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

                       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, 2003

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

     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. [X]

     State issuer's revenues for its most recent fiscal year: $2.4 million

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was approximately  $4.7 million as of March 23, 2004 based on the
last sale ($18.44 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 23, 2004,  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 2004 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,
2003, the Company had total assets of $42.5 million,  loans  receivable of $35.1
million, total deposits of $33.2 million and total equity of $4.2 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 www.cfbky.com.

         THE BANK.  The Bank is a federal stock savings bank  operating  through
two  offices  in  Madisonville,   Kentucky.  It  was  founded  in  1923  as  the
Madisonville  Building  and Loan  Association.  The Bank  converted to a federal
mutual  savings bank charter in 2002 and adopted its current name. 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 2002  unemployment
rate for  Hopkins  County  was 6.0%,  compared  to 5.8%  nationally.  The median
household  income of $28,586 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


                                       2
<PAGE>

slightly  during  the next  decade  according  to  projections  by the  Kentucky
Department for Economic Development.

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, 2003, our gross loans totaled $35.3  million,  of which
$29.7  million  were  first  mortgage  loans  secured  by  one-  to  four-family
residences.  We  originate  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,
                                                            -----------------------------------------------
                                                                    2003                         2002
                                                            -------------------         -------------------
                                                             AMOUNT         %           AMOUNT          %
                                                            -------      -----          ------       ------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                         <C>          <C>            <C>          <C>
     Real estate mortgage loans:
       One- to four-family residential first...             $29,719       83.57%        $22,353       86.10%
       One- to four-family residential second..                 680        1.91             582        2.24
       Multi-family............................                 440        1.24             450        1.73
       Commercial..............................               2,422        6.81             798        3.07
       Construction............................                 547        1.54             207        0.80
     Other loans:
       Consumer installment....................                 166        0.47             283        1.09
       Commercial..............................                 177        0.50             102        0.39
       Automobile..............................                 993        2.79             740        2.85
       Passbook................................                 295        0.83             238        0.92
       Other...................................                 122        0.34             209        0.81
                                                            -------      ------         -------      ------
                                                             35,561      100.00%         25,962      100.00%
                                                                         ======                      ======
     Less:
       Unearned interest.......................                  --                           1
       Allowance for loan losses...............                 181                         106
       Loans in process........................                 314                         145
                                                            -------                     -------
          Total................................             $35,066                     $25,710
                                                            =======                     =======
</TABLE>

                                       3
<PAGE>


     The following table sets forth the estimated maturity of the Company's loan
portfolio  at  December  31,  2003.  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, 2003     DECEMBER 31, 2003     DECEMBER 31, 2003         TOTAL
                                           -----------------     -----------------     -----------------       ---------
                                                                           (IN THOUSANDS)
<S>                                            <C>                    <C>                   <C>                <C>
Real estate mortgage loans:
  One- to four-family residential first.....   $    311               $   953               $ 28,455           $  29,719
  One- to four-family residential second....          1                   226                    453                 680
  Multi-family..............................         --                    --                    440                 440
  Commercial................................         --                   434                  1,988               2,422
  Construction..............................        547                    --                     --                 547
Other loans:
  Consumer installment......................         19                   147                     --                 166
  Commercial................................         26                   151                     --                 177
  Automobile................................         24                   969                     --                 993
  Passbook..................................        295                    --                     --                 295
  Other.....................................        122                    --                     --                 122
                                               --------               -------               --------           ---------
      Total.................................   $  1,345               $ 2,880               $ 31,336           $  35,561
                                               ========               =======               ========           =========
</TABLE>


         The next table sets forth at December  31, 2003,  the dollar  amount of
all loans due one year or more after December 31, 2003 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...........           $  3,508            $ 25,900
         One- to four-family residential second..........                679                  --
         Multi-family....................................                440                  --
         Commercial......................................              1,467                 955
         Construction....................................                 --                  --
     Other loans:
         Consumer installment............................                147                  --
         Commercial......................................                151                  --
         Automobile......................................                969                  --
         Passbook........................................                 --                  --
         Other...........................................                 --                  --
                                                                    --------            --------
              Total......................................           $  7,361            $ 26,855
                                                                    ========            ========
</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 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 the loan can be sold
into the secondary market.  Although we make loans on one- to four-family rental
properties,   the  majority  of  our   residential   first   mortgages   are  on
owner-occupied properties.

         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.

                                       4
<PAGE>

         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 3.4% of the portfolio at December 31, 2003.

         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, 2003, approximately 87% 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.

         At December 31, 2003,  the Bank's largest  commercial  real estate loan
was a $440,000  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

                                       5
<PAGE>

loan was a $346,000  loan secured by a personal  care  facility in  Madisonville
originated in March 2002.  The facility has 48 beds and 22  semi-private  rooms.
The loan has a seven-year term with 30-year  amortization and bears a fixed rate
of interest.  The loan-to-value  ratio was 53% at the date of origination and is
personally guaranteed by the principals of the borrower.

         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, 2003 had a balance
of approximately $37,000 and was made to a local carpet supply 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 $1.7  million,  or 4.9%,  of our total loans at December  31, 2003.  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.

         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.

                                       6
<PAGE>

         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,
                                                                      --------------------------
                                                                       2003              2002
                                                                      -------          --------
                                                                           (IN THOUSANDS)
<S>                                                                   <C>              <C>
Loans originated:
  Real estate mortgage loans:
     One- to four-family residential first...................         $16,475          $  9,332
     One- to four-family residential second..................             507               181
     Multi-family............................................              --               450
     Commercial..............................................           1,675               484
     Construction............................................           1,031               264
  Other loans:
     Consumer installment....................................             200               262
     Commercial..............................................              98               110
     Automobile..............................................             891               637
     Passbook................................................             283                80
     Other...................................................             208               124
                                                                      -------          --------
        Total loans originated...............................         $21,368          $ 11,924
                                                                      =======          ========
</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. 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 was $500,000 at
December  31,  2003.  At  December  31,  2003,  our largest  loan  concentration
outstanding had a balance of $440,000.

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 after 30 days payment is
still delinquent,  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, 2003, our loans past due between 30 and 89 days totaled $267,000.

         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,
                                                           -------------------------
                                                             2003              2002
                                                           ------            ------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                        <C>               <C>
Loans accounted for on a non-accrual basis:(1)
 Real estate:
    One- to four-family residential first..........        $   28            $   53
    One- to four-family residential second.........            --                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --
     Commercial....................................            --                --
     Automobile....................................            --                --
     Passbook......................................            --                --
     Other.........................................            --                --
                                                           ------            ------
     Total.........................................        $   28            $   53
                                                           ======            ======
Accruing loans which are contractually
 past due 90 days or more:
  Real estate:
    One- to four-family residential first..........        $   20            $   31
    One- to four-family residential second.........            --                --
    Multi-family...................................            --                --
    Commercial.....................................            --                --
    Construction...................................            --                --
  Other loans:
     Consumer installment..........................            --                --
     Commercial....................................            --                --
     Automobile....................................            --                --
     Passbook......................................            --                --
     Other.........................................            --                 2
                                                           ------            ------
     Total.........................................        $   20            $   33
                                                           ======            ======
     Total nonperforming loans.....................        $   48            $   86
                                                           ======            ======
  Percentage of total loans........................          0.13%             0.33%
                                                           ======            ======
  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,  2003,  gross  interest  income of
approximately  $748  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 2003.

                                       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 $68,000
at  December  31,  2003.  The  borrower  on this loan has filed  bankruptcy  and
reaffirmation is doubtful.

