HOPFED BANCORP, INC.

                                     [LOGO]

                                 ANNUAL REPORT

                                      1999


<PAGE>
HOPFED BANCORP, INC.
--------------------------------------------------------------------------------

     HopFed Bancorp, Inc., a Delaware corporation (the "Company"), was organized
by Hopkinsville  Federal Savings Bank (the "Bank") for the purpose of serving as
the holding  company of the Bank. On February 6, 1998,  the Bank  converted from
mutual to stock form as a wholly owned subsidiary of the Company. In conjunction
with the conversion,  the Company issued and sold 4,033,625 shares of its common
stock  (the  "Common  Stock")  at a price of  $10.00  per share  (the  "Purchase
Price").

     The Company is  classified  as a unitary  savings and loan holding  company
subject  to  regulation  by the  Office of  Thrift  Supervision  ("OTS")  of the
Department  of the Treasury.  The primary  activity of the Company is overseeing
the business of the Bank and investing the portion of the net proceeds  retained
by it from the sale of Common Stock.

     The Bank is a federal stock  savings bank  headquartered  in  Hopkinsville,
Kentucky,  with  branch  offices  in  Hopkinsville,  Murray,  Cadiz and  Elkton,
Kentucky. The Bank was incorporated in 1879 as a Kentucky chartered building and
loan association.  In 1940, the Bank converted to a federal charter and obtained
federal insurance of accounts. In 1983, the Bank became a federal mutual savings
bank and adopted its current corporate title. The business of the Bank primarily
consists of  attracting  deposits  from the general  public and  investing  such
deposits in loans secured by one-to-four residential properties.

     The executive  offices of the Company and the Bank are located at 2700 Fort
Campbell Boulevard, Hopkinsville,  Kentucky 42240. The telephone number is (270)
885-1171.

MARKET AND DIVIDEND INFORMATION
--------------------------------------------------------------------------------

     Since  February  9, 1998,  the Common  Stock has been  quoted on the Nasdaq
Stock  Market  under the symbol  "HFBC." As of  February  29,  2000,  there were
approximately  1,500  stockholders  of record,  excluding  beneficial  owners in
nominee or street name.

     Following  are the high and low stock  prices of the  Common  Stock for the
periods indicated.

                                     Price Range of Common Stock
                    ------------------------------------------------------------
                     Year Ended December 31, 1998   Year Ended December 31, 1999
                    -----------------------------   ----------------------------

                       High            Low               High           Low
                       ----            ---               ----           ---
    First Quarter      $17.75         $16.00           $23.50         $17.00
    Second Quarter      22.00          17.75            22.00          19.00
    Third Quarter       19.625         15.25            22.875         19.00
    Fourth Quarter      18.875         16.0625          21.9375        15.50

     Dividends of $0.075 per share were declared in each of the third and fourth
quarters of 1998 and in each of the four quarters of 1999. In December 1999, the
Company  declared  a $4.00  per share  special  cash  dividend  in the form of a
nontaxable return of capital.

     Dividends,  when and if paid, are subject to determination  and declaration
by the Board of  Directors in its  discretion,  which will take into account the
Company's consolidated financial condition and results of operations, the Bank's
regulatory  capital  requirements,  tax  considerations,   economic  conditions,
regulatory  restrictions,  other  factors,  and there can be no  assurance  that
dividends will be paid, or if paid, will continue to be paid in the future.  The
payment of future  dividends  by the Company  will depend in large part upon the
receipt  of  dividends  from the  Bank,  which is  subject  to  various  tax and
regulatory restrictions on the payment of dividends.

TABLE OF CONTENTS
--------------------------------------------------------------------------------

   HopFed Bancorp, Inc. ..................................... Inside Front Cover
   Market and Dividend Information........................... Inside Front Cover
   Selected Financial Information and Other Data.............................  1
   Management's Discussion and Analysis of Financial Condition
      and Results of Operations..............................................  4
   Financial Statements...................................................... 16
   Corporate Information...................................... Inside Back Cover

<PAGE>
SELECTED FINANCIAL INFORMATION AND OTHER DATA
--------------------------------------------------------------------------------

     The following summary of selected financial information and other data does
not purport to be complete  and is qualified in its entirety by reference to the
detailed  information and Financial  Statements and accompanying Notes appearing
elsewhere in this Report.
<TABLE>
<CAPTION>
FINANCIAL CONDITION AND
   OTHER DATA                                           At December 31,
                                   ------------------------------------------------------
                                     1999       1998       1997       1996       1995
                                     ----       ----       ----       ----       ----
Total amount of:                                   (Dollars in thousands)
<S>                                <C>        <C>        <C>        <C>        <C>
   Assets ......................   $207,906   $220,032   $343,995   $204,398   $212,598
   Loans receivable, net .......    113,532    108,807    103,470     95,496     84,755
   Cash and due from banks .....      4,537      1,905      1,264      1,452      1,303
    Time deposits and
    interest-bearing deposits
    in FHLB ....................        251        214      5,945      2,000     12,550
   Federal funds sold ..........      4,100      9,685    151,095        500      7,948
   Securities available for sale     71,423     68,139     26,699      5,125      4,053
    Securities held to maturity:
      FHLB securities ..........         --     13,998     31,988     77,962     80,990
   Mortgage-backed securities ..      9,958     13,356     19,578     17,984     17,563
   Deposits ....................    160,905    154,816    320,633    183,827    194,775
   FHLB advances ...............         --         --         --      1,317         --
   Total equity ................     44,346     61,134     19,936     16,824     16,002
                                   --------   --------   --------   --------   --------
Number of:
   Real estate loans outstanding      2,143      2,150      2,198      2,151      2,074
   Deposit accounts ............     18,667     19,251     21,277     23,778     25,473
   Offices open ................          5          5          5          5          5

OPERATING DATA                                         Year Ended December 31,
                                     ----------------------------------------------------
                                     1999       1998       1997       1996       1995
                                     ----       ----       ----       ----       ----
                                                      (In thousands)

Interest income ................   $14,205    $ 15,051    $14,311    $13,220    $12,472
Interest expense ...............     7,078       8,004      9,350      9,757     10,009
                                   -------    --------    -------    -------    -------
Net interest income before
   provision  for loan losses ..     7,127       7,047      4,961      3,463      2,463
Provision for loan losses ......        20          20         20        100         --
                                   -------    --------    -------    -------    -------
Net interest income ............     7,107       7,027      4,941      3,363      2,463
Non-interest income ............     7,028         547        528        590        398
Non-interest expense ...........     8,894       2,982      2,408      3,674(1)   2,246
                                   -------    --------    -------    -------    -------
Income before income taxes .....     5,241       4,592      3,061        279        615
Provision for income taxes .....     2,766       1,641      1,038         84        203
                                   -------    --------    -------    -------    -------
Net income .....................   $ 2,475    $  2,951    $ 2,023    $   195(1) $   412
                                   =======    ========    =======    =======    =======
</TABLE>
------------------
(1)  Includes  payment  to the  SAIF of a  one-time  deposit  insurance  special
     assessment of $1.2 million  ($812,000  net of tax) pursuant to  legislation
     enacted to recapitalize the Savings Association Insurance Fund ("SAIF").

<PAGE>
SELECTED QUARTERLY INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                               First     Second     Third    Fourth
                                              Quarter    Quarter   Quarter   Quarter
                                              -------    -------   -------   -------
                                                           (In thousands)
YEAR ENDED DECEMBER 31, 1998:
<S>                                           <C>       <C>        <C>       <C>
    Interest income .......................   $ 4,317   $ 3,592    $ 3,578   $ 3,564
    Net interest income after provision for
       losses on loans ....................     1,903     1,705      1,710     1,709
    Noninterest income ....................       135       145        138       129
    Noninterest expense ...................       578       622        594     1,188
    Net income ............................       968       794        829       360

YEAR ENDED DECEMBER 31, 1999:
    Interest income .......................   $ 3,500   $ 3,505    $ 3,495   $ 3,705
    Net interest income after provision for
       losses on loans ....................     1,727     1,737      1,727     1,916
    Noninterest income ....................       112       136      6,660       120
    Noninterest expense ...................       880     2,662      1,437     3,915
    Net income (loss) .....................       592      (577)     4,547    (2,087)
</TABLE>

                                       2
<PAGE>
<TABLE>
<CAPTION>
KEY OPERATING RATIOS
                                                               At or for the Year Ended December 31,
                                                               -------------------------------------
                                                                    1999       1998      1997
                                                                    ----       ----      ----
PERFORMANCE RATIOS
<S>                                                                <C>       <C>       <C>
  Return on average assets (net income divided by average
    total assets) ...........................................        1.14%     1.29%     0.93%
  Return on average equity (net income divided by
    average total equity) ...................................        4.30%     5.76%    11.13%
  Interest rate spread (combined weighted average interest
    rate earned less combined weighted average interest
    rate cost) ..............................................        2.11%     2.07%     1.93%
  Ratio of average interest-earning assets to average
    interest-bearing liabilities ............................      137.75%   130.08%   109.17%
  Ratio of non-interest expense to average total assets .....        4.09%     1.30%     1.10%
  Ratio of net interest income after provision
    for loan losses to non-interest expense .................       79.91%   235.65%   205.19%
   Efficiency  ratio  (noninterest  expense divided by sum of
    net interest income plus noninterest income) ............       62.92%    39.26%    44.03%

ASSET QUALITY RATIOS
  Nonperforming assets to total assets at end of period .....         .03%     0.13%     0.05%
  Nonperforming loans to total loans at end of period .......         .05%     0.26%     0.16%
  Allowance for loan losses to total loans at end of period .         .25%     0.24%     0.23%
  Allowance for loan losses to nonperforming loans at
    end of period ...........................................      479.31%    89.90%   145.40%
  Provision for loan losses to total loans receivable, net ..         .02%     0.02%     0.02%
  Net charge-offs to average loans outstanding ..............         N/A(1)    N/A(1)    N/A(1)

CAPITAL RATIOS
  Total equity to total assets at end of period .............       21.33%    27.78%     5.80%
  Average total equity to average assets ....................       26.46%    22.40%     8.33%
</TABLE>
-------------------
(1) Ratio is not  applicable  because  there  were no net  charge-offs  for this
period.

REGULATORY CAPITAL RATIOS                December 31, 1999
                                      ----------------------
                                      (Dollars in thousands)

Tangible capital ....................   $44,971      21.60%
 Less:  Tangible capital requirement      3,123       1.50
                                        -------      -----
  Excess ............................   $41,848      20.10%
                                        =======      =====

Core capital ........................   $44,971      21.60%
Less:  Core capital requirement .....     8,327       4.00
                                        -------      -----
  Excess ............................   $36,644      17.60%
                                        =======      =====

Total risk-based capital ............   $45,249      58.60%
Less:  Risk-based capital requirement     6,177       8.00
                                        -------      -----
  Excess ............................   $39,072      50.60%
                                        =======      =====

                                       3
<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

GENERAL

     This  discussion  relates  to  the  financial   condition  and  results  of
operations  of the  Company,  which  became the holding  company for the Bank in
February 1998. The principal business of the Bank consists of accepting deposits
from the general  public and  investing  these funds  primarily  in loans and in
investment securities and mortgage-backed  securities. The Bank's loan portfolio
consists  primarily of loans secured by  residential  real estate located in its
market area.

     For the year ended  December 31, 1999,  the Company  recorded net income of
$2.5 million, a return on average assets of 1.14% and a return on average equity
of 4.30%.  For the year ended December 31, 1998, the Company recorded net income
of $3.0  million,  a return on  average  assets of 1.29% and a return on average
equity of 5.76%.  For the year ended December 31, 1997, the Company recorded net
income  of $2.0  million,  a return on  average  assets of 0.93% and a return on
average equity of 11.13%.

