
                        One-to-four family residential - first           $39,757,639     $29,719,264
                        One-to-four family residential - second            1,208,539         679,541
                        Multi-family                                       1,075,088         440,061
                        Commercial                                         2,952,877       2,421,368
                        Construction                                       1,899,906         547,365
                    Other loans
                        Consumer installment                                 252,549         166,206
                        Commercial                                         2,369,656         177,308
                        Automobile                                         1,904,563         993,296
                        Passbook                                             330,085         295,390
                        Overdrafts                                            12,104           7,945
                        Other                                                488,486         113,568
                                                                         -----------     -----------
                                                                          52,251,492      35,561,312
                    Less
                        Allowance for loan losses                            319,937         180,955
                        Loans in process                                        --           314,215
                                                                         -----------     -----------
                           Net loans                                     $51,931,555     $35,066,142
                                                                         ===========     ===========
                    </TABLE>



                                      F-12
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

     Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
                                                        2004              2003
                                                     ---------------------------

<S>                                                  <C>              <C>
Balance, beginning of year                           $ 180,955        $ 105,868
    Provision charged to expense                       163,500           82,000
    Losses charged off                                 (25,434)          (8,675)
    Recoveries                                             916            1,762
                                                     ---------        ---------
Balance, end of year                                 $ 319,937        $ 180,955
                                                     =========        =========
</TABLE>

     At December 31, 2004 and 2003,  the total  recorded  investment in loans on
     nonaccrual  amounted to approximately  $130,968 and $27,560,  respectively,
     and the total  recorded  investment  in loans  past due 90 days or more and
     still accruing  interest  amounted to  approximately  $165,700 and $20,100,
     respectively.  At December  31, 2004 and 2003,  there were no loans,  which
     were specifically classed as impaired loans.

     In the ordinary course of business, the Bank has and expects to continue to
     have transactions,  including borrowings,  with its officers and directors.
     In the opinion of management,  such  transactions were on substantially the
     same terms, including interest rates and collateral, as those prevailing at
     the time of comparable  transactions with other persons and did not involve
     more than a normal risk of  collectibility or present any other unfavorable
     features  to the  Bank.  Loans  to such  borrowers,  at  December  31,  are
     summarized as follows:
<TABLE>
<CAPTION>
                                                       2004              2003
                                                   -----------------------------

<S>                                                <C>                <C>
Balance, beginning of year                         $ 544,102          $ 453,096
    Loan proceeds                                    105,853            311,233
    Payments                                        (220,304)          (220,227)
                                                   ---------          ---------
Balance, end of year                               $ 429,651          $ 544,102
                                                   =========          =========
</TABLE>


NOTE 5:  PREMISES AND EQUIPMENT

     Major  classifications  of premises and  equipment  stated at cost,  are as
     follows:
<TABLE>
<CAPTION>
                                                           2004         2003
                                                       -------------------------

<S>                                                    <C>            <C>
           Land                                        $  261,649     $  181,649
           Buildings and improvements                   1,769,087      1,541,986
           Furniture, fixtures and equipment              971,307        591,849
                                                       ----------     ----------
                                                        3,002,043      2,315,484
           Less accumulated depreciation                  506,719        362,935
                                                       ----------     ----------
           Net premises and equipment                  $2,495,324     $1,952,549
                                                       ==========     ==========
</TABLE>



                                      F-13
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 6:  DEPOSITS

          Deposits at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                      2004                               2003
                                       -----------------------------------------------------------------------
                                            AMOUNT          PERCENTAGE         AMOUNT       PERCENTAGE
                                       -----------------------------------------------------------------------
<S>                                      <C>                 <C>            <C>                <C>
           Non-interest bearing
              demand                     $ 4,047,403           9%           $ 1,681,941           5%
           NOW accounts                    2,183,898           5              1,679,342           5
           Money market accounts           3,467,230           7              1,960,580           6
           Passbook savings                4,091,194           9              3,438,191          10
           Time deposits                  32,676,311          70             24,411,472          74
                                         -----------         ---            -----------         ---
                                         $46,466,036         100%           $33,171,526         100%
                                         ===========         ===            ===========         ===
</TABLE>

          Time  deposit  accounts  in  denominations  of  $100,000  or more were
          $9,646,446   and   $2,407,383,   at   December   31,  2004  and  2003,
          respectively.

