UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

Commission file number 000-23667





HOPFED
BANCORP, INC.

(Exact name of registrant as specified in its charter)



|                                                         |  |                                     
|-------------------------------------------------------- |  | ------------------------------------
|Delaware                                                 |  | 61-1322555                          
|(State of jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                         | 
|4155 Lafayette Road, Hopkinsville, KY                    |  | 42240                               
|(Address of principal executive offices)                 |  | (Zip Code)                          

Registrants telephone number, including area code: (270) 885-1171.

Securities registered pursuant to Section 12(b) of the Act: None.

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

Common Stock, par value $.01 per share

(Title of Class)





Indicate by check mark whether
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x.

Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO   ̈

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (subsection 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.     ̈

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (as defined in Rule 12b-2 of the Act).



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller Reporting Company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ̈    No  x

The
registrants voting stock is traded on the NASDAQ Stock Market. The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the price ($9.03 per share) at which the stock was sold on
June 30, 2010, was approximately $59,648,171. For purposes of this calculation, the term affiliate refers to all executive officers and directors of the registrant and all stockholders beneficially owning more than 10% of the
registrants Common Stock.

As of the close of business on March 25, 2011, 7,334,963 shares of the registrants Common Stock
were outstanding.





Documents Incorporated By Reference

Part II:

Annual Report to Stockholders for the year ended December 31, 2010.

Part III:

Portions of the definitive proxy
statement for the 2011 Annual Meeting of Stockholders.









---

PART I



|ITEM 1. | BUSINESS
|------- | --------

In February
1998, HopFed Bancorp, Inc. (the Company) issued and sold 4,033,625 shares of common stock, par value $.01 per share (the Common Stock), in connection with the conversion of Hopkinsville Federal Savings Bank (the
Bank) from a federal mutual savings bank to a federal stock savings bank and the issuance of the Banks capital stock to the Company. The conversion of the Bank, the acquisition of all of the outstanding capital stock of the Bank by
the Company and the issuance and sale of the Common Stock are collectively referred to herein as the Conversion. In June of 2010, the Company issued and sold 3,333,334 shares of common stock, par value $0.01 per share in connection with
a common stock offering. In July 2010, the Company issued and sold an additional 250,000 shares of common stock. Both sales were completed at an offering price of $9.00 per share. After underwriting fees and selling expenses, the Company received
additional capital proceeds of approximately $30.4 million.

HopFed Bancorp, Inc.

HopFed Bancorp, Inc. was incorporated under the laws of the State of Delaware in May 1997 at the direction of the Board of Directors of
the Bank for the purpose of serving as a savings and loan holding company of the Bank upon the acquisition of all of the capital stock issued by the Bank in the Conversion. The Companys assets primarily consist of the outstanding capital stock
of the Bank. The Companys principal business is overseeing the business of the Bank. The Company has registered with the Office of Thrift Supervision (OTS) as a savings and loan holding company.

As a holding company, the Company has greater flexibility than the Bank to diversify its business activities through existing or newly
formed subsidiaries or through acquisition or merger with other financial institutions, although the Company currently does not have any plans, agreements, arrangements or understandings with respect to any such acquisitions or mergers. The Company
currently is classified as a unitary savings and loan holding company and is subject to regulation by the OTS. The Companys executive offices are located at 4155 Lafayette Road, Hopkinsville, Kentucky 42240, and its main telephone number is
(270) 885-1171. The Companys mailing address is P.O. Box 537, Hopkinsville, Kentucky 42241-0537.

As part of the
Dodd / Frank legislation passed in July 2010, the primary regulator for the Company and Bank, the OTS, will cease to exist after July 21, 2011. Supervision of the Company will be assumed by the Board of Governors of the Federal Reserve System
(Federal Reserve). The Companys wholly owned savings bank subsidiary will be supervised by the Office of the Comptroller of the Currency (OCC). See Dodd-Frank Wall Street Reform and Consumer Protection Act.

Heritage Bank

The Bank is a federally chartered stock savings bank headquartered in Hopkinsville, Kentucky, with branch offices in Kentucky and
Tennessee. The Kentucky locations include Hopkinsville, Murray, Cadiz, Elkton, Fulton, Calvert City and Benton. The Tennessee locations include Clarksville, Pleasant View, Ashland City, Kingston Springs and Erin. The Bank was incorporated by the
Commonwealth of Kentucky in 1879 under the name Hopkinsville Building and Loan Association. In 1940, the Bank converted to a federal mutual savings association and received federal insurance of its deposit accounts. In 1983, the Bank became a
federal mutual savings bank. On May 14, 2002, the Bank changed its name from Hopkinsville Federal Bank to Heritage Bank. The primary market area of the Bank consists of the adjacent counties of Calloway, Christian, Todd, Trigg, Fulton, and
Marshall located in southwestern Kentucky and Montgomery, Cheatham, Houston, Obion & Weakley counties located in Tennessee.

The business of the Bank primarily consists of attracting deposits from the general public and investing such deposits in loans secured by single family residential real estate and investment securities,
including U.S. Government and agency securities, municipal and corporate bonds, collateralized mortgages obligations (CMOs), and mortgage-backed securities. The Bank also originates single-family residential/construction loans and multi-family
and commercial real estate loans, as well as loans secured by deposits, other consumer loans and commercial loans. The Bank emphasizes the origination of residential real estate loans with adjustable interest rates and other assets which are
responsive to changes in interest rates and allow the Bank to more closely match the interest rate maturation of its assets and liabilities.



2







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Growth Opportunities

For the year ended December 31, 2010, the Companys loan portfolio shrank by approximately $42.1 million. There were many factors that resulted in the Companys negative loan growth in
2010. Among these factors was the deployment of more than 15,000 troops from nearby Fort Campbell, Kentucky, to Afghanistan. The troop deployment resulted in a reduced level of economic activity, lower sales for merchants, weaker demand for most
goods and services and reduced tax collections. Furthermore, the deployment of troops occurred during a time of a national recession, further exasperating the weakness in the local economy. The most recent deployment of troops is ending and the
majority of troops stationed at Fort Campbell will have returned by the end of June 2011.

Another important factor inhibiting
lending growth is the presence of a Memorandum of Understanding and Agreement (MOU) between the Board of Directors of the Company and the Bank and the OTS. The MOU requires the Bank to limit the growth of specific types of lending,
including commercial real estate lending. In 2010, the MOUs limitation on commercial real estate made it more difficult for the Bank to experience positive loan growth. The MOUs limitation on commercial real estate lending is focused on
the OTS definition of commercial real estate loan concentrations. OTS views all commercial real estate under the same risk profile while the OCC and FDIC view owner occupied commercial real estate differently as compared to non-owner occupied
commercial real estate. We anticipate that the change in regulators discussed above may make it easier for the Bank to grow its loan portfolio in the future. However, we do not anticipate that any change in regulatory interpretations will occur
prior to the July 2011 transfer of the OTS regulators authority to the OCC and may not occur until 2012.

The market for
single family homes in Clarksville, Tennessee, the Companys largest loan market, continues to impress. A recent article printed in the February 2010 Wall Street Journal cited the Clarksville, Tennessee market as one of ten markets nationwide
in which prices of single family homes increased during the recession. The Company is confident that this market is ripe for a strong economic rebound due to the increased number of army personnel returning to the area and the increase in desirable
jobs resulting from the completion of the Hemlock Semiconductor facility in 2012.

The Companys rural markets have fared
much better as compared to urban markets and high growth coastal areas. In 2010, the yields on corn, soybean, and wheat were below average as spring-time flooding was followed by a summer drought. Higher commodity prices helped offset below average
yields. The agricultural community has good reason to be optimistic in 2011 as commodity prices are at near record levels. The Company anticipates an increase in crop production and an increase in demand for agricultural related credit.

Despite the limited short term growth prospects, the Companys longer term prospects remain strong. The Fort Campbell Army Base
continues to experience growth as the Army consolidates smaller bases into this facility. The continued construction of the Hemlock Semiconductor plant (production scheduled to begin in 2012) will provide a stable demand for construction labor as
well as opportunity for highly desirable employment when production begins. The Companys Cheatham County market provides an excellent inroad into the Nashville, Tennessee MSA. The Company anticipates that this market will be among the first to
experience an economic recovery due to its well diversified economy and ideal location. Furthermore, the Companys growth opportunities will continue to be enhanced as many of its competitors struggle to remain in business due to credit and
capital concerns. Typically, these opportunities are in the form of seizing on both customer and bank employees dissatisfied with the poor quality of service and the limitations placed on their employees and availability of credit at larger regional
and national banks. The Company also anticipates that a limited number of whole bank and branch acquisition opportunities will be available within its market. The Company is interested in FDIC assisted transactions but has a strong preference for
local acquisitions.

Beginning in 2008 and continuing through 2009 and 2010, the Company has developed a marketing campaign
focused on increasing its market share of checking accounts. The campaign continues to be a resounding success with more than 4,000 new non-interest bearing checking accounts opened in each of the last two years. The Company will continue to focus
significant resources to this campaign.



3







---

On December 12, 2008, the Company received an $18.4 million investment from the United
States Treasury in the form of preferred stock. The terms of the investment included a 5% dividend for five years, increasing to 9% thereafter. The investment has no stated maturity but may be paid back in whole or part after three years without
penalty. The investment may be paid back in less than three years upon the Companys successful sale of an equal amount of common equity. In addition to the dividend, the Treasury received 243,816 stock warrants that are immediately exercisable
with a ten year maturity and a strike price of $11.32. The amount and price of the warrants have been adjusted to 248,692 shares and a strike price of $11.10 as a result of a 2% stock dividend declared for shareholders of record at
September 30, 2010 and paid on October 18, 2010.

In June and July of 2010, the Company sold a total of 3,583,334
shares of common stock at $9.00 per share in a public offering. The net proceeds of the public offering, $30.4 million, were used for general corporate purposes and included a $10 million distribution to Heritage Bank, our wholly owned subsidiary.
The sale of common stock in June 2010 included 112,639 shares of treasury stock.

At this time, the Company has not redeemed
the $18.4 million in preferred stock issued to the United States Treasury under the Troubled Asset Relief Program. The Company continues to evaluate local and national economic trends, the Companys trends of criticized and non-performing
assets, opportunities for branch acquisitions and whole bank purchases as well as capital alternatives to the preferred stock, including participation in the Treasurys Small Business Lending Fund. It remains the Companys intent to redeem
the preferred stock prior to the increase of the dividend to 9% in December of 2013. At this time, the Company does not anticipate raising additional capital for the redemption of the preferred stock but may raise additional capital should the
opportunity for an acquisition present itself. Additional information on the United States Treasury Investment in HopFed Bancorp can be found in Note 17 of the audited consolidated financial statements.

The following chart outlines the Banks market share in its six largest markets individually at June 30, 2007, June 30,
2008, June 30, 2009, and June 30, 2010, according to information provided by the FDIC market Share Report:



|               |  |            |      |   |      |  |      |      |  |  |      |   |  |  |      |  
|-------------- |  | ---------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|               |  | At June 30 |     
|               |  | 2007       |      |   | 2008 |  |      | 2009 |  |  | 2010 |  
|Calloway       |  |            | 12.6 | % |      |  | 13.2 | %    |  |  | 14.0 | % |  |  | 17.4 | %
|Christian      |  |            | 19.8 | % |      |  | 20.1 | %    |  |  | 22.8 | % |  |  | 28.4 | %
|Fulton         |  |            | 54.8 | % |      |  | 56.7 | %    |  |  | 58.9 | % |  |  | 58.2 | %
|Marshall       |  |            | 12.6 | % |      |  | 13.1 | %    |  |  | 14.3 | % |  |  | 14.6 | %
|Cheatham       |  |            | 14.0 | % |      |  | 14.5 | %    |  |  | 14.9 | % |  |  | 14.8 | %
|Montgomery (a) |  |            | 0.5  | % |      |  | 1.5  | %    |  |  | 2.9  | % |  |  | 3.2  | %



|(a) | The Company opened its first retail banking office in December 2006.
|--- | --------------------------------------------------------------------

Available Information

The Companys filings with the Securities and
Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, are available on the Companys website as soon as reasonably practicable
after the reports are filed with or furnished to the SEC. Copies can be obtained free of charge in the Investor Relations section of the Companys website at www.bankwithheritage.com.



4







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Stock Repurchases

On September 20, 2000, the Company announced that its Board of Directors had approved the repurchase of up to 200,000 shares of its common stock. The stock repurchase program was completed in
February 2001. On March 26, 2001, the Company announced that its Board of Directors had approved the repurchase of an additional 300,000 shares. The Company replaced the March 2001 repurchase plan with a plan to repurchase 125,000 shares of
stock beginning on October 1, 2006 and ending September 30, 2008. The purchases were made from time to time on the NASDAQ Stock Market at prices prevailing on that market or in privately negotiated transactions at managements
discretion, depending on market conditions, price of the Companys common stock, corporate cash requirements and other factors. The Companys acceptance of the capital investment from the United States Treasury Department requires the
Company to cease all stock repurchase activity for a period of no less than three years or until capital investment is redeemed in full. As of March 15, 2011, 402,916 shares of common stock had been repurchased.

Lending Activities

General. The total gross loan portfolio totaled $609.7 million at December 31, 2010, representing 56.3% of total assets at
that date. Substantially all loans are originated in the Banks market area. At December 31, 2010, $229.1 million, or 37.6% of the loan portfolio, consisted of one-to-four family, residential mortgage loans. Other loans secured by real
estate include non-residential real estate loans, which amounted to $255.3 million, or 41.9% of the loan portfolio at December 31, 2010, and multi-family residential loans, which were $29.4 million, or 4.8% of the loan portfolio at
December 31, 2010. At December 31, 2010, construction loans were $23.4 million, or 3.8% of the loan portfolio, and total consumer and commercial loans totaled $72.5 million, or 11.9% of the loan portfolio.

Analysis of Loan Portfolio.Set forth below is selected data relating to the composition of the loan portfolio by type of loan at
the dates indicated. At December 31, 2010, there were no concentrations of loans exceeding 10% of total loans other than as disclosed below.



|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|------------------------------ |  | ---------------------- | ------- | - | ------- |  | ----- | ------ |  | - | ------- | - |  | ------ | ----- | - | ------- | - | ------- | ------ |  |  | ------- | - |  | ------ | ------- | - | ------- |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                               |  | 2010                   |         |   | 2009    |  |       | 2008   |  |   | 2007    |   |  | 2006   |      
|                               |  | Amount                 |         |   | Percent |  |       | Amount |  |   | Percent |   |  | Amount |       |   | Percent |   |         | Amount |  |  | Percent |   |  | Amount |         |   | Percent | 
|                               |  | (Dollars in thousands) |        
|Type of Loan:                  |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Real estate loans:             |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|One-to-four family residential |  | $                      | 229,058 |   |         |  | 37.6  | %      |  | $ | 240,823 |   |  |        | 37.0  | % |         | $ | 223,598 |        |  |  | 35.3    | % |  | $      | 222,888 |   |         |  | 38.4  | % |  | $ | 225,914 |   |  |  | 45.2  | %
|Multi-family residential       |  |                        | 29,416  |   |         |  | 4.8   | %      |  |   | 46,325  |   |  |        | 7.1   | % |         |   | 36,857  |        |  |  | 5.8     | % |  |        | 24,538  |   |         |  | 4.2   | % |  |   | 12,018  |   |  |  | 2.4   | %
|Construction                   |  |                        | 23,361  |   |         |  | 3.8   | %      |  |   | 33,216  |   |  |        | 5.1   | % |         |   | 62,300  |        |  |  | 9.8     | % |  |        | 50,230  |   |         |  | 8.7   | % |  |   | 39,379  |   |  |  | 7.9   | %
|Non-residential (1)            |  |                        | 255,348 |   |         |  | 41.9  | %      |  |   | 254,067 |   |  |        | 39.0  | % |         |   | 223,180 |        |  |  | 35.2    | % |  |        | 183,168 |   |         |  | 31.5  | % |  |   | 147,050 |   |  |  | 29.4  | %
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Total real estate loans        |  |                        | 537,183 |   |         |  | 88.1  | %      |  |   | 574,431 |   |  |        | 88.2  | % |         |   | 545,935 |        |  |  | 86.1    | % |  |        | 480,824 |   |         |  | 82.8  | % |  |   | 424,361 |   |  |  | 84.9  | %
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Other loans:                   |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Secured by deposits            |  |                        | 4,081   |   |         |  | 0.7   | %      |  |   | 4,075   |   |  |        | 0.6   | % |         |   | 3,949   |        |  |  | 0.6     | % |  |        | 4,419   |   |         |  | 0.7   | % |  |   | 3,855   |   |  |  | 0.8   | %
|Other consumer loans           |  |                        | 13,979  |   |         |  | 2.3   | %      |  |   | 17,908  |   |  |        | 2.8   | % |         |   | 19,731  |        |  |  | 3.1     | % |  |        | 21,331  |   |         |  | 3.7   | % |  |   | 21,630  |   |  |  | 4.3   | %
|Commercial loans               |  |                        | 54,439  |   |         |  | 8.9   | %      |  |   | 54,531  |   |  |        | 8.4   | % |         |   | 64,595  |        |  |  | 10.2    | % |  |        | 74,276  |   |         |  | 12.8  | % |  |   | 49,592  |   |  |  | 10.0  | %
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Total other loans              |  |                        | 72,499  |   |         |  | 11.9  | %      |  |   | 76,514  |   |  |        | 11.8  | % |         |   | 88,275  |        |  |  | 13.9    | % |  |        | 100,026 |   |         |  | 17.2  | % |  |   | 75,077  |   |  |  | 15.1  | %
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|                               |  |                        | 609,682 |   |         |  | 100.0 | %      |  |   | 650,945 |   |  |        | 100.0 | % |         |   | 634,210 |        |  |  | 100.0   | % |  |        | 580,850 |   |         |  | 100.0 | % |  |   | 499,438 |   |  |  | 100.0 | %
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Deferred loan cost, net        |  |                        | 363     |   |         |  |       |        |  |   | 261     |   |  |        |       |   |         |   | 279     |        |  |  |         |   |  |        | 244     |   |         |  |       |   |  |   |        |   |  |  |       |  
|Allowance for loan losses      |  |                        | (9,830  | ) |         |  |       |        |  |   | (8,851  | ) |  |        |       |   |         |   | (6,133  | )      |  |  |         |   |  |        | (4,842  | ) |         |  |       |   |  |   | (4,470  | ) |  |  |       |  
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  
|Total                          |  | $                      | 600,215 |   |         |  |       |        |  | $ | 642,355 |   |  |        |       |   |         | $ | 628,356 |        |  |  |         |   |  | $      | 576,252 |   |         |  |       |   |  | $ | 494,968 |   |  |  |       |  
|                               |  |                        |         |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |         |        |  |  |         |   |  |        |         |   |         |  |       |   |  |   |         |   |  |  |       |  



|(1) | Consists of loans secured by first liens on residential lots and loans secured by first mortgages on commercial real property and land.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



5







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Loan Maturity Schedule.The following table sets forth certain information at
December 31, 2010, regarding the dollar amount of loans maturing in the portfolio based on their contractual maturity dates. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due
in one year or less.