     The Company's net income is dependent primarily on its net interest income,
which is the difference  between interest income earned on its loan,  investment
securities  and  mortgage-backed  securities  portfolios  and  interest  paid on
interest-bearing  liabilities.  Net  interest  income is  determined  by (i) the
difference  between yields earned on  interest-earning  assets and rates paid on
interest-bearing  liabilities  ("interest  rate  spread")  and (ii) the relative
amounts  of  interest-earning  assets  and  interest-bearing   liabilities.  The
Company's  interest  rate  spread  is  affected  by  regulatory,   economic  and
competitive  factors  that  influence  interest  rates,  loan demand and deposit
flows.  To a lesser  extent,  the  Company's  net income also is affected by the
level of non-interest  expenses such as compensation  and employee  benefits and
FDIC insurance premiums.

     The  operations  of  the  Company  and  the  entire  thrift   industry  are
significantly  affected by prevailing economic  conditions,  competition and the
monetary,  fiscal and  regulatory  policies of  governmental  agencies.  Lending
activities are  influenced by the demand for and supply of housing,  competition
among  lenders,  the  level of  interest  rates and the  availability  of funds.
Deposit flows and costs of funds are  influenced  by prevailing  market rates of
interest, primarily on competing investments,  account maturities and the levels
of personal income and savings in the Company's market area.

BENEFIT PLAN RESTRUCTURING

     In  December  1999,  the  Board  of  Directors   approved  a  benefit  plan
restructuring  on the  basis of its  belief  that a  reduction  of the  expenses
associated  with the Company's  Employee  Stock  Ownership  Plan ("ESOP")  would
improve the Company's  profitability  and,  therefore,  the Company's  long-term
prospects  for  independence.   For  the  year  ended  December  31,  1999,  the
maintenance expenses for the ESOP were approximately $408,000, and the Company's
one-time termination expense was approximately $2.5 million.  Termination of the
ESOP,  effective  December 31, 1999, and  distribution  to  participants  of its
assets are contingent on receipt of an Internal  Revenue  Service  determination
that the ESOP will be tax-qualified upon its termination,  as well as compliance
with other applicable regulatory requirements.  See Note 9 of Notes to Financial
Statements.

TAX FREE SPECIAL DIVIDEND

     In November  1999,  the Company  announced a special cash dividend of $4.00
per share,  which totaled  approximately  $16.4  million.  The special  dividend
represented a return to  stockholders  of a portion of the proceeds  raised when
the Company went public in February 1998. As a nontaxable return of capital, the
special dividend reduced the tax cost basis of each outstanding share. The Board
of  Directors   took  this  action   because  it  believed  that  the  Company's
equity-to-assets  ratio was  excessive  and  would  prove to be a  deterrent  to
generating acceptable returns on equity over the long term.

SALE OF FHLMC STOCK

     In  August  1999,  the Bank  sold 100% of its  Federal  Home Loan  Mortgage
Corporation   ("FHLMC")  stock  portfolio   (123,072   shares)  in  open  market
transactions and realized an after-tax gain on such sales of approximately  $4.3
million.  The FHLMC stock had been  recorded  at its fair market  value with the
associated  unrealized  gains recorded in the Company's  consolidated net worth.
The sales were  undertaken in recognition  that the FHLMC stock had  appreciated
significantly over the last several years. Although the FHLMC had benefited from
higher  levels of  mortgage  loans  fostered by lower  interest  rates in recent
years, as a result of an uncertainty over the direction of interest rates and an
apparent slowing of mortgage loan originations in general,  the Company believed
that the FHLMC  stock  would be  subject  to future  adverse  market  pressures.

                                       4
<PAGE>
Additionally,  the FHLMC was under  increasing  pressure  to expand  its role in
promoting low income  housing,  which the Company  believed may also depress the
market value of the FHLMC stock. From December 31, 1998 to the date of sale, the
Bank's FHLMC stock portfolio  declined in value  approximately  17%. Proceeds of
these sales were invested in higher yielding investments.

CURRENT BUSINESS STRATEGY

     Until 1996,  the Company's  primary focus was on asset growth by attracting
deposits.  The Company determined that deposits were the most suitable source of
funding for the Bank because of their relative stability and the opportunity for
the Bank to offer other income-producing  products to its depositors. To attract
deposits,  the  Company  offered  rates  on  accounts  that  were  at  or  above
then-prevailing  rates in its market  area.  As a result of this  practice,  the
Company's  total assets  increased  each year until it reached $212.6 million at
December 31, 1995. This strategy substantially  increased the Company's interest
expense and reduced profitability.

     The Company,  however, was unable to deploy the significant amount of funds
generated by this strategy solely through loan  originations in its market area,
as reflected in the  loan-to-deposit  ratio of 43.5% at December 31, 1995.  As a
result,  the  Company  invested  these  funds  in  securities,   primarily  U.S.
government  and  agency   securities   and   mortgage-backed   securities.   See
"--Asset/Liability   Management."   The   yields  on  these   investments   were
significantly  less  than  the  yields  obtained  by the  Company  on  its  loan
portfolio.   The  combined  lower  weighted   average  yield  on  the  Company's
interest-earning  assets,  when  reduced  by the  relatively  high  cost  of the
Company's deposits due to the Company's former deposit pricing strategy,  tended
to depress the Company's overall profitability.

     In 1996, the Company revised its business  strategy to emphasize  increased
profitability  over asset  growth by  attracting  deposits on a less  aggressive
basis through a reduction in overall  deposit  rates.  This  reduction  caused a
deposit  run-off during 1996 of  approximately  $10.9 million in  higher-costing
deposits.  This run-off contributed to a reduction in the Company's total assets
to $204.4 million at December 31, 1996 from $212.6 million at December 31, 1995.
Deposits as a percentage of average assets  decreased from 92.4% at December 31,
1995, to 87.8% at December 31, 1996.  Deposits as a percentage of average assets
were 147.0% at December 31, 1997,  primarily  as a result of  subscriptions  for
Common Stock in the conversion.  At December 31, 1998,  deposits as a percentage
of average assets were 67.7%. In 1999, the Company modified its policy to retain
its deposit base through an increase in overall  deposit rates.  At December 31,
1999, deposits as a percentage of average assets were 74.0%.

     In addition,  the Company has continued its emphasis on the  origination of
adjustable rate loans in its market area. In 1996,  average loans increased $9.9
million,  or 12.0%, from the 1995 average. In 1997, average loans increased $7.1
million,  or 7.7%,  from the 1996 average.  And in 1998 and 1999,  average loans
increased  $6.7  million  and $5.6  million,  respectively,  or 6.8%  and  5.3%,
respectively,  from the prior year's average. The Company's interest rate spread
was 2.11%, 2.07% and 1.93% for each of the three years ended December 31, 1999.

     The Company's  profitability  in the years ended December 31, 1998 and 1999
also was primarily  attributable to its current business strategy. The Company's
net  income,  return on average  assets and return on average  equity  were $3.0
million,  1.29% and 5.76%,  respectively,  for the year ended December 31, 1998.
The Company's net income,  return on average assets and return on average equity
were $2.5 million,  1.14% and 4.30%,  for the year ended  December 31, 1999. See
"Selected Financial Information and Other Data."

     The  results  to date  which  are  attributable  to the  Company's  current
business strategy are not necessarily indicative of future results.

ASSET/LIABILITY MANAGEMENT

     Key components of a successful  asset/liability strategy are the monitoring
and managing of interest rate sensitivity of both the interest-earning asset and
interest-bearing   liability  portfolios.   The  Company  has  employed  various
strategies  intended to minimize  the  adverse  affect of interest  rate risk on
future  operations  by  providing  a better  match  between  the  interest  rate
sensitivity  between its assets and  liabilities.  In particular,  the Company's
strategies  are intended to stabilize  net interest  income for the long-term by
protecting its interest rate spread against  increases in interest  rates.  Such
strategies include the origination of adjustable-rate  mortgage loans secured by
one-to-four   family   residential  real  estate,   and,  to  a  lesser  extent,
multi-family  real estate loans and the origination of other loans with interest
rates that are more sensitive to adjustment  based upon market  conditions  than
long-term,  fixed-rate  residential  mortgage loans. For the year ended December
31, 1999,  approximately  $11.8 million of the  one-to-four  family  residential
loans originated by the Company (comprising 73.85% of such loans) had adjustable
rates.

                                       5
<PAGE>
     The  Company  used  excess  funds to invest in U.S.  government  and agency
securities and  mortgage-backed  securities.  Such investments have been made in
order to manage  interest  rate  risk,  as well as to  diversify  the  Company's
assets,  manage cash flow,  obtain  yields and  maintain  the minimum  levels of
qualified and liquid assets required by regulatory authorities.

     The U.S.  government and agency  securities  consist of notes issued by the
FHLB  System and other  government  agencies.  These  securities  generally  are
purchased  for a term of five  years or less,  and are  fixed-term,  fixed  rate
securities,  callable  securities or securities which provide for interest rates
to increase at specified  intervals to  pre-established  rates, and thus improve
the spread between the cost of funds and yield on  investments.  At December 31,
1999,  approximately  $16.0  million of the  securities  were due in one year or
less, approximately $7.2 million were due in one to five years and approximately
$14.2 million were due after ten years.  However,  at December 31, 1999,  all of
these  securities  had call  provisions  which  authorize the issuing  agency to
prepay the securities at face value at certain  pre-established dates. If, prior
to their maturity  dates,  market interest rates decline below the rates paid on
the securities, the issuing agency may elect to exercise its right to prepay the
securities.  At December 31, 1999, all of these  securities are callable  and/or
due prior to December  31,  2000.  It is  currently  anticipated  that any funds
available from a prepayment  would be reinvested into those U.S.  government and
agency securities or mortgage-backed securities which the Company believes to be
the most appropriate  investments at that time,  assuming lending  opportunities
are not then available.  Notwithstanding their call feature, it is believed that
investments in callable securities, which have improved the portfolio yield over
alternative fixed yield, fixed maturity investments, have been beneficial.

     Mortgage-backed  securities  entitle  the  Company  to  receive  a pro rata
portion  of the  cash  flow  from  an  identified  pool of  mortgages.  Although
mortgage-backed  securities  generally  offer  lesser  yields than the loans for
which they are exchanged,  mortgage-backed  securities present lower credit risk
by virtue of the  guarantees  that back them,  are more liquid  than  individual
mortgage loans, and may be used to collateralize borrowings or other obligations
of  the  Company.   Further,   since  they  are   primarily   adjustable   rate,
mortgage-backed  securities are helpful in limiting the Company's  interest rate
risk. For more information regarding investment securities,  see Note 2 of Notes
to Financial Statements.

INTEREST RATE SENSITIVITY ANALYSIS

     The Company's  profitability is affected by fluctuations in interest rates.
A sudden and  substantial  increase in interest  rates may adversely  impact the
Company's  earnings to the extent that the  interest  rates on interest  earning
assets and interest bearing  liabilities do not change at the same speed, to the
same extent or on the same basis.  As part of its effort to manage interest rate
risk, the Bank monitors its net portfolio value ("NPV"),  a methodology  adopted
by the OTS to assist the Bank in assessing interest rate risk.

     Generally,  NPV is the discounted  present value of the difference  between
incoming  cash flows on  interest-earning  assets and other  assets and outgoing
cash  flows  on   interest-bearing   liabilities  and  other  liabilities.   The
application of the  methodology  attempts to quantify  interest rate risk as the
change in the NPV which would result from a theoretical 200 basis point (1 basis
point equals .01%) change in market  rates.  Both a 200 basis point  increase in
market  interest rates and a 200 basis point  decrease in market  interest rates
are considered.