         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, 2003, we had $20,000 in loans classified as substandard
and $96,000 in loans classified as doubtful.  The Bank's  substandard  assets at
December 31, 2003 consisted of one residential first mortgage which is reflected
in the table in the  preceding  section as an accruing loan 90 days or more past
due at December  31,  2003.  The doubtful  assets  consisted of two  residential
mortgages  with a combined  balance of $96,000 both of which involved a borrower
in  bankruptcy.  One of these loans is  reflected as a  non-accrual  loan in the
table in the  preceding  section.  The other  loan was well  secured  and in the
process of  collection  at December  31,  2003.  Reserves  of $15,300  have been
allocated  to the  substandard  assets and  $7,100  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,  2003,  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.
                                       9
<PAGE>

         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 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,
                                                              --------------------------
                                                                2003             2002
                                                              -------          --------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>              <C>
Balance at beginning of period.....................           $   106          $    105
                                                              -------          --------

Loans charged-off:
  Real estate mortgage loans:
    One- to four-family residential first..........                --                --
    One- to four-family residential second.........                --                --
    Multi-family...................................                --                --
    Commercial.....................................                --                --
    Construction...................................                --                --
  Other loans:
    Consumer installment...........................                 7                15
    Commercial.....................................                --                --
    Automobile.....................................                --                 5
    Passbook.......................................                --                --
    Other..........................................                 2                 5
                                                              -------          --------
Total charge-offs..................................                 9                25
                                                              -------          --------
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...........................                 2                 5
    Commercial.....................................                --                --
    Automobile.....................................                --                 3
    Passbook.......................................                --                --
    Other..........................................                --                --
                                                              -------          --------
Total recoveries...................................                 2                 8
                                                              -------          --------
Net loans charged-off..............................                 7                17
                                                              -------          --------
Provision for loan losses..........................                82                18
                                                              -------          --------
Balance at end of period...........................           $   181          $    106
                                                              =======          ========
Ratio of net charge-offs to average
   loans outstanding during the period.............              0.02%             0.07%
                                                              =======          ========
</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,
                                                  --------------------------------------------------------
                                                        2003                           2002
                                                  --------------------------     -------------------------
                                                               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         $ 111          83.57%          $    65         86.10%
    One- to four-family residential second           --           1.91                --          2.24
    Multi-family.........................             5           1.24                --          1.73
    Commercial...........................            20           6.81                10          3.07
    Construction.........................            --           1.54                --          0.80
Other loans:
    Consumer installment.................            25           0.47                18          1.09
    Commercial...........................             4           0.50                 2          0.39
    Automobile...........................            13           2.79                 9          2.85
    Passbook.............................            --           0.83                --          0.92
    Other................................             3           0.34                 2          0.81
                                                  -----         ------           -------        ------
     Total allowance for loan losses.....         $ 181         100.00%          $   106        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,  2003,  our
investment  securities  portfolio  consisted  primarily of FHLB bonds of various
maturities.

         Our  securities at December 31, 2003 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, 2003.

         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,
                                                                --------------------------
                                                                  2003             2002
                                                                --------         ---------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>              <C>
Securities available-for-sale:
   U.S. government and agency securities..............          $  1,976         $     --
Securities held-to-maturity:
   U.S. government and agency securities..............             1,300            1,700
   Mortgage-backed securities.........................               124              202
                                                                --------         --------
      Total investments...............................          $  3,400         $  1,902
                                                                ========         ========
</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,  2003.  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>
Securities available for sale:
  U.S. government and agency securities..... $     --        -- %    $  1,511         2.40%   $    500       -- %

Securities held to maturity:
  U.S. government and agency securities.....    1,300       5.62           --          --           --       --
  Mortgage-backed securities................       --        --            41         8.00          --       --
                                             --------                --------                 --------
     Total.................................. $  1,300                $  1,552                 $    500
                                             ========                ========                 ========

<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.....   $     --      -- %      $  2,011    $  1,976       2.40%

Securities held to maturity:
  U.S. government and agency securities.....         --      --           1,300       1,400       5.62
  Mortgage-backed securities................         83     8.41%           124         135       8.27
                                               --------                --------    --------
     Total..................................   $     83                $  3,435    $  3,511
                                               ========                ========    ========
</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,  2003,  time  certificates  in amounts of $100,000 or more
constituted  $2.4 million,  or 7.3%, of our total deposit base.  The majority of
these certificates represent deposits from long-standing customers.
<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                              -----------------------------------------------
                                                       2003                      2002
                                              ----------------------      -------------------
                                               AVERAGE       AVERAGE      AVERAGE    AVERAGE
                                               BALANCE        RATE        BALANCE      RATE
                                              --------       -------      --------   --------
                                                          (DOLLARS IN THOUSANDS)
<S>                                           <C>              <C>        <C>          <C>
Non interest-bearing demand............       $  1,674           --%      $ 1,202        --%
Interest-bearing demand................          4,259         0.26%        2,892      0.91%
Passbook savings.......................          4,068         0.37%        3,363      0.65%
Certificates of deposit................         23,191         3.47%       20,230      4.43%
                                              --------                    -------
     Total.............................       $ 33,192                    $27,687
                                              ========                    =======
</TABLE>

     The following table classifies our time certificates of $100,000 or more by
time remaining to maturity as of December 31, 2003.

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

Three months or less..............................          $      --
Over three through six months.....................                310
Over six through 12 months........................                535
Over 12 months....................................              1,562
                                                            ---------
                                                            $   2,407
                                                            =========

     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, 2003,  our  borrowings  from the FHLB  consisted of
$5,000,000 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
class of borrowings outstanding during the past two fiscal years.
<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                             ---------------------------
                                                                               2003               2002
                                                                             --------            -------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                          <C>                  <C>
Amounts outstanding at end of period.................................        $  5,000             $--
Weighted average rate paid ..........................................            1.22%              2.47%
Maximum amount of borrowings outstanding at any month end............        $  5,000             $1,000
Average borrowings outstanding (1)...................................        $  4,016             $  530
Approximae weighted average rate paid (1)...........................            1.22%              2.47%
<FN>
_________
(1) Based on month-end balances.
</FN>
</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  5.8% of FDIC-insured  deposits in Hopkins County as
of June 30, 2003, 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 that 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, 2003, 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...................................  $   4,144           9.73%
         Tangible capital requirement.......................        639           1.50
                                                              ---------          -----
             Excess.........................................  $   3,505           8.23%
                                                              =========          =====

         Core capital.......................................  $   4,144           9.73%
         Core capital requirement(2)........................      1,704           4.00
                                                              ---------          -----
             Excess.........................................  $   2,440           5.73%
                                                              =========          =====

         Total risk-based capital...........................  $   4,325          18.91%
         Total risk-based capital requirement...............      1,830           8.00
                                                              ---------          -----
             Excess.........................................  $   2,495          10.91%
                                                              =========          =====
<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.

         OTS rules  require a deduction  from  capital for savings  institutions
with certain levels of interest rate risk. The OTS calculates the sensitivity of
an institution's  net portfolio value based on data submitted by the institution
in a schedule to its quarterly  Thrift  Financial  Report and using the interest
rate risk measurement  model adopted by the OTS. The amount of the interest rate
risk component, if any, deducted from an institution's total capital is based on
the institution's  Thrift Financial Report filed two quarters  earlier.  The OTS
has indefinitely  postponed  implementation of the interest rate risk component,
and the Bank has not been  required to determine  whether it will be required to
deduct an interest rate risk component from capital.

         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.

                                       17
<PAGE>

         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 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, 2003,  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,  subsequent  to the
conversion,  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.

                                       18
<PAGE>

         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, 2003, the Bank had $660,000 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, 2003, the
Bank's reserves met the minimum level required by the Federal Reserve System.