          At December 31, 2004, the scheduled maturities of time deposit were as
          follows:

                               2005         $19,808,327
                               2006           4,001,349
                               2007           5,483,148
                               2008           3,111,400
                               2009             272,087
                                            -----------
                                            $32,676,311
                                            ===========

          Interest  expense on  deposits  for the years ended  December  31, are
          summarized as follows:
<TABLE>
<CAPTION>
                                                              2004       2003
                                                           ---------------------
<S>                                                        <C>          <C>
Certificates of deposit                                    $922,649     $790,763
Money market accounts                                        11,343       10,615
NOW accounts                                                  5,517        2,710
Passbook savings                                             10,903       12,796
                                                           --------     --------
                                                            950,412      816,884
Less dividends retained for early withdrawal                     70        2,162
                                                           --------     --------
                                                           $950,342     $814,722
                                                           ========     ========
</TABLE>



                                      F-14
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003



        In the  ordinary  course of  business,  the Bank has  continued  to have
        transactions,  including deposits,  with its officers and directors.  In
        the opinion of management,  such  transactions were on substantially the
        same  terms,  including  interest  rates  prevailing  at  the  time,  of
        comparable  transactions with other persons.  Deposits from officers and
        directors totaled $490,335 and $364,478,  on December 31, 2004 and 2003,
        respectively.

NOTE 7:  FEDERAL HOME LOAN BANK ADVANCES AND OTHER SHORT-TERM BORROWINGS

        Short-term  debt  consisted of short-term  fixed rate advances from FHLB
        totaling  $13,000,000  and  $5,000,000  at  December  31, 2004 and 2003,
        respectively.  The advances at December 31, 2004 and 2003,  have a 2.42%
        and a 1.09% variable interest rate respectively.  Advances from FHLB are
        collateralized with the Bank's mortgage portfolio to 135% of the balance
        of the note (blanket  mortgage  collateral) in the amount of $17,550,000
        and is further collateralized by the Bank's stock in the FHLB.

    LINE OF CREDIT

        The Company has a $750,000  revolving  line of credit,  which expires on
        September 10, 2005. At December 31, 2004,  $750,000 was advanced against
        this line. The line is  collateralized  by all of the Company's stock in
        the Bank.  Interest varies monthly and is based on the prime rate, which
        was  5.25% on  December  31,  2004.  Interest  is  payable  monthly  and
        principal is due at maturity.

NOTE 8:  EMPLOYEE BENEFITS

    DEFINED BENEFIT PLAN

        The Bank is a participant in a pension fund known as the Pentegra Group.
        This plan is a multi-employer  plan;  separate actuarial  valuations are
        not made with respect to each participating  employer. The plan required
        contributions in the amount of approximately $59,700 and $20,200 for the
        years ended December 31, 2004 and 2003, respectively.  The plan provides
        pension benefits for substantially all of the Bank's employees.

    DEFINED CONTRIBUTION PLAN

        The Bank began a retirement  savings 401(k) plan covering  substantially
        all employees on January 1, 2004.  Employees may contribute up to 20% of
        their  compensation  with the Bank matching a certain  percentage of the
        employee's  compensation using a formula to be determined each year. The
        Bank made no matching contribution to the plan in 2004.


                                      F-15
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003



    STOCK OPTION PLAN

        On  May  20,  2004,  the   stockholders  of  the  Company  approved  the
        establishment  of the Community  First  Bancorp,  Inc. 2004 Stock Option
        Plan.  Under the Option Plan, the Company may grant either  incentive or
        nonincentive  stock  options  to  directors  and  key  employees  for an
        aggregate  of  27,772  shares of the  Company's  common  stock,  with an
        exercise  price equal to the fair market  value of the stock at the date
        of the award. Upon exercise of the options,  the Company may issue stock
        out of authorized  shares or purchase the stock in the open market.  The
        option to purchase  shares expires 10 years after the date of the grant.
        The options vest, and thereby become exercisable,  at the rate of 20% on
        the  one-year  anniversary  of the date of the  grant  and 20%  annually
        thereafter.  The options become vested  immediately in the case of death
        or disability or upon a change in the control of the Company.
<TABLE>
<CAPTION>
                                                                    2004
                                                          ---------------------------
                                                           SHARES    WEIGHTED-AVERAGE
                                                                     EXERCISE PRICE
                                                           --------------------------
<S>                                                        <C>            <C>
Outstanding, beginning of year                               --          $   --
    Granted                                                16,442         16.00
    Exercised                                                  --            --
    Forfeited                                                  --            --
    Expired                                                    --            --
                                                           ------        ------
Outstanding, end of year                                   16,442        $16.00
                                                           ======        ======
Options exercisable, end of year                                0
                                                           ======

</TABLE>

        The fair  value of each  option  grant is  estimated  on the date of the
        grant using the  Black-Scholes  option-pricing  model.  Weighted-average
        assumptions,  for the periods indicated,  are presented in the following
        table.

