##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB  x
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  OR  o
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
 Commission file number: 0-26360 Frankfort First Bancorp,
Inc.   Delaware
    
    61-1271129(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 216 West Main Street, Frankfort, Kentucky
    
    40602(Address of principal executive offices)
    
    (Zip Code)
 (502) 223-1638   Check whether the issuer 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 o Indicate the number of shares outstanding of each of the issuers classes of
common stock as of November 12, 2004: 1,266,613 Page 1 of 16 pages page 1




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CONTENTS PAGEPART I. FINANCIAL INFORMATIONItem 1 Consolidated Statements of Financial Condition at September 30, 2004 (unaudited) and June 30, 2004 (audited)
    
    
    3Consolidated Statements of Earnings for the three months ended September 30, 2004 and 2003
    
    
    4Consolidated Statements of Comprehensive Income for the three months ended September 30, 2004 and 2003
    
    
    5Consolidated Statements of Cash Flows for the three months ended September 30, 2004 and 2003
    
    
    6-7Notes to Consolidated Financial Statements
    
    
    8-10Item 2 Managements Discussion and Analysis or Plan of Operation
    
    
    11-13Item 3 Controls and Procedures
    
    
    14PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    15Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3 Defaults upon Senior Securities
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    15SIGNATURES
    
    
    16EX-31 SECTION 302 CERTIFICATIONS OF THE CEO & CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO
  page 2




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Frankfort First Bancorp, Inc. 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  September 30,
    
    June 30,2004
    
    2004ASSETSCash and due from banks
    
    $
    548
    
    
    $
    1,122Interest-bearing deposits in other financial institutions
    
    
    617
    
    
    
    Cash and cash equivalents
    
    
    1,165
    
    
    
    1,122Certificates of deposit in other financial institutions
    
    
    2,100
    
    
    
    2,100Mortgage-backed securities available for sale - at market
    
    
    2,506
    
    
    
    2,758Loans
receivable - net
    
    
    123,743
    
    
    
    125,262Office
premises and equipment - at depreciated cost
    
    
    1,482
    
    
    
    1,496Federal Home
Loan Bank stock - at cost
    
    
    2,973
    
    
    
    2,941Accrued interest receivable on loans
    
    
    309
    
    
    
    303Accrued interest receivable on investments and
interest-bearing deposits
    
    
    21
    
    
    
    11Bank-owned life insurance
    
    
    2,035
    
    
    
    2,016Prepaid expenses and other assets
    
    
    242
    
    
    
    109Total assets
    
    $
    136,576
    
    
    $
    138,118LIABILITIES AND SHAREHOLDERS EQUITYDeposits
    
    $
    73,797
    
    
    $
    75,025Advances from the Federal Home Loan Bank
    
    
    43,444
    
    
    
    43,718Advances by borrowers for taxes and insurance
    
    
    453
    
    
    
    307Accrued interest payable
    
    
    18
    
    
    
    19Accrued federal income taxes
    
    
    379
    
    
    
    294Deferred federal income taxes
    
    
    277
    
    
    
    243Other liabilities
    
    
    799
    
    
    
    998Total liabilities
    
    
    119,167
    
    
    
    120,604Shareholders equityPreferred stock, 500,000 shares authorized, $.01 par
value; no shares issued
    
    
    
    
    
    
    Common stock, 3,750,000 shares authorized, $.01
par value; 1,672,443 shares issued
    
    
    17
    
    
    
    17Additional paid-in capital
    
    
    5,918
    
    
    
    5,918Retained
earnings - restricted
    
    
    17,924
    
    
    
    18,068Less 405,830 shares of treasury stock-at cost
    
    
    (6,350
    )
    
    
    (6,350
    )Less shares acquired for stock benefit plan
    
    
    (87
    )
    
    
    (87
    )Other comprehensive income, unrealized losses on securities
designated as available for sale - net of related tax effects
    
    
    (13
    )
    
    
    (52
    )Total shareholders equity
    
    
    17,409
    
    
    
    17,514Total liabilities and shareholders equity
    
    $
    136,576
    
    
    $
    138,118Book value per share
    
    $
    13.74
    
    
    $
    13.83
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Frankfort First Bancorp, Inc. 
 CONSOLIDATED STATEMENTS OF EARNINGS
 