|                               |  |                                  |         |  |                                           |   |        |                                            |  |   |                                             |  |  |                                   |        |  |       |   |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|------------------------------ |  | -------------------------------- | ------- |  | ----------------------------------------- | - | ------ | ------------------------------------------ |  | - | ------------------------------------------- |  |  | --------------------------------- | ------ |  | ----- | - | ------ |  |  | - | ------ |  |  | - | ------- |  |  | - | ------- | 
|                               |  | Due the year ending December 31, |         |  | Due3 through 5years
afterDecember 31,2011 |   |        | Due5 through 10years
afterDecember 31,2011 |  |   | Due10 through 15years
afterDecember 31,2011 |  |  | Due 15years
afterDecember 31,2011 |        |  | Total |  
|                               |  | 2011                             |         |  | 2012                                      |   |        | 2013                                       |  |   |                                             |  |  |                                  
|                               |  | (Dollars In Thousands)           |        
|One-to-four family residential |  |                                  | 10,523  |  |                                           |   | 1,992  |                                            |  |   | 4,536                                       |  |  |                                   | 8,049  |  |       |   | 38,512 |  |  |   | 51,595 |  |  |   | 113,851 |  |  | $ | 229,058 | 
|Multi-family residential       |  |                                  | 1,007   |  |                                           |   | 529    |                                            |  |   | 839                                         |  |  |                                   | 643    |  |       |   | 3,611  |  |  |   | 479    |  |  |   | 22,308  |  |  | $ | 29,416  | 
|Construction                   |  |                                  | 20,353  |  |                                           |   | 1,423  |                                            |  |   | 203                                         |  |  |                                   |       |  |       |   | 7      |  |  |   |       |  |  |   | 1,375   |  |  | $ | 23,361  | 
|Non-residential                |  |                                  | 49,871  |  |                                           |   | 26,110 |                                            |  |   | 4,963                                       |  |  |                                   | 11,797 |  |       |   | 30,133 |  |  |   | 28,425 |  |  |   | 104,049 |  |  | $ | 255,348 | 
|Secured by deposits            |  |                                  | 2,241   |  |                                           |   | 272    |                                            |  |   | 1,186                                       |  |  |                                   | 382    |  |       |   |       |  |  |   |       |  |  |   |        |  |  | $ | 4,081   | 
|Other                          |  |                                  | 27,193  |  |                                           |   | 5,494  |                                            |  |   | 9,671                                       |  |  |                                   | 15,347 |  |       |   | 6,292  |  |  |   | 1,420  |  |  |   | 3,001   |  |  | $ | 68,418  | 
|                               |  |                                  |         |  |                                           |   |        |                                            |  |   |                                             |  |  |                                   |        |  |       |   |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|Total                          |  | $                                | 111,188 |  |                                           | $ | 35,820 |                                            |  | $ | 21,398                                      |  |  | $                                 | 36,218 |  |       | $ | 78,555 |  |  | $ | 81,919 |  |  | $ | 244,584 |  |  | $ | 609,682 | 
|                               |  |                                  |         |  |                                           |   |        |                                            |  |   |                                             |  |  |                                   |        |  |       |   |        |  |  |   |        |  |  |   |         |  |  |   |         | 

The following table sets forth at December 31, 2010, the dollar amount of all loans due after
December 31, 2011, which had predetermined interest rates and had floating or adjustable interest rates.



|                               |  |                        |        |  |                            |   |         | 
|------------------------------ |  | ---------------------- | ------ |  | -------------------------- | - | ------- | 
|                               |  | PredeterminedRate      |        |  | Floating orAdjustable Rate |  
|                               |  | (Dollars In Thousands) |       
|One-to-four family residential |  | $                      | 27,582 |  |                            | $ | 190,953 | 
|Multi-family residential       |  |                        | 1,762  |  |                            |   | 26,647  | 
|Construction                   |  |                        | 203    |  |                            |   | 2,805   | 
|Non-residential                |  |                        | 39,021 |  |                            |   | 166,456 | 
|Other                          |  |                        | 31,419 |  |                            |   | 11,646  | 
|                               |  |                        |        |  |                            |   |         | 
|Total                          |  | $                      | 99,987 |  |                            | $ | 398,507 | 
|                               |  |                        |        |  |                            |   |         | 

Scheduled contractual principal repayments of loans do not reflect the actual life of such assets. The
average life of loans is substantially less than their contractual terms because of prepayments. In addition, due-on-sale clauses on loans generally give the lender the right to declare a loan immediately due and payable in the event, among other
things, that the borrower sells the real property subject to the mortgage and the loan is not repaid. The average life of mortgage loans tends to increase when current mortgage loan market rates are substantially higher than rates on existing
mortgage loans and, conversely, decrease when current mortgage loan market rates are substantially lower than rates on existing mortgage loans.



6







---

In the last ten years, the Company has attempted to diversify its loan portfolio mix to
mitigate the risk of lending in a geographically limited area. The Company uses several metrics to measure our relative success in this area. The table below identifies loan balances by type as a percentage of consolidated risk based capital:



|                               |  |                        |         |  |                                                                |  |        |  
|------------------------------ |  | ---------------------- | ------- |  | -------------------------------------------------------------- |  | ------ | -
|                               |  | Total                  |         |  | Current Balance as PercentageOf Consolidated RiskBased Capital | 
|                               |  | (Dollars In Thousands) |        
|One-to-four family residential |  | $                      | 229,058 |  |                                                                |  | 182.49 | %
|Multi-family residential       |  |                        | 29,416  |  |                                                                |  | 23.44  | %
|Construction                   |  |                        | 23,361  |  |                                                                |  | 18.61  | %
|Non-residential                |  |                        | 255,348 |  |                                                                |  | 203.44 | %
|Secured by deposits            |  |                        | 4,081   |  |                                                                |  | 3.25   | %
|Other                          |  |                        | 68,418  |  |                                                                |  | 54.51  | %
|                               |  |                        |         |  |                                                                |  |        |  
|Total                          |  | $                      | 609,682 |  |                                                                |  | 485.74 | %
|                               |  |                        |         |  |                                                                |  |        |  

As discussed on page 3 of this report, the Company and the Bank are subject to an MOU issued by the OTS. A
significant concern to the OTS was the level of the Banks non-residential real estate lending as compared to its risk based capital. The OTS considers all lending outside of loans secured by commercial equipment, consumer goods, and 1-4 family
homes as non-residential real estate. At December 31, 2010, non-residential real estate loans totaled $255.3 million, or approximately 203.4% of total consolidated risk based capital. The Bank uses standardized industry codes known as NASICS
codes to track the individual components of its loan portfolio, including our non-residential real estate loan portfolio. At December 31, 2010, the Banks non-residential real estate loan portfolio consisted of the following:



|                                          |  |                        |         |  |                  |  |        |                 |  |  |         | 
|----------------------------------------- |  | ---------------------- | ------- |  | ---------------- |  | ------ | --------------- |  |  | ------- | 
|                                          |  | CurrentBalance         |         |  | UnadvancedAmount |  |        | TotalCommitment | 
|                                          |  | (Dollars in Thousands) |        
|Land                                      |  | $                      | 60,063  |  |                  |  | 2,756  |                 |  |  | 62,819  | 
|Construction                              |  |                        | 5,179   |  |                  |  | 865    |                 |  |  | 6,044   | 
|Manufacturing                             |  |                        | 5,358   |  |                  |  | 223    |                 |  |  | 5,581   | 
|Professional, Technical                   |  |                        | 2,440   |  |                  |  | 159    |                 |  |  | 2,599   | 
|Retail Trade                              |  |                        | 12,664  |  |                  |  | 545    |                 |  |  | 13,209  | 
|Other Services                            |  |                        | 20,200  |  |                  |  | 147    |                 |  |  | 20,347  | 
|Finance & Insurance                       |  |                        | 144     |  |                  |  | 19     |                 |  |  | 163     | 
|Agricultural, Forestry, Fishing & Hunting |  |                        | 40,655  |  |                  |  | 2,346  |                 |  |  | 43,001  | 
|Real Estate and Rental and Leasing        |  |                        | 49,017  |  |                  |  | 1,221  |                 |  |  | 50,238  | 
|Wholesale Trade                           |  |                        | 7,779   |  |                  |  | 13,949 |                 |  |  | 21,728  | 
|Arts, Entertainment & Recreation          |  |                        | 5,981   |  |                  |  | 126    |                 |  |  | 6,107   | 
|Accomodations / Food Service              |  |                        | 26,439  |  |                  |  | 25     |                 |  |  | 26,464  | 
|Healthcare and Social Assistance          |  |                        | 10,588  |  |                  |  | 94     |                 |  |  | 10,682  | 
|Educational Services                      |  |                        | 38      |  |                  |  |       |                 |  |  | 38      | 
|Transportation & Warehousing              |  |                        | 1,771   |  |                  |  |       |                 |  |  | 1,771   | 
|Information                               |  |                        | 3,099   |  |                  |  | 28     |                 |  |  | 3,127   | 
|Public Administration                     |  |                        | 119     |  |                  |  | 332    |                 |  |  | 451     | 
|Non-industry                              |  |                        | 3,426   |  |                  |  |       |                 |  |  | 3,426   | 
|Admin Support / Waste Mgmt                |  |                        | 388     |  |                  |  | 11     |                 |  |  | 399     | 
|                                          |  |                        |         |  |                  |  |        |                 |  |  |         | 
|Total                                     |  | $                      | 255,348 |  |                  |  | 22,846 |                 |  |  | 278,194 | 
|                                          |  |                        |         |  |                  |  |        |                 |  |  |         | 



7







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In addition to the measurements prescribed by the OTS in its MOU, management measures
commercial real estate (CRE) concentrations as discussed in Concentrations of Commercial Real Estate Lending, Sound Risk Management Practices issued on December 12, 2006 jointly by the Office of the Comptroller of the Currency (OCC),
Board of Governors of the Federal Reserve System (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC). In this guidance, the agencies make a significant distinction between owner-occupied CRE and non-owner occupied CRE. The
agencies have a heighted level of concerned with those loans with risk profiles sensitive to the condition of the CRE market. CRE loans secured by non-farm non-residential CRE where the primary source of repayment is the cash flow from the ongoing
operations and activities conducted by the owner of the property are generally excluded from the guidance. Using the instructions provided in the FDIC call report, the Company estimates that 60% of our CRE portfolio (excluding land) consists of
owner occupied properties. Management anticipates that this guidance will be applied to its operations after the merger of the OTS into the OCC in July 2011.

Originations, Purchases and Sales of Loans. The Bank generally has authority to originate and purchase loans secured by real estate located throughout the United States. Consistent with its
emphasis on being a community-oriented financial institution, the Bank conducts substantially all of its lending activities in its market area. The following table sets forth certain information with respect to loan origination activity for the
periods indicated.



|                                                                     |  |                         |          |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                     |  | Year Ended December 31, |         
|                                                                     |  | 2010                    |          |   | 2009 |   |         | 2008 | 
|                                                                     |  | (Dollars In Thousands)  |         
|Loan originations:                                                   |  |                         |          |   |      |   |         |      |  |   |         |  
|One-to-four family residential                                       |  | $                       | 83,568   |   |      | $ | 52,361  |      |  | $ | 81,107  |  
|Multi-family residential                                             |  |                         | 13,480   |   |      |   | 10,285  |      |  |   | 23,007  |  
|Construction                                                         |  |                         | 18,537   |   |      |   | 20,352  |      |  |   | 56,606  |  
|Non-residential                                                      |  |                         | 74,798   |   |      |   | 65,125  |      |  |   | 74,223  |  
|Other                                                                |  |                         | 54,240   |   |      |   | 68,980  |      |  |   | 63,032  |  
|                                                                     |  |                         |          |   |      |   |         |      |  |   |         |  
|Total loans originated                                               |  |                         | 244,623  |   |      |   | 217,103 |      |  |   | 297,975 |  
|                                                                     |  |                         |          |   |      |   |         |      |  |   |         |  
|Loan reductions:                                                     |  |                         |          |   |      |   |         |      |  |   |         |  
|Transfer to other real estate owned                                  |  |                         | 11,505   |   |      |   | 1,473   |      |  |   | 1,246   |  
|(Increase) decrease in deferred loan origination fees, net of income |  |                         | (102     | ) |      |   | 18      |      |  |   | (35     | )
|Change in allowance for loan losses                                  |  |                         | 979      |   |      |   | 2,718   |      |  |   | 1,291   |  
|Loans sold                                                           |  |                         | 42,866   |   |      |   | 5,500   |      |  |   | 3,565   |  
|Loan principal payments                                              |  |                         | 231,515  |   |      |   | 193,395 |      |  |   | 239,804 |  
|                                                                     |  |                         |          |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in loan portfolio                            |  |                         | ($42,140 | ) |      | $ | 13,999  |      |  | $ | 52,104  |  
|                                                                     |  |                         |          |   |      |   |         |      |  |   |         |  

Loan originations are derived from a number of sources, including existing customers, referrals by real
estate agents, depositors and borrowers and advertising, as well as walk-in customers. Solicitation programs consist of advertisements in local media, in addition to occasional participation in various community organizations and events. Real estate
loans are originated by the Banks loan personnel. All of the loan personnel are salaried, and are not compensated on a commission basis for loans originated. Loan applications are accepted at any of the Banks branches.

Loan Underwriting Policies. Lending activities are subject to written, non-discriminatory underwriting standards and to loan
origination procedures prescribed by the Board of Directors and its management. Detailed loan applications are obtained to determine the ability of borrowers to repay, and the more significant items on these applications are verified through the use
of credit reports, financial statements and confirmations. Loan requests exceeding loan officer limits must be approved by the loan committee or Board of Directors.



8







---

Generally, upon receipt of a loan application from a prospective borrower, a credit report
and verifications are ordered to confirm specific information relating to the loan applicants employment, income and credit standing. If a proposed loan is to be secured by a mortgage on real estate, an appraisal of the real estate is
undertaken by an appraiser approved by the Board of Directors and licensed or certified (as necessary) by the Commonwealth of Kentucky or the State of Tennessee. In the case of one-to-four family residential mortgage loans, except when the Bank
becomes aware of a particular risk of environmental contamination, the Bank generally does not obtain a formal environmental report on the real estate at the time a loan is made. A formal environmental report may be required in connection with
nonresidential real estate loans.

It is the Banks policy to record a lien on the real estate securing a loan and to
obtain a title opinion from Kentucky counsel who provides that the property is free of prior encumbrances and other possible title defects. Title Insurance is generally required on all commercial real estate loans, all one-to-four family loans with
balances exceeding $100,000 and all one-to-four family loans that are to be sold in the secondary market. Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood hazard area, pay flood insurance
policy premiums. The majority of real estate loan applications are underwritten and closed in accordance with the Banks own lending guidelines, which generally do not conform to secondary market guidelines. Although such loans may not be
readily saleable in the secondary market, management believes that, if necessary, such loans may be sold to private investors at a discount to par.

The Bank offers a fixed rate loan program with maturities of 15, 20, and 30 years. These loans are underwritten and closed in accordance with secondary market standards. These loans are originated with
the intent to sell on the secondary market. The Bank offers both servicing retained and servicing released products in an attempt to meet the needs of our customers. At December 31, 2010, the Banks 1-4 family loan servicing portfolio was
approximately $24.2 million.

The Bank is permitted to lend up to 100% of the appraised value of the residential real property
securing a mortgage loan. The Bank is required by federal regulations to obtain private mortgage insurance on that portion of the principal amount of any loan that is greater than 90% of the appraised value of the property. Under its lending
policies, the Bank will originate a one-to-four family residential mortgage loan for owner-occupied property with a loan-to-value ratio of up to 95%. For residential properties that are not owner-occupied, the Bank generally does not lend more than
80% of the appraised value. For all residential mortgage loans, the Bank may increase its lending level on a case-by-case basis, provided that the excess amount is insured with private mortgage insurance. Exceptions to this policy must be approved
by the loan committee or the Board of Directors. At December 31, 2010, the Bank held approximately $10.6 million of 1-4 family residential mortgages with a loan to value ratio exceeding 90% without private mortgage insurance. For these loans at
December 31, 2010, approximately $124,000 was past due more than 30 days or in non-accrual status.

Under applicable law,
with certain limited exceptions, loans and extensions of credit outstanding by a savings institution to a person at one time shall not exceed 15% of the institutions unimpaired capital and surplus. Loans and extensions of credit fully secured
by readily marketable collateral may comprise an additional 10% of unimpaired capital and surplus. Applicable law additionally authorizes savings institutions to make loans to one borrower, for any purpose, in an amount not to exceed the lesser of
$30.0 million or 30% of unimpaired capital and surplus to develop residential housing, provided certain requirements are satisfied. Under these limits, the Banks loans to one borrower were limited to approximately $15.7 million at
December 31, 2010. At that date, the Bank had no lending relationships in excess of the loans-to-one-borrower limit.

Interest rates charged by the Bank on loans are affected principally by competitive factors, the demand for such loans and the supply of
funds available for lending purposes. These factors are, in turn, affected by general economic conditions, monetary policies of the federal government, including the Federal Reserve Board, legislative tax policies and government budgetary matters.

One-to-four Family Residential Lending. The Bank historically has been and continues to be an originator of
one-to-four family residential real estate loans in its market area. At December 31, 2010, one-to-four family residential mortgage loans totaled approximately $229.1 million, or 37.6% of the Banks loan portfolio. The Bank originated
approximately $42.9 million in loans were sold in the secondary market with servicing released. At December 31, 2010, the Bank had approximately $1.7 million in one-to-four family residential real estate loans past due more than ninety days or
in non-accrual status.



9







---

The Bank primarily originates residential mortgage loans with adjustable rates. As of
December 31, 2010, 87.1% of one-to-four family mortgage loans in the Banks loan portfolio carried adjustable rates or mature within one year. The Banks one to four family loan portfolio consists of closed end first and second
mortgages as well as opened ended home equity lines of credit. At December 31, 2010, approximately $188.9 million of the Banks residential mortgage portfolio consisted of closed end first and second mortgage loans. Such loans are
primarily for terms of 25 years, although the Bank does occasionally originate adjustable rate mortgages for 15, 20 and 30 year terms, in each case amortized on a monthly basis with principal and interest due each month. The interest rates on these
mortgages are adjusted once per year, with a maximum adjustment of 1% per adjustment period and a maximum aggregate adjustment of 5% over the life of the loan. Prior to August 1, 1997, rate adjustments on the Banks adjustable rate
loans were indexed to a rate which adjusted annually based upon changes in an index based on the National Monthly Median Cost of Funds, plus a margin of 2.75%. Because the National Monthly Median Cost of Funds is a lagging index, which results in
rates changing at a slower pace than rates generally in the marketplace, the Bank changed to a one-year Treasury bill constant maturity (One Year CMT), which the Bank believes reflects more current market information and thus allows the
Bank to react more quickly to changes in the interest rate environment. In mid 2004, the Bank increased its margin on its adjustable rate loans to 3.00%. However, the vast majority of the current adjustable rate portfolio maintains a margin of 2.75%
over the One Year CMT.

The Bank also originates, to a limited extent, fixed-rate loans for terms of 10 and 15 years. Such
loans are secured by first mortgages on one-to-four family, owner-occupied residential real property located in the Banks market area. Because of the Banks policy to mitigate its exposure to interest rate risk through the use of
adjustable rate rather than fixed rate products, the Bank does not emphasize fixed-rate mortgage loans. Fixed rate mortgage loans originated by the Bank are loans that often do not qualify for the secondary market due to numerous factors not related
to credit quality. Typically, these products are not priced to be competitive with secondary market loans but to offer as an alternative if that option is not available. At December 31, 2010, $27.6 million of the Banks loan portfolio
consisted of fixed-rate one-to-four family first mortgage loans that will mature after December 31, 2011. To further reduce its interest rate risk associated with such loans, the Bank may rely upon FHLB advances with similar maturities to fund
such loans. See  Deposit Activity and Other Sources of Funds  Borrowing.

At December 31, 2010,
the Bank had $40.2 million in home equity lines of credit outstanding and $29.6 million of additional credit available. Typically, these loans are for a term of fifteen years and have loan to value ratio of between 80% to 100%. The home equity
portfolio is priced at a spread to prime, adjusted daily, depending on the customers loan to value ratio at the time of origination. Many of the home equity lines of credit require monthly interest payments with all unpaid interest and
principal due at maturity.

The retention of adjustable rate loans in the Banks portfolio helps reduce, but does not
eliminate, the Banks exposure to increases in prevailing market interest rates. However, there are unquantifiable credit risks resulting from potential increases in costs to borrowers in the event of upward re-pricing of adjustable-rate loans.
It is possible that during periods of rising interest rates, the risk of default on adjustable rate loans may increase due to increases in interest costs to borrowers. Further, although adjustable rate loans allow the Bank to increase the
sensitivity of its interest-earning assets to changes in interest rates, the extent of this interest sensitivity is limited by the initial fixed-rate period before the first adjustment and the lifetime interest rate adjustment limitations. This risk
is heightened by the Banks practice of offering its adjustable rate mortgages with a 1% limitation on annual interest rate adjustments. Accordingly, there can be no assurance that yields on the Banks adjustable rate loans will fully
adjust to compensate for increases in the Banks cost of funds.