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           2003            SQUARE FOOTAGE
                              ------      --------      ---------------     ---------------
                                                      (DOLLARS IN THOUSANDS)
<S>                            <C>         <C>              <C>                <C>
MAIN OFFICE:
2420 North Main Street
Madisonville, KY  42431        2004         Owned           $1,132             8,400

BRANCH OFFICE:
240 South Main Street
Madisonville, KY 42431         1959         Owned           $ 821              4,200
</TABLE>

         The book value of the Bank's  investments  in  premises  and  equipment
totaled  $1,953,000  at December 31, 2003.  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 2003.

                                     PART II

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

         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.

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

         HOLDERS.  As of March 23,  2004,  there were 138 record  holders of the
Common Stock.

         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.

                                       20
<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                    AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------------------
                                                                 2003            2002              2001
                                                              ---------         --------         ---------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>               <C>              <C>
SELECTED FINANCIAL CONDITION DATA:
     Assets.................................................  $  42,541         $ 29,968         $  29,530
     Loans receivable, net..................................     35,066           25,710            22,158
     Cash and cash equivalents..............................      1,109              758             2,307
     Investment securities:
         Available-for-sale.................................      1,976               --               754
         Held-to-maturity...................................      1,424            1,902             3,070
     Deposits...............................................     33,172           28,128            26,611
     Advances from Federal Home Loan Bank...................      5,000               --             1,000
     Stockholders' equity...................................      4,209            1,749             1,838

SELECTED OPERATIONS DATA:
     Interest income........................................  $   2,182         $  1,941         $   2,018
     Interest expense.......................................        833              961             1,234
                                                              ---------         --------         ---------
         Net interest income................................      1,349              980               784
     Provision for loan losses..............................         82               18                94
                                                              ---------         --------         ---------
         Net interest income after provision for
             loan losses....................................      1,267              962               690
     Other income...........................................        195               73               130
     Other expenses.........................................      1,564            1,109               978
                                                              ---------         --------         ---------
         Income (loss) before federal income tax
             expense (benefit)..............................       (102)             (74)             (158)
     Federal income tax expense (benefit)...................       (116)              10               (33)
                                                              ---------         --------         ---------
         Net income (loss)..................................  $      14         $    (84)        $    (125)
                                                              =========         ========         =========
PERFORMANCE RATIOS:
     Return on average assets...............................       0.03%           (0.28)%           (0.43)%
     Return on average equity...............................       0.33            (4.50)            (6.41)
     Interest rate spread...................................       3.20             3.44              2.73
     Net interest margin....................................       3.43             3.54              2.94
     Ratio of average interest-earning assets to average
        interest-bearing liabilities........................     110.83           102.59            104.49
     Ratio of noninterest expense to average total assets...       3.78             3.66              3.40

ASSET QUALITY RATIOS:
     Nonperforming assets to total assets at end of period..       0.11             0.29              0.22
     Nonperforming loans to total loans at end of period....       0.13             0.33              0.21
     Allowance for loan losses to total loans at end
        of period...........................................       0.51             0.44              0.47
     Allowance for loan losses to nonperforming loans
        at end of period....................................     376.99           123.26            223.40
     Net charge-offs to average loans outstanding...........       0.02             0.07              0.24

CAPITAL RATIOS:
     Equity to total assets at end of period................       9.89             5.84              6.22
     Average equity to average assets.......................      10.03             6.16              6.78
     Tangible capital.......................................       9.73             5.83              6.21
     Core capital...........................................       9.73             5.83              6.21
     Total risk-based capital...............................      18.91            11.12             13.90
</TABLE>

                                       21
<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.

         In 2001,  the Board of Directors  engaged an  executive  search firm to
find a new chief executive  officer with experience in bank turn-arounds and Mr.
William Tandy was hired in November of that year. Mr. Tandy had previously  been
involved in three bank turn-arounds.

         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 $980,000 in the year ended
December 31, 2002 to $1.3 million in 2003.

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.

                                       22
<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  $181,000  was  adequate,  but not  excessive,  to  absorb
estimated credit losses associated with the loan portfolio at December 31, 2003.

       DEFERRED  INCOME  TAXES.  We have a deferred  tax asset of  $128,000.  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, 2003, there is no valuation allowance established. The deferred tax
asset will be utilized to offset  future  taxable  income.  The  estimate of the
realizable amount of this asset is a critical accounting policy.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2003 AND DECEMBER 31, 2002

         Total assets  increased by  approximately  $12.6 million,  or 42.0%, to
$42.6 million at December 31, 2003 from $30.0 million at December 31, 2002.  The
Bank's gross loan portfolio grew by $9.6 million,  or 36.9%,  from $26.0 million
at December  31, 2002 to $35.1  million at December  31,  2003.  The increase in
loans was  principally  the result of one- to  four-family  first  mortgage loan
originations  which  expanded this portion of the portfolio by $7.4 million,  or
33.0%,  to  $29.7  million.  Also  contributing  to  asset  growth  was a larger
investment securities portfolio, which increased $1.5 million, or 78.8%, to $3.4
million at December 31, 2003 from $1.9  million at December  31, 2002.  Cash and
cash  equivalents  also  increased  to $1.1  million at  December  31, 2003 from
$758,000 at December 31, 2002, an increase of $351,000,  or 46.3%. The increases
in these asset categories reflect management's decision to improve the Company's
liquidity position. Net premises and equipment increased $1.2 million, or 152.7%
as a result of the purchase and renovation of the new main office.

                                       23
<PAGE>

         Funding for the Bank's loan growth also came from  increased  deposits,
which  increased by $5.1 million,  or 17.9%,  from $28.1 million at December 31,
2002 to $33.2  million at  December  31,  2003.  The Bank's  deposit  growth was
primarily  attributable  to NOW  accounts  and  certificates  of  deposit  under
$100,000.

         Stockholders' equity increased $2.5 million, or 140.6%, to $4.2 million
at December  31,  2003,  primarily  due to the sale of 277,725  shares of common
stock  at $10  per  share  as part  of the  Bank's  conversion  to  stock  form.
Stockholders' equity also benefited from $14,000 in earnings. Equity was reduced
by $24,000 due to a change in unrealized gain on available-for-sale  securities,
net of tax benefits.

COMPARISON  OF RESULTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2003 AND
2002

         GENERAL.  Net income for the year ended  December 31, 2003 increased to
$14,000  compared to a net loss of $84,000 for the year ended December 31, 2002.
The increase in net income was primarily  attributable  to a federal  income tax
benefit of $116,000  which the Company was able to  recognize as a result of its
improved earnings position. The tax benefit helped offset increased non-interest
expenses  resulting from the growth of the Bank and the conversion to a new data
processor.  Net interest income increased  approximately  $369,000, or 37.7%, to
$1.3 million  compared to  approximately  $980,000 for the 2002 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, 2003,  net interest  income  increased
approximately $369,000, or 37.7%, compared to the prior year. The improvement in
net interest income  reflects  increased  interest  income and reduced  interest
expense.  Interest income increased  approximately  $241,000,  or 12.4%, for the
year ended December 31, 2003,  while interest  expense  decreased  approximately
$128,000,  or 13.3%. The average yield on  interest-earning  assets declined 151
basis  points to 5.49% while the average  cost of  interest-bearing  liabilities
fell 133 basis points to 2.23%. As a result of these rate movements,  the Bank's
interest  rate spread  decreased to 3.26% for 2003,  compared to 3.44% for 2002.
The declines in average  yields and costs both reflect a significant  decline in
interest  rates  between  the  periods as the  Federal  Reserve  cut  short-term
interest rates a record 12 times.  Also  contributing  to the improvement in net
interest  income  was a $12.0  million,  or  43.4%,  increase  in the  volume of
interest-earning  assets  and  in  the  percentage  of  interest-earning  assets
represented by loans,  as the Bank  emphasized the origination of loans while at
the same time increasing the investment portfolio and available cash to maintain
an  adequate  liquidity  position.  As a result  of the  increase  in  volume of
interest-earning assets, the ratio of average interest-earning assets to average
interest-bearing  liabilities  increased  to  110.83%  from  102.59%  in 2002 as
average interest-bearing liabilities increased by $8.5 million, or 31.5%, during
the period.  Reflecting the decrease in the net interest  spread,  however,  the
Bank's net interest margin narrowed to 3.43% for fiscal year 2003 from 3.54% for
fiscal year 2002.