 2004
    
    2003Interest incomeLoans
    
    $
    1,779
    
    
    $
    1,889Investment securities
    
    
    29
    
    
    
    40Interest-bearing deposits and other
    
    
    33
    
    
    
    34Total interest income
    
    
    1,841
    
    
    
    1,963Interest expenseDeposits
    
    
    422
    
    
    
    515Borrowings
    
    
    647
    
    
    
    657Total interest expense
    
    
    1,069
    
    
    
    1,172Net interest income
    
    
    772
    
    
    
    791Provision for losses on loans
    
    
    
    
    
    
    Net interest income after provision for
losses on loans
    
    
    772
    
    
    
    791Other operating income
    
    
    52
    
    
    
    12General, administrative and other expenseEmployee compensation and benefits
    
    
    325
    
    
    
    258Occupancy and equipment
    
    
    43
    
    
    
    38Franchise and other taxes
    
    
    26
    
    
    
    25Data processing
    
    
    31
    
    
    
    28Other operating
    
    
    92
    
    
    
    74Total general, administrative
and other expense
    
    
    517
    
    
    
    423Earnings before income taxes
    
    
    307
    
    
    
    380Federal income taxesCurrent
    
    
    57
    
    
    
    136Deferred
    
    
    41
    
    
    
    (7
    )Total federal income taxes
    
    
    98
    
    
    
    129NET EARNINGS
    
    $
    209
    
    
    $
    251Earnings Per ShareBasic
    
    $
    0.17
    
    
    $
    0.20Diluted
    
    $
    0.16
    
    
    $
    0.19
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Frankfort First Bancorp, Inc. 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 2004
    
    2003Net earnings
    
    $
    209
    
    
    $
    251Other comprehensive losses, net of tax:Unrealized gain and (loss) on
securities, net of $21 tax expense in
2004 and $13 tax benefits in 2003
    
    
    39
    
    
    
    (25
    )Comprehensive income
    
    $
    248
    
    
    $
    226Accumulated comprehensive loss
    
    $
    (13
    )
    
    $
    (19
    )
 page 5




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Frankfort First Bancorp, Inc. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 2004
    
    2003Cash flows from operating activities:Net earnings for the period
    
    $
    209
    
    
    $
    251Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:Amortization of discounts and premiums on loans,
investments, and mortgage-backed securities, net
    
    
    6
    
    
    
    8Amortization of deferred loan origination fees
    
    
    (3
    )
    
    
    (20
    )Depreciation and amortization
    
    
    23
    
    
    
    19Provision for losses on loans
    
    
    
    
    
    
    Federal Home Loan Bank stock dividends
    
    
    (32
    )
    
    
    (28
    )Noncash compensation expense
    
    
    
    
    
    
    4Mortgage loans originated for sale
    
    
    (178
    )
    
    
    Proceeds from sale of mortgage loans
    
    
    1,333
    
    
    
    Increase (decrease) in cash due to changes in:Accrued interest receivable
    
    
    (16
    )
    
    
    (20
    )Prepaid expenses and other assets
    
    
    (152
    )
    
    
    24Accrued interest payable
    
    
    (1
    )
    
    
    Other liabilities
    
    
    (199
    )
    
    
    50Federal income taxesCurrent
    
    
    85
    
    
    
    133Deferred
    
    
    13
    
    
    
    (3
    )Net cash provided by operating activities
    
    
    1,088
    
    
    
    418Cash flows provided by (used in) investing activities:Principal repayments on mortgage-backed securities
    
    
    306
    
    
    
    382Loan principal repayments
    
    
    5,588
    
    
    
    10,077Loan disbursements
    
    
    (5,221
    )
    
    
    (10,524
    )Purchase of office premises and equipment
    
    
    (9
    )
    
    
    (5
    )Net cash provided by (used in) investing activities
    
    
    664
    
    
    
    (70
    )Cash flows provided by (used in) financing activities:Net increase (decrease) in deposit accounts
    
    
    (1,228
    )
    
    
    470Proceeds from Federal Home Loan Bank advances
    
    
    3,100
    
    
    
    Repayment of Federal Home Loan Bank advances
    
    
    (3,374
    )
    
    
    (368
    )Advances by borrowers for taxes and insurance
    
    
    146
    
    
    
    128Dividends paid on common stock
    
    
    (353
    )
    
    
    (351
    )Net cash used in financing activities
    
    
    (1,709
    )
    