Finally, adjustable rate loans increase the Banks
exposure to decreases in prevailing market interest rates, although the 1% limitation on annual decreases in the loans interest rate tends to offset this effect. In times of declining interest rates, borrowers often refinance into fixed rate
loan products, limiting the Banks ability to significantly increase its interest rate margin on adjustable rate loans in a declining interest rate market. In times of increasing interest rates, the 1% annual cap on increases in the interest
rates tends to reduce refinancing activity and reduce the Banks net interest margin.

Neither the fixed rate nor the
adjustable rate residential mortgage loans held in the Banks portfolio are originated in conformity with secondary market guidelines issued by FHLMC or FNMA. As a result, such loans may not be readily saleable in the secondary market to
institutional purchasers. However, such loans may still be sold to private investors whose investment strategies do not depend upon loans that satisfy FHLMC or FNMA criteria. Further, given its high liquidity, the Bank does not currently view loan
sales as a necessary funding source.



10







---

Construction Lending.The Bank engages in construction lending involving loans to
individuals for construction of one-to-four family residential housing, multi-family housing and non-residential real estate located within the Banks market area, with such loans converting to permanent financing upon completion of
construction. The Bank mitigates its risk with construction loans by imposing a maximum loan-to-value ratio of 95% for homes that will be owner-occupied and 80% for homes being built on a speculative basis.

The Bank also makes loans to qualified builders for the construction of one-to-four family residential housing located in established
subdivisions in the Banks market area. Because such homes are intended for resale, such loans are generally not converted to permanent financing at the Bank. All construction loans are secured by a first lien on the property under
construction.

Loan proceeds are disbursed in increments as construction progresses and as inspections warrant.
Construction/permanent loans may have adjustable or fixed interest rates and are underwritten in accordance with the same terms and requirements as the Banks permanent mortgages. Such loans generally provide for disbursement in stages during a
construction period of up to eighteen months, during which period the borrower is required to make payments of interest only. The permanent loans are typically 30-year adjustable rate loans, with the same terms and conditions otherwise offered by
the Bank. Monthly payments of principal and interest commence the month following the date the loan is converted to permanent financing. Borrowers must satisfy all credit requirements that would apply to the Banks permanent mortgage loan
financing prior to receiving construction financing for the subject property.

Construction financing generally is considered
to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. 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 or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the
Bank may be confronted at or prior to the maturity of the loan, with a project having a value which is insufficient to assure full repayment. The ability of a developer to sell developed lots or completed dwelling units will depend on, among other
things, demand, pricing, availability of comparable properties and economic conditions. The Bank has sought to minimize this risk by limiting construction lending to qualified borrowers in the Banks market area, by requiring the involvement of
qualified builders, and by limiting the aggregate amount of outstanding construction loans.

At December 31, 2010, the
Banks loan portfolio included $23.4 million of loans secured by properties under construction, including construction/permanent loans structured to become permanent loans upon the completion of construction and interim construction loans
structured to be repaid in full upon completion of construction and receipt of permanent financing. At December 31, 2010, approximately $12.9 million of construction loans were for one to four family dwellings, $5.5 million were for
multi-family dwellings and $5.0 million were for non-residential real estate. At December 31, 2010, there were $1.5 million in construction loans past due more than ninety days or classified as non-accrual.

Multi-Family Residential and Non-Residential Real Estate Lending. The Banks multi-family residential loan portfolio consists
of fixed and adjustable rate loans secured by real estate. At December 31, 2010, the Bank had $29.4 million of multi-family residential loans, which amounted to 4.8% of the Banks loan portfolio at such date. The Banks
non-residential real estate portfolio generally consists of adjustable and fixed rate loans secured by first mortgages on commercial real estate, residential lots, and rental property. In most cases, such property is located in the Banks
market area. At December 31, 2010, the Bank had approximately $255.3 million of such loans, which comprised 41.9% of its loan portfolio. Multi-family residential real estate loans are underwritten with loan-to-value ratios up to 80% of the
appraised value of the property. Non-residential real estate loans are underwritten with loan-to-value ratios up to 65% of the appraised value for raw land and 75% for land development loans.



11







---

Multi-family residential and non-residential real estate lending entails significant
additional risks as compared with one-to-four family residential property lending. Multi-family residential and commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. The payment
experience on such loans typically is dependent on the successful operation of the real estate project, retail establishment or business. These risks can be significantly impacted by supply and demand conditions in the market for the office, retail
and residential space, and, as such, may be subject to a greater extent to adverse conditions in the economy generally.

To
minimize these risks, the Bank generally limits itself to its market area or to borrowers with which it has prior experience or who are otherwise known to the Bank. It has been the Banks policy to obtain annual financial statements of the
business of the borrower or the project for which multi-family residential real estate or non-residential real estate loans are made. At December 31, 2010, $301,000 in multi-family loans were past due more than 90 days or classified as
non-accrual. At December 31, 2010, there were $1.0 million in non-residential real estate loans that were past due by 90 days or more or classified as non-accrual.

In 2010, the Company experienced a significant increase in the amount of delinquency and charge offs in the multi-family portfolio. In 2010, the Company charged off approximately $1.6 million in
multi-family properties while transferring another $7.9 million to other real estate owned. The increase in delinquency, other real estate owned and loan losses for multi-family loans is the result of a small number of customer relationships that
have been affected by the deployment of military personnel. At December 31, 2010, the Companys allowance for loan loss includes $2.0 million in reserve for multi-family loans and $4.0 million in reserve for non-residential real estate
loans.

Consumer Lending. The consumer loans currently in the Banks loan portfolio consist of loans secured by
savings deposits and other consumer loans. Savings deposit loans are usually made for up to 90% of the depositors savings account balance. The interest rate is approximately 2.0% above the rate paid on such deposit account serving as
collateral, and the account must be pledged as collateral to secure the loan. Interest generally is billed on a quarterly basis. At December 31, 2010, loans on deposit accounts totaled $4.1 million, or 0.7% of the Banks loan portfolio.
Other consumer loans include automobile loans, the amount and terms of which are determined by the loan committee, and home equity and home improvement loans, which are made for up to 100% of the value of the property. At December 31, 2010,
other consumer loan accounts totaled $14.0 million, or 2.3% of total loans.

Consumer loans may entail greater credit risk
than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or are secured by rapidly depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrowers continuing financial
stability, and therefore are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such
loans. At December 31, 2010, there was $23,000 in consumer loans delinquent 90 days or more or classified as non-accrual.

Commercial Lending. The Bank originates commercial loans on a secured and, to a lesser extent, unsecured basis. At
December 31, 2010, the Banks commercial loans amounted to $54.4 million, or 8.9% of the Banks loan portfolio. The Banks commercial loans generally are secured by business assets. In addition, the Bank generally obtains
guarantees from the principals of the borrower with respect to all commercial loans. At December 31, 2010, there was $97,000 in commercial loans delinquent 90 days or more or classified as non-accrual.

Non-accrual Loans and Other Problem Assets

The Banks non-accrual loans totaled 0.82% of total loans at December 31, 2010. Loans are placed on a non-accrual status when the loan is past due in excess of 90 days or the collection of
principal and interest is doubtful. The Bank places a high priority on contacting customers by telephone as a primary method of determining the status of delinquent loans and the action necessary to resolve any payment problem. The Banks
management performs quality reviews of problem assets to determine the necessity of establishing additional loss reserves. The Banks total non-performing assets to total asset ratio was 1.37% at December 31, 2010.



12







---

The following table sets forth information with respect to the Banks non-accrual loans
at the dates indicated. No loans were recorded as restructured loans within the meaning of Financial Accounting Standards Board (FASB) ASC 310.40 at the dates indicated.



|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|---------------------------------------------------------------- |  | --------------- | ----- | - | ---------------------- | - | ------ | ---- |  | - | ----- | - |  | ---- | ---- | - |  | - | ---- | -
|                                                                 |  | At December 31, |      
|                                                                 |  | 2010            |       |   | 2009                   |   |        | 2008 |  |   | 2007  |   |  | 2006 |     
|                                                                 |  |                 |       |   | (Dollars In Thousands) |   |        |      | 
|Accruing loans which are contractually past due 90 days or more: |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Residential real estate                                          |  | $               |      |   |                        | $ |       |      |  | $ |      |   |  | $    | 42   |   |  | $ | 93   |  
|Non-residential real estate                                      |  |                 |      |   |                        |   |       |      |  |   |      |   |  |      |     |   |  |   |     |  
|Consumer                                                         |  |                 |      |   |                        |   |       |      |  |   |      |   |  |      | 4    |   |  |   | 8    |  
|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Total                                                            |  |                 |      |   |                        |   |       |      |  |   |      |   |  |      | 46   |   |  |   | 101  |  
|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Non-Accrual Loans:                                               |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Construction                                                     |  |                 | 1,541 |   |                        |   | 572    |      |  |   | 341   |   |  |      |     |   |  |   |     |  
|Multi-family                                                     |  |                 | 301   |   |                        |   | 4,851  |      |  |   |      |   |  |      |     |   |  |   |     |  
|Residential real estate                                          |  |                 | 1,662 |   |                        |   | 1,399  |      |  |   | 1,340 |   |  |      | 476  |   |  |   | 599  |  
|Land                                                             |  |                 | 363   |   |                        |   | 3,503  |      |  |   | 5,052 |   |  |      |     |   |  |   |     |  
|Non residential real estate                                      |  |                 | 1,043 |   |                        |   | 490    |      |  |   | 427   |   |  |      | 46   |   |  |   | 61   |  
|Consumer                                                         |  |                 | 23    |   |                        |   | 27     |      |  |   | 55    |   |  |      |     |   |  |   |     |  
|Commercial                                                       |  |                 | 97    |   |                        |   | 367    |      |  |   | 106   |   |  |      | 25   |   |  |   | 102  |  
|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Total non-accrual loans                                          |  | $               | 5,030 |   |                        | $ | 11,209 |      |  | $ | 7,321 |   |  | $    | 593  |   |  | $ | 863  |  
|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  
|Percentage of total loans                                        |  |                 | 0.82  | % |                        |   | 1.72   | %    |  |   | 1.16  | % |  |      | 0.10 | % |  |   | 0.17 | %
|                                                                 |  |                 |       |   |                        |   |        |      |  |   |       |   |  |      |      |   |  |   |      |  

At December 31, 2010, the Bank had $5.0 million in loans outstanding which were classified as
non-accrual, 90 days past due or restructured but where known information about possible credit problems of borrowers caused 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.

Federal regulations require savings institutions to
classify their assets on the basis of quality on a regular basis. In determining the classification of an asset, the Company utilizes a Classified Asset Committee consisting of members of senior management, accounting, credit analysis, loan
administration, loan review, internal audit and collections. The committee is charged with determining the value of assets that are potentially impaired as well as the accurate reporting of Troubled Debt Restructuring (TDR) assets as
defined on page 15 and 16 of this report. The committees function is an important step in managements determination as to the necessary level of funding required in the Companys allowance for loan loss account.

An asset meeting one of the classification definitions set forth below may be classified and still be a performing loan. An asset is
classified as substandard if it is determined to be inadequately protected by the current retained earnings and paying capacity of the obligor or of the collateral pledged, if any. A substandard classification may also result from the change in
business purpose of a loan and / or its collateral. For example, a home builder who intends to sell a home upon completion changes his mind due to market conditions and places the home in a rental portfolio that he maintains. The Company may allow
the builder to do this if he has experience in this line of business but requires the customer to refinance the home on a twenty year term with monthly principal and interest payments. The change of business purpose (built for sale then converted to
rental) requires that the Company classify the loan as substandard and review the collateral for impairment. After a period of time of satisfactory loan performance and having satisfactory financial trends, the Company may gradually upgrade the loan
from substandard to satisfactory. The typical time for a loan to receive an upgrade from a substandard to satisfactory is twelve to eighteen months of continuous satisfactory performance.



13







---

An asset is classified as doubtful if full collection is highly questionable or improbable.
An asset is classified as loss if it is considered uncollectible, even if a partial recovery could be expected in the future. The regulations also provide for a special mention designation, described as assets which do not currently expose a savings
institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving managements close attention. Such assets designated as special mention may include non-performing loans
consistent with the above definition.

Assets classified as substandard or doubtful require a savings institution to conduct
an impairment test to determine if the establishment of a specific reserve against the allowance for loan loss account is necessary. Typically, the basis for a loan impairment test is the current market value of the collateral, discounted to allow
for selling and carrying cost. Typically, new appraisals on 1-4 family properties are discounted 10% to 15% from the appraised value while land and commercial real estate are discounted at 15% to 25% of new appraised values depending on the
perceived marketability of the property.

The Company requires a new appraisal for all impairment testing of collateral when
the loan balance exceeds $100,000. For loans less than $100,000, the Company may choose to use an old appraisal and provide additional discounts to the appraised value in determining the amount of specific reserve required. In the last twelve
months, the Company has found that appraisers face an increase in request for services and the time between a request for an appraisal and its completion is longer than normal, up to sixty days for complex multi-family or commercial properties.
During the interim, the Company may chose to use an old appraisal with larger discounts to ascertain the likelihood of a loan impairment until a current appraisal is received.

If an asset or portion thereof is classified loss, a savings institution must either establish a specific allowance for loss in the amount of the portion of the asset-classified loss, or charge off such
amount. A commercial bank with the FDIC, OCC or state regulator will typically require the bank to immediately charge off any portion of the asset-classified loss. The Company anticipates that our accounting policies will change during the third
quarter of 2011 to meet the practices as prescribed by the OCC, which will become the Banks primary regulator after July 21, 2011. Therefore, it is highly likely that the Banks loan charge offs will increase during the second and
third quarter of 2011 as it begins to implement OCC accounting requirements for impaired loans. The higher level of charge offs are likely to result in lower levels of non-performing loans and a decrease in the allowance for loan loss. However, the
net economic effect to the Company should be negligible as the charge offs should reduce the overall future loss exposure to the Companys loan portfolio as future losses are realized prior to the sale of collateral.

Federal examiners may disagree with a savings institutions classifications. If a savings institution does not agree with an
examiners classification of an asset, it may appeal this determination to the OTS Regional Director. The Bank regularly reviews its assets to determine whether any assets require classification or re-classification. At December 31, 2010,
the Bank had $57.1 million in assets classified as substandard and $1.5 million in assets classified as doubtful. Loans classified as substandard or doubtful by the Bank meet our classification of impaired loans, as defined by FASB ASC 942-310-45-1.

As depicted in the table below, the level of impaired assets increased significantly in 2010 as compared to 2009. The
increase was primary the result of continued weakness in the local and national economy and the deployment of army personnel from Fort Campbell to the Middle East. The increase in classified assets does not necessarily translate into increased
losses and charge offs as many customer classified as substandard continue to pay as agreed. The business results of these customers may be weaker as compared to prior years given the difficulties in the economy. Despite these challenges, most
customers continue to make payments as agreed.



14







---

The tables below provide a summary of loans classified by the Bank as special mention,
substandard and doubtful by category for the twelve month period ended December 31, 2010, and December 31, 2009. The table also identifies the amount of the Banks allowance for loan loss account specifically allocated to individual
loans for the specific periods below:



|                              |  |                        |        |  |             |  |        |         |  |  |                                  |  |  |   |       | 
|----------------------------- |  | ---------------------- | ------ |  | ----------- |  | ------ | ------- |  |  | -------------------------------- |  |  | - | ----- | 
|                              |  | SpecialMention         |        |  | Substandard |  |        | Doubful |  |  | Specific Allowance forImpairment | 
|                              |  | (Dollars In Thousands) |       
|December 31, 2010             |  |                        |        | 
|One-to-four family mortgages  |  | $                      | 8,121  |  |             |  | 8,388  |         |  |  | 298                              |  |  |   | 350   | 
|Home equity line of credit    |  |                        | 499    |  |             |  | 333    |         |  |  | 230                              |  |  |   | 77    | 
|Second mortgages              |  |                        | 495    |  |             |  | 187    |         |  |  |                                 |  |  |   | 105   | 
|Multi-family                  |  |                        |       |  |             |  | 3,017  |         |  |  | 301                              |  |  |   | 178   | 
|Construction                  |  |                        | 3,292  |  |             |  | 3,702  |         |  |  | 203                              |  |  |   | 108   | 
|Land                          |  |                        | 16,930 |  |             |  | 13,275 |         |  |  |                                 |  |  |   | 588   | 
|Non-residential real estate   |  |                        | 11,089 |  |             |  | 22,780 |         |  |  | 421                              |  |  |   | 2,540 | 
|Consumer assets owned by bank |  |                        | 205    |  |             |  | 367    |         |  |  |                                 |  |  |   | 85    | 
|Commercial loans              |  |                        | 2,314  |  |             |  | 5,092  |         |  |  | 17                               |  |  |   | 255   | 
|                              |  |                        |        |  |             |  |        |         |  |  |                                  |  |  |   |       | 
|Total                         |  | $                      | 42,945 |  |             |  | 57,141 |         |  |  | 1,470                            |  |  | $ | 4,286 | 
|                              |  |                        |        |  |             |  |        |         |  |  |                                  |  |  |   |       | 



|                              |  |                        |             |  |                |         |        |                                  |  |  |     |  |  |  |       | 
|----------------------------- |  | ---------------------- | ----------- |  | -------------- | ------- | ------ | -------------------------------- |  |  | --- |  |  |  | ----- | 
|                              |  | SpecialMention         |             |  | Impaired Loans |         |        | Specific Allowance forImpairment | 
|                              |  |                        | Substandard |  |                | Doubful |        |                                 
|                              |  | (Dollars In Thousands) |            
|December 31, 2009             |  |                        |             | 
|One-to-four family mortgages  |  |                        | 3,325       |  |                |         | 3,781  |                                  |  |  |    |  |  |  | 337   | 
|Home equity line of credit    |  |                        | 80          |  |                |         | 165    |                                  |  |  |    |  |  |  | 6     | 
|Second mortgages              |  |                        | 64          |  |                |         | 80     |                                  |  |  |    |  |  |  | 43    | 
|Multi-family                  |  |                        | 524         |  |                |         | 10,039 |                                  |  |  | 39  |  |  |  | 1,004 | 
|Construction                  |  |                        |            |  |                |         | 1,850  |                                  |  |  |    |  |  |  | 217   | 
|Land                          |  |                        | 9,609       |  |                |         | 6,067  |                                  |  |  | 23  |  |  |  | 177   | 
|Non-residential real estate   |  |                        | 15,821      |  |                |         | 7,837  |                                  |  |  | 75  |  |  |  | 396   | 
|Consumer assets owned by bank |  |                        | 149         |  |                |         | 680    |                                  |  |  |    |  |  |  | 159   | 
|Commercial loans              |  |                        | 1,365       |  |                |         | 332    |                                  |  |  | 366 |  |  |  | 173   | 
|                              |  |                        |             |  |                |         |        |                                  |  |  |     |  |  |  |       | 
|Total                         |  |                        | 30,937      |  |                |         | 30,831 |                                  |  |  | 503 |  |  |  | 2,512 | 
|                              |  |                        |             |  |                |         |        |                                  |  |  |     |  |  |  |       | 

Troubled Debt Restructuring

Due to challenges in the local and national economy that persisted into 2010, the Company has had more of its customers incur financial problems. These customers may request temporary or permanent
modification of loans in an effort to avoid foreclosure. The Company analyzes each request separately and grants loan modifications based on the customers ability to eventually repay the loan and return to the original loan terms, the
customers current loan status and the current and projected future value of the banks collateral. Loans that are modified as a result of a customers financial distress are classified as TDR. The classification of a loan as TDR is
important in that it indicates that a particular customer may not be past due but represents a credit weakness due to the banks willingness to modify loan terms based on the financial weakness of the borrower.



15







---

The classification of a loan as a TDR may represent the Companys last best
chance to work with a distressed customer before foreclosure proceedings begin. In 2010, the most significant additions to the Companys TDR listing are the result of a May 2010 flood that occurred in middle Tennessee. During 2010, the
Company added $7.8 million in loans classified as TDR that were directly the result of the middle Tennessee flood. At December 31, 2010, TDR loans affected by the May 2010 flood included $2.3 million in 1-4 family homes, approximately $2.5
million in commercial real estate and approximately $250,000 in multi-family loans. At December 31, 2010, the Company incurred loss on flood affected TDR loans of approximately $345,000.