                                       6
<PAGE>
     The  following  table  presents  the Bank's NPV at December  31,  1999,  as
calculated by the OTS, based on information provided to the OTS by the Bank.
<TABLE>
<CAPTION>
                                            Net Portfolio Value                              NPV as % of PV of Assets
                            -------------------------------------------------------     ---------------------------------------
    CHANGE                    $ Amount            $ Change            % Change
    IN RATES                  --------            --------            --------                NPV RATIO              CHANGE
                                            (Dollars in thousands)
            <S>                    <C>                <C>                     <C>                  <C>                  <C>
            +400 bp                   $--                  $0                   0%                  0.00%                  0bp
            +300 bp                38,320             -10,466                 -21%                 19.34%               -373bp
            +200 bp                42,209              -6,577                 -13%                 20.79%               -227bp
            +100 bp                45,763              -3,023                  -6%                 22.06%               -101bp
               0 bp                48,786                                                          23.07%
            -100 bp                51,272               2,486                  +5%                 23.85%                +78bp
            -200 bp                53,938               5,152                 +11%                 24.66%               +160bp
            -300 bp                57,241               8,454                 +17%                 25.66%               +260bp
            -400 bp                    --                   0                   0%                  0.00%                  0bp
</TABLE>
          Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock

   Pre-Shock NPV Ratio:  NPV as % of PV of Assets.................    23.07%
   Exposure Measure:  Post-Shock NPV Ratio........................    20.79%
   Sensitivity Measure:  Change in NPV Ratio......................    22bp

     The  computation  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest  rates,  loan  prepayments  and deposit decay rates,  and should not be
relied upon as indicative of actual results. The computations do not contemplate
any actions the Bank could undertake in response to changes in interest rates.

     The matching of assets and  liabilities  may be analyzed by  examining  the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring  an  institution's  interest  rate  sensitivity  "gap."  An  asset or
liability is said to be interest rate sensitive  within a specific  period if it
will mature or reprice within that period.  The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing  within a specific  time period and the amount of  interest-bearing
liabilities  maturing or repricing  within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities,  and is considered negative when the amount
of interest  rate  sensitive  liabilities  exceeds  the amount of interest  rate
sensitive  assets.  At December  31, 1999,  the Company had a positive  one-year
interest  rate  sensitivity  gap of  22.59%  of total  interest-earning  assets.
Generally,  during a period of rising  interest  rates,  a negative gap position
would be expected to adversely  affect net interest  income while a positive gap
position  would be expected to result in an  increase  in net  interest  income.
Conversely  during a period of falling  interest  rates, a negative gap would be
expected  to result in an  increase in net  interest  income and a positive  gap
would be expected to adversely affect net interest income.

                                       7
<PAGE>
     The following table sets forth the amounts of  interest-earning  assets and
interest-bearing liabilities outstanding at December 31, 1999 which are expected
to mature or reprice in each of the time periods shown.
<TABLE>
<CAPTION>
                                                      Over One     Over Five      Over Ten
                                        One Year      Through       Through        Through       Over Fifteen
                                         or Less     Five Years    Ten Years     Fifteen Years       Years          Total
                                         -------     ----------      -----       -------------       -----          -----
                                                                       (Dollars in thousands)
Interest-earning assets:
   Loans:
<S>                                       <C>           <C>         <C>             <C>            <C>           <C>
      One-to-four family.........          $68,411        $3,014     $2,536          $13,844          $ --         $87,805
      Multi-family residential...            2,165            --         --               --            --           2,165
      Construction...............            4,077            --         --               --            --           4,077
      Non-residential............           12,291            --         --               --            --          12,291
      Secured by deposits........            2,525            --         --               --            --           2,525
      Other consumer.............              270         4,400         --               --            --           4,670
   Time deposits and interest
   bearing deposits in FHLB......              251            --         --               --            --             251
   Federal funds sold............            4,100            --         --               --            --           4,100
   Securities....................           17,540         6,985     13,597               --            --          38,122
   Mortgage-backed securities....           26,485        13,707        747               53         2,267          43,259
                                          --------       -------    -------          -------       -------        --------
     Total.......................         $138,115       $28,106    $16,880          $13,897        $2,267        $199,265
                                          --------       -------    -------          -------       -------        --------
Interest-bearing liabilities:
   Deposits......................         $113,876       $44,085         --               --            --        $157,961
                                          --------       -------    -------          -------        ------        --------

Interest sensitivity gap.........          $25,445     $(17,185)    $16,880          $13,897        $2,267         $41,304
                                           =======     =========    =======          =======       =======         =======
Cumulative interest sensitivity
   gap...........................          $25,445        $8,260    $25,140          $39,037       $41,304         $41,304
                                           =======     =========    =======          =======       =======         =======
Ratio of interest-earning assets to
   interest-bearing liabilities..          122.58%        62.06%        N/A              N/A           N/A         137.75%
                                           =======     =========    =======          =======       =======         =======
Ratio of cumulative gap to
   total interest-earning assets.           12.77%         4.15%     12.62%           19.59%        20.73%          20.73%
                                           =======     =========    =======          =======       =======         =======
</TABLE>
     The preceding  table was prepared based upon the assumption that loans will
not be  repaid  before  their  respective  contractual  maturities,  except  for
adjustable rate loans which are classified based upon their next repricing date.
Further,  it is assumed that fixed maturity  deposits are not withdrawn prior to
maturity  and that other  deposits are  withdrawn  or repriced  within one year.
Management  of the  Company  does not  believe  that these  assumptions  will be
materially  different from the Company's actual experience.  However, the actual
interest rate  sensitivity of the Company's  assets and  liabilities  could vary
significantly  from the  information  set forth in the  table due to market  and
other factors.

     The retention of adjustable-rate  mortgage loans in the Company's portfolio
helps reduce the Company's exposure to changes in interest rates. However, there
are  unquantifiable  credit risks  resulting from potential  increased  costs to
borrowers  as a  result  of  repricing  adjustable-rate  mortgage  loans.  It is
possible that during periods of rising  interest  rates,  the risk of default on
adjustable-rate  mortgage  loans may  increase due to the upward  adjustment  of
interest costs to the borrowers.

                                       8
<PAGE>
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

     The  following  table  sets  forth  certain  information  relating  to  the
Company's average  interest-earning assets and interest-bearing  liabilities and
reflects  the average  yield on assets and average cost of  liabilities  for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or  expense by the  average  monthly  balance  of assets or  liabilities,
respectively,  for the periods  presented.  Average  balances  are derived  from
month-end  balances.  Management  does not  believe  that  the use of  month-end
balances  instead of daily  balances has caused any material  difference  in the
information presented.

     The  table  also  presents  information  for the  periods  and at the  date
indicated  with respect to the  difference  between the average  yield earned on
interest-earning  assets and average rate paid on interest-bearing  liabilities,
or "interest rate spread," which savings institutions have traditionally used as
an  indicator  of  profitability.  Another  indicator  of an  institution's  net
interest income is its "net yield on interest-earning  assets," which is its net
interest income divided by the average balance of  interest-earning  assets. Net
interest  income is affected  by the  interest  rate spread and by the  relative
amounts  of  interest-earning  assets  and  interest-bearing  liabilities.  When
interest-earning assets approximate or exceed interest-bearing  liabilities, any
positive interest rate spread will generate net interest income.

                                                       At December 31, 1999
                                                 -------------------------------
                                                                    Weighted
                                                                     Average
                                                      Balance       Yield/Cost
                                                      -------       ----------
                                                     (Dollars in thousands)
Interest-earning assets:
   Loans receivable, net................               $113,532         7.55%
   Securities available for sale........                 71,423         6.70%
   Securities held to maturity..........                  9,958         6.12%
   Time deposits and other interest-
      bearing cash deposits.............                  4,351         5.27%
                                                       --------       -------
     Total interest-earning assets......                199,264         7.12%
Non-interest-earning assets.............                  8,642
                                                       --------
   Total assets.........................               $207,906
                                                       ========
Interest-bearing liabilities:
   Deposits.............................               $157,961         4.65%
Non-interest-bearing liabilities........                  5,599
                                                       --------
     Total liabilities..................                163,560
Common stock............................                     39
Additional paid-in capital..............                 24,215
Retained earnings.......................                 20,991
Unallocated ESOP shares.................                     --
Accumulated other comprehensive
   income...............................                  (899)
                                                       --------
     Total liabilities and equity.......               $207,906
                                                       ========

Interest rate spread....................                                2.47%
                                                                      ------
Ratio of interest-earning assets
   interest-bearing liabilities.........                              126.15%
                                                                      ======

                                                   (Continued on following page)

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                               -----------------------------------------------------------------------------------------------------
                                             1999                             1998                              1997
                               ---------------------------------  ------------------------------      ------------------------------
                               Average               Average     Average               Average        Average              Average
                                Balance   Interest  Yield/Cost    Balance   Interest  Yield/Cost      Balance  Interest   Yield/Cost
                                -------   --------  ----------    -------   --------  ----------      -------  --------   ----------
                                                                     (Dollars in thousands)
Interest-earning assets:
<S>                             <C>         <C>      <C>          <C>         <C>       <C>          <C>         <C>         <C>
   Loans receivable, net...     $111,469     $8,435    7.57%      $105,837     $8,279     7.82%       $99,126     $7,607       7.67%
   Securities available for
     sale..................       73,863      4,204    5.69%        48,539      2,418     4.98%        11,405        412       3.61%
   Securities held to .....
       maturity ...........       14,220        814    5.72%        36,777      2,360     6.42%        75,307      4,706       6.25%
   Time deposits and other
     interest-bearing cash
     deposits..............       11,536        751    6.51%        32,480      1,994     6.13%        27,233      1,586       5.82%
                                --------     ------               --------     ------                --------     ------
     Total interest-earning
       assets..............      211,088     14,204    6.73%       223,633     15,051     6.73%       213,071     14,311       6.72%
                                             ------  ------                    ------   ------                    ------       ----
Non-interest-earning assets        6,324                             5,143                              5,119
                                --------                          --------                           --------
   Total assets............     $217,412                          $228,776                           $218,190
                                ========                          ========                           ========

Interest-bearing liabilities:
   Deposits...............      $153,245      7,078    4.62%      $171,922      8,004     4.65%      $195,019     $9,341       4.79%
   Borrowings.............            --         --      --%            --         --       --%           161          9       5.59%
                                --------     ------  ------       --------     ------   ------       --------     ------     ------
     Total interest-bearing
       liabilities........       153,245      7,078    4.62%       171,922      8,004     4.65%       195,180      9,350       4.79%
                                             ------  ------                    ------   ------                    ------       ----
Non-interest-bearing
   liabilities............         6,641                             5,629                              4,829
                                --------                          --------                           --------
     Total liabilities....       159,886                           177,551                            200,009
Common stock..............            40                                32                                 --
Additional paid-in capital        40,442                            31,492                                 --
Retained earnings.........        16,670                            18,174                             15,510
Unallocated ESOP shares...       (2,318)                           (2,582)                                 --
Accumulated other
   comprehensive income...         2,692                             4,109                              2,671
                                --------                          --------                           --------
     Total liabilities and
       equity.............      $217,412                          $228,776                           $218,190
                                ========                          ========                           ========

Net interest income.......                   $7,126                            $7,047                             $4,961
                                            =======                           =======                            =======
Interest rate spread......                             2.11%                              2.07%                                1.93%
                                                     ======                             ======                               ======
Net yield on interest-earning
   Assets.................                             3.38%                              3.15%                                2.33%
                                                     ======                             ======                               ======
Ratio of average interest-earning
   assets to average interest-bearing
   liabilities............                           137.75%                            130.08%                              109.17%
                                                     ======                             ======                               ======
</TABLE>
                                       10