                                       24
<PAGE>
         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.

         During the year ended December 31, 2002, the Bank reported net interest
income, before provision for loan losses, of $980,000. Interest income consisted
of $1.7  million  in  interest  and  fees on  loans,  $169,000  in  interest  on
investment  securities,  $29,000 in dividends on FHLB stock and $13,000 in other
interest and totaled $1.9 million,  while interest  expense,  which consisted of
$949,000 in interest on deposits  and $12,000 in interest on FHLB  advances  and
other borrowings, totaled $961,000.

         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,
                                                -------------------------------------------------------------------------
                                                              2003                                    2002
                                                ----------------------------------      ---------------------------------
                                                                           AVERAGE                                AVERAGE
                                                AVERAGE                    YIELD/       AVERAGE                   YIELD/
                                                BALANCE      INTEREST        COST       BALANCE      INTEREST       COST
                                                -------      --------     ---------     -------      --------     -------
                                                                         (DOLLARS IN THOUSANDS)
<S>                      <C>                      <C>            <C>          <C>         <C>          <C>           <C>
   Interest-earning assets:
    Loans receivable, net(1)..................    $34,470        $2,040       5.92%       $ 23,012     $ 1,731        7.52%
    Investment securities.....................      3,425           116       3.39           2,939         169        5.75
    Other investments.........................      1,489            26       1.75           1,763          41        2.33
                                                  -------        ------                   --------     -------
       Total interest-earning assets..........     39,384         2,182       5.54          27,714       1,941        7.00
   Non-interest-earning assets................      2,307                                    2,567
                                                  -------                                 --------
       Total assets...........................    $41,691                                 $ 30,281
                                                  =======                                 ========
   Interest-bearing liabilities:
    Deposits..................................    $31,518           815       2.59        $ 26,485         949        3.58
    Borrowings................................      4,016            18       0.45             530          12        2.26
                                                  -------        ------                   --------     -------
       Total interest-bearing liabilities.....     35,534           833       2.34          27,015         961        3.56
   Non-interest-bearing liabilities...........      1,845                                    1,401
                                                  -------                                 --------
       Total liabilities......................     37,379                                   28,416
   Total equity...............................      4,312                                    1,865
                                                  -------                                 --------
       Total liabilities and equity...........    $41,691                                 $ 30,281
                                                  =======                                 ========
   Net interest income........................                   $1,349                               $    980
                                                                 ======                               ========
   Interest rate spread.......................                                3.20%                                  3.44%
                                                                            ======                                 ======
   Net interest margin........................                                3.43%                                  3.54%
                                                                            ======                                 ======
   Ratio of average interest-earning assets to
      Average interest-bearing liabilities....                              110.83%                                102.59%
                                                                            ======                                 ======
<FN>
________________
(1)  Non-accrual loans are included in average balances, less allowance for loan
     losses and deferred fees.
</FN>
</TABLE>

                                       25
<PAGE>
         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,
                                            -----------------------    -----------------------
                                                2003 VS. 2002              2002 VS. 2001
                                            -----------------------    -----------------------
                                              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...................................$  546   $(237)   $ 309    $ 210    $(128)   $  82
   Investment securities...................    51    (104)     (53)     (93)     (24)    (117)
   Other investments.......................     1     (16)     (15)      (5)     (37)     (42)
                                           ------   -----    -----    -----    -----    -----
      Total interest-earning assets........   598    (357)     241      112     (189)     (77)
                                           ------   -----    -----    -----    -----    -----

Interest expense:
   Deposits................................$  124   $(258)   $(134)   $  67    $(329)   $(262)
   Borrowings..............................    18     (11)       7     --        (12)     (12)
                                           ------   -----    -----    -----    -----    -----
      Total interest-bearing
        liabilities .......................   142    (269)    (128)      67     (341)    (274)
                                           ------   -----    -----    -----    -----    -----
Change in net interest income..............$  456   $ (88)   $ 369    $  45    $ 152    $ 197
                                           ======   =====    =====    =====    =====    =====
</TABLE>


         PROVISION  FOR LOAN LOSSES.  The provision for loan losses for the year
ended  December  31,  2003 was  $82,000,  compared to $18,000 for the year ended
December 31, 2002.  Net  charge-offs  for the year ended  December 31, 2003 were
$7,000 (0.02% of average  loans),  compared to $17,000  (0.07% of average loans)
during the year ended  December 31, 2002.  The ratio of the  allowance  for loan
losses to total  loans was  0.51% at  December  31,  2003  compared  to 0.44% at
December 31, 2002.  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, 2003 was
$195,000,  compared to $73,000 for the year ended December 31, 2002, an increase
of approximately $122,000, or 167.1%. Other income increased primarily due to an
approximate  $115,000  increase  in service  charges  and fees.  Service and fee
charges  include  various fees charged in connection  with the  origination  and
pay-off of residential mortgage loans which increased substantially during 2003.
Contributing  also to the  increase  in  other  income  was an  increase  in the
secondary  market lending area. The Bank originated $1.7 million and $184,000 in
mortgage loans as agent for secondary  market investors during fiscal years 2003
and  2002.  In these  transactions,  the Bank  takes  the  application  from its
customer and transmits it to the secondary  market investor,  which  underwrites
the loan. The Bank may also order credit reports, appraisals and title searches.
The loans are closed in the name of and funded by the secondary market investor,
and the Bank does not advance any funds to the customer.  For its services,  the
Bank receives a fee from the secondary market investor based on the loan amount.

                                       26
<PAGE>

         OTHER  EXPENSES.  Other  expenses for the year ended  December 31, 2003
were $1.6 million compared to $1.1 million for the year ended December 31, 2002,
an increase of approximately  $500,000, or 45.5%. The increase in other expenses
is attributable to the Bank's growth, the costs of operating as a public company
and expenses  associated with the conversion to a new data  processor.  Included
were  increases  in   compensation   and  benefits   expense,   which  increased
approximately  $130,000,  or 28.8%, as the Bank added staff,  and an increase in
occupancy expense (which increased  approximately  $55,000, or 49.7%) related to
the higher depreciation expense associated with the Bank's new main office. Also
contributing to the increase in other expenses were increases in advertising (up
approximately  $26,000, or 38.9%) and office supplies expenses (up approximately
$12,000, or 22.8%), each reflecting the change in the Bank's name and associated
promotional  activity.  The Bank  experienced  increases in expenses  related to
payroll  and other  taxes (up  approximately  $13,000,  or 22.2%) and  insurance
premiums (up approximately $5,000, or 22.8%) due to Bank growth. Data processing
expense increased  approximately $56,000, or 34.8%, which the Bank attributes to
growth. The Company also incurred  approximately $107,000 in expenses related to
the  termination  of its  contract  with its prior data  processor in the fourth
quarter.  Although  the  conversion  is  expected  to result in some  additional
expense while the transition to the new system is underway,  management believes
that the new data  processor  will be more  economical  in the  long  run.  Also
contributing   to  increased   expenses  were  higher   professional   fees  (up
approximately  $24,000, or 75.0%) reflecting the increased costs of operating as
a public  company,  and increased  other  operating  expenses (up  approximately
$27,000, or 31.0%).