At December 31, 2010, the Company had $11.0 million in loans classified as TDR, with $7.9 million of reported TDRs performing
as agreed by the loans modified terms. At December 31, 2010, non-performing TDRs included $1.5 million in construction loans and $1.3 million in 1-4 family mortgage loans. At December 31, 2010, the Company had $406,000 in specific reserves
of the allowance for loan loss account allocated to loans classified as performing TDRs and $2.4 million in specific reserves for non-performing TDRs. A summary of loans classified as TDR and the respective TDR for the twelve month period ended
December 31, 2010 can be found in the table below:



|                              |  |                        |        |  |              |  |        |             |  |  |                       |   |  |           |      |   |                   |  |       |  |  |  |        | 
|----------------------------- |  | ---------------------- | ------ |  | ------------ |  | ------ | ----------- |  |  | --------------------- | - |  | --------- | ---- | - | ----------------- |  | ----- |  |  |  | ------ | 
|                              |  | Activity During 2010   |       
|                              |  | Balance12/31/2009      |        |  | Foreclosures |  |        | Charge offs |  |  | RemovedCurrent / Sold |   |  | Additions |      |   | Balance12/31/2010 | 
|                              |  | (Dollars In Thousands) |       
|One-to-four family mortgages  |  | $                      | 750    |  |              |  |       |             |  |  | (225                  | ) |  |           | (287 | ) |                   |  | 3,808 |  |  |  | 4,046  | 
|Multi-family                  |  |                        | 7,976  |  |              |  | (6,696 | )           |  |  | (1,034                | ) |  |           |     |   |                   |  |      |  |  |  | 246    | 
|Construction                  |  |                        | 1,077  |  |              |  |       |             |  |  |                      |   |  |           |     |   |                   |  | 464   |  |  |  | 1,541  | 
|Land                          |  |                        |       |  |              |  |       |             |  |  |                      |   |  |           |     |   |                   |  | 512   |  |  |  | 512    | 
|Non-residential real estate   |  |                        | 1,062  |  |              |  |       |             |  |  | (500                  | ) |  |           | (400 | ) |                   |  | 3,753 |  |  |  | 3,915  | 
|Consumer assets owned by bank |  |                        | 11     |  |              |  |       |             |  |  | (11                   | ) |  |           |     |   |                   |  | 69    |  |  |  | 69     | 
|Commercial loans              |  |                        | 14     |  |              |  |       |             |  |  | (14                   | ) |  |           |     |   |                   |  | 700   |  |  |  | 700    | 
|                              |  |                        |        |  |              |  |        |             |  |  |                       |   |  |           |      |   |                   |  |       |  |  |  |        | 
|Total                         |  | $                      | 10,890 |  |              |  | (6,696 | )           |  |  | (1,784                | ) |  |           | (687 | ) |                   |  | 9,306 |  |  |  | 11,029 | 
|                              |  |                        |        |  |              |  |        |             |  |  |                       |   |  |           |      |   |                   |  |       |  |  |  |        | 

Real estate acquired by the Bank as a result of foreclosure is classified as real estate owned until such
time as it is sold. The Bank generally tries to sell the property at its current market price. The current market price is determined by obtaining an appraisal prior to the acquisition of the property. When such property is acquired, it is recorded
at its fair value less estimated costs of sale. In the last eighteen months, the Company has determined that properties acquired through foreclosure have experienced a significant loss in market value as compared to the market value at the time of
the origination of the loan. At the time of foreclosure, the collateral is reduced in value to its fair market value less holding and selling expenses and the remaining balance is charged against the allowance for loan losses. Subsequent to
foreclosure, in accordance with accounting principles generally accepted in the United States of America, a valuation allowance is established if the carrying value of the property exceeds its fair value net of related selling expenses. The value of
other real estate owned is periodically evaluated, no less than annually, to ascertain its current market value. Additional reductions in market value or recognized as an expense through a charge to losses on real estate owned. At December 31,
2010, the Banks real estate and other assets owned totaled $9.8 million.

The following table sets forth information
with respect to the Banks real estate and other assets owned at December 31, 2010, and December 31, 2009.



16







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|                                         |  |                        |       |  |      |  |       | 
|---------------------------------------- |  | ---------------------- | ----- |  | ---- |  | ----- | 
|                                         |  | 2010                   |       |  | 2009 | 
|                                         |  | (Dollars in Thousands) |      
|One-to-four family first mortgages       |  | $                      | 534   |  |      |  | 438   | 
|Multi-family                             |  |                        | 7,266 |  |      |  | 425   | 
|Construction                             |  |                        | 624   |  |      |  | 468   | 
|Land                                     |  |                        | 482   |  |      |  | 225   | 
|Non-residential real estate              |  |                        | 900   |  |      |  | 312   | 
|Consumer assets owned by bank            |  |                        | 6     |  |      |  | 15    | 
|                                         |  |                        |       |  |      |  |       | 
|Total real estate and other assets owned |  | $                      | 9,812 |  |      |  | 1,883 | 
|                                         |  |                        |       |  |      |  |       | 

Allowance for Loan Losses. In originating loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the
security for the loan. It is managements policy to maintain an adequate allowance for loan losses based on, among other things, the Banks and the industrys historical loan loss experience, evaluation of economic conditions, regular
reviews of delinquencies and loan portfolio quality and evolving standards imposed by federal bank examiners and other regulatory agencies. The Bank increases its allowance for loan losses by charging provisions for loan losses against the
Banks income.

Management will continue to actively monitor the Banks asset quality and allowance for loan losses.
Management will charge off loans and properties acquired in settlement of loans against the allowances for loan losses on such loans and such properties when appropriate and will provide specific loss allowances when necessary. Although management
believes it uses the best information available to make determinations with respect to the allowances for loan losses and believes such allowances are adequate, future adjustments may be necessary if economic conditions differ substantially from the
economic conditions in the assumptions used in making the initial determinations.

The Banks methodology for
establishing the allowance for loan losses takes into consideration probable losses that have been identified in connection with specific assets as well as losses that have not been identified but can be expected to occur. Management conducts
regular reviews of the Banks assets and evaluates the need to establish allowances on the basis of this review. Allowances are established by the Board of Directors on a quarterly basis based on an assessment of risk in the Banks assets
taking into consideration the composition and quality of the portfolio, delinquency trends, current charge-off and loss experience, loan concentrations, the state of the real estate market, regulatory reviews conducted in the regulatory examination
process and economic conditions generally.

Specific reserves will be provided for individual assets, or portions of assets,
when ultimate collection is considered improbable by management based on the current payment status of the assets and the fair value of the security. At the date of foreclosure or other repossession, the Bank would transfer the property to real
estate acquired in settlement of loans initially at the lower of cost or estimated fair value and subsequently at the lower of book value or fair value less estimated selling costs. Any portion of the outstanding loan balance in excess of fair value
less estimated selling costs would be charged off against the allowance for loan losses. If, upon ultimate disposition of the property, net sales proceeds exceed the net carrying value of the property, a gain on sale of other real estate would be
recorded.

Financial institutions must provide adequate disclosure of the methodology used regarding maintenance of an
adequate allowance for loan and lease losses and an effective loan review system. The Company utilizes a combination of its one year loss history and the sum of all impairment testing completed on individually classified loans.

The Company uses a one year charge off history to provide an allowance for loan loss balance on loans not
individually tested for impairment. The charge off history is weighted using the sum of the years digits. This method provides the a 40% weight to the most recent quarters losses, then 30% for the prior quarters losses, 20% for the 2ndprior quarters losses and 10% for the fourth quarter losses.



17







---

Using this method, the Companys trends for increasing or decreasing levels of charge
offs may materially impact the funding level of the allowance for loan loss account. Additional, the Company reserves the loss amount of any loans deemed to be impaired.

Financial institutions regulated by the OCC and FDIC are required to immediately charge off any portion of a loan that is deemed to be impaired. After July 21, 2011, the Company anticipates that this
requirement will be applied to it as well, eliminating all specific reserves for impaired loans.

The following table sets
forth an analysis of the Banks allowance for loan losses for the periods indicated.



|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|----------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ----- | - |  | - | ------ | -
|                                                                        |  | Year Ended December 31, |       
|                                                                        |  | 2010                    |        |   | 2009 |   |        | 2008 |  |   | 2007   |   |  | 2006 |      
|                                                                        |  | (Dollars in thousands)  |       
|Balance at beginning of period                                          |  | $                       | 8,851  |   |      | $ | 6,133  |      |  | $ | 4,842  |   |  | $    | 4,470 |   |  | $ | 4,004  |  
|Loans charged off:                                                      |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Commercial loans                                                        |  |                         | (4,354 | ) |      |   | (530   | )    |  |   | (364   | ) |  |      | (110  | ) |  |   | (117   | )
|Consumer loans and overdrafts                                           |  |                         | (472   | ) |      |   | (662   | )    |  |   | (685   | ) |  |      | (625  | ) |  |   | (628   | )
|Residential real estate                                                 |  |                         | (464   | ) |      |   | (644   | )    |  |   | (365   | ) |  |      | (186  | ) |  |   | (258   | )
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Total charge-offs                                                       |  |                         | (5,290 | ) |      |   | (1,836 | )    |  |   | (1,414 | ) |  |      | (921  | ) |  |   | (1,003 | )
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Recoveries                                                              |  |                         | 299    |   |      |   | 355    |      |  |   | 288    |   |  |      | 317   |   |  |   | 261    |  
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Net loans charged off                                                   |  |                         | (4,991 | ) |      |   | (1,481 | )    |  |   | (1,126 | ) |  |      | (604  | ) |  |   | (742   | )
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Credit devaluation of purchased loans                                   |  |                         |       |   |      |   |       |      |  |   |       |   |  |      |      |   |  |   | 185    |  
|Provision for loan losses                                               |  |                         | 5,970  |   |      |   | 4,199  |      |  |   | 2,417  |   |  |      | 976   |   |  |   | 1,023  |  
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Balance at end of period                                                |  | $                       | 9,830  |   |      | $ | 8,851  |      |  | $ | 6,133  |   |  | $    | 4,842 |   |  | $ | 4,470  |  
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  
|Ratio of net charge-offs to average loans outstanding during the period |  |                         | 0.78   | % |      |   | 0.20   | %    |  |   | 0.20   | % |  |      | 0.11  | % |  |   | 0.16   | %
|                                                                        |  |                         |        |   |      |   |        |      |  |   |        |   |  |      |       |   |  |   |        |  

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates
indicated. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.



|                                |  |                        |       |  |                                                |  |       |        |  |   |                                               |  |  |        |       |   |                                               |   |       |        |  |  |                                               |   |  |   |       |  |  |  |       |  
|------------------------------- |  | ---------------------- | ----- |  | ---------------------------------------------- |  | ----- | ------ |  | - | --------------------------------------------- |  |  | ------ | ----- | - | --------------------------------------------- | - | ----- | ------ |  |  | --------------------------------------------- | - |  | - | ----- |  |  |  | ----- | -
|                                |  | At December 31,        |      
|                                |  | 2010                   |       |  | 2009                                           |  |       | 2008   |  |   | 2007                                          | 
|                                |  | Amount                 |       |  | Percent ofLoans in 
EachCategory toTotal Loans |  |       | Amount |  |   | Percent ofLoans in EachCategory toTotal Loans |  |  | Amount |       |   | Percent ofLoans in EachCategory toTotal Loans |   |       | Amount |  |  | Percent ofLoans in EachCategory toTotal Loans |  
|                                |  | (Dollars in thousands) |      
|One-to-four family              |  | $                      | 1,454 |  |                                                |  | 37.6  | %      |  | $ | 2,209                                         |  |  |        | 37.0  | % |                                               | $ | 2,693 |        |  |  | 35.3                                          | % |  | $ | 1,910 |  |  |  | 38.4  | %
|Construction                    |  |                        | 657   |  |                                                |  | 3.8   | %      |  |   | 514                                           |  |  |        | 5.1   | % |                                               |   | 393   |        |  |  | 9.8                                           | % |  |   | 292   |  |  |  | 8.7   | %
|Multi-family residential        |  |                        | 2,021 |  |                                                |  | 4.8   | %      |  |   | 1,344                                         |  |  |        | 7.1   | % |                                               |   | 445   |        |  |  | 5.8                                           | % |  |   | 307   |  |  |  | 4.2   | %
|Non-residential                 |  |                        | 4,893 |  |                                                |  | 41.9  | %      |  |   | 3,231                                         |  |  |        | 39.0  | % |                                               |   | 443   |        |  |  | 35.2                                          | % |  |   | 265   |  |  |  | 31.5  | %
|Secured by deposits             |  |                        |      |  |                                                |  | 0.7   | %      |  |   |                                              |  |  |        | 0.6   | % |                                               |   |      |        |  |  | 0.6                                           | % |  |   |      |  |  |  | 0.7   | %
|Other loans                     |  |                        | 805   |  |                                                |  | 11.2  | %      |  |   | 1,553                                         |  |  |        | 11.2  | % |                                               |   | 2,159 |        |  |  | 13.3                                          | % |  |   | 2,068 |  |  |  | 16.5  | %
|                                |  |                        |       |  |                                                |  |       |        |  |   |                                               |  |  |        |       |   |                                               |   |       |        |  |  |                                               |   |  |   |       |  |  |  |       |  
|Total allowance for loan losses |  | $                      | 9,830 |  |                                                |  | 100.0 | %      |  | $ | 8,851                                         |  |  |        | 100.0 | % |                                               | $ | 6,133 |        |  |  | 100.0                                         | % |  | $ | 4,842 |  |  |  | 100.0 | %
|                                |  |                        |       |  |                                                |  |       |        |  |   |                                               |  |  |        |       |   |                                               |   |       |        |  |  |                                               |   |  |   |       |  |  |  |       |  



18







---

|                                |  |                        |       |  |                                                 |  |       |  
|------------------------------- |  | ---------------------- | ----- |  | ----------------------------------------------- |  | ----- | -
|                                |  | At December 31, 2006   |      
|                                |  | Amount                 |       |  | Percent of Loans in EachCategory to Total Loans | 
|                                |  | (Dollars In Thousands) |      
|One-to-four family              |  | $                      | 339   |  |                                                 |  | 45.2  | %
|Construction                    |  |                        | 295   |  |                                                 |  | 7.9   | %
|Multi-family residential        |  |                        | 22    |  |                                                 |  | 2.4   | %
|Non-residential                 |  |                        | 1,044 |  |                                                 |  | 29.4  | %
|Secured by deposits             |  |                        |      |  |                                                 |  | 0.8   | %
|Other consumer loans            |  |                        | 2,770 |  |                                                 |  | 14.3  | %
|                                |  |                        |       |  |                                                 |  |       |  
|Total allowance for loan losses |  | $                      | 4,470 |  |                                                 |  | 100.0 | %
|                                |  |                        |       |  |                                                 |  |       |  

Investment Activities

The Bank makes investments in order to maintain the levels of liquid assets required by regulatory authorities and manage cash flow, diversify its assets, obtain yield and to satisfy certain requirements
for favorable tax treatment. The principal objective of the investment policy is to earn as high a rate of return as possible, but to consider also financial or credit risk, liquidity risk and interest rate risk. The investment activities of the
Company and the Bank consist primarily of investments in U.S. Government agency securities, municipal and corporate bonds, CMOs, and mortgage-backed securities. Typical investments include federally sponsored agency mortgage pass-through and
federally sponsored agency and mortgage-related securities. Investment and aggregate investment limitations and credit quality parameters of each class of investment are prescribed in the Banks investment policy. The Company and the Bank
perform analyses on mortgage-related securities prior to purchase and on an ongoing basis to determine the impact on earnings and market value under various interest rate and prepayment conditions. Securities purchases must be approved by the
Banks Chief Financial Officer or President. The Board of Directors reviews all securities transactions on a monthly basis.

At December 31, 2010, securities, including FHLB stock, with an amortized cost of $359.6 million and an approximate market value of $362.1 million were classified as available for sale. Management
presently does not intend to sell such securities and, based on the current liquidity level and the access to borrowings through the FHLB of Cincinnati, management currently does not anticipate that the Company or the Bank will be placed in a
position of having to sell securities with material unrealized losses.

Mortgage-Backed and Related Securities.
Mortgage-backed securities represent a participation interest in a pool of one-to-four family or multi-family mortgages, the principal and interest payments on which are passed from the mortgage originators through intermediaries that pool and
repackage the participation interest in the form of securities to investors such as the Bank. CMOs are a variation of mortgage-backed securities in which the mortgage pool is divided into specific classes, with different classes receiving
different principal reduction streams based on numerous factors, including prepayments speeds. Such intermediaries may include quasi-governmental agencies such as FHLMC, FNMA and the Government National Mortgage Association (GNMA) which
guarantees the payment of principal and interest to investors. Of the $79.0 million mortgage-backed security portfolio and $31.9 million CMO portfolio at December 31, 2010, approximately $40.0 million were originated through GNMA, approximately
$33.6 million were originated through FNMA, approximately $33.8 million were originated through FHLMC, and approximately $3.5 million are Whole Loan CMOs.

Typically, the collateral in Whole Loan CMOs include jumbo mortgages that exceeded the limits provided by federal agencies and do not have a federal government or agency guarantee. The issuers of
Whole Loan CMOs receive an AAA rating by credit rating agencies by providing an overabundance of collateral to secure these investments. In capital computations, Whole Loan CMOs are risk rated 20%, the same of FNMA and FHLMC. At
December 31, 2010, the Company owns two securities, with a combined market value of $1.75 million that have been downgraded below investment grade. During the fourth quarter of 2009, the Company incurred a $200,000 Other Than Temporary
Impairment charge to recognize potential losses on these securities due to higher than anticipated defaults within their portfolios. Whole Loan CMOs that fail to maintain an AAA rating from S&P or Moodys are risked weighted 100%. See
Note 2 of Notes to Audited Financial Statements for further details.



19







---

Mortgage-backed securities are typically issued with stated principal amounts and the
securities are backed by pools of mortgages that have loans with interest rates that are within a range and have similar maturities. The underlying pool of mortgages can be composed of either fixed-rate or adjustable-rate mortgage loans.
Mortgage-backed securities generally are referred to as mortgage participation certificates or pass-through certificates. As a result, the interest rate risk characteristics of the underlying pool of mortgages, i.e., fixed-rate or adjustable-rate,
as well as prepayment risk, 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 actual maturity of a mortgage-backed security varies, depending on when
the mortgagors prepay or repay the underlying mortgages. Prepayments of the underlying mortgages may shorten the life of the investment, thereby adversely affecting its yield to maturity and the related market value of the mortgage-backed security.

Amortizing U.S. Agency securities owned by the Company are similar in structure to mortgage backed securities. The Company
owns two types of amortizing agency securities, both of which are issued with the full faith and credit guarantee of the Small Business Administration (SBA). The Small Business Investment Corporation (SBIC) bonds include pools of SBA loans for
business equipment with a ten year maturity. The Small Business Administration Participation Notes (SBAP) has a twenty year maturity and are secured by pools of commercial real estate loans guaranteed by the SBA. Both investments provide superior
yields to mortgage backed securities with a credit rating equal to GNMA and superior to FHLMC and FNMA. The actual cash flows and prepayment speeds for SBIC and SBAP bonds are typically slower than similar maturities for mortgage backed securities
due to the cost of refinancing SBA loans.

The yield is based upon the interest income and the amortization of the premium or
accretion of the discount related to the mortgage-backed security. Premiums and discounts on mortgage-backed securities are amortized or accreted over the estimated term of the securities using a level yield method. The prepayment assumptions used
to determine the amortization period for premiums and discounts can significantly affect the yield of the mortgage-backed security, and these assumptions are reviewed periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the coupon rate, the age of the mortgages, the geographical location of the underlying real estate collateralizing the mortgages and general levels of market interest
rates. The difference between the interest rates on the underlying mortgages and the prevailing mortgage interest rates is an important determinant in the rate of prepayments. During periods of falling mortgage interest rates, prepayments generally
increase, and, conversely, during periods of rising mortgage interest rates, prepayments generally decrease. If the coupon rate of the underlying mortgage significantly exceeds the prevailing market interest rates offered for mortgage loans,
refinancing generally increases and accelerates the prepayment of the underlying mortgages. Prepayment experience is more difficult to estimate for adjustable-rate mortgage-backed securities.