    
    (121
    )Net increase in cash and cash equivalents
    
    
    43
    
    
    
    227Cash and cash equivalents at beginning of period
    
    
    1,122
    
    
    
    2,028Cash and cash equivalents at end of period
    
    $
    1,165
    
    
    $
    2,255
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Frankfort First Bancorp, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the three months ended September 30,
(In thousands) 2004
    
    2003Supplemental disclosure of cash flow information:Cash paid during the period for:Federal income taxes
    
    $
    70
    
    
    $
    Interest on deposits and borrowings
    
    $
    1,070
    
    
    $
    1,172Supplemental disclosure of noncash investing activities:Origination of loans upon sale of real estate acquired
through foreclosure
    
    $
    
    
    
    $
    40Unrealized gain (loss) on securities designated as available
for sale, net of related tax effects
    
    $
    39
    
    
    $
    (25
    )Supplemental disclosure of noncash financing activities:Dividends declared but unpaid
    
    $
    353
    
    
    $
    350Issuance of shares under stock option plan in exchange
for previously issued shares
    
    $
    
    
    
    $
    104
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Frankfort First Bancorp, Inc. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the three month periods ended September 30, 2004 and 2003
 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and therefore do not include
all disclosures necessary for a complete presentation of the statements of
financial condition, statements of earnings, statements of comprehensive income
and statements of cash flows in conformity with accounting principles generally
accepted in the United States of America. However, all adjustments which are,
in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included and all such adjustments are of
a normal recurring nature. The results of operations for the three month
periods ended September 30, 2004 are not necessarily indicative of the results
which may be expected for the entire fiscal year. These financial statements
should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Companys Annual Report on
Form 10-KSB for the year ended June 30, 2004. (2) PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of
Frankfort First Bancorp, Inc. (the Company) and First Federal Savings Bank of
Frankfort (the Bank). All significant intercompany items have been
eliminated. (3) EARNINGS PER SHARE Basic earnings per share is computed based upon the weighted average
common shares outstanding which totaled 1,266,613 and 1,254,690 for the three
month periods ended September 30, 2004 and 2003, respectively. Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares, i.e. the Companys
stock option plan. Weighted-average common shares deemed outstanding for
purposes of computing diluted earnings per share totaled 1,330,766 and
1,313,887 for the three month periods ended September 30, 2004 and 2003,
respectively. Incremental shares related to the assumed exercise of stock
options included in the calculation of diluted earnings per share totaled
64,153 and 59,197 for the three month periods ended September 30, 2004 and
2003, respectively. As of September 30, 2004, the Company had 147,230 stock
options outstanding of which 142,483 had an exercise price of $13.80 per share
and 4,747 had an exercise price of $14.91 per share. (4) STOCK OPTION PLAN The Board of Directors adopted the Frankfort First Bancorp, Inc. 1995
Stock Option and Incentive Plan (the Plan) which provided for the issuance of
261,085 (adjusted) shares of authorized, but unissued shares of common stock at
fair value at the date of grant. The Company had initially granted options to
purchase shares at an adjusted fair value of $13.80 per share. The Plan
provides for one-fifth of the shares granted to be exercisable on each of the
first five anniversaries of the date of the grant. page 8




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The Company accounts for the Plan in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation, which contains a fair value-based
method for valuing stock-based compensation that entities may use, which
measures compensation cost at the grant date based on the fair value of the
award. Compensation is then recognized over the service period, which is
usually the vesting period. Alternatively, SFAS No. 123 permits entities to
continue to account for stock options and similar equity instruments under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees. Entities that continue to account for stock options
using APB Opinion No. 25 are required to make pro forma disclosures of net
earnings and earnings per share, as if the fair value-based method of
accounting defined in SFAS No. 123 had been applied. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option plan. Accordingly, no compensation cost has
been recognized with respect to the Plan. The pro forma disclosure
requirements for net earnings and earnings per share are not applicable to the
three month periods ended September 30, 2004 and 2003, as no options were
granted during those periods and options previously granted had fully vested
prior to July 1, 2001. A summary of the status of the Companys stock option plan as of September
30, 2004 and June 30, 2004 and 2003, and changes during the periods ending on
those dates is presented below: Three months ended
    
    Year endedSeptember 30,
    
    June 30,2004
    
    2004
    
    2003Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    average
    
    
    