         INCOME TAX EXPENSE (BENEFIT). For the year ended December 31, 2003, the
Bank incurred a federal tax benefit of $116,000,  compared to a $10,000  federal
tax expense during 2002. The Bank provides for both the current and deferred tax
effects of the transactions reported in its financial statements and establishes
deferred  tax  assets  and  liabilities   for  the  temporary   differences  and
establishes financial reporting and tax bases of its assets and liabilities. The
Bank, however,  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 its current earnings and other factors,  the Bank determined
in 2002 that it was  appropriate to establish a valuation  allowance for its net
deferred tax assets.  During 2003, the Bank  determined  that it was more likely
than not that some or all of the net deferred tax assets would be realizable and
the valuation allowance was reversed.

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, 2003,  approximately  81.5% 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, 2003,
approximately  82.7% 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.

                                       27
<PAGE>

         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
following  table  presents the interest  rate  sensitivity  of the Bank's NPV at
December 31,  2003,  as  calculated  by the OTS,  which is based upon  quarterly
information that it voluntarily provided to the OTS.
<TABLE>
<CAPTION>
                                                                 NPV AS % OF PRESENT VALUE
                             NET PORTFOLIO VALUE                       OF  ASSETS
                       ---------------------------------        ---------------------------
CHANGE                                                                          BASIS POINT
IN RATES               $ AMOUNT      $ CHANGE   % CHANGE        NPV RATIO         CHANGE
--------               --------      --------   --------        ---------         ------
                                  (DOLLARS IN THOUSANDS)
<S>                    <C>         <C>             <C>            <C>              <C>
+300 bp                $ 3,235     $ (1,880)      -37%            7.85%           -374 bp
+200 bp                  4,054       (1,061)      -21             9.57            -202 bp
+100 bp                  4,698         (417)       -8            10.84             -75 bp
   0 bp                  5,115                                   11.59
-100 bp                  5,295           180       +4            11.85             +26 bp
</TABLE>

         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, 2003, 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.

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.

                                       28
<PAGE>

     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,  2003,  cash and cash
equivalents totaled $1.1 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,  2003  and  2002,  purchases  of  investment  and  mortgage-backed
securities  totaled  $2.0  million  and  $500,000,   respectively,   while  loan
originations  totaled  $21.4  million  and $11.9  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, 2003 and 2002.

     At December  31,  2003,  we had  $314,000  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  $12.4  million  at
December 31, 2003. 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.

     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, 2003, the Bank had $2.5 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."

RECENT ACCOUNTING PRONOUNCEMENTS

     The  Bank  has  reviewed  recently  issued  pronouncements  which  could be
expected to impact financial institutions including:

     o    SFAS No. 146  "Accounting  for Costs  Associated with Exit or Disposal
          Activities"
     o    SFAS No. 147 "Acquisition of Certain Financial Institutions"
     o    SFAS No. 148 "Accounting for Stock Based Compensation"
     o    SFAS No.  150  "Accounting  for  Certain  Financial  Instruments  with
          Characteristics of both Liabilities and Equity"
     o    SFAS  Interpretation  No. 45  "Guarantor's  Accounting  and Disclosure
          Requirements  for  Guarantees,   Including   Indirect   Guarantees  of
          Indebtedness of Others"
     o    SFAS's  Interpretation  No. 46  "Consolidation  of  Variable  Interest
          Entities"

                                       29
<PAGE>

These recently 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 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.

                                    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 2004 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.

                                       30
<PAGE>

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.
<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:                 na                    na                         na

    Equity compensation plans
      not approved by security
      holders:                                      na                    na                         na

         TOTAL
</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.


                                       31
<PAGE>

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------------

     (a)  EXHIBITS.  The  following  exhibits  are either  filed as part of this
          --------
Annual Report on Form 10-KSB or incorporated herein by reference:
<TABLE>
<CAPTION>
         NO.      DESCRIPTION
         --       -----------
         <S>      <C>
         3.1      Articles of Incorporation of Community First Bancorp, Inc. *
         3.2      Bylaws of Community First Bancorp, Inc. *
         4        Form of Common Stock Certificate of Community First Bancorp, Inc. *
         10.1     Employment Agreement between Community First Bank and William M. Tandy + **
         21       Subsidiaries of the Registrant
         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
<FN>
______________________
*        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.
+        Management or compensatory plan required to be filed as an exhibit.
</FN>
</TABLE>

     (b) REPORTS ON FORM 8-K. No current  reports on Form 8-K were filed  during
         -------------------
the last quarter of the fiscal year covered by this report.

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.


                          COMMUNITY FIRST BANCORP, INC.

                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                         PAGE
Independent Auditor's Report............................................. F-1
Consolidated Statements of Financial Condition........................... F-2
Consolidated Statements of Operations.................................... F-3
Consolidated Statements of Stockholders' Equity.......................... F-4
Consolidated Statements of Cash Flows.................................... F-5
Notes to Consolidated Financial Statements............................... F-6

                                       32
<PAGE>

                                [BKD Letterhead]



                         Independent Accountants' Report


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

We have audited the accompanying  consolidated balance sheets of Community First
Bancorp,  Inc. and  Subsidiary as of December 31, 2003 and 2002, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility   of  the  management  of  Community  First  Bancorp,   Inc.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Community  First
Bancorp,  Inc. and  Subsidiary as of December 31, 2003 and 2002, and the results
of their  operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.


                                                              /s/ BKD, LLP


Louisville, Kentucky
February 26, 2004

                                      F-1
<PAGE>

                          Community First Bancorp, Inc.
                           Consolidated Balance Sheets
                           December 31, 2003 and 2002

<TABLE>
<CAPTION>
Assets

                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
        Cash and due from banks                                               $      1,068,146   $        269,937
        Interest-bearing demand deposits                                                15,916            463,189
        Interest-bearing time deposits                                                  25,000             25,000
                                                                              ----------------   ----------------

               Cash and cash equivalents                                             1,109,062            758,126

        Held-to-maturity securities                                                  1,424,067          1,901,750
        Available-for-sale securities                                                1,975,718                 --

        Loans receivable, net of the allowance for loan loss of $180,955
          and $105,868, for December 31, 2003 and 2002, respectively                35,066,142         25,709,770
        Premises and equipment, net                                                  1,952,549            772,662
        Federal Home Loan Bank (FHLB) stock                                            659,600            634,100
        Interest receivable                                                            159,150            135,220
        Deferred income taxes                                                          127,677                 --
        Other assets                                                                    67,499             56,197
                                                                              ----------------   ----------------

               Total assets                                                   $     42,541,464   $     29,967,825
                                                                              ================   ================

Liabilities and Stockholders' Equity

    Liabilities
        Deposits                                                              $     33,171,526   $     28,128,252
        FHLB advance                                                                 5,000,000                 --
        Interest payable and other liabilities                                         161,171             90,707
                                                                              ----------------   ----------------

               Total liabilities                                                    38,332,697         28,218,959
                                                                              ----------------   ----------------

    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 2003                        2,777                 --
        Additional paid-in capital                                                   2,466,428                 --
        Retained earnings - substantially restricted                                 1,763,045          1,748,866
        Accumulated other comprehensive loss                                           (23,483)                --
                                                                              ----------------   ----------------