20







---

The following table sets forth the carrying value of the investment securities at the dates
indicated.



|                                       |  |                 |         |  |      |   |         |      |  |   |         | 
|-------------------------------------- |  | --------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                       |  | At December 31, |        
|                                       |  | 2010            |         |  | 2009 |   |         | 2008 | 
|                                       |  | (In thousands)  |        
|FHLB stock, restricted                 |  | $               | 4,378   |  |      | $ | 4,281   |      |  | $ | 4,050   | 
|Securities available for sale:         |  |                 |         |  |      |   |         |      |  |   |         | 
|U.S. Agency securities, non-amortizing |  |                 | 33,988  |  |      |   | 54,561  |      |  |   | 53,415  | 
|U.S. Agency securities, amortizing     |  |                 | 130,416 |  |      |   | 64,414  |      |  |   | 64,200  | 
|Mortage-backed securities              |  |                 | 110,872 |  |      |   | 115,382 |      |  |   | 108,744 | 
|Tax free municipal bonds               |  |                 | 64,393  |  |      |   | 51,154  |      |  |   | 18,092  | 
|Taxable municipal bonds                |  |                 | 16,792  |  |      |   | 2,754   |      |  |   |        | 
|Trust preferred security               |  |                 | 1,277   |  |      |   | 1,426   |      |  |   | 1,623   | 
|Corporate bonds                        |  |                 |        |  |      |   |        |      |  |   | 878     | 
|Securities held to maturity:           |  |                 |         |  |      |   |         |      |  |   |         | 
|Mortage-backed securities              |  |                 |        |  |      |   |        |      |  |   | 454     | 
|                                       |  |                 |         |  |      |   |         |      |  |   |         | 
|Total investment securities            |  | $               | 362,116 |  |      | $ | 293,972 |      |  | $ | 251,456 | 
|                                       |  |                 |         |  |      |   |         |      |  |   |         | 

The following table sets forth information on the scheduled maturities, amortized cost, market values and
average yields for U.S. Government agency securities, corporate bonds and municipal securities in the investment portfolio at December 31, 2010. At such date, $26.1 million of the agency securities were callable and/or due on or before
December 31, 2013. At December 31, 2010, $9.3 million were callable before December 31, 2011. The Bank had securities that may be called only one time totaling $12.7 million that are callable in the year ending December 31, 2012,
and $4.1 million that are callable only once on February 26, 2013. In addition, approximately $130.4 million in small business administration amortizing bonds require periodic principal payments. At December 31, 2010, $69.8 million of
municipal securities (both taxable and tax free) were callable and/or due between January 2011 and December 2020. The average yield for the tax free municipal security portfolio is quoted as a taxable equivalent yield.



|                                      |  |                        |     |  |                  |  |      |                   |  |   |                 |  |  |                            |      |   |              |   |        |               |  |  |              |   |  |               |        |  |             |  |      |              |  |   |        |  |  |   |        |  |  |  |      |  
|------------------------------------- |  | ---------------------- | --- |  | ---------------- |  | ---- | ----------------- |  | - | --------------- |  |  | -------------------------- | ---- | - | ------------ | - | ------ | ------------- |  |  | ------------ | - |  | ------------- | ------ |  | ----------- |  | ---- | ------------ |  | - | ------ |  |  | - | ------ |  |  |  | ---- | -
|                                      |  | One Year or Less       |     |  | One to FiveYears |  |      | Five to Ten Years |  |   | After Ten Years |  |  | Total Investment Portfolio |     
|                                      |  | CarryingValue          |     |  | AverageYield     |  |      | CarryingValue     |  |   | AverageYield    |  |  | CarryingValue              |      |   | AverageYield |   |        | CarryingValue |  |  | AverageYield |   |  | CarryingValue |        |  | MarketValue |  |      | AverageYield | 
|.                                     |  | (Dollars in thousands) |    
|Non-amortizing U.S. agency securities |  | $                      |    |  |                  |  |     | %                 |  | $ | 2,074           |  |  |                            | 2.25 | % |              | $ | 12,056 |               |  |  | 3.28         | % |  | $             | 19,858 |  |             |  | 4.40 | %            |  | $ | 33,988 |  |  | $ | 33,988 |  |  |  | 3.87 | %
|                                      |  |                        |     |  |                  |  |      |                   |  |   |                 |  |  |                            |      |   |              |   |        |               |  |  |              |   |  |               |        |  |             |  |      |              |  |   |        |  |  |   |        |  |  |  |      |  
|Taxable municipal bonds               |  | $                      |    |  |                  |  |     | %                 |  | $ | 407             |  |  |                            | 3.25 | % |              | $ | 1,990  |               |  |  | 4.81         | % |  |               | 14,395 |  |             |  | 4.94 | %            |  | $ | 16,792 |  |  | $ | 16,792 |  |  |  | 4.87 | %
|                                      |  |                        |     |  |                  |  |      |                   |  |   |                 |  |  |                            |      |   |              |   |        |               |  |  |              |   |  |               |        |  |             |  |      |              |  |   |        |  |  |   |        |  |  |  |      |  
|Tax free municipal bonds              |  | $                      | 328 |  |                  |  | 4.17 | %                 |  | $ | 4,291           |  |  |                            | 4.59 | % |              | $ | 8,469  |               |  |  | 5.46         | % |  | $             | 51,305 |  |             |  | 6.11 | %            |  | $ | 64,393 |  |  | $ | 64,393 |  |  |  | 5.91 | %
|                                      |  |                        |     |  |                  |  |      |                   |  |   |                 |  |  |                            |      |   |              |   |        |               |  |  |              |   |  |               |        |  |             |  |      |              |  |   |        |  |  |   |        |  |  |  |      |  
|Trust preferred                       |  |                        |    |  |                  |  |     |                   |  |   |                |  |  |                            |     |   |              |   |       |               |  |  |             |   |  | $             | 1,277  |  |             |  | 8.00 | %            |  | $ | 1,277  |  |  | $ | 1,277  |  |  |  | 8.00 | %
|                                      |  |                        |     |  |                  |  |      |                   |  |   |                 |  |  |                            |      |   |              |   |        |               |  |  |              |   |  |               |        |  |             |  |      |              |  |   |        |  |  |   |        |  |  |  |      |  



21







---

Deposit Activity and Other Sources of Funds

General. Deposits are the primary source of the Banks funds for lending, investment activities and general operational
purposes. In addition to deposits, the Bank derives funds from loan principal and interest repayments, maturities of investment securities and mortgage-backed securities and interest payments thereon. Although loan repayments are a relatively stable
source of funds, deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds, or on a longer
term basis for general corporate purposes. The Bank has access to borrow from the FHLB of Cincinnati, and the Bank will continue to have access to FHLB of Cincinnati advances. The Bank may rely upon retail deposits rather than borrowings as its
primary source of funding for future asset growth.

Deposits. The Bank attracts deposits principally from within its
market area by offering competitive rates on its deposit instruments, including money market accounts, passbook savings accounts, individual retirement accounts, and certificates of deposit which range in maturity from three months to five years.
Deposit terms vary according to the minimum balance required and the length of time the funds must remain on deposit and the interest rate. Maturities, terms, service fees and withdrawal penalties for its deposit accounts are established by the Bank
on a periodic basis. The Bank reviews its deposit mix and pricing on a weekly basis. In determining the characteristics of its deposit accounts, the Bank considers the rates offered by competing institutions, lending and liquidity requirements,
growth goals and federal regulations.

The Bank has, on a limited basis, utilized brokered deposits to augment its funding
requirements. At December 31, 2010, the Bank had $75.7 million in brokered deposits as compared to $83.3 million at December 31, 2009. In addition to brokered deposits, the Bank has deposits through the CDARS program of $15.7 million at
December 31, 2010, that are classified as brokered deposits by the OTS. The Bank often chooses these to use longer termed brokered deposits as a substitute for local deposits which can be expensive in the Banks local market. All brokered
deposits are FDIC insured.

The Bank attempts to compete for deposits with other institutions in its market area by offering
competitively priced deposit instruments that are tailored to the needs of its customers. Additionally, the Bank seeks to meet customers needs by providing convenient customer service to the community. With the exception of brokered deposits,
substantially all of the Banks depositors are Kentucky or Tennessee residents who reside in the Banks market area.



22







---

Savings deposits in the Bank at December 31, 2010, were represented by the various
types of savings programs described below.



|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  
|------------- |  | ---------------- |  | ----------------------- |  | -------------- | ----- |  | ------- | - | ------- | -------------------------- |  |  | ----- | -
|InterestRate* |  | Minimum
Term     |  | Category                |  | MinimumAmount  |       |  | Balance |   |         | Percentageof TotalDeposits | 
|              |  |                  |  |                         |  | (In thousands) |      
|  %          |  | None             |  | Non-interest bearing    |  | $              | 100   |  |         | $ | 69,139  |                            |  |  | 8.4   | %
|0.05%*        |  | None             |  | NOW accounts            |  |                | 1,500 |  |         |   | 138,936 |                            |  |  | 16.8  | %
|0.20%         |  | None             |  | Savings & money market  |  |                | 10    |  |         |   | 63,848  |                            |  |  | 7.7   | %
|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  
|              |  |                  |  |                         |  |                |       |  |         |   | 271,923 |                            |  |  | 32.9  | %
|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  
|              |  |                  |  | Certificates of Deposit |  |                |       |  |         |   |         |                            | 
|0.75%         |  | 3 months or less |  | Fixed-term, fixed rate  |  |                | 1,000 |  |         |   | 51,473  |                            |  |  | 6.2   | %
|1.30%         |  | 3 to 12 months   |  | Fixed-term, fixed-rate  |  |                | 1,000 |  |         |   | 238,943 |                            |  |  | 28.9  | %
|1.45%         |  | 12 to 24-months  |  | Fixed-term, fixed-rate  |  |                | 1,000 |  |         |   | 106,155 |                            |  |  | 12.8  | %
|2.10%         |  | 24 to 36-months  |  | Fixed-term, fixed-rate  |  |                | 1,000 |  |         |   | 109,428 |                            |  |  | 13.2  | %
|2.40%         |  | 36 to 48-months  |  | Fixed-term, fixed-rate  |  |                | 1,000 |  |         |   | 25,901  |                            |  |  | 3.1   | %
|3.00%         |  | 48 to 60-months  |  | Fixed-term, fixed rate  |  |                | 1,000 |  |         |   | 23,106  |                            |  |  | 2.9   | %
|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  
|              |  |                  |  |                         |  |                |       |  |         |   | 555,006 |                            |  |  | 67.1  | %
|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  
|              |  |                  |  |                         |  |                |       |  |         | $ | 826,929 |                            |  |  | 100.0 | %
|              |  |                  |  |                         |  |                |       |  |         |   |         |                            |  |  |       |  



|* | Represents current interest rate offered by Heritage Bank.
|- | ----------------------------------------------------------

The following table sets forth, for the periods indicated, the average balances and interest rates based on month-end balances for interest-bearing demand deposits and time deposits.



|                |  |                                 |         |   |              |   |         |                                 |  |   |              |   |  |                                 |         |   |              |   |         |   |  |   |         |  
|--------------- |  | ------------------------------- | ------- | - | ------------ | - | ------- | ------------------------------- |  | - | ------------ | - |  | ------------------------------- | ------- | - | ------------ | - | ------- | - |  | - | ------- | -
|                |  | Year Ended December 31,         |        
|                |  | 2010                            |         |   | 2009         |   |         | 2008                            | 
|                |  | Interest-bearingdemand deposits |         |   | Timedeposits |   |         | Interest-bearingdemand deposits |  |   | Timedeposits |   |  | Interest-bearingdemand deposits |         |   | Timedeposits |  
|                |  | (Dollars in thousands)          |        
|Average Balance |  | $                               | 191,661 |   |              | $ | 570,757 |                                 |  | $ | 155,956      |   |  | $                               | 542,411 |   |              | $ | 166,745 |   |  | $ | 415,072 |  
|Average Rate    |  |                                 | 0.94    | % |              |   | 2.73    | %                               |  |   | 1.06         | % |  |                                 | 3.10    | % |              |   | 2.91    | % |  |   | 3.84    | %



23







---

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



|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |                                          |  |       |   |  |   |        | 
|-------------------- |  | -------------------------- | ------- |  | ------------ |  | ----- | ---------------------------------------- |  | - | -------------------------- | - |  | ------------ | ------- |  | ---------------------------------------- |  | ----- | - |  | - | ------ | 
|                     |  | Balance atDecember 31,2010 |         |  | % ofDeposits |  |       | Increase(Decrease) fromDecember 
31,2009 |  |   | Balance atDecember 31,2009 |   |  | % ofDeposits |         |  | Increase(Decrease) fromDecember 
31,2008 | 
|                     |  | (Dollars in thousands)     |        
|Non-interest bearing |  | $                          | 69,139  |  |              |  | 8.4   | %                                        |  | $ | 608                        |   |  | $            | 68,531  |  |                                          |  | 8.6   | % |  | $ | 11,397 | 
|Demand & Now         |  |                            | 138,936 |  |              |  | 16.8  | %                                        |  |   | 33,115                     |   |  |              | 105,821 |  |                                          |  | 13.3  | % |  |   | 16,272 | 
|Savings & MMDA       |  |                            | 63,848  |  |              |  | 7.7   | %                                        |  |   | 3,439                      |   |  |              | 60,409  |  |                                          |  | 7.6   | % |  |   | 2,035  | 
|Time deposits        |  |                            | 555,006 |  |              |  | 67.1  | %                                        |  |   | (4,377                     | ) |  |              | 559,383 |  |                                          |  | 70.5  | % |  |   | 51,435 | 
|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |                                          |  |       |   |  |   |        | 
|Total                |  | $                          | 826,929 |  |              |  | 100.0 | %                                        |  | $ | 32,785                     |   |  | $            | 794,144 |  |                                          |  | 100.0 | % |  | $ | 81,139 | 
|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |                                          |  |       |   |  |   |        | 



|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |  |  |       |  
|-------------------- |  | -------------------------- | ------- |  | ------------ |  | ----- | ---------------------------------------- |  | - | -------------------------- | - |  | ------------ | ------- |  |  |  | ----- | -
|                     |  | Balance atDecember 31,2008 |         |  | % ofDeposits |  |       | Increase(Decrease) fromDecember 
31,2007 |  |   | Balance atDecember 31,2007 |   |  | % ofDeposits |        
|                     |  | (Dollars in thousands)     |        
|Non-interest bearing |  | $                          | 57,134  |  |              |  | 8.0   | %                                        |  | $ | 4,908                      |   |  | $            | 52,226  |  |  |  | 8.7   | %
|Demand & NOW         |  |                            | 89,549  |  |              |  | 12.6  | %                                        |  |   | (12,157                    | ) |  |              | 101,706 |  |  |  | 17.0  | %
|Savings & MMDA       |  |                            | 58,374  |  |              |  | 8.2   | %                                        |  |   | (5,186                     | ) |  |              | 63,560  |  |  |  | 10.6  | %
|Time deposits        |  |                            | 507,948 |  |              |  | 71.2  | %                                        |  |   | 126,687                    |   |  |              | 381,261 |  |  |  | 63.7  | %
|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |  |  |       |  
|Total                |  | $                          | 713,005 |  |              |  | 100.0 | %                                        |  | $ | 114,252                    |   |  | $            | 598,753 |  |  |  | 100.0 | %
|                     |  |                            |         |  |              |  |       |                                          |  |   |                            |   |  |              |         |  |  |  |       |  

The following table sets forth the time deposits in the Bank classified by rates at the dates indicated.



|             |  |                 |         |  |      |   |         |      |  |   |         | 
|------------ |  | --------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|             |  | At December 31, |        
|             |  | 2010            |         |  | 2009 |   |         | 2008 | 
|             |  | (In thousands)  |        
|0.01 - 2.00% |  | $               | 206,126 |  |      | $ | 121,759 |      |  | $ | 16,569  | 
|2.01 - 4.00% |  |                 | 280,943 |  |      |   | 170,233 |      |  |   | 191,430 | 
|4.01 - 6.00% |  |                 | 67,370  |  |      |   | 266,857 |      |  |   | 299,446 | 
|6.01 - 8.00% |  |                 | 567     |  |      |   | 534     |      |  |   | 503     | 
|             |  |                 |         |  |      |   |         |      |  |   |         | 
|Total        |  | $               | 555,006 |  |      | $ | 559,383 |      |  | $ | 507,948 | 
|             |  |                 |         |  |      |   |         |      |  |   |         | 

The following table sets forth the amount and maturities of time deposits at December 31, 2010.



|             |  |                    |         |  |           |   |         |           |  |   |               |  |  |       |        |  |  |   |         | 
|------------ |  | ------------------ | ------- |  | --------- | - | ------- | --------- |  | - | ------------- |  |  | ----- | ------ |  |  | - | ------- | 
|             |  | Amount Due         |        
|             |  | Less Than One Year |         |  | 1-2 Years |   |         | 2-3 Years |  |   | After 3 Years |  |  | Total |       
|             |  | (In thousands)     |        
|0.00 - 2.00% |  | $                  | 143,813 |  |           | $ | 30,115  |           |  | $ | 21,864        |  |  | $     | 10,334 |  |  | $ | 206,126 | 
|2.01 - 4.00% |  |                    | 108,321 |  |           |   | 59,118  |           |  |   | 75,073        |  |  |       | 38,431 |  |  |   | 280,943 | 
|4.01 - 6.00% |  |                    | 49,464  |  |           |   | 16,922  |           |  |   | 766           |  |  |       | 218    |  |  |   | 67,370  | 
|6.01 - 8.00% |  |                    | 567     |  |           |   |        |           |  |   |              |  |  |       |       |  |  |   | 567     | 
|             |  |                    |         |  |           |   |         |           |  |   |               |  |  |       |        |  |  |   |         | 
|Total        |  | $                  | 302,165 |  |           | $ | 106,155 |           |  | $ | 97,703        |  |  | $     | 48,983 |  |  | $ | 555,006 | 
|             |  |                    |         |  |           |   |         |           |  |   |               |  |  |       |        |  |  |   |         | 



24







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The following table indicates the amount of the Banks certificates of deposit of
$100,000 or more by time remaining until maturity as of December 31, 2010.



|                              |  |                         |       | 
|----------------------------- |  | ----------------------- | ----- | 
|Maturity Period               |  | Certificates of Deposit |      
|                              |  | (In millions)           |      
|Three months or less          |  | $                       | 25.4  | 
|Over three through six months |  |                         | 41.6  | 
|Over six through 12 months    |  |                         | 73.8  | 
|Over 12 months                |  |                         | 148.3 | 
|                              |  |                         |       | 
|Total                         |  | $                       | 289.1 | 
|                              |  |                         |       | 

Certificates of deposit at December 31, 2010, included approximately $289.1 million of deposits with
balances of $100,000 or more, compared to $266.8 million and $218.9 million at December 31, 2009 and December 31, 2008, respectively. Such time deposits may be risky because their continued presence in the Bank is dependent partially upon
the rates paid by the Bank rather than any customer relationship and, therefore, may be withdrawn upon maturity if another institution offers higher interest rates. The Bank may be required to resort to other funding sources such as borrowings or
sales of its securities available for sale if the Bank believes that increasing its rates to maintain such deposits would adversely affect its operating results. At this time, the Bank does not believe that it will need to significantly increase its
deposit rates to maintain such certificates of deposit and, therefore, does not anticipate resorting to alternative funding sources. See Note 6 of Notes to Consolidated Financial Statements.

The following table sets forth the deposit activities of the Bank for the periods indicated.



|                                      |  |                         |         |  |      |   |         |      |  |   |         | 
|------------------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                      |  | Year Ended December 31, |        
|                                      |  | 2010                    |         |  | 2009 |   |         | 2008 | 
|                                      |  | (In thousands)          |        
|Deposits                              |  | $                       | 321,997 |  |      | $ | 401,246 |      |  | $ | 437,661 | 
|Withdrawals                           |  |                         | 299,929 |  |      |   | 332,506 |      |  |   | 336,464 | 
|                                      |  |                         |         |  |      |   |         |      |  |   |         | 
|Net increase before interest credited |  |                         | 22,068  |  |      |   | 68,740  |      |  |   | 101,197 | 
|Interest credited                     |  |                         | 10,717  |  |      |   | 12,399  |      |  |   | 13,055  | 
|                                      |  |                         |         |  |      |   |         |      |  |   |         | 
|Net increase in deposits              |  | $                       | 32,785  |  |      | $ | 81,139  |      |  | $ | 114,252 | 
|                                      |  |                         |         |  |      |   |         |      |  |   |         | 

Borrowings. Savings deposits historically have been the primary source of funds for the Banks
lending, investments and general operating activities. The Bank is authorized, however, to use advances from the FHLB of Cincinnati to supplement its supply of lendable funds and to meet deposit withdrawal requirements. The FHLB of Cincinnati
functions as a central reserve bank providing credit for savings institutions and certain other member financial institutions.