<PAGE>
RATE VOLUME ANALYSIS

     The following  table sets forth certain  information  regarding  changes in
interest income and interest  expense of the Company for the periods  indicated.
For each  category of  interest-earning  asset and  interest-bearing  liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  from year to year  multiplied  by the  average  rate for the
prior  year) and (ii) change in rate  (changes in the average  rate from year to
year multiplied by the prior year's volume).
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                              --------------------------------------------------------------
                                      1999 vs. 1998                  1998 vs. 1997
                              -----------------------------  -------------------------------
                                  Increase                        Increase
                              (Decrease) due to               (Decrease) due to
                              -----------------               -----------------
                                                   Total                           Total
                                                  Increase                        Increase
                              Rate      Volume   (Decrease)   Rate     Volume    (Decrease)
                              ----      ------   ----------   ----     ------    ----------
                                                  (Dollars in thousands)
Interest-earning assets:
<S>                        <C>        <C>        <C>        <C>        <C>        <C>
   Loans receivable ....   $  (279)   $   440    $   161    $   157    $   515    $   672
   Securities available
     for sale ..........       525      1,261      1,786        665      1,341      2,006
   Securities held to
   maturity ............      (100)    (1,448)    (1,548)        62     (2,408)    (2,346)
   Other interest-
    earning assets .....        43     (1,286)    (1,243)       102        306        408
                           -------    -------    -------    -------    -------    -------
     Total interest-
     earning assets ....   $   189    $(1,033)   $  (844)   $   986    $  (246)   $   740
                           -------    -------    -------    -------    -------    -------
Interest-bearing
liabilities:
   Deposits ............   $   (61)   $  (871)   $  (932)   $  (231)   $(1,106)   $(1,337)
   Borrowings ..........        --         --         --         --         (9)        (9)
                           -------    -------    -------    -------    -------    -------
     Total interest-
     bearing liabilities   $   (61)   $  (871)   $  (932)   $  (231)   $(1,115)   $(1,346)
                           -------    -------    -------    -------    -------    -------
Increase (decrease) in
  net interest income ..   $   250    $  (162)   $    88    $ 1,217    $   869    $ 2,086
                           =======    =======    =======    =======    =======    =======
</TABLE>

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1999 AND DECEMBER 31, 1998

     The Company's total assets decreased by $12.1 million,  from $220.0 million
at December 31, 1998 to $207.9 million at December 31, 1999.  Federal funds sold
decreased from $9.7 million at December 31, 1998 to $4.1 million at December 31,
1999.  Securities held to maturity  declined $17.4 million due to various issues
maturing.  A portion of such funds was  reinvested in  securities  available for
sale, which increased $3.3 million. The special dividend of $4.00 per share paid
in December 1999 utilized $16.4 million.

     The  Company's  loan  portfolio  increased by $4.6 million  during the year
ended  December 31, 1999. Net loans totaled $113.5 million and $108.8 million at
December 31, 1999 and December 31, 1998, respectively.  The increase in the loan
activity  during  the year  ended  December  31,  1999 was due to the  Company's
efforts  to  increase  its  loan  originations  using  funds  currently  held in
investment  securities.  For the year ended  December  31, 1999,  the  Company's
average yield on loans was 7.57%,  compared to 7.82% for the year ended December
31, 1998.

     At December 31, 1999,  the  Company's  investments  classified  as "held to
maturity"  were carried at  amortized  cost of $9.9 million and had an estimated
fair market value of $10.1 million, and its securities  classified as "available
for sale" had an  estimated  fair market value of $71.4  million.  See Note 2 of
Notes to Financial Statements.

                                       11
<PAGE>
     The  allowance  for loan losses  totaled  $278,000 at December 31, 1999, an
increase of $20,000 from the  allowance  of $258,000 at December  31, 1998.  The
ratio of the allowance for loan losses to loans was .24% at each of December 31,
1999 and 1998.  Also at December 31, 1999,  the Company's  non-performing  loans
were  $58,000,  or .05% of total loans,  compared to $287,000,  or .26% of total
loans,  at December  31, 1998,  and the  Company's  ratio of allowance  for loan
losses to  non-performing  loans at December  31, 1999 and December 31, 1998 was
479.3% and 89.9%, respectively.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

     NET INCOME.  The Company's net income for the year ended  December 31, 1999
was $2.5 million compared to $3.0 million for the year ended December 31, 1998.

     NET INTEREST  INCOME.  Net interest  income for the year ended December 31,
1999 was $7.1 million,  compared to $7.0 million for the year ended December 31,
1998.  The increase in net interest  income for the year ended December 31, 1999
was primarily due to a slightly lower cost of funds. For the year ended December
31, 1998,  the  Company's  average  yield on total  interest-earning  assets was
6.73%,  compared to 6.73% for the year ended  December 31, 1998, and its average
cost of interest-bearing  liabilities was 4.62%,  compared to 4.65% for the year
ended December 31, 1998. As a result, the Company's interest rate spread for the
year ended  December  31,  1999 was 2.11%,  compared to 2.07% for the year ended
December 31, 1998,  and its net yield on  interest-earning  assets was 3.38% for
the year ended December 31, 1999,  compared to 3.15% for the year ended December
31, 1998.

     INTEREST  INCOME.  Interest income decreased by $926,000 from $15.1 million
to $14.2 million, or by 6.15%, during the year ended December,  1999 compared to
1998. This decrease was due to a decline in interest earning assets. The average
balance of  securities  held to  maturity  declined  $22.6  million,  from $36.8
million at December 31,  1998,  to $14.2  million at December 31, 1999.  Average
time deposits and other  interest-bearing cash deposits decreased $21.0 million,
from $32.5  million at December 31, 1998 to $11.5  million at December 31, 1999.
Overall,  average total  interest-earning  assets  decreased  $12.5 million from
December 31, 1998 to December 31, 1999. The ratio of interest-earning  assets to
interest-bearing  liabilities  increased from 130.1% for the year ended December
31, 1998 to 137.8% for the year ended December 31, 1999.

     INTEREST  EXPENSE.  Interest expense decreased to $7.1 million for the year
ended  December  31, 1999,  compared to $8.0 million for 1998.  The decrease was
primarily  attributable  to a decrease in deposits.  The average cost of average
interest bearing liabilities declined from 4.65% for the year ended December 31,
1998 to 4.62% for the year ended  December 31, 1999.  Over the same period,  the
average  balance of deposits  decreased  from $171.9  million for the year ended
December 31, 1998 to $153.2 million at December 31, 1999.

     PROVISION  FOR LOAN  LOSSES.  The  Company  determined  that an  additional
$20,000  provision  for loan loss was required  for the year ended  December 31,
1999.  For the year ended  December  31,  1998,  the Company  determined  that a
$20,000 provision was warranted.

     NON-INTEREST EXPENSE. Total non-interest expense in the year ended December
31, 1999 was $8.9 million,  compared to $3.0 million in 1998.  This increase was
primarily  attributable to approximately $5.5 million of employee benefits.  See
Note 9 of Notes to Financial Statements.

     INCOME TAXES.  The effective tax rate for the year ended  December 31, 1999
was 52.6%,  compared to 34.9% for 1998.  This increase in the effective tax rate
resulted from $2.9 million of employee  benefits  which were not  deductible for
income tax purposes.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

     NET INCOME.  The Company's net income for the year ended  December 31, 1998
was $3.0 million, compared to $2.0 million for the year ended December 31, 1997.
The increase in net income for the year  resulted  primarily  from the Company's
repositioning funds into higher yielding assets as well as a decline in the cost
of funds.

                                       12
<PAGE>
     NET INTEREST  INCOME.  Net interest  income for the year ended December 31,
1998 was $7.0 million,  compared to $5.0 million for the year ended December 31,
1997.  The increase in net interest  income for the year ended December 31, 1998
was   primarily   due  to  a  lower  cost  of  funds  and  a  higher   yield  on
interest-earning assets. For the year ended December 31, 1998, the average yield
on total interest-earning assets was 6.73%, compared to 6.72% for the year ended
December 31,  1997,  and its average cost of  interest-bearing  liabilities  was
4.65%,  compared to 4.79% for the year ended December 31, 1997. As a result, the
interest rate spread for the year ended December 31, 1998 was 2.07%, compared to
1.93%  for  the  year  ended   December   31,   1997,   and  its  net  yield  on
interest-earning assets was 3.15% for the year ended December 31, 1998, compared
to 2.33% for the year ended December 31, 1997.

     INTEREST  INCOME.  Interest income increased by $740,000 from $14.3 million
to $15.1  million,  or by 5.2%,  during  1998  compared to 1997.  This  increase
primarily  resulted from an increase in the average yield on the loan portfolio,
which was 7.82% for 1998  compared to 7.67% for 1997,  as well as an increase in
the average balance of loans to $105.8 million in 1998 compared to $99.1 million
in 1997.

     INTEREST  EXPENSE.  Interest expense  decreased $1.3 million,  or 14.4%, to
$8.0 million for the year ended December 31, 1998 from $9.4 million for the year
ended December 31, 1997. The Company's strategy of less aggressively pricing its
deposit  products  resulted  in a  decrease  in its  cost of  funds as well as a
reduction  in the level of  interest-bearing  liabilities  due to an  outflow of
higher cost deposits.  At December 31, 1998, total deposits were $154.8 million,
compared to $320.6 million at December 31, 1997, a decrease of 51.7%.

     PROVISION FOR LOAN LOSSES.  The  allowance  for loan losses is  established
through a provision for loan losses based on management's evaluation of the risk
inherent  in its  loan  portfolio  and  the  general  economy.  Such  evaluation
considers  numerous  factors,   including  general  economic  conditions,   loan
portfolio  composition,  prior loss experience,  the estimated fair value of the
underlying  collateral and other factors that warrant  recognition.  The Company
determined  that a provision  for loan loss of $20,000 was  appropriate  for the
year ended December 31, 1998.  The Company  determined not to increase the level
of the provision for loan losses, which was $20,000 in 1997.

     INCOME TAXES. The Company's  effective tax rate for the year ended December
31,  1998 was 34.9%,  compared  to 33.9% for 1997.  The  increase  in income tax
expense of $602,000 in 1998 compared to 1997 was due to an increase in income.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company  has no  business  other  than  that of the  Bank.  Management
believes  dividends  that may be paid from the Bank to the Company  will provide
sufficient funds for the Company's current and anticipated  needs;  however,  no
assurance  can be given  that the  Company  will not have a need for  additional
funds in the future. The Bank is subject to certain regulatory  limitations with
respect to the payment of dividends to the Company.

     Capital  Resources.  At December 31, 1999, the Bank exceeded all regulatory
minimum capital  requirements.  For a detailed discussion of the OTS' regulatory
capital  requirements,  and for a tabular  presentation of the Bank's compliance
with such requirements, see Note 13 of Notes to Financial Statements.

     Liquidity.  Liquidity  management is both a daily and long-term function of
business  management.  If the Bank requires funds beyond its ability to generate
them internally,  the Bank believes that it could borrow funds from the FHLB. At
December 31, 1999, the Bank had no outstanding  advances from the FHLB. See Note
6 of Notes to Financial Statements.

     The Bank's primary sources of funds consist of deposits, repayment of loans
and mortgage-backed  securities,  maturities of investments and interest-bearing
deposits,  and funds provided from  operations.  While  scheduled  repayments of
loans and mortgage-backed securities and maturities of investment securities are
predictable  sources of funds,  deposit flows and loan  prepayments  are greatly
influenced  by the general  level of interest  rates,  economic  conditions  and
competition.  The Bank uses its liquidity resources principally to fund existing
and future loan commitments, to fund maturing certificates of deposit and demand
deposit  withdrawals,  to invest in other  interest-earning  assets, to maintain
liquidity,  and to  meet  operating  expenses.  Management  believes  that  loan
repayments  and other  sources  of funds  will be  adequate  to meet the  Bank's
liquidity needs for the immediate future.

     In  addition,  the Bank is required to  maintain  minimum  levels of liquid
assets as defined by OTS regulations.  This requirement,  which may be varied at
the direction of the OTS depending  upon economic  conditions and deposit flows,
is based upon a percentage of deposits and short-term  borrowings.  The required
minimum ratio is currently 4%. The Bank has  historically  maintained a level of
liquid assets in excess of regulatory requirements.  The Bank's liquidity ratios
at  December  31,  1999,   1998  and  1997  were  58.02%,   53.87%  and  65.36%,
respectively.

                                       13
<PAGE>
     A portion of the Bank's liquidity consists of cash and cash equivalents. At
December 31, 1999, cash and cash equivalents totaled $4.5 million.  The level of
these  assets  depends  upon  the  Bank's  operating,  investing  and  financing
activities during any given period.