               Total stockholders' equity                                            4,208,767          1,748,866
                                                                              ----------------   ----------------

               Total liabilities and stockholders' equity                     $     42,541,464   $     29,967,825
                                                                              ================   ================
</TABLE>
See Notes to Consolidated Financial Statements                               F-2
<PAGE>

                          Community First Bancorp, Inc.
                      Consolidated Statements of Operations
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>

                                                                                   2003                2002
                                                                            ----------------------------------------
<S>                                                                         <C>                <C>
    Interest and Dividend Income
        Loans                                                                 $      2,039,805   $      1,730,628
        Investment securities                                                          116,391            169,222
        Dividends on FHLB stock                                                         25,743             28,503
        Other                                                                               --             12,523
                                                                              ----------------   ----------------

               Total interest and dividend income                                    2,181,939          1,940,876
                                                                              ----------------   ----------------

    Interest Expense
        Deposits                                                                       814,722            948,879
        FHLB advances                                                                   17,848             11,314
        Other borrowings                                                                    --                568
                                                                              ----------------   ----------------

               Total interest expense                                                  832,570            960,761
                                                                              ----------------   ----------------

    Net Interest Income                                                              1,349,369            980,115
                                                                              ----------------   ----------------

    Provision for Loan Losses                                                           82,000             18,200
                                                                              ----------------   ----------------

    Net Interest Income After Provision for Loan Losses                              1,267,369            961,915
                                                                              ----------------   ----------------

    Noninterest Income
        Service charges and fees                                                       177,013             63,543
        Loss on sale of fixed assets                                                    (3,277)            (4,030)
        Loss on sale of other real estate                                                   --             (3,762)
        Foreclosed real estate expense, net                                               (595)              (984)
        Insurance commissions and premiums                                               4,645              4,674
        Other income                                                                    17,593             13,571
                                                                              ----------------   ----------------

               Total noninterest income                                                195,379             73,012
                                                                              ----------------   ----------------

    Noninterest Expense
        Compensation and benefits                                                      580,014            450,225
        Directors fees                                                                  43,200             43,200
        Occupancy expense                                                              186,413            131,347
        Insurance premiums                                                              27,248             22,193
        Data processing                                                                217,400            161,329
        Advertising                                                                     91,361             65,753
        Office supplies and postage                                                     67,304             54,816
        Payroll and other taxes                                                         73,145             59,799
        Professional fees                                                               56,315             32,181
        Data processor conversion expenses                                             106,498                 --
        Other operating expenses                                                       115,251             88,005
                                                                              ----------------   ----------------

               Total noninterest expense                                             1,564,149          1,108,848
                                                                              ----------------   ----------------
</TABLE>

See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>

                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
    Loss Before Income Tax                                                    $       (101,401)  $        (73,921)

    Provision (Credit) for Income Taxes                                               (115,580)            10,000
                                                                              ----------------   ----------------

    Net Income (Loss)                                                         $         14,179   $        (83,921)
                                                                              ================   ================
</TABLE>
                                                                             F-3
<PAGE>

                          Community First Bancorp, Inc.
                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                              Common Stock        Additional                    Other
                                       ------------------------    Paid-in      Retained    Comprehensive  Comprehensive
                                           Shares     Amount       Capital      Earnings    Income (Loss)  Income (Loss)   Total
                                       ---------------------------------------------------------------------------------------------
<S>                                    <C>        <C>         <C>           <C>            <C>            <C>
    Balance, January 1, 2002                    0    $       0   $         0   $ 1,832,787    $    5,375                $ 1,838,162

      Comprehensive income
        Net loss                               --           --            --       (83,921)           --    $   (83,921)    (83,921)
        Change in unrealized
          appreciation (depreciation)
          on available-for-sale
          securities, net of taxes             --           --            --            --        (5,375)        (5,375)     (5,375)
                                                                                                            -----------
           Total comprehensive loss                                                                         $   (89,296)         --
                                          -------    ---------   -----------   -----------    ----------    ===========  ----------
    Balance, December 31, 2002                  0            0             0     1,748,866             0                  1,748,866

      Comprehensive income
        Net income                             --           --            --        14,179            --    $    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                   277,725        2,777     2,466,428            --            --                  2,469,205
                                          -------    ---------   -----------   -----------    ----------                 ----------
    Balance, December 31, 2003            277,725    $   2,777   $ 2,466,428   $ 1,763,045    $  (23,483)                $4,208,767
                                          =======    =========   ===========   ===========    ==========                 ==========
</TABLE>
See Notes to Consolidated Financial Statements                               F-4
<PAGE>

                          Community First Bancorp, Inc.
                      Consolidated Statements of Cash Flows
                     Years Ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------
<S>                                                                         <C>                <C>
    Operating Activities
        Net income (loss)                                                     $         14,179   $        (83,921)
        Items not requiring (providing) cash
           Provision for loan losses                                                    82,000             18,200
           Depreciation, amortization and accretion                                     76,862             49,182
           Loss on sale of equipment                                                     3,277              4,030
           Loss on sale of other real estate owned                                          --              3,762
           Deferred income taxes                                                      (115,580)            10,000
           FHLB stock dividends                                                        (25,500)           (28,400)
        Changes in
           Interest receivable                                                         (23,930)            26,494
           Other assets                                                                (11,302)           (25,684)
           Interest payable and other liabilities                                       70,464              9,666
                                                                              ----------------   ----------------

               Net cash provided by (used in) operating activities                      70,470            (16,671)
                                                                              ----------------   ----------------

    Investing Activities
        Net change in loans                                                         (9,438,372)        (3,562,435)
        Purchases of held-to-maturity securities                                            --           (500,000)
        Purchases of available-for-sale securities                                  (2,014,155)                --
        Proceeds from maturities of held-to-maturity securities                        477,683          1,669,564
        Proceeds from maturities of available-for-sale securities                           --            749,000
        Purchase of premises and equipment                                          (1,257,419)          (410,635)
        Proceeds from the sale of foreclosed estate                                         --              5,338
        Proceeds from sale of premises and equipment                                       250                 --
                                                                              ----------------   ----------------

               Net cash used in investing activities                               (12,232,013)        (2,049,168)
                                                                              ----------------   ----------------

    Financing Activities
        Net increase in deposits                                                     5,043,274          1,517,028
        Repayment of FHLB advances                                                  (4,500,000)        (3,000,000)
        Proceeds from FHLB advances                                                  9,500,000          2,000,000
        Proceeds from issuance of stock                                              2,469,205                 --
                                                                              ----------------   ----------------

               Net cash provided by financing activities                            12,512,479            517,028
                                                                              ----------------   ----------------

    Increase (Decrease) in Cash and Cash Equivalents                                   350,936         (1,548,811)

    Cash and Cash Equivalents, Beginning of Year                                       758,126          2,306,937
                                                                              ----------------   ----------------

    Cash and Cash Equivalents, End of Year                                    $      1,109,062   $        758,126
                                                                              ================   ================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
    Supplemental Cash Flows Information

        Interest paid                                                         $        839,135   $        986,936

        Loans transferred to foreclosed real estate                           $              0   $          7,400

        Loans to facilitate sale of foreclosed real estate                    $              0   $         15,300
</TABLE>
                                                                             F-5
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002


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
        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

                                                                             F-6
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        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-7
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        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-8
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        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 Held for Sale

        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 bases 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.


    Earnings per Share

        The Bank  converted to a stock savings bank in March 2003.  Earnings per
        share for 2003 are not meaningful and are therefore not presented.

                                                                             F-9
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002


    Reclassifications

        Certain   reclassifications   have  been  made  to  the  2002  financial
        statements  to conform  to the 2003  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  cost of  approximately  $308,000,  were  approximately
        $2,469,000.