As a member of the FHLB System, the Bank is required to own stock in the FHLB of Cincinnati and is authorized to apply for advances.
Advances are pursuant to several different programs, each of which has its own interest rate and range of maturities. The Bank has entered into a Cash Management Advance program with FHLB. See Note 7 of Notes to Consolidated Financial Statements.
Advances from the FHLB of Cincinnati were $81.9 million at December 31, 2010, and are secured by a blanket security agreement in which the Bank has pledged its 1-4 family first mortgage loans, multi-family residential real estate loans and
non-residential real estate loan held in the Banks loan portfolio.

On September 25, 2003, the Company issued
$10,310,000 in floating rate junior subordinated debentures with a thirty year maturity and callable at the Companys discretion quarterly after September 25, 2008. The subordinated debentures are priced at a variable rate equal to the
three month Libor (London Inter Bank Offering Rate) plus 3.10%. At December 31, 2010, the three-month Libor rate was 0.30%. The securities are immediately callable in the event of a change in tax or accounting law that has a significant
negative impact to issuing these securities.



25







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For regulatory purposes, subordinated debentures may be treated as Tier I capital. Federal
regulations limit the use of subordinated debentures to 25% of total Tier I capital. Discussions among regulatory agencies are underway that may limit the current and future use of subordinated debentures as Tier I capital. The Companys
decision to issue subordinated debentures was in part influenced by potential regulatory actions in the future. The Company anticipates above average growth to continue and anticipates a time in the future when capital ratios are lower and
additional capital may be need.

In October of 2008, the Bank entered into an interest rate swap agreement. The agreement
calls for the Bank to pay a fixed rate of 7.27% until October 8, 2015, on $10.0 million and receive payment equal to the three month libor plus 3.10%. The Bank then completed an intercompany transaction that transferred the swap to the Company,
providing an effective hedge for its variable rate subordinated debentures. At December 31, 2010, the cost to the Bank to terminate the swap is approximately $1,088,000.

Subsidiary Activities

As a federally chartered savings bank, the Bank is
permitted to invest an amount equal to 2% of its assets in subsidiaries, with an additional investment of 1% of assets where such investment serves primarily community, inner-city and community development purposes. The Banks lone subsidiary
is Fall and Fall Insurance Agency (Fall and Fall) of Fulton, Kentucky. Fall and Fall was acquired in the Fulton acquisition on September 5, 2002. The Banks investment in the agency is approximately $380,000.

Competition

The Bank
faces significant competition both in originating mortgage and other loans and in attracting deposits. The Bank competes for loans principally on the basis of interest rates, the types of loans it originates, the deposit products it offers and the
quality of services it provides to borrowers. The Bank also competes by offering products which are tailored to the local community. Its competition in originating real estate loans comes primarily from other savings institutions, commercial banks
and mortgage bankers making loans secured by real estate located in the Banks market area. Commercial banks, credit unions and finance companies provide vigorous competition in consumer lending. Competition may increase as a result of the
continuing reduction of restrictions on the interstate operations of financial institutions.

At June 30, 2010, the Bank
had a 15.9% share of the deposit market in its combined markets. The Banks most significant competition across its entire market area was Regions Bank of Alabama with a 9.1% deposit market share and Branch Bank & Trust of North
Carolina with a 8.8% deposit market share. In addition, each market contains other community banks that provide competitive products and services within individual markets.

The Bank attracts its deposits through its eighteen offices primarily from the local community. Consequently, competition for deposits is principally from other savings institutions, commercial banks and
brokers in the local community as well as from credit unions. The Bank competes for deposits and loans by offering what it believes to be a variety of deposit accounts at competitive rates, convenient business hours, a commitment to outstanding
customer service and a well-trained staff. The Bank believes it has developed strong relationships with local realtors and the community in general.

The Bank is a community and retail-oriented financial institution. Management considers the Banks branch network and reputation for financial strength and quality customer service as its major
competitive advantage in attracting and retaining customers in its market area. A number of the Banks competitors have been acquired by statewide/nationwide banking organizations. While the Bank is subject to competition from other financial
institutions which may have greater financial and marketing resources, management believes the Bank benefits by its community orientation and its long-standing relationship with many of its customers.

Employees

As of
December 31, 2010, the Company and the Bank had 252 full-time and 11 part-time employees, none of whom were represented by a collective bargaining agreement. Management considers the Banks relationships with its employees to be good.



26







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Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was signed into
law. The Dodd-Frank Act is intended to effect a fundamental restructuring of federal banking regulation. Among other things, the Dodd-Frank Act creates a new Financial Stability Oversight Council to identify systemic risks in the financial system
and gives federal regulators new authority to take control of and liquidate financial firms. The Dodd-Frank Act eliminates our current primary federal regulator and subjects savings and loan holding companies to greater regulation. The Dodd-Frank
Act additionally creates a new independent federal regulator to administer federal consumer protection laws. The Dodd-Frank Act is expected to have a significant impact on our business operations as its provisions take effect. Among the provisions
that are likely to affect us are the following:

Elimination of OTS. The Dodd-Frank Act calls for the elimination of
the OTS, which is our primary federal regulator and the primary federal regulator of the Bank on July 21, 2011. At that time, the primary federal regulator of HopFed Bancorp, Inc. will become the Federal Reserve System, and the primary federal
regulator for the Bank will become the OCC. The Federal Reserve and OCC will generally have rulemaking, examination, supervision and oversight authority over our operations and the FDIC will retain secondary authority over the Bank. Prior to the
elimination of the OTS, the Federal Reserve and OCC will provide a list of the current regulations issued by the OTS that each will continue to apply. OTS guidance, orders, interpretations, policies and similar items under which we and other savings
and loan holding companies and federal savings associations operate will continue to remain in effect until they are superseded by new guidance and policies from the OCC or Federal Reserve.

Holding Company Capital Requirements. Effective as of the transfer date, the Federal Reserve will be authorized to establish
capital requirements for savings and loan holding companies. These capital requirements must be countercyclical so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction,
consistent with safety and soundness. Savings and loan holding companies will also be required to serve as a source of financial strength for their depository institution subsidiaries. Within five years after enactment, the Dodd-Frank Act requires
the Federal Reserve to apply consolidated capital requirements that are no less stringent than those currently applied to depository institutions to depository institution holding companies that were not supervised by the Federal Reserve as of
May 19, 2009. Under these standards, trust preferred securities will be excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by a bank or savings and loan holding company with less than $15 billion in
assets. The Company has trust preferred securities, but is exempt from these standards.

Federal Preemption. A major
benefit of the federal thrift charter has been the strong preemptive effect of the Home Owners Loan Act (HOLA), under which we are chartered. Historically, the courts have interpreted the HOLA to occupy the field with
respect to the operations of federal thrifts, leaving no room for conflicting state regulation. The Dodd-Frank Act, however, amends the HOLA to specifically provide that it does not occupy the field in any area of state law. Henceforth, any
preemption determination must be made in accordance with the standards applicable to national banks, which have themselves been scaled back to require case-by-case determinations of whether state consumer protection laws discriminate against
national banks or interfere with the exercise of their powers before these laws may be pre-empted.

Deposit Insurance.
The Dodd-Frank Act permanently increases the maximum deposit insurance amount for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2009, and extends unlimited deposit insurance to non-interest
bearing transaction accounts through December 31, 2013. The Dodd-Frank Act also broadens the base for FDIC insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial
institution. The Dodd-Frank Act requires the FDIC to increase the reserve ratio of the Deposit Insurance Fund from 1.15% to 1.35% of insured deposits by 2020 and eliminates the requirement that the FDIC pay dividends to insured depository
institutions when the reserve ratio exceeds certain thresholds. The Dodd-Frank Act eliminates the federal statutory prohibition against the payment of interest on business checking accounts.



27







---

Qualified Thrift Lender Test. Under the Dodd-Frank Act, a savings association that
fails the qualified thrift lender test will be prohibited from paying dividends, except for dividends that: (i) would be permissible for a national bank; (ii) are necessary to meet obligations of a company that controls the savings
association; and (iii) are specifically approved by the OCC and the Federal Reserve. In addition, a savings association that fails the qualified thrift lender test will be deemed to have violated Section 5 of the Home Owners Loan Act
and may become subject to enforcement actions thereunder.

Corporate Governance. The Dodd-Frank Act will require
publicly traded companies to give stockholders a non-binding vote on executive compensation at their first annual meeting taking place six months after the date of enactment and at least every three years thereafter and on so-called golden
parachute payments in connection with approvals of mergers and acquisitions. The new legislation also authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a companys proxy materials.
Additionally, the Dodd-Frank Act directs the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets in excess of $1.0 billion,
regardless of whether the company is publicly traded or not. The Dodd-Frank Act gives the SEC authority to prohibit broker discretionary voting on elections of directors and executive compensation matters.

Transactions with Affiliates and Insiders. Effective one year from the date of enactment, the Dodd-Frank Act expands the
definition of affiliate for purposes of quantitative and qualitative limitations of Section 23A of the Federal Reserve Act to include mutual funds advised by a depository institution or its affiliates. The Dodd-Frank Act will apply
Section 23A and Section 22(h) of the Federal Reserve Act (governing transactions with insiders) to derivative transactions, repurchase agreements and securities lending and borrowing transaction that create credit exposure to an affiliate
or an insider. Any such transactions with affiliates must be fully secured. The current exemption from Section 23A for transactions with financial subsidiaries will be eliminated. The Dodd-Frank Act will additionally prohibit an insured
depository institution from purchasing an asset from or selling an asset to an insider unless the transaction is on market terms and, if representing more than 10% of capital, is approved in advance by the disinterested directors.

Consumer Financial Protection Bureau. The Dodd-Frank Act creates a new, independent federal agency called the Consumer Financial
Protection Bureau (CFPB), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate
Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes. The CFPB will have examination and primary enforcement authority with
respect to depository institutions with $10 billion or more in assets. Smaller institutions will be subject to rules promulgated by the CFPB but will continue to be examined and supervised by federal banking regulators for consumer compliance
purposes. The CFPB will have authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The Dodd-Frank Act authorizes the CFPB to establish certain minimum standards for the
origination of residential mortgages including a determination of the borrowers ability to repay. In addition, the Dodd-Frank Act will allow borrowers to raise certain defenses to foreclosure if they receive any loan other than a
qualified mortgage as defined by the CFPB. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state
attorneys general to enforce compliance with both the state and federal laws and regulations. Federal preemption of state consumer protection law requirements, traditionally an attribute of the federal savings association charter, has also been
modified by the Dodd-Frank Act and now requires a case-by-case determination of preemption by the OCC and eliminates preemption for subsidiaries of a bank. Depending on the implementation of this revised federal preemption standard, the operations
of the Bank could become subject to additional compliance burdens in the states in which it operates.



28







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Ratio of Earnings to Fixed Charges.

The table below is a Companys computation of earnings to fixed charges for the years ended December 31, 2010, through
December 31, 2006. (All dollars in thousands).



|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|---------------------------------------------------------- |  | ---- | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|                                                           |  | 2010 |        |  | 2009 |  |        | 2008 |  |  | 2007   |  |  | 2006 |       
|Including interest on deposits                             |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Earnings                                                   |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Pre-tax income                                             |  | $    | 9,129  |  |      |  | 2,372  |      |  |  | 6,567  |  |  |      | 5,844  |  |  |  | 5,608  | 
|Add: fixed charges from below                              |  |      | 22,246 |  |      |  | 26,312 |      |  |  | 26,420 |  |  |      | 28,891 |  |  |  | 23,288 | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|                                                           |  | $    | 31,375 |  |      |  | 28,684 |      |  |  | 32,987 |  |  |      | 34,735 |  |  |  | 28,896 | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Fixed Charges:                                             |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Total interest expense                                     |  | $    | 22,246 |  |      |  | 26,312 |      |  |  | 26,420 |  |  |      | 28,891 |  |  |  | 23,288 | 
|Preference security dividend                               |  |      | 1,394  |  |      |  | 1,394  |      |  |  | 56     |  |  |      |       |  |  |  |       | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Including preference security dividend                     |  | $    | 23,640 |  |      |  | 27,706 |      |  |  | 26,476 |  |  |      | 28,891 |  |  |  | 23,288 | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Ratio of earnings to fixed charges                         |  |      | 1.41   |  |      |  | 1.09   |      |  |  | 1.25   |  |  |      | 1.20   |  |  |  | 1.24   | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Including preference security dividend                     |  |      | 1.33   |  |      |  | 1.04   |      |  |  | 1.25   |  |  |      | 1.20   |  |  |  | 1.24   | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Excluding interest on deposits                             |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Earnings                                                   |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Pre-tax income                                             |  | $    | 9,129  |  |      |  | 2,372  |      |  |  | 6,567  |  |  |      | 5,844  |  |  |  | 5,608  | 
|Add: fixed charges from below                              |  |      | 4,862  |  |      |  | 5,479  |      |  |  | 5,631  |  |  |      | 6,612  |  |  |  | 6,383  | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|                                                           |  | $    | 13,991 |  |      |  | 7,851  |      |  |  | 12,198 |  |  |      | 12,456 |  |  |  | 11,991 | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Fixed Charges:                                             |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Total interest expense excluding interest paid on deposits |  | $    | 4,862  |  |      |  | 5,479  |      |  |  | 5,631  |  |  |      | 6,612  |  |  |  | 6,383  | 
|Preferred security dividend                                |  |      | 1,394  |  |      |  | 1,394  |      |  |  | 56     |  |  |      |       |  |  |  |       | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Including preference security dividend                     |  | $    | 6,256  |  |      |  | 6,873  |      |  |  | 5,687  |  |  |      | 6,612  |  |  |  | 6,383  | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Ratio of earnings to fixed charges                         |  |      | 2.88   |  |      |  | 1.43   |      |  |  | 2.17   |  |  |      | 1.88   |  |  |  | 1.88   | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|Including preference security dividend                     |  |      | 2.24   |  |      |  | 1.14   |      |  |  | 2.14   |  |  |      | 1.88   |  |  |  | 1.88   | 
|                                                           |  |      |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 

Limitations on Capital Distributions. OTS regulations impose limitations upon capital distributions
by savings institutions, such as cash dividends, payments to repurchase or otherwise acquire its shares, payments to stockholders of another institution in a cash-out merger and other distributions charged against capital. Under the OTS capital
distribution regulations, a savings institution that (i) qualifies for expedited treatment of applications by maintaining one of the two highest supervisory examination ratings, (ii) will be at least adequately capitalized after the
proposed capital distribution and (iii) and is not otherwise restricted by applicable law in making capital distributions may, without prior approval by the OTS, make capital distributions during a calendar year equal to its net income for such
year plus its retained net income for the preceding two years. Capital distributions in excess of such amount would require prior OTS approval. However, given the current economic climate, OTS has publically stated that it is carefully reviewing
every dividend request and has informed the Company that it must seek approval prior to any future declaration of dividends to common shareholders.



29







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As a participant in the United States Treasurys Capital Purchase Program, the Company
must obtain prior written approval before it increases the amount of dividends paid to common shareholders prior to December 12, 2011. In the event that the Company fails to make a scheduled dividend payment to preferred shareholders, the
Company would be prohibited from paying any dividends to common shareholders.

As a condition in the Companys MOU signed
April 30, 2010, the Company must make a request to the OTS prior to the payment of any dividends from either the Bank to the Company or from the Company to its common shareholders. The Company may continue to pay dividends on preferred stock
and interest on subordinated debentures as long as the Banks Tier 1 Capital Ratio exceeds 9% and its Total Risk Based Capital Exceeds 12%. At December 31, 2010, the Banks Tier 1 and Total Risk Based Capital Ratios were 9.37% and
16.22%, respectively.

Future earnings of the Bank appropriated to bad debt reserves and deducted for federal income tax
purposes are not available for payment of dividends or other distributions to the Company without payment of taxes at the then current tax rate by the Bank on the amount of earnings removed from the reserves for such distributions.

Transactions with Affiliates and Insiders. Generally, transactions between a savings bank or its subsidiaries and its affiliates
are required to be on terms as favorable to the savings bank as transactions with non-affiliates. In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the savings banks capital.
Affiliates of the Bank include the Company and any company that is under common control with the Bank. In addition, a savings bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the
securities of most affiliates. The OTS has the discretion to treat subsidiaries of savings banks as affiliates on a case-by-case basis.

Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the OTS. These conflict of interest regulations and other statutes
also impose restrictions on loans to such persons and their related interests. Among other things, such loans must generally be made on terms that are substantially the same as for loans to unaffiliated individuals.

Reserve Requirements. Pursuant to regulations of the Federal Reserve Board (the FRB), all FDIC-insured depository
institutions must maintain average daily reserves at specified levels against their transaction accounts. The Bank met these reserve requirements at December 31, 2010.

Federal Home Loan Bank System.The Federal Home Loan Bank System consists of 12 district Federal Home Loan Banks subject to supervision and regulation by the Federal Housing Finance Board
(FHFB). The Federal Home Loan Banks provide a central credit facility primarily for member institutions. As a member of the FHLB, the Bank is required to acquire and hold shares of capital stock in the FHLB in an amount at least equal to
1% of the aggregate unpaid principal of its home mortgage loans, home purchase contracts, and similar obligations at the beginning of each year, or 5% of its advances (borrowings) from the FHLB, whichever is greater. The Bank was in compliance with
this requirement, with a $4.4 million investment in FHLB stock at December 31, 2010.

Emergency Economic Stabilization Act of 2008,
Federal Deposit Insurance Corporation, Financial Stability Plan, American Recovery and Reinvestment Act of 2009, Homeowner Affordability and Stability Plan, and Other Regulatory Developments

Emergency Economic Stabilization Act of 2008

On October 3, 2008, the EESA was enacted, enabling the federal government to insure troubled assets of financial institutions and collect fees from institutions participating in this program under
the terms and conditions set forth by the Secretary of the Treasury. EESA includes, among other provisions: (a) the $700 billion Troubled Asset Relief Program (TARP), under which the Secretary of the Treasury is authorized to
purchase, insure, hold, and sell a wide variety of financial instruments, particularly those that are based on or related to residential or commercial mortgages originated or issued on or before March 14, 2008; and (b) an increase in the
amount of deposit insurance provided by the FDIC.



30







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Troubled Assets Relief Program

Under TARP, the United States Department of the Treasury authorized a voluntary capital purchase program (CPP) to purchase up
to $250 billion of senior preferred shares of qualifying financial institutions that elected to participate. Participating companies must adopt certain standards for executive compensation, including prohibiting golden parachute payments
as defined in EESA to senior Executive Officers; (b) requiring recovery of any compensation paid to senior Executive Officers based on criteria that is later proven to be materially inaccurate; and (c) prohibiting incentive compensation
that encourages unnecessary and excessive risks that threaten the value of the financial institution. The terms of the CPP also limit certain uses of capital by the issuer, including repurchases of company stock and increases in dividends paid to
common shareholders.

On December 12, 2008, the Company agreed to participate in the CPP and issued and sold 18,400
shares of preferred stock for $18.4 million. The preferred stock pays a cash dividend of 5% per year for the first five years and then increases to 9% per year thereafter. In addition, the Company issued the United States Treasury warrants
to purchase up to 243,816 shares of its common stock at a strike price of $11.32 per share. The warrants are immediately exercisable and have a ten year final maturity. The warrants outstanding were adjusted to 248,692 shares and the strike price
was adjusted to $11.098 per share as a result of a 2% stock dividend paid to shareholders of record at September 30, 2010.

Financial
Stability Plan

On February 10, 2009, the Financial Stability Plan (FSP) was announced by the United
States Department of the Treasury. The FSP is a comprehensive set of measures intended to improve the health of the financial system. The key elements of the FSP include making additional capital injections into financial institutions, creating a
private  public investment fund to buy troubled assets, establishing guidelines for loan modification programs and expanding the Federal Reserve lending program. The Treasury Department has indicated more details regarding the FSP are to be
announced.