     Although  operating  activities  have  historically  generated  a declining
amount of cash flows, cash flows from operating  activities increased during the
year ended December, 1998 and decreased during the year ended December 1999. For
the years ended  December  31,  1997,  1998 and 1999,  such cash flows were $2.4
million, $2.6 million and $1.4 million, respectively.

     Cash flows from  investing  activities  were a net source of funds of $12.2
million and $127.7 million in 1999 and 1998 respectively.  A principal source of
cash   flows  in  this  area  has  been   proceeds   from  the   maturities   of
held-to-maturity  securities, the volume of which reflects the prior emphasis on
investments in such securities over loans.  These proceeds were a source of cash
flows of $50.3  million for 1997,  $24.2  million for 1998 and $17.4 million for
1999.  At the same time,  the  investment  of cash in loans was $4.7  million in
1999,  $5.4  million  in 1998  and $8.0  million  in 1997,  while  purchases  of
held-to-maturity  securities were $5.9 million in 1997.  There were no purchases
of  held-to-maturity  securities  in  1998  and  1999.  Further,  the  Bank  has
re-positioned the investment of its excess funds to enhance their  availability.
Funds not  immediately  invested in loans are sold on the federal  funds market,
which permits the Bank to earn a favorable  rate of interest  while  maintaining
daily access to such funds.  Although the Bank  continues to acquire  securities
using  funds  from  loan  repayments  and  proceeds  from  maturities  of  other
securities,  the  liquidity  position  avoids the need to  consider  the sale of
securities   prior  to  maturity  to  satisfy   lending  or  other   operational
commitments.  At December  31, 1999,  in addition to its federal  funds sold and
other liquid assets,  which were 58.02% of deposits and  short-term  borrowings,
the Bank had  available an unused $10.1  million line of credit with the FHLB of
Cincinnati.

     Beginning in 1996,  the Bank permitted the run-off of  higher-costing  time
deposits by offering only market rates of interest on maturing  deposits  rather
than above-market  rates under its previous pricing strategy.  Cash was required
to fund net  withdrawals of time deposits in amounts of $7.8 million in 1997 and
$16.5 million in 1998.  The Bank  modified this strategy in 1999,  and had a net
increase in deposits of $6.6 million.  Because of the Bank's ability to generate
cash flows  from its  financing  activities  and the  availability  of its other
liquid  assets,  the Bank does not  anticipate  any difficulty in funding future
withdrawals of such time deposits as they come due.

     At December 31, 1999, the Bank had $1.2 million in outstanding  commitments
to originate  loans.  The Bank  anticipates  that it will have sufficient  funds
available  to meet its current loan  origination  commitments.  Certificates  of
deposit  which are scheduled to mature in one year or less totaled $63.8 million
at December 31, 1999. Based on historical experience, management believes that a
significant portion of such deposits will remain with the Bank.

     Another source of liquidity is net proceeds from the conversion.  Following
the completion of the conversion, the Bank received 50% of the net proceeds from
the  conversion or  approximately  $19.7  million,  which are being used for the
Bank's business activities.

IMPACT OF INFLATION AND CHANGING PRICES

     The  financial  statements  and notes  thereto  presented  herein have been
prepared in accordance  with generally  accepted  accounting  principles,  which
require the measurement of financial  position and operating results in terms of
historical  dollars without  considering  the change in the relative  purchasing
power of money  over  time and due to  inflation.  The  impact of  inflation  is
reflected in the increased cost of the Bank's operations.

     Unlike most industrial companies,  nearly all the assets and liabilities of
the Company are monetary in nature. As a result,  changes in interest rates have
a greater  impact on the  Company's  performance  than do the effects of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or to the same extent as the price of goods and services.

YEAR 2000

     Prior to January 1, 2000, the Company was aware of concerns  throughout the
business  community of reliance  upon  computer  software  that did not properly
recognize  the Year 2000 in date  formats,  often  referred to as the "Year 2000
Problem."  The Year 2000 Problem was the result of software  being written using
two digits  rather than four digits to define the  applicable  year (i.e.,  "98"
rather than "1998").  A failure by a business to properly identify and correct a
Year 2000 Problem in its  operations  could have resulted in system  failures or
miscalculations. In turn, this could have resulted in disruptions of operations,
including among other things a temporary inability to process  transactions,  or
otherwise engage in routine business transactions on a day-to-day basis.

                                       14
<PAGE>
     Operations  of the Company  depend on the  successful  operation on a daily
basis of its computer systems and a third party service  bureau's  equipment and
software.  In its analysis of these systems,  equipment and software,  a plan of
action was put in place by the Bank to  minimize  its risk  exposure to the Year
2000 Problem.  As part of the plan, an oversight committee was set up to monitor
Year 2000 compliance.

     The Company's service provider successfully completed the renovation of its
equipment  as  well  as  proxy  tests  involving  the  participation  of  member
institutions  transmitting  within a test institution  created for this purpose.
The service  provider  contracted  with a recovery site in Philadelphia to cover
Year 2000  contingencies and conducted  Business Recovery Tests to ensure proper
transmission  with  member  institutions.  The  service  provider's  systems and
equipment were well prepared for the Year 2000 Problem.

     The Company also renovated computer  equipment,  assessed  mission-critical
systems,  reviewed tests and made contingency plans. The Company  experienced no
disruptions to normal business operations due to the Year 2000 Problem.

     As of December 31, 1999, the Company had incurred  approximately $47,000 in
direct  compliance  costs  associated  with the Year 2000  Problem.  The Company
estimates that $47,000 will  approximate  total direct  compliance costs through
the Year 2000. The Company does not separately track internal costs incurred for
Year  2000   compliance,   such  costs  are   principally   related  to  payroll
expenditures.  Funding  for such costs has been and will be derived  from normal
operating cash flow.

FORWARD-LOOKING STATEMENTS

     Management's  discussion  and  analysis  includes  certain  forward-looking
statements  addressing,  among other things,  the Bank's prospects for earnings,
asset growth and net interest margin. Forward-looking statements are accompanied
by, and identified  with, such terms as  "anticipates,"  "believes,"  "expects,"
"intends," and similar phrases.  Management's expectations for the Bank's future
involve a number of assumptions  and estimates.  Factors that could cause actual
results to differ from the expectations  expressed  herein include:  substantial
changes in interest rates,  and changes in the general  economy;  changes in the
Bank's strategies for credit-risk management,  interest-rate risk management and
investment  activities.  Accordingly,  any  forward-looking  statements included
herein do not purport to be  predictions of future events or  circumstances  and
may not be realized.

                                       15

<PAGE>
                                  LETTERHEAD OF
                       YORK, NEEL & CO.-HOPKINSVILLE, LLP
                               1113 BETHEL STREET
                             HOPKINSVILLE, KY 42240
                         (270)886-0206/FAX (270)886-0875




                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
Hopfed Bancorp, Inc.


We have audited the accompanying  consolidated statements of financial condition
of HopFed  Bancorp,  Inc. and subsidiary (the "Company") as of December 31, 1999
and  1998,  and the  related  consolidated  statements  of  income,  changes  in
stockholders'  equity  and cash  flows for each of the  years in the  three-year
period  ended   December  31,  1999.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Hopfed Bancorp, Inc.
and  subsidiary  as of  December  31,  1999 and  1998,  and the  results  of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December  31,  1999 in  conformity  with  generally  accepted  accounting
principles.

/s/:  York, Neel & Co.-Hopkinsville, LLP

Hopkinsville, Kentucky
February 4, 2000
<PAGE>

                       HOPFED BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           December 31, 1999 and 1998

                                     ASSETS
<TABLE>
<CAPTION>
                                                                        1999             1998
                                                                    -------------    -------------
<S>                                                                 <C>              <C>
Cash and due from banks                                               $ 4,537,222      $ 1,904,620
Interest-earning deposits in Federal Home Loan Bank                       250,750          214,166
Federal funds sold                                                      4,100,000        9,685,000
Securities available for sale                                          71,423,331       68,139,383
Securities held to maturity, market value of
   $10,078,157 for 1999 and $27,633,452 for 1998, respectively          9,958,147       27,354,099
Loans receivable, net of allowance for loan losses of
   $278,144 for 1999 and $257,744 for 1998, respectively              113,532,380      108,806,634
Accrued interest receivable                                             1,094,810        1,157,252
Premises and equipment, net                                             2,471,523        2,546,349
Deferred tax assets                                                       514,744               --
Other assets                                                               23,252          224,711
                                                                    -------------    -------------
           Total assets                                             $ 207,906,159    $ 220,032,214
                                                                    =============    =============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
    Noninterest-bearing accounts                                    $   2,943,337    $   2,730,676
    Interest-bearing accounts:
        Demand/NOW accounts                                             9,017,284        8,624,089
        Money market accounts                                          30,062,939       30,771,443
        Passbook savings                                                9,802,140       10,194,223
        Other time deposits                                           109,079,053      102,495,354
                                                                    -------------    -------------

           Total deposits                                             160,904,753      154,815,785
Advances from borrowers for taxes and insurance                           155,861          165,799
Federal income taxes payable:
    Current                                                               369,242               --
    Deferred                                                                   --        3,268,965
Dividends payable                                                         307,364          302,524
Accrued expenses and other liabilities                                  1,822,514          345,195
                                                                    -------------    -------------
           Total liabilities                                          163,559,734      158,898,268
                                                                    -------------    -------------
Stockholders' Equity:
    Common stock par value $.01 per share; 7,500,000
       shares authorized; 3,942,500 shares issued and outstanding          39,425           40,336
     Additional paid in capital                                        24,214,409       39,546,434
     Retained earnings-substantially restricted                        20,991,195       18,983,884
    Unallocated ESOP shares                                                    --       (2,932,666)
    Accumulated other comprehensive income (loss)                        (898,604)       5,495,958
                                                                    -------------    -------------

           Total stockholders' equity                                  44,346,425       61,133,946
                                                                    -------------    -------------

           Total liabilities and stockholders' equity               $ 207,906,159    $ 220,032,214
                                                                    =============    =============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        2

<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
              For the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
                                                  1999          1998         1997
                                                  ----          ----         ----
 Interest income:
<S>                                           <C>           <C>           <C>
      Loans receivable                        $ 8,435,464   $ 8,279,744   $ 7,606,685
      Securities available for sale             4,204,268     2,418,597       412,355
      Securities held to maturity                 814,048     2,359,611     4,705,678
      Time deposits                               751,108     1,993,546     1,586,451
                                              -----------   -----------   -----------
           Total interest income               14,204,888    15,051,498    14,311,169
                                              -----------   -----------   -----------
Interest expense:
      Deposits                                  7,078,126     8,003,911     9,340,884
      Other borrowed funds                             --            --         9,336
                                              -----------   -----------   -----------
           Total interest expense               7,078,126     8,003,911     9,350,220
                                              -----------   -----------   -----------

Net interest income                             7,126,762     7,047,587     4,960,949

Provision for loan losses                          20,400        20,300        20,000
                                              -----------   -----------   -----------
           Net interest income after
               provision for loan losses        7,106,362     7,027,287     4,940,949
                                              -----------   -----------   -----------
Noninterest income:
      NOW account fees                            196,309       168,153       150,640
      Loan fees                                   177,111       228,949       207,706
      Service charges                              67,095        84,852        82,807
      Realized gain from sale of securities
          available for sale                    6,523,526            --            --
      Other                                        64,289        65,300        86,566
                                              -----------   -----------   -----------

           Total noninterest income             7,028,330       547,254       527,719
                                              -----------   -----------   -----------
Noninterest expenses:
      Salaries and benefits                     7,625,889     1,959,406     1,479,118
      Deposit insurance premium                    90,767       151,701       120,084
      Occupancy expense                           197,249       188,093       211,986
      Data processing                             143,266       117,368       113,941
      Other                                       836,548       565,844       482,716
                                              -----------   -----------   -----------
           Total noninterest expense            8,893,719     2,982,412     2,407,845
                                              -----------   -----------   -----------