                                                                          2004
                                                                         -------

Dividend yields                                                            0.00%
Volatility factors of expected market price of common stock               37.07%
Risk-free interest rates                                                   2.18%
Expected life of options                                                 5 years

Weighted-average fair value of options granted during the year           $ 5.97


                                      F-16
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


     The following table  summarizes  information  about stock options under the
     plan outstanding at December 31, 2004:
<TABLE>
<CAPTION>
                                                 OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE
                                     -------------------------------------------------------------------------------
    EXERCISE PRICE                       WEIGHTED-AVERAGE
                           NUMBER      REMAINING CONTRACTUAL    WEIGHTED-AVERAGE      NUMBER      WEIGHTED-AVERAGE
                        OUTSTANDING            LIFE             EXERCISE PRICE    EXERCISABLE     EXERCISE PRICE
--------------------------------------------------------------------------------------------------------------------
        
              <C>                 <C>                    <C>                    <C>      <C>
        $16.00           16,442              4.5 years              $16.00                 0        $         0
</TABLE>



NOTE 9:  INCOME TAXES

        The provision (credit) for income taxes includes these components:
<TABLE>
<CAPTION>
                                                         2004             2003
                                                      --------------------------

<S>                                                   <C>             <C>
Taxes currently payable                               $      --       $      --
Deferred income taxes                                   115,580        (115,580)
                                                      ---------       ---------
       Income tax expense (credit)                    $ 115,580       $(115,580)
                                                      =========       =========
</TABLE>

     A reconciliation  of income tax expense at the statutory rate to the Bank's
     actual income tax expense is shown below:
<TABLE>
<CAPTION>
                                                               2004          2003
                                                            -----------------------

<S>                                                         <C>          <C>
Computed at the statutory rate (34%)                        $(311,436)   $ (34,476)
Increase (decrease) resulting from
    Change in tax rate from prior year                           --        (74,689)
    Changes in the deferred tax asset valuation allowance     418,547       (7,062)
    Other                                                       8,469          647
                                                            ---------    ---------
       Actual tax expense (credit)                          $ 115,580    $(115,580)
                                                            =========    =========
</TABLE>


                                      F-17
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


     The tax effects of temporary differences related to deferred taxes shown on
     the balance sheets were:
<TABLE>
<CAPTION>
                                                            2004        2003
                                                         ----------------------
<S>                                                      <C>          <C>
Deferred tax assets
    Allowance for loan losses                            $ 108,779    $  61,526
    Net operating loss carryovers                          523,408      264,775
    Unrealized loss on available-for-sale securities        14,521       12,097
    Capital loss carryover                                   5,100           --
    Charitable contributions carryover                      11,292           --
    Other                                                       --        1,772
                                                         ---------    ---------

                                                           663,100      340,170
                                                         ---------    ---------

Deferred tax liabilities
    Depreciation                                            59,892       51,707
    FHLB stock                                             170,102      160,786
    Other                                                       38           --
                                                         ---------    ---------

                                                           230,032      212,493
                                                         ---------    ---------

       Net deferred tax asset before
          valuation allowance                              433,068      127,677
                                                         ---------    ---------

Valuation allowance
    Beginning balance                                           --       (7,062)
    (Increase) decrease during the period                 (418,547)       7,062
                                                         ---------    ---------

    Ending balance                                        (418,547)           0
                                                         ---------    ---------
       Net deferred tax asset                            $  14,521    $ 127,677
                                                         =========    =========
</TABLE>

        As of December 31, 2004, the Company had approximately $1,539,436 of net
        operating loss carryovers available to offset future federal income. The
        net operating losses will begin to expire in the year 2010.