American Recovery and Reinvestment Act of 2009

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (ARRA) was enacted. ARRA is intended to provide a stimulus to the United States economy in the wake of the
economic downturn brought about by the subprime mortgage crisis and resulting liquidity and credit crunch. The bill includes federal tax cuts, expansion of unemployment benefits and other social welfare provisions, and domestic spending in
education, healthcare, and infrastructure, including the energy structure. The new law also includes numerous non-economic recovery related items, including a limitation on executive compensation in federally aided banks.

Under ARRA, an institution will be subject to the following restrictions and standards through out the period of which any obligation
arising from the financial assistance provide under TARP remains outstanding:



| |  |  | Limits on incentive compensation for risk taking by senior executive officers.
| | - |  | ------------------------------------------------------------------------------



| |  |  | Claw Back provisions for compensation paid based or inaccurate financial information.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Prohibition on Golden Parachute Payments.
| | - |  | -------------------------------------------



| |  |  | Limitations on luxury expenditures.
| | - |  | -----------------------------------



| |  |  | TARP recipients are required to permit a separate shareholder vote to approve the compensation of executives, as disclosed pursuant to the SECs
compensation disclosure rules.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Publically registered TARP recipients must establish a board compensation committee comprised entirely of independent directors, for the purpose of
reviewing employee compensation plans.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



31







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SarbanesOxley Act of 2002

In July 2002, the President of the United States signed the Sarbanes-Oxley Act of 2002 into law. The Sarbanes-Oxley Act provided for
sweeping changes with respect to corporate governance, accounting policies and disclosure requirements for public companies, and also for their directors and officers. The Sarbanes-Oxley Act required the SEC to adopt new rules to implement the
Acts requirements. These requirements include new financial reporting requirements and rules concerning the chief executive and chief financial officers to certify certain financial and other information included in the companys
quarterly and annual reports. The rules also require these officers to certify that they are responsible for establishing, maintaining and regularly evaluating the effectiveness of the companys disclosure controls and procedures; and that they
have included information in their quarterly and annual filings about their evaluation and whether there have been significant changes to the controls and procedures or other factors which would significantly impact these controls subsequent to
their evaluation. The certifications by the Companys Chief Executive Officer and Chief Financial Officer of the financial statements and other information included in this Annual Report on Form 10-K have been filed as exhibits to this Form
10-K. See Item 9A (Controls and Procedures) hereof for the Companys evaluation of disclosure controls and procedures.

Pursuant to Section 404 of the Sarbanes-Oxley Act, the Company will be required under rules adopted by the SEC to include in its annual reports a
report by management on the Companys internal control over financial reporting and an accompanying auditors report. In September 2005, the SEC extended the Section 404 compliance date for the Company and other non-accelerated
filers. Under the extension, the Company is required to comply with these requirements.

USA Patriot Act

The USA Patriot Act authorizes new regulatory powers to combat international terrorism. The provisions that affect financial institutions
most directly provide the federal government with enhanced authority to identify, deter, and punish international money laundering and other crimes. Among other things, the USA Patriot Act prohibits financial institutions from doing business with
foreign shell banks and requires increased due diligence for private banking transactions and correspondent accounts for foreign banks. In addition, financial institutions have to follow minimum verification of identity standards for all
new accounts and are permitted to share information with law enforcement authorities under circumstances that were not previously permitted.

Forward-Looking Statements

This Annual Report on Form 10-K, including all documents incorporated herein by reference, contains forward-looking statements. Additional written or oral forward-looking statements may be made by the
Company from time to time in filings with the Securities and Exchange Commission or otherwise. The words believe, expect, seek, and intend and similar expressions identify forward-looking statements,
which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements may include, but are not limited to, projections of income or loss, expenditures, acquisitions, plans for future operations, financing needs or plans relating to services of the Company, as well as assumptions relating to
the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or
underlying the forward-looking statements.

The Company does not undertake, and specifically disclaims, any obligation to
publicly release the results of revisions which may be made to forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.



32







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|Item 1A. | RISK FACTORS
|-------- | ------------

The Company could
experience an increase in loan losses, which would reduce the Companys earnings.

As the nation continues to suffer
from an economic recession, real estate prices remain under pressure in the Companys market. Furthermore, elevated levels of unemployment have made it difficult for many consumers to meet their monthly obligations. The deployment of military
personnel out of Fort Campbell to the Middle East may reduce both demand for and pricing of all types of real estate in the Companys largest market. As a lender, we are exposed to the risk that our customers will be unable to repay their loans
according to their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. As discussed in Footnote 3 of the Notes to Consolidated Financial Statements, the Company has significant exposure to
various types of real estate loans, including commercial real estate, land and land development loans, construction loans, multi-family real estate and loans for residential homes. Credit losses are inherent in the business of making loans and our
industry has seen above average loan loss levels for approximately eighteen months. While the Company believes that its loan underwriting standards have been and remain sound, the Company has experienced an increase in charge offs and non-performing
loans. To the extent charge offs exceed our financial models, increased amounts charged to the provision for loan losses would reduce net income.

Rapidly changing interest rate environments could reduce our net interest margin, net interest income, fee income and net income.

Interest and fees on loans and securities, net of interest paid on deposits and borrowings, are a large part of our net income. Interest
rates are the key drivers of the Companys net interest margin and subject to many factors beyond the control of management. As interest rates change, net interest income is affected. Rapid increases in interest rates in the future could result
in interest expense increasing faster than interest income because of mismatches in the maturities of the Companys assets and liabilities. Furthermore, substantially higher rates generally reduce loan demand and may result in slower loan
growth. Decreases or increases in interest rates could have a negative effect on the spreads between interest rates earned on assets and the rates of interest paid on liabilities, and therefore decrease net interest income. See Quantitative
and Qualitative Disclosures about Market Risk

Liquidity needs could adversely affect the Companys results of operations and
financial condition.

The Company relies on dividends from the Bank as a primary source of funds. The Banks primary
source of funds is customer deposits and cash flows from investment instruments and loan repayments. While scheduled loan repayments are a relatively stable source, they are subject to the ability of the borrowers to repay their loans. The ability
of the borrowers to repay their loans can be adversely affected by a number of factors, including changes in the economic conditions, adverse trends or events affecting the business environment, natural disasters and various other factors. Cash
flows from the investment portfolio may be affected by changes in interest rates, resulting in excessive levels of cash flow during periods of declining interest rates and lower levels of cash flow during periods of rising interest rates. Deposit
levels may be affected by a number of factors, including both the national market and local competitive interest rate environment, local and national economic conditions, natural disasters and other various events. Accordingly, the Company may be
required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include the FHLB advances, brokered deposits and federal funds lines of credit from correspondent banks.

The Company may also pledge investments as collateral to borrow money from third parties. In certain cases, the Company may
sell investment instruments for sizable losses to meet liquidity needs, hurting net income. While the Company believes that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity needs.



33







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The financial industry is very competitive.

We face competition in attracting and retaining deposits, making loans, and providing other financial services throughout our market area.
Our competitors include other community banks, regional and super-regional banking institutions, national banking institutions, and a wide range of other financial institutions such as credit unions, government-sponsored enterprises, mutual fund
companies, insurance companies, brokerage companies, and other non-bank businesses. Many of these competitors have substantially greater resources than HopFed Bancorp, Inc.

Inability to hire or retain certain key professionals, management and staff could adversely affect our revenues and net income.

We rely on key personnel to manage and operate our business, including major revenue generating functions such as our loan and deposit
portfolios. The loss of key staff may adversely affect our ability to maintain and manage these portfolios effectively, which could negatively affect our revenues. In addition, loss of key personnel could result in increased recruiting, hiring, and
training expenses, resulting in lower net income.

The Company is subject to extensive regulation that could limit or restrict its
activities.

The Company operates in a highly regulated industry and is subject to examination, supervision, and
comprehensive regulation by various federal agencies, including the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. The Companys regulatory compliance is costly and certain types of activities, including the payment
of dividends, mergers and acquisitions, investments, loans and interest rates charged and interest rates paid on deposits and locations of offices are subject to regulatory approval and may be limited by regulation. The Company is also subject to
capitalization guidelines established by its regulators, which require it and the Bank to maintain adequate capital to support its and the Banks growth.

The laws and regulations applicable to the banking industry could change at any time, and the Company cannot predict the effects of these changes on its business and profitability. The Sarbanes-Oxley Act
of 2002, and the related rules and regulations promulgated by the Securities and Exchange Commission and NASDAQ National Market that are now and will be applicable to the Company, have increased the scope, complexity, and cost of corporate
governance, reporting and disclosure practices. As a result, the Company has experienced, and may continue to experience, greater compliance cost.

Legislation was enacted on July 21, 2010 that will implement sweeping changes to the current bank regulatory structure. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act) will eliminate the Office of Thrift Supervision. The Comptroller of the Currency (the primary federal regulator for national banks) will become the primary federal regulator of the Bank. The Board of Governors of the
Federal Reserve System (theFederal Reserve) will have exclusive authority to regulate all bank and thrift
holding companies. As a result, the Company will become subject to supervision by the Federal Reserve Board as opposed to the Office of Thrift Supervision. These changes to our regulators will occur on the transfer date, which is expected to be
July 21, 2011.

Among the many requirements in the Dodd-Frank Act for new banking regulations is a requirement for new
capital regulations to be adopted within 18 months. These regulations must be at least as stringent as, and may call for higher levels of capital than, current regulations. Generally, trust preferred securities will no longer be eligible as Tier 1
capital, but the Company's currently outstanding trust preferred securities will be grandfathered. Savings and loan holding companies like the Company have not previously been subject to capital requirements, but under the Dodd-Frank Act, five years
from the date of enactment, savings and loan holding companies will become subject to the same capital requirements as bank holding companies. Savings and loan holding companies are immediately subject to the source of strength doctrine, under which
a holding company must serve as a source of financial strength for its depository institution subsidiaries.

The Dodd-Frank
Act also establishes a new minimum reserve ratio for the deposit insurance fund of 1.35%, and requires the FDIC to take steps to reach this ratio by September 30, 2020. It is expected that this will result in relatively higher assessments for
larger institutions (with assets greater than $10 billion).



34







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Even though the Companys common stock is currently traded on The NASDAQ National Market, the
trading volume in the Companys common stock has been low and the sale of substantial amounts of its common stock in the public market could depress the price of the Companys common stock.

The trading volume of the Companys common stock on The NASDAQ National Market has been relatively low when compared with larger
companies listed on The NASDAQ National Market or other stock exchanges. Thinly traded stocks, such as the Companys, can be more volatile than stocks trading in an active public market. Because of this, the Company stockholders may not be able
to sell their shares at the volumes, prices, or times that they desire.

The Company cannot predict the effect, if any, that
future sales of its common stock in the market, or availability of shares of its common stock for sale in the market, will have on the market prices of the Companys common stock. The Company, therefore, can give no assurance that sales of
substantial amounts of its common stock in the market, or the potential for large amounts of sale in the market, would not cause the price of its common stock to decline or impair the Companys ability to raise capital through sales of its
common stock.

The market price of the Companys common stock may fluctuate in the future, and these fluctuations may be
unrelated to its performance. General market prices declines or overall market volatility in the future could adversely affect the price of the Companys common stock, and the current market price may not be indicative of future market prices.

The current banking crisis, including the enactment of Emergency Economic Stabilization Action (EESA) and American Recovery and
Reinvestment Act (ARRA), have significantly affected our financial condition, results of operations, liquidity or stock price.

The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached unprecedented levels. In some cases, the
markets have produced downward pressure on stock prices and credit availability for certain issuers seeming without regard to those issuers underlying financial strength.

EESA, which established the TARP, was signed into law in October 2008. As part of TARP, the Treasury established the Capital Purchase
Program (CPP) to provide up to $700 billion of funding to eligible financial institutions through the purchase of preferred shares and other financial instruments with the stated purpose of stabilizing and providing liquidity to the U.S. financial
markets. On December 12, 2008, the Company accepted an $18.4 million treasury investment of preferred stock with terms that included a 5% dividend that increases to 9% after five years. The Company issued 243,816 common stock warrants that are
immediately issued and have a strike price of $11.32 and have a ten year maturity. The amount of common warrants outstanding has been adjusted to 248,692 and the strike price adjusted to $11.098 as a result of a 2% common stock dividend paid on
October 18, 2010, to shareholders of record on September 30, 2010.

On February 17, 2009, President Obama
signed ARRA, an economic recovery package intended to stimulate the economy and provide for a broad range of infrastructure, energy, health and educational needs. There can be no assurance as to the actual impact that EESA or its programs, including
the CPP, and the ARRA or its programs, will have on the national economy or financial markets. The failure of these significant legislative measures to help stabilize the financial markets and the continuation or worsening of current financial
market conditions may materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common shares.



35







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The Company and the Bank each are required to comply with the terms of a Memorandum of Understanding
(MOU) issued by the OTS and lack of compliance could result in monetary penalties and/or regulatory actions.

On
April 30, 2010, the Company and the Bank each entered into a Memorandum of Understanding (MOU) with the Office of Thrift Supervision (OTS). This informal agreement places additional reporting and operational requirements on the
Company and Bank. The Bank is required to reduce the level of commercial real estate loans to Total Risk Based Capital. This requirement may result in lower levels of commercial real estate loans, reducing the Banks ability to continue to
pursue its current strategy to grow its loan portfolio and net interest income.

The MOU will remain in effect until stayed,
modified, terminated or superseded by the OTS. If the OTS, or after July 21, 2011 the OCC, were to determine that the Company or the Bank were not in compliance with their respective MOUs, it would have available numerous remedies. Management
continues to take actions necessary to comply with the MOUs requirements. The OTS or OCC may determine, however, in its sole discretion that the issues raised have not been addressed satisfactorily, or any current or past action, violation or
deficiencies could be subject to future regulatory enforcement actions. Such enforcement actions could result in penalties or additional limitations on the Companys business.

There can be no assurance of whether or when the Company may pay dividends in the future. Cash available to pay dividend to our
shareholders is derived primarily, if not entirely, from dividends paid to us from the Bank. The ability of the Bank to pay dividends to us, as well as our ability to pay dividends to our shareholders, is limited by regulatory and legal restrictions
and the need to maintain sufficient capital at the Bank. The MOU with the OTS restricts us from declaring or paying any dividends or other capital distributions to common shareholders without prior OTS approval.

This dividend restriction does not apply to cash dividends on currently outstanding shares on Series A Preferred Stock issued to and held
by the United States Department of the Treasury and obligations in connection with currently outstanding trust preferred securities, provided that such dividend payment or distribution of capital does not cause the Banks capital levels to fall
below a Tier 1 core capital ratio of 8.00% and a total risk based capital of 12.00%. We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business. We are
restricted from paying dividends if we have deferred payments of the interest on, or an event of default has occurred with respect to, our trust preferred securities or Series A Preferred Stock.

The Company conducts virtually all of its business activities in a geographically concentrated area of Middle and West Tennessee and Western Kentucky.

The Company operates eighteen offices located in Middle Tennessee and Western Kentucky. The Company maintains significant
business relationships in the markets in which it operates as well as the communities adjoining our offices. Therefore, the Companys success is directly tied to the economic viability of our markets which may not be representative of the
country as a whole. In 2010, the Companys market had unemployment rates ranging from 9% to 12%. While the Company believes that its credit quality has been strong given the current environment, continued economic stress in the market may
result in an increase in non-performing loans and charge offs. Given the limited geographic footprint of our Company, the economic conditions in our marketplace may not be reflective of the entire nation.

Managements analysis of the necessary funding for the allowance for loan loss account may be incorrect or may suddenly change, resulting in
lower earnings.

The funding of the allowance for loan loss account is the most significant estimate made by management in its financial
reporting to shareholders and regulators. If negative changes to the performance of the Companys loan portfolio were to occur, management may find it necessary or be required to funding the allowance for loan loss account through additional
charges to the Companys provision for loan loss expense. These changes may occur suddenly and be dramatic in nature. These changes are likely to affect the Companys financial performance, capital levels and stock price.



36







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We have increased levels of other real estate owned, primarily as the result of foreclosures, and we
anticipate higher levels of real estate expense.

As a result in an increase in non-performing loans, the Company has experienced in
increase in both the dollar amount and number of other real estate owned properties acquainted through the foreclosure process. The Company ensures numerous types of both operating and non-operating expenses while holding property for sale.
Typically, the Company hires a property management company to manage the day to day functions and market the property for sale. These expenses typically included property taxes, property maintenance and repairs. In todays economic climate, the
majority of properties face the significant risk of a decline in value. The Company periodically, but no less than annually, evaluates the market value of each property classified as other real estate owned. The Company recognizes both expenses
related to holding the property and any reduction in the market value of the collateral as an expense in the current period. Therefore, holding large amounts of other real estate owned is likely to reduce the Companys level of interest earning
assets, reducing interest income and increasing non-interest expenses.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

There are no
unresolved staff comments from the Securities and Exchange Commission.



37







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|ITEM 2. | PROPERTIES
|------- | ----------

The following
table sets forth information regarding the Banks offices at December 31, 2010.



|                               |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|------------------------------ |  | -------------- | ---- |  | --------------- |  | ----- | -------------- |  | - | ----------------------------------- |  |  |  | ------ | 
|                               |  | Year Opened    |      |  | Owned or Leased |  |       | Book Value (1) |  |   | ApproximateSquare Footage of Office | 
|                               |  | (In thousands) |     
|Main Office:                   |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|4155 Lafayette Road            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Hopkinsville, Kentucky         |  |                | 2006 |  |                 |  | Owned |                |  | $ | 5,770                               |  |  |  | 24,072 | 
|Branch Offices:                |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|2700 Fort Campbell Boulevard   |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Hopkinsville, Kentucky         |  |                | 1995 |  |                 |  | Owned |                |  | $ | 1,437                               |  |  |  | 17,625 | 
|Downtown Branch Office         |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|605 South Virginia Street      |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Hopkinsville, Kentucky         |  |                | 1997 |  |                 |  | Owned |                |  | $ | 135                                 |  |  |  | 756    | 
|Murray South Office            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|210 N. 12thStreet              |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Murray, Kentucky               |  |                | 2003 |  |                 |  | Owned |                |  | $ | 1,748                               |  |  |  | 5,600  | 
|Murray North Office            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|1601 North 12thStreet          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Murray, Kentucky               |  |                | 2007 |  |                 |  | Owned |                |  | $ | 1,310                               |  |  |  | 3,400  | 
|Cadiz Branch Office            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|352 Main Street                |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Cadiz, Kentucky                |  |                | 1998 |  |                 |  | Owned |                |  | $ | 381                                 |  |  |  | 2,200  | 
|Elkton Branch Office           |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|536 W. Main Street             |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Elkton, Kentucky               |  |                | 1976 |  |                 |  | Owned |                |  | $ | 120                                 |  |  |  | 3,400  | 
|Benton Branch Office           |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|105 W. 5thStreet               |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Benton, Kentucky               |  |                | 2003 |  |                 |  | Owned |                |  | $ | 522                                 |  |  |  | 4,800  | 
|Calvert City Office            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|35 Oak Plaza Drive             |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Calvert City, Kentucky         |  |                | 2003 |  |                 |  | Owned |                |  | $ | 1,176                               |  |  |  | 3,400  | 
|Carr Plaza Office              |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|607 N. Highland Drive          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Fulton, Kentucky               |  |                | 2002 |  |                 |  | Owned |                |  | $ | 208                                 |  |  |  | 800    | 
|Lake Street Office             |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|306 Lake Street                |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Fulton, Kentucky               |  |                | 2002 |  |                 |  | Owned |                |  | $ | 1,077                               |  |  |  | 15,000 | 
|Fall & Fall Insurance Office   |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|101 Main Street                |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Fulton, Kentucky               |  |                | 2002 |  |                 |  | Owned |                |  | $ | 13                                  |  |  |  | 3,200  | 
|Clarksville Main Street        |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|322 Main Street                |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Clarksville, Tennessee         |  |                | 2007 |  |                 |  | Owned |                |  | $ | 1,661                               |  |  |  | 10,000 | 
|Trenton Road Branch            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|3845 Trenton Road              |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Clarksville, Tennessee         |  |                | 2006 |  |                 |  | Owned |                |  | $ | 2,578                               |  |  |  | 3,362  | 
|Madison Street Office          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|2185 Madison Street            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Clarksville, Tennessee         |  |                | 2007 |  |                 |  | Owned |                |  | $ | 1,801                               |  |  |  | 3,950  | 
|Houston County Office          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|1102 West Main Street          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Erin, Tennessee                |  |                | 2006 |  |                 |  | Owned |                |  | $ | 544                                 |  |  |  | 2,390  | 
|Ashland City Office            |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|108 Cumberland Street          |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Ashland City, Tennessee        |  |                | 2006 |  |                 |  | Owned |                |  | $ | 1,387                               |  |  |  | 7,058  | 
|Pleasant View Office           |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|2556 Highway 49 East           |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Pleasant View, Tennessee       |  |                | 2006 |  |                 |  | Owned |                |  | $ | 739                                 |  |  |  | 2,433  | 
|Kingston Springs Office        |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|104 West Kingston Springs Road |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Kingston Springs, Tennessee    |  |                | 2006 |  |                 |  | Owned |                |  | $ | 1,682                               |  |  |  | 9,780  | 
|                               |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 
|Total                          |  |                |      |  |                 |  |       |                |  | $ | 24,289                              |  |  |  |        | 
|                               |  |                |      |  |                 |  |       |                |  |   |                                     |  |  |  |        | 



|(1) | Represents the book value of land, building, furniture, fixtures and equipment owned by the Bank.
|--- | -------------------------------------------------------------------------------------------------



38







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

From
time to time, the Company or the Bank is a party to various legal proceedings incident to its business. At December 31, 2010 there were no legal proceedings to which the Company or the Bank was a party, or to which any of their property was
subject, which were expected by management to result in a material loss to the Company or the Bank. There are no pending regulatory proceedings to which the Company or the Bank is a party or to which any of their properties is subject which are
currently expected to result in a material loss.



|ITEM 4. | Removed and Reserved
|------- | --------------------

EXECUTIVE
OFFICERS OF THE REGISTRANT

John E. Peck. Mr. Peck has served as President and Chief Executive Officer of both
the Company and the Bank since July 2000. Prior to that, Mr. Peck was President and Chief Executive Officer of United Commonwealth Bank and President of Firstar Bank-Calloway County. Mr. Peck was a past board member and president of the
Christian County Chamber of Commerce, Jennie Stuart Hospital and Calloway County Hospital. Mr. Peck holds a Bachelor of Science of Business of Administration in Finance from the University of Louisville. Mr. Peck is a graduate of the
Louisiana State University School of Banking. Mr. Peck is a member and serves on the finance committee of the First Baptist Church of Hopkinsville.