Income before income taxes                      5,240,973     4,592,129     3,060,823
      Income tax expense                        2,765,704     1,640,707     1,038,254
                                              -----------   -----------   -----------
Net income                                    $ 2,475,269   $ 2,951,422   $ 2,022,569
                                              ===========   ===========   ===========
Earnings per share:
      Basic                                   $      0.65   $      0.80           N/A
      Fully diluted                                  0.65          0.80           N/A

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                        3
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                 For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
                                                     Additional                  Unallocated     Accumulated Other
                                         Common       Paid-in       Retained     Common Stock     Comprehensive          Total
                                          Stock       Capital       Earnings     Held by ESOP     Income (Loss)          Equity
                                        ---------   -----------   ------------  -------------   -----------------     ------------
<S>                                     <C>        <C>            <C>           <C>                <C>                <C>
 Balance, January 1, 1998               $      -   $         -    $ 16,613,308  $         -        $ 3,322,769        $ 19,936,077
 Comprehensive income:
      Net income                                                     2,951,422
      Unrealized holding gains
         arising during the period
         on securities available-
         for-sale, net of taxes
         of $1,119,410                                                                               2,173,189
      Total comprehensive income                                                                                        5,124,611
 Issuance of common stock                 40,336    39,334,954                                                         39,375,290
 Purchase of common stock by ESOP                                                (3,226,900)                           (3,226,900)
 Release and allocation of common
     stock held by ESOP                                211,480                      294,234                               505,714
 Cash dividends paid net of dividends
     on ESOP shares                                                   (580,846)                                          (580,846)
                                        ---------   ----------    ------------  -----------        -----------        -----------

 Balance, December 31, 1998               40,336    39,546,434      18,983,884   (2,932,666)         5,495,958         61,133,946
 Comprehensive income (loss):
      Net income                                                     2,475,269
           Other comprehensive
             income (loss)
          Unrealized holding losses
             arising during the period
             net of tax effect of
             ($1,076,170)                                                                           (2,089,035)
          Less: reclassification
             adjustment for gains
             included in net income net
             of tax effect of
            ($2,217,999)                                                                            (4,305,527)
                                                                                                   -----------
             Net change in unrealized
               gains (losses) on
               securities available-for-
               sale                                                                                 (6,394,562)
                                                                                                   -----------
      Total comprehensive loss                                                                                         (3,919,293)
 Issuance of common stock - MRP              646     1,290,094                                                          1,290,740
 Retirement of common stock (from ESOP)   (1,557)   (1,555,063)                   1,556,620                                     -
 Release and allocation of common stock
     held by ESOP                                      993,643                    1,376,046                             2,369,689
 Cash dividends paid net of dividends
   on ESOP shares                                  (16,060,699)       (467,958)                                       (16,528,657)
                                        --------   -----------    ------------  -----------        -----------        -----------
  Balance, December 31, 1999             $ 39,425   $24,214,409    $ 20,991,195  $         -        $  (898,604)       $44,346,425
                                        ========   ===========    ============  ===========        ===========        ===========

 The accompanying notes are an integral part of these consolidated financial statements.

                                        4
</TABLE>
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                      1999             1998              1997
                                                                   ------------     ------------     -------------
 CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>              <C>              <C>
     Net income                                                     $   2,475,269    $   2,951,422    $   2,022,569
     Adjustments to reconcile net income to net
         cash provided by operating activities:
        Provision for loan losses                                          20,400           20,300           20,000
        Depreciation                                                      121,291          110,518          130,337
        Accretion of investment security discounts                       (424,431)         (40,113)         (48,539)
        Amortization of investment security premiums                       37,287               --               --
        Provision (benefit) for deferred income taxes                    (489,541)         182,541         (244,697)
        Stock dividend                                                   (134,100)        (127,200)        (118,500)
        (Gain) loss on sale of equipment                                    1,100           (6,527)          (4,741)
        Earned ESOP shares                                              2,899,941          211,480
        MRP shares                                                      1,290,740               --               --
        Gain on sale of FHLMC stock                                    (6,523,526)              --               --
        (Increase) decrease in:
            Accrued interest receivable                                    62,442           26,556          106,600
            Other assets                                                  201,459          214,202         (142,190)
        Increase (decrease) in:
            Current income taxes payable                                  369,242         (360,231)         360,231
            ESOP contribution payable                                    (294,234)         294,234               --
            Accrued expenses and other liabilities                      1,477,337         (555,551)         343,814
                                                                    -------------    -------------    -------------
        Net cash provided by operating activities                       1,090,676        2,921,631        2,424,884
                                                                    -------------    -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net decrease in time deposits                                             --        2,000,000               --
     Net (increase) decrease in interest-bearing deposits in FHLB         (36,584)       3,730,455       (3,944,621)
     Net (increase) decrease in federal funds sold                      5,585,000      141,410,000     (150,595,000)
     Proceeds from maturities of held-to-maturity securities           17,407,471       24,229,625       50,336,539
     Purchases of held-to-maturity securities                                  --               --       (5,909,005)
     Proceeds from maturities of available-for-sale securities         56,226,497       12,565,393           81,009
     Purchases of available-for-sale securities                       (68,809,959)     (50,590,246)     (19,895,099)
     Proceeds from sale of FHLMC stock                                  6,644,034               --               --
     Net increase in loans                                             (4,746,146)      (5,356,773)      (8,036,005)
     Purchase of premises/equipment                                       (47,565)        (327,565)        (258,961)
     Proceeds from sale of premises/equipment                                  --           10,700          132,766
                                                                    -------------    -------------    -------------
        Net cash provided by (used in) investing activities            12,222,748      127,671,589     (138,088,377)
                                                                    -------------    -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase (decrease) in demand deposits, savings
        and NOW deposits                                                 (494,731)    (149,270,443)     144,631,967
     Net increase (decrease) in time deposits                           6,583,699      (16,546,373)      (7,826,732)
     Increase (decrease) in advance payments
        by borrowers for taxes and insurance                               (9,938)          (5,720)         (12,601)
     Net increase (decrease) in other borrowed funds                           --               --       (1,317,000)
     Issuance of common stock                                                  --       36,148,390               --
     Dividends paid                                                   (17,515,618)        (278,322)              --
     Payments on loan to ESOP                                             755,766               --               --
                                                                    -------------    -------------    -------------
        Net cash provided by (used in) financing activities           (10,680,822)    (129,952,468)     135,475,634
                                                                    -------------    -------------    -------------

Increase (decrease) in cash and cash equivalents                        2,632,602          640,752         (187,859)

Cash and cash equivalents, beginning of period                          1,904,620        1,263,868        1,451,727
                                                                    -------------    -------------    -------------
Cash and cash equivalents, end of period                            $   4,537,222    $   1,904,620    $   1,263,868
                                                                    =============    =============    =============
SUPPLEMENTAL DISCLOSURES
         Interest paid                                              $   7,068,469    $   8,503,476    $   9,128,049
                                                                    =============    =============    =============
         Income taxes paid                                          $   2,735,164    $   1,969,233    $     670,074
                                                                    =============    =============    =============
         Non-cash transaction - ESOP loan redeemed with stock       $   2,471,134    $          --    $          --
                                                                    =============    =============    =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                        5
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The  accounting  and  reporting  policies  of  Hopfed  Bancorp,  Inc.  (the
     "Company")  and  subsidiary  conform  with  generally  accepted  accounting
     principles  and to  general  practice  within  the  banking  industry.  The
     following  is a  description  of the more  significant  policies  which the
     Company  follows in preparing and  presenting  its  consolidated  financial
     statements.

     A.   BASIS OF PRESENTATION

          The accompanying consolidated financial statements include the amounts
          of the Company and its wholly-owned  subsidiary,  Hopkinsville Federal
          Savings Bank (the "Bank"). All significant  intercompany  transactions
          and balances are eliminated in consolidation.

          As more  fully  discussed  in  Note  1.b.,  the  Company,  a  Delaware
          corporation,  was  organized  by the Bank for the purpose of acquiring
          all the capital  stock of the Bank  pursuant to the  conversion of the
          Bank from a federally  chartered  mutual  savings  bank to a federally
          chartered  stock savings bank. The Company is subject to the financial
          reporting  requirements of the Securities and Exchange Act of 1934, as
          amended.

     B.   ORGANIZATION/FORM OF OWNERSHIP

          The Bank was  originally  founded  as a mutual  savings  bank in 1879.
          Effective  February  6,  1998,  the Bank  converted  from a  federally
          chartered  mutual savings bank to a federally  chartered stock savings
          bank,  as a  wholly-owned  subsidiary of a holding  company  chartered
          under  Delaware law for the purpose of  acquiring  control of the Bank
          following consummation of the Bank's conversion. The Company completed
          its initial public  offering on February 6, 1998 and issued  4,033,625
          shares of common stock  resulting in proceeds of  $39,375,290,  net of
          expenses totaling $960,960.  The Company loaned $3,226,900 to the ESOP
          which  purchased  322,690 shares of the Company's stock in the initial
          public offering.

          The Bank  established,  in  accordance  with the  requirements  of the
          Office  of  Thrift  Supervision  (OTS),  a  liquidation   account  for
          $18,732,503,  the amount of the Bank's net worth as of the date of the
          latest statement of financial condition, September 30, 1997, appearing
          in the IPO  prospectus  supplement.  The  liquidation  account will be
          maintained  for the benefit of eligible  deposit  account  holders who
          maintain their deposit accounts in the Bank after conversion.

                                    Continued
                                        6
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     B.   ORGANIZATION/FORM OF OWNERSHIP, (CONTINUED)

          In the event of a complete liquidation (and only in such an event) and
          prior to any payment to  stockholders,  each eligible  deposit account
          holder will be entitled to receive a liquidation distribution from the
          liquidation  account  in an amount  proportionate  to the  depositor's
          current   adjusted  balance  for  deposit  accounts  held  before  any
          liquidation.  Except  for the  repurchase  of  stock  and  payment  of
          dividends by the Bank, the existence of the  liquidation  account will
          not restrict the use or application of such net worth.

          The Bank may not declare or pay a cash dividend on or  repurchase  any
          of its capital stock if the effect  thereof would cause the Bank's net
          worth to be reduced below the capital requirements imposed by the OTS.

     C.   CASH AND CASH EQUIVALENTS

          For the purpose of presentation in the consolidated statements of cash
          flows, cash and cash equivalents are defined as those amounts included
          in the  consolidated  statements of financial  condition "cash and due
          from banks".

     D.   SECURITIES HELD TO MATURITY

          Bonds, notes and debentures for which the Bank has the positive intent
          and ability to hold to maturity  are  reported at cost,  adjusted  for
          premiums and discounts that are recognized in interest income over the
          period to maturity using the level yield method.

          Declines in the fair value of individual  held-to-maturity  securities
          below their cost that are other than  temporary  result in write-downs
          of the individual  securities to their fair value. The write-downs are
          included in earnings as realized losses.

     E.   SECURITIES AVAILABLE FOR SALE

          Available-for-sale securities consist of bonds, notes, debentures, and
          certain equity securities not classified as trading  securities nor as
          held-to-maturity securities.

                                    Continued
                                        7
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     E.   SECURITIES AVAILABLE FOR SALE, CONTINUED

          Unrealized holding gains and losses, net of tax, on available-for-sale
          securities are reported as a net amount in other comprehensive income.

          Gains and  losses  on the sale of  available-for-sale  securities  are
          determined using the specific identification method.

          Declines in the fair value of individual available-for-sale securities
          below their cost that are other than  temporary  result in write-downs
          of the individual  securities to their fair value. The write-downs are
          included in earnings as realized losses.

          Premiums and  discounts  are  recognized  in interest  income over the
          period to maturity using the level yield method.

     F.   LOANS RECEIVABLE

          Loans  receivable are stated at unpaid  principal  balances,  less the
          allowance for loan losses and discounts.

          Discounts on home  improvement  and consumer loans are recognized over
          the lives of the loans using the interest method. Loan origination fee
          income is recognized as received and direct loan origination costs are
          expensed as  incurred.  Statement  of  Financial  Accounting  Standard
          ("SFAS")  No. 91 requires  the  recognition  of loan  origination  fee
          income over the life of the loan and the recognition of certain direct
          loan origination costs over the life of the loan. However, deferral of
          such fees and costs would not have a material  effect on the financial
          statements.