    
    
    averageexercise
    
    
    
    
    
    exercise
    
    
    
    
    
    exerciseShares
    
    price
    
    Shares
    
    price
    
    Shares
    
    priceOutstanding at beginning of period
    
    
    147,230
    
    
    $
    13.84
    
    
    
    181,859
    
    
    $
    13.83
    
    
    
    181,859
    
    
    $
    13.83Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    (34,629
    )
    
    
    13.80
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of period
    
    
    147,230
    
    
    $
    13.84
    
    
    
    147,230
    
    
    $
    13.84
    
    
    
    181,859
    
    
    $
    13.83Options exercisable at period-end
    
    
    147,230
    
    
    $
    13.84
    
    
    
    147,230
    
    
    $
    13.84
    
    
    
    181,859
    
    
    $
    13.83
 The following information applies to options outstanding at September 30, 2004: Number outstanding
    
    
    147,230Range of exercise prices
    
    $
    13.80 - $14.91Weighted-average exercise price
    
    $
    13.84Weighted-average remaining contractual life
    
    1.25 years
 (5) CRITICAL ACCOUNTING POLICIES Allowance for Losses on Loans:It is the Companys policy to provide
valuation allowances for estimated losses on loans based upon past loss
experience, trends in the level of delinquent and specific problem loans,
adverse situations that may affect the borrowers ability to repay, the
estimated value of any underlying collateral and current economic conditions in
the Companys primary market areas. When the collection of a loan becomes
doubtful, or otherwise troubled, the Company records a loan loss provision
equal to the difference between the fair value of the property securing the
loan and the loans carrying value. Lending areas are reviewed periodically to
determine potential problems at an early date. The allowance for loan losses
is increased by charges to earnings and decreased by charge-offs (net of
recoveries). page 9




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The Company accounts for impaired loans in accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, which requires that
impaired loans be measured based upon the present value of expected future cash
flows discounted at the loans effective interest rate or, as an alternative,
at the loans observable market price or fair value of the collateral. A loan is defined under SFAS No. 114 as impaired when, based on current
information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. In applying the provisions of SFAS No. 114, the Company considers
its investment in one-to-four family residential loans and consumer installment
loans to be homogeneous and therefore excluded from separate identification for
evaluation of impairment. With respect to the Companys investment in
multi-family and nonresidential loans, and its evaluation of impairment
thereof, such loans are collateral dependent and as a result are carried as a
practical expedient at the lower of cost or fair value. Collateral dependent loans which are more than ninety days delinquent are
considered to constitute more than a minimum delay in repayment and are
evaluated for impairment under SFAS No. 114 at that time. page 10