Michael L. Woolfolk. Mr. Woolfolk has served as Executive Vice President and Chief Operations Officer of the Bank since August 2000. Prior to that, he was President of First-star Bank-Marshall
County, President and Chief Executive Officer of Bank of Marshall County and President of Mercantile Bank. Mr. Woolfolk is a member of First Baptist Church of Hopkinsville.

Billy C. Duvall. Mr. Duvall has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company and the
Bank since June 1, 2001. Prior to that, he was an Auditor with Rayburn, Betts & Bates, P.C., independent public accountants and a Principal Examiner with the National Credit Union Administration. Mr. Duvall holds a Bachelor of
Business Administration from Austin Peay State University in Accounting and Finance. Mr. Duvall is a Certified Public Accountant of Virginia. Mr. Duvall is the current board chairman for the Pennyroyal Mental Health Center, a member of the
Hopkinsville Kiwanis club and a member of Southside Church of Christ in Hopkinsville.

Michael F. Stalls.
Mr. Stalls has served as Senior Vice President, Chief Credit Officer of the Bank since May 28, 2004. Prior to that, he was Senior Vice President and Chief Credit Officer for the southern Tennessee markets of Regions Bank. Mr. Stalls
holds a Bachelor of Business Administration with a concentration in Finance from Murray State University and is a graduate of the Louisiana State University School of Banking. Mr. Stalls is a member and board trustee of the First United
Methodist Church of Hopkinsville.

All officers serve at the discretion of the boards of directors of the Company or the Bank.
There are no known arrangements or understandings between any officer and any other person pursuant to which he or she was or is to be selected as an officer.



39







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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES.
|------- | --------------------------------------------------------------------------------------------------------------

A cash dividend of $0.12 per share was declared in each of the four quarters in 2009 and the first and second quarter of 2010. A cash
dividend of $0.08 per share was declared in the third and fourth quarter of 2010. The Company paid a 2% stock dividend during the third quarter of 2010. As a participant in the U.S. Treasurys Capital Purchase Program, the Company may not
increase its cash dividend without the express written approval of the Treasury Department. As agreed upon in the previously mentioned Memorandum of Understanding and Agreement between the Office of Thrift Supervision and the Company, we must obtain
prior written permission from the Southeastern Regional Director of the Office of Thrift Supervision prior to the payment of any cash dividend. The high and low price range of the Companys common stock for 2010 and 2009 is set forth below and
has been adjusted to reflect the 2% stock dividend paid to shareholders of record at September 30, 2010:



|               |  |                              |       |  |                              |   |      |      |  |   |       |  |  |   |      | 
|-------------- |  | ---------------------------- | ----- |  | ---------------------------- | - | ---- | ---- |  | - | ----- |  |  | - | ---- | 
|               |  | Year Ended December 31, 2010 |       |  | Year Ended December 31, 2009 |  
|               |  | High                         |       |  | Low                          |   |      | High |  |   | Low   | 
|First Quarter  |  | $                            | 12.25 |  |                              | $ | 9.12 |      |  | $ | 12.25 |  |  | $ | 8.26 | 
|Second Quarter |  | $                            | 14.74 |  |                              | $ | 8.82 |      |  | $ | 9.56  |  |  | $ | 7.97 | 
|Third Quarter  |  | $                            | 9.63  |  |                              | $ | 8.91 |      |  | $ | 11.28 |  |  | $ | 9.07 | 
|Fourth Quarter |  | $                            | 9.30  |  |                              | $ | 8.83 |      |  | $ | 10.78 |  |  | $ | 9.15 | 

At March 28,
2011, the Company estimates that is has approximately 2,900 shareholders, with approximately 1,600 reported in the name of the shareholder and the remainder recorded in street name.

On August 25, 2006, the Company announced that its Board of Directors had approved the repurchase of an additional 125,000 of the
Companys common stock, or approximately 3.5% of the total shares outstanding. The purchases are being made from time to time on the NASDAQ Stock Market at prices prevailing on that market or in privately negotiated transactions at
managements discretion, depending on market conditions, price of the Companys common stock, corporate cash requirements and other factors. The Company has repurchased a total of 515,555 shares of common stock under all current and prior
repurchase programs. The Companys current repurchase plan has expired. The Companys participation in the United States Treasurys Capital Purchase Program precludes it from repurchasing additional treasury shares for a three year
period. The Company issued 112,639 shares of treasury stock as part of its common equity offering in June 2010. The Company currently has 402,916 shares of treasury stock.

See Note 16 of Notes to the Consolidated Financial Statements regarding the restrictions on the payment of cash dividends by the Company and the Bank.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The information set forth under the caption Selected Financial Information and Other Data in the Companys Annual Report
to Stockholders for the year ended December 31, 2010 (Exhibit No. 13.1) is incorporated herein by reference. See Note 21 of Notes of Consolidated Financial Statements which is incorporated herein by reference.



40







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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The information set forth under the caption Managements Discussion and Analysis of Financial Condition and Results of
Operations in the Companys Annual Report to Stockholders for the year ended December 31, 2010 (Exhibit No. 13.1) is incorporated herein by reference.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

The information set forth under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations  Interest Rate Sensitivity Analysis in the
Companys Annual Report to Stockholders for the year ended December 31, 2010 (Exhibit No. 13.1) is incorporated herein by reference.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The Companys Consolidated Financial Statements together with the related notes and the report of Rayburn, Bates & Fitzgerald, P.C., independent registered public accounting firm, all as set
forth in the Companys Annual Report to Stockholders for the year ended December 31, 2010 (Exhibit No. 13.1) are incorporated herein by reference.



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

Not Applicable



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934 (the Exchange Act) that are designed to insure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified under the SECs rules and forms and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision
making regarding required disclosure. The Company, under the supervision and participation of its management, including the Companys Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the
design and operation of the Companys disclosure controls and procedures as of the end of the period covered by this report pursuant to the Exchange Act. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in ensuring that all material information required to be disclosed is this annual report has been accumulated and communicated to them in a manner appropriate to
allow timely decisions regarding required disclosures.



41







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Management Report on Internal Control

The management of HopFed Bancorp, Inc. and its subsidiaries Heritage Bank, (collectively referred to the as Company) is responsible for
the preparation, integrity and fair presentation of published financial statements and all other information presented in this annual report. The financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (GAAP) and, as such, include amounts based on informed judgments and estimates made by management.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for financial presentations
in conformity with GAAP. Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Companys Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and included those policies and procedures
that:



| |  |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Company.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that
could have a material effect on the financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All internal control systems, no matter how well
designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, or that the degree of compliance with the policies and procedures include in such controls may deteriorate.

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2010 based on the control criteria established in a report entitled Internal Control
 Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that HopFed Bancorps internal control over financial reporting is effective as of
December 31, 2010.

This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Management report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only managements report in this annual report.



|      |  |                |  |  |  |     |  |                                      
|----- |  | -------------- |  |  |  | --- |  | -------------------------------------
|      |  |                |  | 
|      |  |                |  | 
|Date: |  | March 31, 2011 |  |  |  | By: |  | /s/    JOHN E.
PECK                  
|      |  |                |  |  |  |     |  | John E. Peck                         
|      |  |                |  |  |  |     |  | President and Chief Executive Officer
|      |  |                |  | 
|      |  |                |  |  |  | By: |  | /s/    BILLY C.
DUVALL               
|      |  |                |  |  |  |     |  | Billy C. Duvall                      
|      |  |                |  |  |  |     |  | Senior Vice President and Treasurer  
|      |  |                |  |  |  |     |  | (Principal Financial Officer)        



42







---

|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not
Applicable

PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------

Information regarding directors of the Company is omitted from this Report as the Company will file a definitive proxy statement (the Proxy Statement) not later than 120 days after
December 31, 2010, and the information included therein under Proposal I  Election of Directors is incorporated herein by reference. Information regarding the executive officers of the Company is included under separate
caption in Part I of this Form 10-K

Information regarding Section 16(a) beneficial ownership reporting compliance is
omitted from this Report as the Company will file the Proxy Statement not later than 120 days after December 31, 2010, and the information included therein under Section 16(a) Beneficial Ownership Reporting Compliance is
incorporated herein by reference.

Information regarding audit committee financial expert compliance is omitted from this
Report as the Company will file the Proxy Statement not later than 120 days after December 31, 2010, and the information contained therein under Committees of the Board of Directors is incorporated herein by reference.

The Company has adopted a code of ethics that applies to all directors and employees, including without exception, the principal
executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Information regarding executive compensation is omitted from this Report as the Company will file the Proxy Statement not later than 120
days after December 31, 2010, and the information included therein under Proposal I  Election of Directors is incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Information required by this Item is omitted from this Report as the Company will file the Proxy Statement not later than 120 days after
December 31, 2010, and the information included therein under Voting Securities and Principal Holders Thereof and Proposal I  Election of Directors is incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------

Information required by this Item is omitted from this Report as the Company will file the Proxy Statement, not later than 120 days after December 31, 2010, and the information included therein under
Proposal I  Election of Directors is incorporated herein by reference.



43







---

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

Information required by this item is omitted from this report as the Company will file the Proxy Statement not later than 120 days after December 31, 2010, and the information included therein under
Independent Registered Public Accounting Firm is incorporated herein by reference.

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) The following consolidated financial statements of the Company included in the Annual Report to Stockholders for the year ended December 31, 2010, are incorporated herein by reference in
Item 8 of this Report. The remaining information appearing in the Annual Report to Stockholders is not deemed to be filed as part of this Report, except as expressly provided herein.



| | 1. | Report of Independent Registered Public Accounting Firm.
| | -- | --------------------------------------------------------



| | 2. | Consolidated Balance Sheets - December 31, 2010 and 2009.
| | -- | ---------------------------------------------------------



| | 3. | Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008.
| | -- | ---------------------------------------------------------------------------------------



| | 4. | Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2010, 2009 and 2008.
| | -- | -----------------------------------------------------------------------------------------------------



| | 5. | Consolidated Statements of Changes in Stockholders Equity for the Years Ended December 31, 2010, 2009 and 2008.
| | -- | ----------------------------------------------------------------------------------------------------------------



| | 6. | Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008.
| | -- | -------------------------------------------------------------------------------------------



| | 7. | Notes to Consolidated Financial Statements.
| | -- | -------------------------------------------



| | (b) | The following exhibits either are filed as part of this Report or are incorporated herein by reference:
| | --- | -------------------------------------------------------------------------------------------------------

Exhibit No. 1.1. Underwriting Agreement by and between Registrant and Howe Barnes Hoefer & Arnett, Inc. as the underwriter,
dated as of June 16, 2010. Incorporated herein by reference to Exhibit No. 1.1 to Registrants Current Report on Form 8-K dated and filed on June 17, 2010.

Exhibit No. 2.1. Plan of Conversion of Hopkinsville Federal Savings Bank. Incorporated herein by reference to Exhibit No. 2 to Registrants Registration Statement on Form S-1 (File No.
333-30215).

Exhibit No. 3.1. Certificate of Incorporation. Incorporated herein by reference to Exhibit No. 3.1 to
Registrants Registration Statement on Form S-1 (File No. 333-30215).

Exhibit No. 3.2 Certificate of Designations
with respect to Fixed Rate Cumulative Perpetual Preferred Stock, Series A. Incorporated herein by reference to Exhibit No. 3.1 to Registrants Current Report on Form 8-K dated December 12, 2008 (filed on December17, 2008).

Exhibit No. 3.3 Bylaws, as amended. Incorporated herein by reference to Exhibit No. 3.2 to Registrants Current Report on
Form 8-K dated December 5, 2007 (filed on December6, 2007).

Exhibit No. 4.1. Form of Common Stock Certificate
incorporated herein by reference to Exhibit No. 4.1 to Registrants Registration Statement on Form S-1 (File No. 333-30215).



44







---

Exhibit No. 4.2 Warrant to Purchase up to 243,816 shares of Common Stock.
Incorporated herein by reference to Exhibit No. 3.2 to Registrants Current Report on Form 8-K dated December 12, 2008 (filed December 17, 2008).

Exhibit No. 10.1. HopFed Bancorp, Inc. Management Recognition Plan. Incorporated herein by reference to Exhibit 99.1 to Registration Statement on Form S-8 (File No. 333-79391).

Exhibit No. 10.2. HopFed Bancorp, Inc. 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 99.2 to
Registration Statement on Form S-8 (File No. 333-79391).

Exhibit No. 10.3. Employment Agreement by and between
Hopkinsville Federal Savings Bank and John E. Peck. Incorporated herein by reference to Exhibit No. 10.2 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

Exhibit No. 10.4. Employment Agreement by and between Registrant and John E. Peck. Incorporated herein by reference to Exhibit
No. 10.2 to Registrants Current Report on Form 8-K dated April 17, 2008 (filed April 22, 2008).

Exhibit No. 10.5.
HopFed Bancorp, Inc. 2000 Stock Option Plan. Incorporated herein by reference to Exhibit 10.10 to Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

Exhibit No. 10.6. Employment Agreement by and between Registrant and Billy C. Duvall. Incorporated herein by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K dated February 12, 2008 (filed February 19, 2008).

Exhibit
No. 10.7. Employment Agreement by and between Heritage Bank and Billy C. Duvall. Incorporated herein by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K dated February 12, 2008 (filed February 19, 2008).

Exhibit No. 10.8. Employment Agreement by and between Registrant and Michael L. Woolfolk. Incorporated herein by
reference to Exhibit 10.1 to Registrants Current Report on Form 8-K dated April 17, 2008 (filed April 22, 2008).

Exhibit
No. 10.9. Employment Agreement by and between Heritage Bank and Michael L. Woolfolk. Incorporated herein by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K dated April 17, 2008 (filed April 22, 2008).

Exhibit No. 10.10. Fulton Division Acquisition Agreement dated as of March 1, 2002, by and between Old National Bank and
Hopkinsville Federal Bank. Incorporated herein by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K dated March 1, 2002.

Exhibit No. 10.11 HopFed Bancorp, Inc. 2004 Long Term Incentive Plan. Incorporated herein by reference to Exhibit 99.3 to Registration Statement on Form S-8 (File No. 333-117956) dated August
5, 2004.

Exhibit No. 10.12 Employment Agreement by and between Registrant and Michael F. Stalls. Incorporated
herein by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K dated February 12, 2008 (filed February 19, 2008).

Exhibit No. 10.13 Employment Agreement by and between Heritage Bank and Michael F. Stalls. Incorporated herein by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K
dated February 12, 2008 (filed February 19, 2008).



45







---

Exhibit No. 10.17 Form of Letter Agreement, executed by each of Messrs. John E. Peck,
Michael L. Woolfolk, Michael F. Stalls, Billy C. Duvall, and Keith Bennett with Registrant. Incorporated herein by reference to Exhibit No. 10.3 to Registrants Current Report on Form 8-K dated December 12, 2008 (filed
December 17, 2008)

Exhibit No. 13.1. Annual Report to Stockholders Except for those portions of the Annual
Report to Stockholders for the year ended December 31, 2010, which are expressly incorporated herein by reference, such Annual Report is furnished for the information of the Commission and is not to be deemed filed as part of this
Report.

Exhibit No. 14.1. Code of Ethics. Incorporated herein by reference to Exhibit 14 to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

Exhibit No. 21.1 Subsidiaries of the
Registrant.

Exhibit No. 23.1. Consent of Rayburn, Bates & Fitzgerald, P.C.

Exhibit No. 31.1 Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a  14(a) or 15d  14(a).

Exhibit No. 31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a  14(a) or 15d
 14(a).

Exhibit No 32.1. Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.

Exhibit No 32.2. Certification of Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.

(c) All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and
therefore have been omitted.

SIGNATURES

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



|      |  |                |  |                                   |  |     |  |                                      
|----- |  | -------------- |  | --------------------------------- |  | --- |  | -------------------------------------
|      |  |                |  | HOPFED BANCORP, INC.
(Registrant)
|      |  |                |  |                                  
|Date: |  | March 31, 2011 |  |                                   |  | By: |  | /s/    JOHN E.
PECK                  
|      |  |                |  |                                   |  |     |  | John E. Peck                         
|      |  |                |  |                                   |  |     |  | President and Chief Executive Officer



46







---

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

DATE: SIGNATURE
AND TITLE:



|                                                                              |  |               
|----------------------------------------------------------------------------- |  | --------------
|/s/    JOHN E.
PECK                                                           |  | March 31, 2011
|John E. Peck                                                                  |  |               
|Director, President and Chief Executive Officer
(Principal Executive Officer) |  |               
|                                                                              | 
|/s/    BILLY C.
DUVALL                                                        |  | March 31, 2011
|Billy C. Duvall                                                               |  |               
|Senior Vice President, Chief                                                  |  |               
|Financial Officer and Treasurer                                               |  |               
|(Principal Financial and Accounting Officer)                                  |  |               
|                                                                              | 
|/s/    GILBERT E.
LEE                                                         |  | March 31, 2011
|Gilbert E. Lee                                                                |  |               
|Chairman of the Board                                                         |  |               
|                                                                              | 
|/s/    BOYD M.
CLARK                                                          |  | March 31, 2011
|Boyd M. Clark                                                                 |  |               
|Director, Vice President and Secretary                                        |  |               
|                                                                              | 
|/s/    STEVE
HUNT                                                             |  | March 31, 2011
|Steve Hunt                                                                    |  |               
|Director                                                                      |  |               
|                                                                              | 
|/s/    HARRY J.
DEMPSEY                                                       |  | March 31, 2011
|Harry J. Dempsey                                                              |  |               
|Director                                                                      |  |               
|                                                                              | 
|/s/    TED
KINSEY                                                             |  | March 31, 2011
|Ted Kinsey                                                                    |  |               
|Director                                                                      |  |               
|                                                                              | 
|/s/    THOMAS I.
MILLER                                                       |  | March 31, 2011
|Thomas I. Miller                                                              |  |               
|Vice-Chairman of the Board                                                    |  |               



47