          Uncollectible  interest  on loans that are  contractually  past due is
          charged  off, or an  allowance is  established  based on  management's
          periodic  evaluation.  The  allowance  is  established  by a charge to
          interest income equal to all interest previously  accrued,  and income
          is  subsequently  recognized only to the extent that cash payments are
          received  while the loan is  classified  as  nonaccrual.  Loans may be
          returned to accrual  status when all  principal  and interest  amounts
          contractually  due (including  arrearages)  are reasonably  assured of
          repayment  within  an  acceptable  period  of  time,  and  there  is a
          sustained   period  of  repayment   performance  by  the  borrower  in
          accordance with the contractual terms of interest and principal.

                                    Continued
                                        8
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     F.   LOANS RECEIVABLE (CONTINUED)

          The Bank  provides  an  allowance  for loan  losses  and  includes  in
          operating   expenses  a  provision  for  loan  losses   determined  by
          management.  Management's  periodic  evaluation of the adequacy of the
          allowance is based on the Bank's past loan loss experience,  known and
          inherent risks in the portfolio,  adverse  situations  that may affect
          the borrower's ability to repay, the estimated value of any underlying
          collateral,  and current economic  conditions.  Management believes it
          has established  the allowance in accordance  with generally  accepted
          accounting  principles  and has taken  into  account  the views of its
          regulators and the current economic environment.

     G.   FORECLOSED REAL ESTATE

          Real  estate  properties   acquired  through,  or  in  lieu  of,  loan
          foreclosure  are  carried at the lower of cost or fair value less cost
          to sell. Costs of developing such real estate are capitalized, whereas
          costs  relating to holding the property are expensed.  Valuations  are
          periodically performed by management, and any adjustments to value are
          made through an allowance for losses.

     H.   INCOME TAXES

          Income  taxes  are  accounted  for  through  the use of the  asset and
          liability method. Under the asset and liability method, deferred taxes
          are recognized for the tax  consequences  of temporary  differences by
          applying  enacted  statutory  rates  applicable  to  future  years  to
          differences  between the financial  statement carrying amounts and the
          tax bases of existing assets and  liabilities.  The effect on deferred
          taxes of a change in tax rates  would be  recognized  in income in the
          period that includes the enactment date.

     I.   PREMISES AND EQUIPMENT

          Land is carried at cost. Land improvements,  buildings,  and furniture
          and equipment are carried at cost, less  accumulated  depreciation and
          amortization.   Buildings  and  land   improvements   are  depreciated
          generally by the straight-line method, and furniture and equipment are
          depreciated under accelerated  methods over the estimated useful lives
          of the assets. The estimated useful lives used to compute depreciation
          are as follows:

                                    Continued
                                        9
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     I.   PREMISES AND EQUIPMENT (CONTINUED)

                 Land improvements                                5-15 years
                 Buildings                                          40 years
                 Furniture and equipment                          5-15 years

     J.   FINANCIAL INSTRUMENTS

          In the  ordinary  course  of  business,  the  Bank  has  entered  into
          off-balance-sheet  financial instruments  consisting of commitments to
          extend  credit,  etc. Such financial  instruments  are recorded in the
          financial statements when they are funded or related fees are incurred
          or received.

     K.   FAIR VALUES OF FINANCIAL INSTRUMENTS

          The  following  methods  and  assumptions  were  used  by the  Bank in
          estimating fair values of financial instruments as disclosed herein:

          CASH AND SHORT  TERM  INSTRUMENTS.  The  carrying  amounts of cash and
          short term instruments approximate their fair value.

          AVAILABLE-FOR-SALE  AND HELD-TO-MATURITY  SECURITIES.  Fair values for
          securities are based on quoted market prices.

          LOANS  RECEIVABLE.  For variable rate loans that reprice  annually and
          have no  significant  change in credit risk,  fair values are based on
          carrying  values.  Fair values for fixed rate mortgage loans and fixed
          rate  commercial  loans  are  estimated  using  discounted  cash  flow
          analyses,  using interest rates currently being offered for loans with
          similar terms to borrowers of similar credit quality.

          DEPOSIT  LIABILITIES.  The fair values  disclosed for demand  deposits
          are,  by  definition,  equal to the  amount  payable  on demand at the
          reporting date (that is, their carrying amounts). The carrying amounts
          of variable rate,  fixed-term money market accounts  approximate their
          fair  values  at the  reporting  date.  Fair  values  for  fixed  rate
          certificates  of deposits (CD's) are estimated using a discounted cash
          flow  calculation  that applies interest rates currently being offered
          on certificates of deposit to a schedule of aggregated expected annual
          maturities on time deposits.

                                    Continued
                                       10
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     K.   FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

          ADVANCES FROM BORROWERS FOR TAXES AND LICENSES.  The carrying  amounts
          of advances from borrowers approximate their fair value.

          OTHER  BORROWED  FUNDS.  The carrying  amounts of other borrowed funds
          approximate  their fair values since such borrowings  mature within 90
          days.

          ACCRUED INTEREST. The carrying amounts of accrued interest approximate
          their fair values.

          OFF-BALANCE-SHEET  INSTRUMENTS.  Off-balance-sheet lending commitments
          approximate  their fair values due to the short  period of time before
          the commitment expires.

     L.   ESTIMATES

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

     M.   EARNINGS PER SHARE

          Earnings  per share is computed by dividing net income by the weighted
          average  number of shares of common  stock and  dilutive  common stock
          equivalents  outstanding,  adjusted  for the  unallocated  portion  of
          shares held by the Employee Stock Ownership Plan (ESOP).  For the year
          ended  December 31, 1999,  basic and fully  diluted  weighted  average
          common  stock   outstanding  was  3,800,971   shares,   (adjusted  for
          unallocated ESOP shares).

2.   SECURITIES

     Securities,  which  consist  of debt  and  equity  investments,  have  been
     classified in the consolidated  statements of financial condition according
     to  management's  intent.  The  carrying  amount  of  securities  and their
     approximate fair values follow:

                                    Continued
                                       11
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

2.   SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
                                                             Gross         Gross       Estimated
                                           Amortized      Unrealized    Unrealized       Market
                                             Cost            Gains         Losses         Value
                                             ----            -----         ------         -----
<S>                                      <C>            <C>             <C>             <C>
Available-For-Sale Securities
December 31, 1999:
 Restricted:
    FHLB stock                           $  1,986,700   $         --    $         --    $  1,986,700
    Intrieve stock                             15,000             --              --          15,000
                                         ------------   ------------    ------------    ------------
                                            2,001,700             --              --       2,001,700
                                         ------------   ------------    ------------    ------------
 Unrestricted:
    U.S. government and agency securities:
      FHLB investment securities           33,411,633            180      (1,103,991)     32,307,822
      FFCB                                  4,000,000             --        (187,500)      3,812,500
 Mortgage-backed securities:
      GNMA                                 13,634,537        141,473              --      13,776,010
      FNMA                                  9,943,909         29,931        (115,733)      9,858,107
      FHLMC                                 9,793,075         40,071        (165,954)      9,667,192
                                         ------------   ------------    ------------    ------------
                                           70,783,154        211,655      (1,573,178)     69,421,631
                                         ------------   ------------    ------------    ------------
                                         $ 72,784,854   $    211,655    $ (1,573,178)   $ 71,423,331
                                         ============   ============    ============    ============
December 31, 1998:
 Restricted:
   FHLB stock                            $  1,852,600   $         --    $         --    $  1,852,600
   Intrieve stock                              15,000             --              --          15,000
                                         ------------   ------------    ------------    ------------
                                            1,867,600             --              --       1,867,600
                                         ------------   ------------    ------------    ------------
 Unrestricted:
 FHLMC stock                                  120,508      7,871,480              --       7,991,988
 U.S. government and agency securities:
    FHLB investment securities              7,000,000         50,310              --       7,050,310
    FFCB                                   15,995,265         20,000              --      16,015,265
 Mortgage-backed securities:
    GNMA                                   16,800,955        205,697              --      17,006,652
    FNMA                                    8,575,909         57,131              --       8,633,040
    FHLMC                                   9,451,937        132,567          (9,976)      9,574,528
                                         ------------   ------------    ------------    ------------
                                           57,944,574      8,337,185          (9,976)     66,271,783
                                         ------------   ------------    ------------    ------------
                                         $ 59,812,174   $  8,337,185    $     (9,976)   $ 68,139,383
                                         ============   ============    ============    ============
</TABLE>
     The scheduled maturities of securities  available-for-sale  at December 31,
     1999 were as follows:

                                           Amortized               Fair
                                             Cost                 Value
                                             ----                 -----

        Due in one to five years        $15,996,875            $15,538,300
        Due in five to ten years          7,205,856              6,984,576
        Due after ten years              14,208,902             13,597,446
                                        -----------            -----------

                                         37,411,633             36,120,322

        Mortgage-backed securities       33,371,521             33,301,309
                                        -----------            -----------
                                        $70,783,154            $69,421,631
                                        ===========            ===========


                                    Continued
                                       12
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

2.      SECURITIES (CONTINUED)

        FHLB stock is an equity interest in the Federal Home Loan Bank. Intrieve
        stock is an equity interest in Intrieve,  Incorporated,  the Bank's data
        processing service center. These stocks do not have readily determinable
        fair values  because  ownership is  restricted  and a market is lacking.
        FHLB stock and Intrieve  stock are  classified as restricted  investment
        securities, carried at cost and evaluated for impairment.
<TABLE>
<CAPTION>
                                   Gross          Gross         Estimated
                                 Amortized      Unrealized      Unrealized       Market
                                   Cost           Gains           Losses          Value
                                   ----           -----           ------          -----
HELD-TO-MATURITY SECURITIES

December 31, 1999:

Mortgage-backed securities:
<S>                            <C>            <C>             <C>             <C>
  GNMA                         $  8,898,170   $    137,006    $     (1,764)   $  9,033,412
  FNMA                            1,059,977             --         (15,232)      1,044,745
                               ------------   ------------    ------------    ------------
                               $  9,958,147   $    137,006    $    (16,996)   $ 10,078,157
                               ============   ============    ============    ============

December 31, 1998:

U.S. government and agency
 securities:
  FHLB investment securities   $ 13,997,542   $      5,098    $     (1,410)   $ 14,001,230
                               ------------   ------------    ------------    ------------

Mortgage-backed securities:
   GNMA                          11,900,966        242,338             (30)     12,143,274
   FNMA                           1,455,591         33,357              --       1,488,948
                               ------------   ------------    ------------    ------------
                                 13,356,557        275,695             (30)     13,632,222
                               ------------   ------------    ------------    ------------

                               $ 27,354,099   $    280,793    $     (1,440)   $ 27,633,452
                               ============   ============    ============    ============
</TABLE>
                                    Continued
                                       13
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

3.   LOANS RECEIVABLE

     The  components  of  loans  in the  consolidated  statements  of  financial
     condition as of December 31, 1999 and 1998 were as follows:

                                              1999              1998
                                              ----              ----

Real estate loans:
  One-to-four family                     $  88,248,441    $  88,954,630
  Multi-family                               2,165,271        1,538,864
  Construction                               5,706,152        4,625,527
  Non-residential                           12,398,156        8,260,156
                                         -------------    -------------
    Total mortgage loans                   108,518,020      103,379,177
                                         -------------    -------------
Consumer loans:
  Loans secured by deposits                  2,525,120        2,279,709
  Other consumer loans                       4,670,123        4,586,487
                                         -------------    -------------
    Total consumer loans                     7,195,243        6,866,196
                                         -------------    -------------
                                           115,713,263      110,245,373
Less:
 Undisbursed portion of mortgage loans      (1,902,739)      (1,180,995)
                                         -------------    -------------
Total loans                                113,810,524      109,064,378
Less allowance for loan losses                (278,144)        (257,744)
                                         -------------    -------------
                                         $ 113,532,380    $ 108,806,634
                                         =============    =============

     An  analysis of the change in the  allowance  for loan losses for the years
     ended December 31, 1999 and 1998 follows:

                                                1999               1998
                                                ----               ----

        Balance at beginning of year          $257,744           $237,444

        Loans charged off                            -                  -
        Recoveries                                   -                  -
                                              --------           --------
          Net loans charged off                      -                  -

        Provision for loan
         losses                                 20,400             20,300
                                              --------           --------

        Balance at end of year                $278,144           $257,744
                                              ========           ========

                                    Continued
                                       14
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

4.   PREMISES AND EQUIPMENT

     Components  of  properties  and  equipment  included  in  the  consolidated
     statements  of  financial  condition  as of  December  31,  1999  and  1998
     consisted of the following:

                                               1999                  1998
                                               ----                  ----

        Land                              $   543,013          $   543,013
        Land improvements                      74,861               74,861
        Buildings                           2,069,632            2,061,675
        Furniture and equipment               507,435              583,189
                                          -----------          -----------
                                            3,194,941            3,262,738
        Less accumulated

         depreciation                        (723,418)            (716,389)
                                          -----------          -----------

                                          $ 2,471,523          $ 2,546,349
                                          ===========          ===========

     Depreciation  expense was  $121,291,  $110,518  and  $130,337 for the years
     ended December 31, 1999, 1998 and 1997, respectively.