        Retained earnings at December 31, 2004 and 2003,  include  approximately
        $647,729,  for which no deferred  federal  income tax liability has been
        recognized.  These amounts represent an allocation of income to bad debt
        deductions  for tax purposes  only.  Reduction of amounts  allocated for
        purposes  other than tax bad debt  losses or  adjustments  arising  from
        carryback of net operating losses,  would create income for tax purposes
        only,  which would be subject to the  then-current  corporate income tax
        rate. The deferred income tax liabilities on the preceding  amounts that
        would have been  recorded if they were  expected to reverse into taxable
        income in the foreseeable future was approximately  $220,228 at December
        31, 2004 and 2003, respectively.



                                      F-18
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 10:  OTHER COMPREHENSIVE LOSS

     Other  comprehensive  income  (loss)  components  and related taxes were as
     follows:
<TABLE>
<CAPTION>
                                                             2004        2003
                                                          ----------------------
<S>                                                       <C>          <C>
Unrealized losses on available-for-sale securities        $ (7,128)    $(35,580)
                                                          --------     --------

       Other comprehensive loss, before
          tax effect                                        (7,128)     (35,580)
Tax benefit                                                 (2,424)     (12,097)
                                                          --------     --------
       Other comprehensive loss                           $ (4,704)    $(23,483)
                                                          ========     ========
</TABLE>


NOTE 11: REGULATORY MATTERS

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

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain  minimum  amounts and ratios (set forth in the
     table below).  Management believes,  as of December 31, 2004 and 2003, that
     the Bank meets all capital adequacy requirements to which it is subject.

     As of  December  31,  2004,  the  most  recent  notification  from  the OTS
     categorized the Bank as well capitalized under the regulatory framework for
     prompt corrective  action. To be categorized as well capitalized,  the Bank
     must  maintain  minimum  total  risk-based,  Tier I  risk-based  and Tier I
     leverage  ratios as set forth in the  table.  There  are no  conditions  or
     events since that  notification  that management  believes have changed the
     Bank's category.

     The Bank's  actual  capital  amounts and ratios are also  presented  in the
     table.


                                      F-19
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                                       TO BE WELL CAPITALIZED UNDER
                                                               FOR CAPITAL ADEQUACY      PROMPT CORRECTIVE ACTION
                                         ACTUAL                 PURPOSES REQUIRED           PROVISIONS REQUIRED
                              ---------------------------------------------------------------------------------------
                                 AMOUNT       PERCENTAGE      AMOUNT      PERCENTAGE      AMOUNT       PERCENTAGE
                              ---------------------------------------------------------------------------------------
<S>                             <C>              <C>       <C>                <C>      <C>                <C>
     DECEMBER 31, 2004
           Total risk-based
              capital           $   4,161        11.78%    $     2,826         8.0%    $     3,533         10.0%
           Tier I
              risk-based
              capital           $   3,842        10.88%    $     1,413         4.0%    $     2,120          6.0%
           Tier I core
              capital           $   3,842         6.05%    $     2,542         4.0%    $     3,177          5.0%
           Tangible equity
              capital           $   3,842         6.05%    $       953         1.5%    $       953          1.5%

     DECEMBER 31, 2003
           Total risk-based
              capital           $   4,325        18.91%      $   1,830         8.0%      $   2,288         10.0%
           Tier I
              risk-based
              capital           $   4,144        18.12%      $     915         4.0%      $   1,373          6.0%
           Tier I core
              capital           $   4,144         9.73%      $   1,704         4.0%      $   2,130          5.0%
           Tangible equity
              capital           $   4,144         9.73%      $     639         1.5%      $     639          1.5%
</TABLE>

        LIQUIDATION  ACCOUNT.  Upon  conversion to a capital stock savings bank,
        eligible  account  holders  who  continued  to  maintain  their  deposit
        accounts  in the Bank were  granted  priority in the event of the future
        liquidation  of  the  Bank  through  the   establishment  of  a  special
        "Liquidation  Account" in an amount equal to the  consolidated net worth
        of the Bank as of the date  specified  in the  Plan of  Conversion.  The
        initial liquidation account balance of $1,748,866 is reduced annually in
        proportion to decreases in the accounts of the eligible account holders.
        The liquidation  account does not restrict the use or application of net
        worth,  except with respect to the cash payment of  dividends.  The Bank
        may not  declare  or pay a cash  dividend  on or  repurchase  any of its
        common  stock if the effect  would  cause its  regulatory  capital to be
        reduced below the amount required for the liquidation account.