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Managements Discussion and Analysis Note Regarding Forward-Looking Statements In addition to historical information contained herein, the following
discussion contains statements that are forward-looking, as that term is
defined by the Private Securities Litigation Act of 1995 or the Securities and
Exchange Commission in its rules, regulations and releases. The Company
intends that such forward-looking statements be subject to the safe harbors
created thereby. All forward-looking statements are based on current
expectation regarding important risk factors including, but not limited to,
real estate values and the impact of interest rates on financing. Accordingly,
actual results may differ from those expressed in the forward-looking
statements, and the making of such statements should not be regarded as a
representation by the Company or any other person that results expressed
therein will be achieved. Pending Acquisition The Company and First Federal Savings and Loan Association of Hazard
(First Federal of Hazard) executed a definitive agreement pursuant to which
First Federal of Hazard will reorganize into a mutual holding company in order
to acquire the Company for $23.50 per share of outstanding Company common
stock. The mutual holding company will be known as First Federal MHC (MHC).
The MHC will form and own approximately 55% of a new subsidiary mid-tier stock
holding company to be known as Kentucky First Federal Bancorp. Of the 45% of
Kentucky First Federal Bancorps common stock to be issued to the public, a
maximum of 45% will be issued to Frankfort First Bancorp stockholders, together
with cash, to pay the merger consideration. First Federal of Hazard and the Bank will remain separate banks following
the merger and the reorganization but will each be a wholly owned subsidiary of
Kentucky First Federal Bancorp. First Federal of Hazard is a mutual savings association operating one
banking office in Hazard, Kentucky. As of June 30, 2004, First Federal of
Hazard had assets of $139.8 million, deposits of $98.8 million and retained
earnings of approximately $31.0 million. General The principal business of the Bank consists of accepting deposits from the
general public and investing these funds in loans secured by one-to-four family
owner-occupied residential properties in the Banks primary market area. The
Bank also originates loans secured by non-owner occupied one-to-four family
residential properties, churches, professional office real estate,
multi-family, home equity lines of credit, second mortgages and share loans.
The Bank also maintains an investment portfolio which may include FHLB stock,
FHLB certificates of deposit, U.S. Government Agency-issued bonds,
mortgage-backed securities and other investments. Comparison of Financial Condition at September 30, 2004 and June 30, 2004 Assets: The Companys total assets were $136.6 million at September 30,
2004, a decrease of $1.5 million or 1.1% from the June 30, 2004 level. The
decrease in total assets was primarily attributable to a decrease in the
Companys loans receivable. Loans receivable-net decreased $1.5 million or
1.2% to $123.7 million at September 30, 2004. During the three months ended
September 30, 2004, the Company sold $1.3 million in fixed rate mortgage loans,
compared to $613,000 in the three months ended June 30, 2004-the first period
in which the Company had sold any mortgage loans. Management believes that
such loan sales contributed to the decrease in the level of loans receivable,
but that such sales were prudent in light of anticipated increases in market
interest rates in the coming months. Liabilities: The Companys total liabilities decreased $1.4 million or
1.2% from $120.6 million at June 30, 2004 to $119.2 million at September 30,
2004. Deposits decreased $1.2 million or 1.6% from $75.0 million at June 30,
2004 to $73.8 million at September 30, 2004. FHLB advances decreased $274,000
or 0.6% to $43.4 million at September 30, 2004. page 11




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Shareholders Equity: Shareholders equity was $17.4 million at September
30, 2004, a decrease of $105,000 or 0.6% compared to June 30, 2004. The
decrease in book value per share is attributable to the excess of dividends
over earnings for the three month period ended September 30, 2004. (See
Dividends) Comparison of Results of Operations for the Three Months Ended September 30,
2004 and 2003 Net Earnings: The Companys net earnings decreased $42,000 or 16.7% to
$209,000 for the three month period ended September 30, 2004 compared to 2003.
The decrease in net earnings was primarily attributable to an increase in
general, administrative and other expense. The Companys basic earnings per
share decreased $0.03 or 15.0% from $0.20 per share for the three month period
ended September 30, 2003 to $0.17 per share for the comparable 2004 period.
The Companys diluted earnings per share also decreased $0.03 per share or
15.8% to $0.16 per share for the three month period just ended compared to
$0.19 for the three month period ended September 30, 2003. Net Interest Income: Net interest income was $772,000 for the three month
period ended September 30, 2004 a decrease of $19,000 or 2.4% compared to
$791,000 for the three month period ended September 30, 2003. While total
interest income and interest expense decreased from period to period, the
decrease in net interest income was primarily due to a greater decrease in
interest income compared to the decrease in interest expense. Interest Income: Interest income decreased $122,000 or 6.2% to $1.8
million for the three month period ended September 30, 2004. The decrease was
related primarily to a decrease in interest income from loans, which decreased
$110,000 or 5.8%, to $1.8 million for the three month period recently ended.
The average yield on loans decreased from 6.80% for the three months ended
September 30, 2003, to 5.71% for the three months ended September 30, 2004, a
difference of 109 basis points. Also contributing to the decrease in interest
income was a decrease in interest income from investment securities, which
decreased $11,000 or 27.5% from period to period. Interest Expense: Interest expense decreased $103,000 or 8.8% to $1.1
million for the three month period ended September 30, 2004. This decrease was
primarily due to a decrease in interest expense on deposits, which decreased
$93,000 or 18.1% to $422,000 for the three month period ended September 30,
2004. The decrease in interest expense on deposits was attributable primarily
to a decrease in the average rate paid on deposits, which decreased 45 bps to
2.27% for the three month period ended September 30, 2004. Also contributing
to the decrease in the interest expense on deposits was a decrease in the
average outstanding balance of deposits which decreased $1.5 million or 1.9% to
$74.4 million for the period ended September 30, 2004, compared to the
comparable 2003 period. Interest expense on FHLB advances decreased $10,000 or
1.5% to $647,000 for the three month period ended September 30, 2004, compared
to the same period in 2003. It is difficult to predict what interest rates will do in the future. If
market interest rates increase, the Companys cost of deposits will increase as
well, and may increase faster than the yield generated by the loan and
investment portfolio, resulting in decreased net income. General, Administrative, and Other Expenses: General, administrative, and
other expense increased $94,000 or 22.2% to $517,000 for the three month period
ended September 30, 2004. The increase was due primarily to a $67,000 or 26.0%
increase in employee compensation and benefits, which resulted from a variety
of factors associated with employee compensation and the benefits afforded the
Companys personnel, including lower deferred costs associated with a lower
number of loans originated during the quarter just ended compared to last
years quarter. To a lesser extent, benefit costs contributed to the overall
increase. Dividends: Under its dividend policy announced on September 14, 2001, the
Company declared a dividend of $0.28 per share to shareholders of record at
September 30, 2004, payable on October 15, 2004. At September 30, 2004, the
Company had recorded dividends payable of $353,000 for the payment of a
dividend on October 15, 2004. page 12