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, 2003
                  U. S. Government
                     agencies                 $   2,011,298     $           0     $        35,580   $   1,975,718
                                              =============     =============     ===============   =============

           Held-to-maturity Securities
               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
                                              =============     =============     ===============   =============

               December 31, 2002
                  U. S. Government
                     agencies                 $   1,700,255     $      79,776     $            --   $   1,780,031
                  Mortgage-backed
                     securities                     201,495            15,433                  --         216,928
                                              -------------     -------------     ---------------   -------------

                                              $   1,901,750     $      95,209     $             0   $   1,996,959
                                              =============     =============     ===============   =============
</TABLE>
                                                                            F-10
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        The  amortized  cost  and  fair  value  of  debt  securities,  including
        mortgage-backed securities at December 31, 2003, 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.

<TABLE>
<CAPTION>
                                                         Available-for-sale                  Held-to-maturity
                                                      Amortized           Fair          Amortized          Fair
                                                        Cost             Value            Cost             Value
                                                 ----------------------------------------------------------------------
<S>                                              <C>                <C>             <C>              <C>
                   Within one year                 $          --      $         --    $   1,300,000    $  1,400,045
                   One to five years                   1,511,298         1,489,718               --              --
                   Five to 10 years                      500,000           486,000               --              --
                                                   -------------      ------------    -------------    ------------
                                                       2,011,298         1,975,718        1,300,000       1,400,045
                   Mortgage-backed securities                 --                --          124,067         135,115
                                                   -------------      ------------    -------------    ------------

                                                   $   2,011,298      $  1,975,718    $   1,424,067    $  1,535,160
                                                   =============      ============    =============    ============
</TABLE>

        Investment securities with a carrying value of approximately $35,000 and
        $0  at  December  31,  2003  and  2002,  respectively  were  pledged  as
        collateral for certain customer deposits.

        Certain  investments  in  debt  and  marketable  equity  securities  are
        reported  in the  financial  statements  at an amount  less  than  their
        historical cost.  Total fair value of these  investments at December 31,
        2003,  was  $1,975,718,   which  is  approximately  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, 2003:

                                                                            F-11
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                      Less than 12 Months          12 Months or More                 Total
                                  -------------------------------------------------------------------------------------
           Description of          Fair Value    Unrealized    Fair Value    Unrealized    Fair Value    Unrealized
             Securities                            Losses                      Losses                      Losses
        ---------------------------------------------------------------------------------------------------------------

<S>                                <C>          <C>            <C>          <C>            <C>          <C>
         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, 2003 and 2002, are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  2003                2002
                                                                            ----------------------------------------
<S>                                                                         <C>                <C>
           Real estate mortgage loans
               One-to-four family residential - first                         $     29,719,264   $     22,353,189
               One-to-four family residential - second                                 679,541            582,108
               Multi-family                                                            440,061            450,000
               Commercial                                                            2,421,368            798,107
               Construction                                                            547,365            206,400
           Other loans
               Consumer installment                                                    166,206            283,174
               Commercial                                                              177,308            101,777
               Automobile                                                              993,296            739,686
               Passbook                                                                295,390            238,158
               Overdrafts                                                                7,945             17,532
               Other                                                                   113,568            191,423
                                                                              ----------------   ----------------
                                                                                    35,561,312         25,961,554
           Less
               Unearned interest                                                            --                456
               Allowance for loan losses                                               180,955            105,868
               Loans in process                                                        314,215            145,460
                                                                              ----------------   ----------------

                  Net Loans                                                   $     35,066,142   $     25,709,770
                                                                              ================   ================
</TABLE>


        Activity in the allowance for loan losses was as follows:

                                                                            F-12
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002
<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
           Balance, beginning of year                                         $        105,868   $        105,000
               Provision charged to expense                                             82,000             18,200
               Losses charged off                                                       (8,675)           (24,936)
               Recoveries                                                                1,762              7,604
                                                                              ----------------   ----------------
           Balance, end of year                                               $        180,955   $        105,868
                                                                              ================   ================
</TABLE>


        At December 31, 2003 and 2002, the total recorded investment in loans on
        nonaccrual amounted to approximately $27,560 and $53,000,  respectively,
        and the total recorded  investment in loans past due 90 days or more and
        still accruing interest  amounted to approximately  $20,100 and $33,000,
        respectively.  At December 31, 2003 and 2002,  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>
                                                                                   2003                2002
                                                                            ----------------------------------------
<S>                                                                           <C>                <C>
           Balance, beginning of year                                         $        453,096   $        172,241
               Loan proceeds                                                           311,233            359,884
               Payments                                                               (220,227)           (79,029)
                                                                              ----------------   ----------------

           Balance, end of year                                               $        544,102   $        453,096
                                                                              ================   ================
</TABLE>


Note 5:  Premises and Equipment

        Major  classifications  of premises and equipment stated at cost, are as
follows:

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                          <C>                <C>
           Land                                                               $        181,649   $         73,649
           Buildings and improvements                                                1,541,986            735,348
           Furniture, fixtures and equipment                                           591,849            360,823
                                                                              ----------------   ----------------
                                                                                     2,315,484          1,169,820
           Less accumulated depreciation                                               362,935            397,158
                                                                              ----------------   ----------------

           Net premises and equipment                                         $      1,952,549   $        772,662
                                                                              ================   ================
</TABLE>
                                                                            F-13
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 6:  Deposits

        Deposits at December 31, 2003 and 2002, are summarized as follows:

<TABLE>
<CAPTION>
                                                      2003                               2002
                                       -----------------------------------------------------------------------
                                            Amount          Percentage         Amount          Percentage
                                       -----------------------------------------------------------------------
<S>                                  <C>                       <C>      <C>                        <C>

           Non-interest bearing
              demand                     $     1,681,941           5%       $     1,430,336            5%
           NOW accounts                        1,679,342           5              1,107,109            4
           Money market accounts               1,960,580           6              2,072,339            8
           Passbook savings                    3,438,191          10              3,168,832           11
           Time deposits                      24,411,472          74             20,349,636           72
                                         ---------------         ---        ---------------          ---

                                         $    33,171,526         100%       $    28,128,252          100%
                                         ===============         ===        ===============          ===
</TABLE>

        Time  deposit  accounts  in  denominations  of  $100,000  or  more  were
        $2,407,383 and $3,536,007, at December 31, 2003 and 2002, respectively.

        At December 31, 2003,  the scheduled  maturities of time deposit were as
follows:

<TABLE>
<CAPTION>
<S>        <C>                                                                <C>
           2004                                                               $     12,418,972
           2005                                                                      5,572,079
           2006                                                                      1,287,347
           2007                                                                      2,008,022
           2008                                                                      3,125,052
                                                                              ----------------

                                                                              $     24,411,472
                                                                              ================
</TABLE>


        Interest  expense on deposits for the years ended  December 31, 2003 and
2002, are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
           Certificates of deposit                                            $        790,763   $        901,739
           Money market accounts                                                        10,615             24,573
           NOW accounts                                                                  2,710              4,406
           Passbook savings                                                             12,796             20,610
                                                                              ----------------   ----------------
                                                                                       816,884            951,328
           Less dividends retained for early withdrawal                                  2,162              2,449
                                                                              ----------------   ----------------
                                                                              $        814,722   $        948,879
                                                                              ================   ================
</TABLE>
                                                                            F-14
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        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 $364,478 and $611,864,  on December 31, 2003 and 2002,
        respectively.