        DIVIDEND RESTRICTIONS.  The payment of cash dividends by the Bank on its
        common  stock  is  limited  by  regulations  of  the  Office  of  Thrift
        Supervision  (OTS).  Interest on deposits will be paid prior to payments
        of  dividends  on  common  stock.  Additional  limitation  on  dividends
        declared or paid or repurchases of the Bank stock are tied to the Bank's
        level of compliance  with its  regulatory  capital  requirements.  Under
        current OTS regulations the Bank must either 1) file  notification  with
        the OTS because it is a subsidiary of a savings and loan holding company
        or  2)  apply  for   distributions   if  the  total  amount  of  capital
        distributions  for the  applicable  calendar year exceeds net income for
        that year to date plus retained net income for the preceding two years.


                                      F-20
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 12:  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

     The  following  table  presents  estimated  fair  values  of the  Company's
     financial instruments. The fair values of certain of these instruments were
     calculated by discounting  expected cash flows, which involves  significant
     judgments by  management  and  uncertainties.  Fair value is the  estimated
     amount at which  financial  assets or  liabilities  could be exchanged in a
     current  transaction  between  willing  parties,  other than in a forced or
     liquidation  sale.  Because no market exists for certain of these financial
     instruments and because  management does not intend to sell these financial
     instruments,  the Company does not know whether the fair values shown below
     represent  values at which the respective  financial  instruments  could be
     sold individually or in the aggregate.
<TABLE>
<CAPTION>

                                                         2004                                   2003
                                        ------------------------------------------------------------------------------
                                             CARRYING              FAIR             CARRYING             FAIR
                                               VALUE              VALUE               VALUE              VALUE
                                        ------------------------------------------------------------------------------
<S>                                       <C>                <C>                 <C>                <C>
     Financial assets
        Cash and cash equivalents         $      5,793,196   $      5,793,196    $      1,109,062   $      1,109,062
        Held-to-maturity securities       $         88,965   $         95,025    $      1,424,067   $      1,535,160
        Available-for-sale securities     $      2,215,285   $      2,215,285    $      1,975,718   $      1,975,718
        FHLB stock                        $        687,000   $        687,000    $        659,600   $        659,600
        Loans, net of allowance for
           loan losses                    $     51,931,555   $     51,932,700    $     35,066,142   $     36,303,150
        Interest receivable               $        227,066   $        227,066    $        159,150   $        159,150

     Financial liabilities
        Deposits                          $     46,466,036   $     46,615,800    $     33,171,526   $     31,521,843
        FHLB advances                     $     13,000,000   $     13,000,000    $      5,000,000   $      5,000,000
        Advances under line of credit     $        750,000   $        750,000    $             --   $             --
        Interest payable                  $         56,213   $         56,213    $         13,425   $         13,425

     Unrecognized financial
        instruments (net of contract
        amount)
     Commitments to originate loans       $              0   $              0    $              0   $              0
</TABLE>

     The following  methods and assumptions were used to estimate the fair value
     of each class of financial instruments.


     CASH AND CASH EQUIVALENTS,  INTEREST-BEARING  DEPOSIT AND FEDERAL HOME LOAN
     BANK STOCK

          The carrying amount approximates fair value.



                                      F-21
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

     SECURITIES

          Fair values equal quoted market prices, if available. If quoted market
          prices  are not  available,  fair value is  estimated  based on quoted
          market prices of similar securities.

     LOANS

          The fair value of loans is  estimated by  discounting  the future cash
          flows using the current  rates at which similar loans would be made to
          borrowers  with  similar  credit  ratings  and for the same  remaining
          maturities.  Loans with similar  characteristics  were  aggregated for
          purposes of the calculations.  The carrying amount of accrued interest
          approximates its fair value.

     DEPOSITS

          Deposits include demand deposits,  savings accounts,  NOW accounts and
          certain money market deposits.  The carrying amount  approximates fair
          value.  The fair value of  fixed-maturity  time  deposits is estimated
          using a  discounted  cash  flow  calculation  that  applies  the rates
          currently offered for deposits of similar remaining maturities.

     SHORT-TERM BORROWINGS AND INTEREST PAYABLE

          The carrying amount approximates fair value.

     COMMITMENTS TO ORIGINATE LOANS

          The fair value of  commitments to originate  loans is estimated  using
          the fees currently  charged to enter into similar  agreements,  taking
          into account the  remaining  terms of the  agreements  and the present
          creditworthiness   of  the   counterparties.   For   fixed-rate   loan
          commitments,  fair value also considers the difference between current
          levels of interest rates and the committed rates.

NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS

     Accounting  principles  generally  accepted in the United States of America
     require   disclosure   of  certain   significant   estimates   and  current
     vulnerabilities  due to certain  concentrations.  Estimates  related to the
     allowance  for loan  losses  are  reflected  in the note  regarding  loans.
     Current  vulnerabilities  due to certain  concentrations of credit risk are
     discussed in the note on commitments and credit risk.



                                      F-22
<PAGE>

                          COMMUNITY FIRST BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003



NOTE 14:  COMMITMENTS AND CREDIT RISK

          The Bank grants  agribusiness,  commercial  and  residential  loans to
          customers primarily in Hopkins County, Kentucky.

     COMMITMENTS TO ORIGINATE LOANS

          Commitments to originate loans 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 a portion
          of the  commitments  may expire  without  being drawn upon,  the total
          commitment   amounts  do  not   necessarily   represent   future  cash
          requirements.  Each  customer's  creditworthiness  is  evaluated  on a
          case-by-case  basis.  The  amount of  collateral  obtained,  if deemed
          necessary,   is  based  on  management's   credit  evaluation  of  the
          counterparty.   Collateral  held  varies  but  may  include   accounts
          receivable,  inventory, property, plant and equipment, commercial real
          estate and residential real estate.

          At December 31, 2004 and 2003, the Bank had outstanding commitments to
          originate  loans  aggregating  approximately  $1,948,000 and $314,265,
          respectively.  The  commitments  extended over varying periods of time
          with the majority being disbursed within a one-year period.

     OTHER CREDIT RISKS

          At December 31, 2004 and 2003,  approximately $4,075,987 and $245,895,
          respectively,  were held in  deposits  at  financial  institutions  in
          excess of federally insured amounts.


NOTE 15: FUTURE CHANGE IN ACCOUNTING PRINCIPLE

          On December 16, 2004, the Financial  Accounting Standards Board (FASB)
          issued FASB  Statement No. 123 (revised  2004),  Share-Based  Payment,
          which  is a  revision  of  FASB  Statement  No.  123,  Accounting  for
          Stock-Based Compensation.  Statement 123(R) supersedes APB Opinion No.
          25,  Accounting  for  Stock  Issued  to  Employees,  and  amends  FASB
          Statement No. 95,  Statement of Cash Flows. The approach to accounting
          for  share-based  payments  in  Statement  123(R)  is  similar  to the
          approach  described  in  Statement  123.  However,   Statement  123(R)
          requires all share-based  payments to employees,  including  grants of
          employee stock options,  to be recognized in the financial  statements
          based on their fair values and no longer  allows pro forma  disclosure
          as an alternative to financial statement recognition. The Company will
          be required to adopt Statement  123(R) at the beginning of its quarter
          ending March 31, 2006. The Company has not  determined  what financial
          statement impact Statement 123(R) will have on the Company.


                                      F-23
<PAGE>

                                   SIGNATURES

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

                                     COMMUNITY FIRST BANCORP, INC.

Date:   March 31, 2005               By: /s/ William M. Tandy
                                         -------------------------------------
                                         William M. Tandy
                                         President and Chief Executive Officer
                                         (Duly Authorized Officer)

         In accordance  with the Exchange Act, 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/ William M. Tandy                                   Date: March 31, 2005
    --------------------------------------------------
      William M. Tandy
      President, Chief Executive Officer and Director
      (Principal Executive Officer)

By: /s/ Michael D. Wortham                                 Date: March 31, 2005
    --------------------------------------------------
      Michael D. Wortham
      Vice President and Director
      (Principal Financial and Accounting Officer)

By: /s/ Ralph T. Teague                                    Date: March 31, 2005
    --------------------------------------------------
      Ralph T. Teague
      Director

By: /s/ Paul W. Arison                                     Date: March 31, 2005
    --------------------------------------------------
      Paul W. Arison
      Director

By:
    --------------------------------------------------
      Charlotte E. Baldwin
      Director

By:
    --------------------------------------------------
      Charles G. Ramsey
      Director


By:
    --------------------------------------------------
      J. Craig Riddle
      Director


By: /s/ Charles B. Vaughn                                  Date: March 31, 2005
    --------------------------------------------------
      Charles B. Vaughn
      Director

By:
    --------------------------------------------------
      Steven E. Carson
      Director