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Stock Repurchases: The Company has utilized stock repurchase programs to
increase earnings per share, increase the Companys return on equity, and to
attempt to improve the market liquidity in the Companys stock. During the
three month period ended September 30, 2004, the Company did not have a
repurchase program in place and did not repurchase any shares of its stock.
The Companys Board and Management continue to believe in the potential
positive effects of a repurchase strategy and will continue to evaluate market
conditions along with other possible uses of capital in determining the
authorization of future repurchase programs, although it is not expected that
the Company will engage in any stock repurchase activity pending the outcome of
the proposed acquisition by First Federal Savings and Loan Association of
Hazard. Liquidity:The Company maintains sufficient liquid assets to meet its
short-term obligations as they become due in the ordinary course of business.
In addition to its cash and cash equivalents the Company has additional
borrowing capacity with the Federal Home Loan Bank of approximately $25.5
million. Of that additional borrowing capacity, the Company maintains a $10.0
million line of credit with the Federal Home Loan Bank of which $2.3 million
had been drawn at September 30, 2004. page 13




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Item 3. Controls and Procedures As of the end of the period covered by this report, Management of the
Company carried out an evaluation, under the supervision and with the
participation of the Companys principal executive officer and principal
financial officer, of the effectiveness of the Companys disclosure controls
and procedures. Based on this evaluation, the Companys principal executive
officer and principal financial officer concluded that the Companys disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commissions rules and forms. It should be noted that the design of the
Companys disclosure controls and procedures is based in part upon certain
reasonable assumptions about the likelihood of future events, and there can be
no reasonable assurance that any design of disclosure controls and procedures
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote, but the Companys principal executive and
financial officers have concluded that the Companys disclosure controls and
procedures are, in fact, effective at a reasonable assurance level. In connection with its audit of the Companys consolidated financial
statements for the year ended June 30, 2004, the Companys independent auditors
identified a control deficiency wherein during the Companys conversion of its
third party data processing servicer, segregation of access capabilities was
not fully implemented until August 2004. This control deficiency allowed
certain employees to have access that allowed them to originate, alter or
approve transactions that were not compatible with their duties or
responsibilities. Although the Company had in place various detection
controls, the independent auditors considered the situation a significant
deficiency in internal control. Except for the segregation of access
capabilities implemented during the three months ended September 30, 2004,
there have been no changes in the Companys internal control over financial
reporting (to the extent that elements of internal control over financial
reporting are subsumed within disclosure controls and procedures) identified in
connection with the evaluation described in the above paragraph that occurred
during the Companys last fiscal quarter, that have materially affected or are
reasonably likely to affect the Companys financial statements as presented. page 14




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PART II. 
 Item 1. Legal Proceedings None 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None 
 Item 3. Defaults Upon Senior Securities None 
 Item 4. Submission of Matters to a Vote of Security Holders None 
 Item 5. Other Information None 
 Item 6. Exhibits Exhibit 31
- Rule 13a-14 Certifications Exhibit 32
- Section 1350 Certification page 15




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Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. FRANKFORT FIRST BANCORP, INC.Date: November 12, 2004
    
    /s/ Don D. JenningsDon D. JenningsPresident/s/ R. Clay HuletteR. Clay HuletteVice President and Treasurer(Principal Financial and AccountingOfficer)
 page 16