Note 7:  Federal Home Loan Bank Advances

        Short-term debt as of December 31, 2003, consisted of a short-term fixed
        rate advance from FHLB.  Advances  totaling  $5,000,000  at December 31,
        2003, were set to mature at various dates over the first three months of
        2004. The advance has a 1.09% variable interest rate. 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
        $6,750,000  and is further  collateralized  by the  Bank's  stock in the
        FHLB.



Note 8:  Employee Benefits

        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 $20,184  and $26,672 for the years ended
        December  31, 2003 and 2002,  respectively.  The plan  provides  pension
        benefits for substantially all of the Bank's employees.

        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.


Note 9:  Income Taxes

        The provision (credit) for income taxes includes these components:

<TABLE>
<CAPTION>

                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
           Taxes currently payable                                            $             --   $             --
           Deferred income taxes                                                      (115,580)            10,000
                                                                              ----------------   ----------------

                  Income tax expense (credit)                                 $       (115,580)  $         10,000
                                                                              ================   ================
</TABLE>
                                                                            F-15
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        A  reconciliation  of income tax  expense at the  statutory  rate to the
Bank's actual income tax expense is shown below:

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
           Computed at the statutory rate (34%)                               $        (34,476)  $        (25,133)
           Increase (decrease) resulting from
               Nondeductible expenses                                                      647                565
               Change in tax rate from prior year                                      (74,689)                --
               Graduated tax rates                                                          --              9,153
               Changes in the deferred tax asset valuation allowance                    (7,062)             7,062
               Other                                                                        --             18,353
                                                                              ----------------   ----------------

                  Actual tax expense (credit)                                 $       (115,580)  $         10,000
                                                                              ================   ================
</TABLE>

        The tax effects of temporary differences related to deferred taxes shown
on the balance sheets were:

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------
<S>                                                                         <C>                <C>
           Deferred tax assets
               Allowance for loan losses                                      $         61,526   $             --
               Net operating loss carryovers                                           264,775             88,900
               Unrealized loss on available-for-sale securities                         12,097                 --
               Other                                                                     1,772                 --
                                                                              ----------------   ----------------

                                                                                       340,170             88,900
                                                                              ----------------   ----------------

           Deferred tax liabilities
               Depreciation                                                             51,707             13,976
               FHLB stock                                                              160,786             67,110
               Allowance for loan losses                                                    --                752
                                                                              ----------------   ----------------

                                                                                       212,493             81,838
                                                                              ----------------   ----------------

                  Net deferred tax asset before
                     valuation allowance                                               127,677              7,062
                                                                              ----------------   ----------------

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

               Ending balance                                                               --             (7,062)
                                                                              ----------------   ----------------

                  Net deferred tax asset                                      $        127,677   $              0
                                                                              ================   ================
</TABLE>
                                                                            F-16
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        As of December 31, 2003, the Company had  approximately  $778,700 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, 2003 and 2002,  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 so 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 were approximately $220,228 and $97,159
        at December 31, 2003 and 2002, respectively.

Note 10:  Other Comprehensive Income

        Other  comprehensive  income (loss) components and related taxes were as
follows:

<TABLE>
<CAPTION>
                                                                                   2003                2002
                                                                            ----------------------------------------

<S>                                                                         <C>                <C>
           Unrealized losses on available-for-sale securities                 $        (35,580)  $             --
                                                                              ----------------   ----------------
                  Other comprehensive loss, before
                     tax effect                                                        (35,580)                --
           Tax benefit                                                                 (12,097)                --
                                                                              ----------------   ----------------

                  Other comprehensive income (loss)                           $        (23,483)  $              0
                                                                              ================   ================
</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, 2003
        and 2002, that the Bank meets all capital adequacy requirements to which
        it is subject.

                                                                            F-17
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        As of  December  31,  2003,  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.

<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, 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%

     December 31, 2002
           Total Risk-Based
              Capital           $   1,855        11.12%      $   1,335         8.0%      $   1,669         10.0%
           Tier I
              Risk-Based
              Capital           $   1,749        10.48%      $     668         4.0%      $   1,001          6.0%
           Tier I Core
              Capital           $   1,749         5.83%      $   1,199         4.0%      $   1,499          5.0%
           Tangible Equity
              Capital           $   1,749         5.83%      $     450         1.5%      $     450          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 at March  13,  2003.  The  December  31,  2003,  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.

                                                                            F-18
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

        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.


Note 12:  Disclosures about Fair Values of Financial Instruments

        The  following  table  presents  estimated  fair  values  of the  Bank'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 Bank 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>
                                                         2003                                   2002
                                        ------------------------------------------------------------------------------
                                             Carrying              Fair             Carrying             Fair
                                               Value              Value               Value              Value
                                        ------------------------------------------------------------------------------
<S>                                     <C>                <C>                 <C>                <C>

     Financial assets
        Cash and cash equivalents         $      1,109,062   $      1,109,062    $        758,126   $       758,126
        Held-to-maturity securities       $      1,424,067   $      1,535,160    $      1,901,750   $     1,996,959
        Available-for-sale securities     $      1,975,718   $      1,975,718    $              0   $             0
        FHLB stock                        $        659,600   $        659,600    $        634,100   $       634,100
        Loans, net of allowance for
           loan losses                    $     35,066,142   $     36,303,150    $     25,709,770   $    25,997,227
        Interest receivable               $        159,150   $        159,150    $        135,220   $       135,220

     Financial liabilities
        Deposits                          $     33,171,526   $     31,521,843    $     28,128,252   $    28,429,929
        FHLB advances                     $      5,000,000   $      5,000,000    $              0   $             0
        Interest payable                  $         13,425   $         13,425    $         19,990   $        19,990

     Unrecognized financial
        instruments (net of contract
        amount)
     Commitments to extend
        credit                            $              0   $              0    $              0   $             0
</TABLE>
                                                                            F-19
<PAGE>

                          Community First Bancorp, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

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


    Cash and Cash Equivalents and Federal Home Loan Bank Stock

        The carrying amount approximates fair value.


    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.


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-20
<PAGE>
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, 2003 and 2002, the Bank had  outstanding  commitments to
        originate  loans  aggregating   approximately   $314,265  and  $634,261,
        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, 2003 and 2002,  approximately  $245,895  and  $732,100,
        respectively,  were held in deposits at financial institutions in excess
        of federally insured amounts.



                                                                            F-21



<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 30, 2004                 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 30, 2004
      ------------------------------------------------
      William M. Tandy
      President, Chief Executive Officer and Director
      (Principal Executive Officer)

By:   /s/ Michael D. Wortham                            Date:     March 30, 2004
      ------------------------------------------------
      Michael D. Wortham
      Vice President and Director
      (Principal Financial and Accounting Officer)


By:   /s/ Ralph T. Teague                               Date:     March 30, 2004
      ------------------------------------------------
      Ralph T. Teague
      Director


By:   /s/ Paul W. Arison                                Date:     March 30, 2004
      ------------------------------------------------
      Paul W. Arison
      Director


By:   /s/ Charlotte E. Baldwin                          Date:     March 30, 2004
      ------------------------------------------------
      Charlotte E. Baldwin
      Director

By:   /s/ Charles G. Ramsey                             Date:     March 30, 2004
      ------------------------------------------------
      Charles G. Ramsey
      Director

By:   /s/ J. Craig Riddle                               Date:     March 30, 2004
      ------------------------------------------------
      J. Craig Riddle
      Director


<PAGE>

By:   /s/ Charles B. Vaughn                             Date:     March 30, 2004
      ------------------------------------------------
      Charles B. Vaughn
      Director



By:   /s/ Steven E. Carson                              Date:     March 30, 2004
      ------------------------------------------------
      Steven E. Carson
      Director