5.   DEPOSITS

     At December 31, 1999, the scheduled  maturities of other time deposits were
     as follows:

                2000                           $  63,788,091
                2001                              35,293,973
                2002                               4,388,233
                2003                               2,994,782
                2004                               2,613,974
                                               -------------
                                               $ 109,079,053
                                               =============

     The amount of other time deposits with a minimum  denomination  of $100,000
     was   $10,379,000,   and   $7,161,825   at  December  31,  1999  and  1998,
     respectively. Deposits in excess of $100,000 are not federally insured.

                                    Continued
                                       15
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

5.   DEPOSITS (CONTINUED)

     Interest  expense on deposits for the years ended December 31, 1999,  1998,
     and 1997 is summarized as follows:

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

     Demand / NOW accounts      $   215,736      $   222,674      $    212,759
     Money market accounts        1,320,265        1,346,675         1,619,467
     Passbook savings               274,064          673,383           794,300
     Other time deposits          5,268,061        5,761,179         6,714,358
                                -----------      -----------      ------------
                                $ 7,078,126      $ 8,003,911      $  9,340,884
                                ===========      ===========      ============

     The Bank  maintains  clearing  arrangements  for its demand,  NOW and money
     market accounts with the Federal Home Loan Bank of Cincinnati.  The Bank is
     required to maintain  certain cash reserves in its account to cover average
     daily  clearings.  At December  31,  1999,  average  daily  clearings  were
     approximately $565,081.

6.   OTHER BORROWED FUNDS

     During 1996, the Bank entered into a Cash Management  Advance (CMA) program
     with the  Federal  Home Loan Bank.  This  program is a source of  overnight
     liquidity to address day-to-day cash needs. The program has a term of up to
     90 days and bears  interest  at a  variable  rate equal to the FHLB cost of
     funds  (approximately 5.6% at December 31, 1999). At December 31, 1999, the
     Bank could  borrow up to  $10,170,300  under the CMA program and the amount
     would be  collateralized by $9,204,088 of FHLB investment  securities.  The
     balance  owed at December  31, 1999 and 1998 was zero.  Subsequent  to year
     end,  the  bank  increased  its  limit to  $20,000,000  and  increased  the
     collateral pledged. On February 4, 2000, the bank had borrowed  $15,550,000
     at a rate of 5.82%.

7.   FINANCIAL INSTRUMENTS

     The Bank is a party to financial instruments with off-balance-sheet risk in
     the normal course of business to meet the financing  needs of its customers
     and to reduce its own exposure to  fluctuations  in interest  rates.  These
     financial  instruments  include commitments to extend credit and commercial
     letters of credit. Those instruments involve, to varying degrees,  elements
     of credit and interest rate risk in excess of the amount  recognized in the
     statements  of financial  condition.  The  contract or notional  amounts of
     those  instruments   reflect  the  extent  of  the  Bank's  involvement  in
     particular classes of financial instruments.

                                    Continued
                                       16
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

7.   FINANCIAL INSTRUMENTS (CONTINUED)

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
     other party to the financial  instrument  for  commitments to extend credit
     and commercial letters of credit is represented by the contractual notional
     amount of those  instruments.  The Bank uses the same  credit  policies  in
     making   commitments   and   conditional   obligations   as  it  does   for
     on-balance-sheet instruments.

     Unless  noted  otherwise,  the Bank does not  require  collateral  or other
     security to support financial instruments with credit risk.

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there is no  violation of any  condition  established  in the  contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require payment of a fee. Since some of the commitments are
     expected to expire without being drawn upon, the total  commitment  amounts
     do  not  necessarily   represent  future  cash  requirements.   The  Bank's
     experience has been that most loan commitments are drawn upon by customers.
     The Bank has offered  standby  letters of credit on a limited basis.  As of
     December 31, 1999,  the Bank has not been requested to advance funds on any
     of the standby letters of credit.

     The  estimated  fair  values of  financial  instruments  were as follows at
     December 31, 1999:

                                                 Carrying             Fair
                                                  Amount              Value
                                                  ------              -----
     Financial assets:
        Cash and due from banks               $   4,537,222      $   4,537,222
        Interest-earning deposits in FHLB           250,750            250,750
        Federal funds sold                        4,100,000          4,100,000
        Securities available for sale            71,423,331         71,423,331
        Securities held to maturity               9,958,147         10,078,157
        Loans receivable                        113,532,380        113,825,355
        Accrued interest receivable               1,094,810          1,094,810
     Financial liabilities:
        Deposit liabilities                     160,904,753        160,802,661
        Advances from borrowers for
          taxes and insurance                       155,861            155,861
     Off-balance-sheet liabilities:
        Commitments to extend credit                                 1,208,900
        Commercial letters of credit                                   382,119

                                    Continued
                                       17
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

7.   FINANCIAL INSTRUMENTS (CONTINUED)

     The  estimated  fair  values of  financial  instruments  were as follows at
     December 31, 1998:

                                                Carrying                Fair
                                                Amount                 Value
                                                ------                 -----
     Financial assets:
        Cash and due from banks              $   1,904,620      $    1,904,620
        Interest-earning deposits in FHLB          214,166             214,166
        Federal funds sold                       9,685,000           9,685,000
        Securities available for sale           68,139,383          68,139,383
        Securities held to maturity             27,354,099          27,633,452
        Loans receivable                       108,806,634         108,966,659
        Accrued interest receivable              1,157,252           1,157,252
     Financial liabilities:
        Deposit liabilities                    154,815,785         154,987,013
        Advances from borrowers for
          taxes and insurance                      165,799             165,799
     Off-balance-sheet liabilities:
        Commitments to extend credit                                   464,789
        Commercial letters of credit                                   679,744

8.   SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

     Most of the Bank's business  activity is with customers  located within the
     western part of the Commonwealth of Kentucky. The majority of the loans are
     collateralized  by  a  one-to-four  family  residence.  The  Bank  requires
     collateral for all loans.

     The   distribution  of  commitments  to  extend  credit   approximates  the
     distribution   of   loans   outstanding.   The   contractual   amounts   of
     credit-related  financial  instruments such as commitments to extend credit
     and  commercial  letters  of credit  represent  the  amounts  of  potential
     accounting  loss should the  contract be fully  drawn  upon,  the  customer
     default, and the value of any existing collateral become worthless.

     Cash on deposit with financial institutions and federal funds sold exceeded
     the  insurance  coverage as of December  31,  1999 and 1998.  The  carrying
     amount and bank  balance of such items as of December 31, 1999 and 1998 was
     as follows:

                                    Continued
                                       18
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

8.   SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK (CONTINUED)

                                                1999              1998
                                                ----              ----


           Carrying amount                   $5,794,889        $10,655,165
                                             ==========        ===========

           Bank balance                       4,811,533          9,783,412
           Amount covered by insurance         (446,260)          (422,374)
                                             ----------        -----------

           Amount not collateralized         $4,365,273        $ 9,361,038
                                             ==========        ===========

9.   EMPLOYEE BENEFITS

     PENSION PLAN

     The Bank maintains a  contributory,  defined  benefit pension plan covering
     substantially  all of its  employees  who  satisfy  certain age and service
     requirements. The benefits are based on years of service and the employee's
     average earnings which are computed using the five consecutive  years prior
     to  retirement  that  yield the  highest  average.  Hopkinsville  Federal's
     funding policy is to contribute annually, actuarially determined amounts to
     finance the plan benefits.

     The  following  table  sets  forth the plan's  funded  status  and  amounts
     recognized  in  the  consolidated  statements  of  financial  condition  at
     December 31:

                                                        1999            1998
                                                        ----            ----
Change in benefit obligation
   Benefit obligation at beginning of year          $ 2,489,410    $ 2,176,248
   Service cost                                          80,542         74,924
   Interest cost                                        171,417        151,986
   Actuarial loss                                      (252,951)        86,252
   Benefits paid                                       (105,259)            --
                                                    -----------    -----------

   Benefit obligation at end of year                  2,383,159      2,489,410
                                                    -----------    -----------

Change in plan assets
   Fair value of plan assets at beginning of year     1,666,076      1,421,158
   Actual return on plan assets                         211,876         93,803
   Employer contributions                               168,357        151,115
   Benefits paid                                       (105,259)            --
                                                    -----------    -----------

   Fair value of plan assets at end of year           1,941,050      1,666,076
                                                    -----------    -----------

Funded status                                          (442,109)      (823,334)
Unrecognized net asset                                  (41,742)       (49,002)
Unrecognized prior service cost                          84,048        102,281
Unrecognized net loss                                   267,857        643,762
                                                    -----------    -----------

   Accrued pension cost                             $  (131,946)   $  (126,293)
                                                    ===========    ===========

                                    Continued
                                       19
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

9.   EMPLOYEE BENEFITS (CONTINUED)

     PENSION PLAN (CONTINUED)

     Weighted average  assumptions used to develop the net periodic pension cost
     were:

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

                 Discount rate                    7.75%      7.00%     7.00%
                 Expected long-term rate of
                  return on assets                7.00%      7.25%     8.00%
                 Rate of increase in
                  compensation levels             4.50%      4.50%     4.50%

     The  components of net periodic  pension cost for the years ended  December
     31, were as follows:
<TABLE>
<CAPTION>
                                                                 1999           1998             1997
                                                                 ----           ----             ----

                  <S>                                         <C>            <C>             <C>
                  Service cost                                $  80,542      $  74,924       $  67,026
                  Interest cost on projected benefit
                     obligation                                 171,417        151,986         142,868
                  Expected return on plan assets               (125,078)      (112,256)       (120,164)
                  Amortization of transitional asset             (7,260)        (7,260)         (7,995)
                  Amortization of prior service cost             18,233         18,233          18,233
                  Amortization of net loss                       36,156         33,069           9,388
                                                              ---------      ---------       ---------

                  Net periodic pension cost                   $ 174,010      $ 158,696       $ 109,356
                                                              =========      =========       =========
</TABLE>
     EMPLOYEE STOCK OWNERSHIP PLAN

     The Company had a noncontributory  employee stock ownership plan (ESOP) for
     those employees who met the eligibility  requirements of the plan. Eligible
     employees  were those who had attained the age of 21 and completed one year
     of service.  This plan was terminated  effective December 31, 1999, subject
     to approval by the Internal Revenue Service.

     The ESOP trust borrowed  $3,226,900 in 1998 through a loan from the Company
     and used the proceeds to purchase  322,690  shares of the common stock at a
     price of $10.00 per share. Shares purchased were held in a suspense account
     for allocation among the  participants as the loan was paid.  Contributions
     to the ESOP and shares  released from the loan  collateral  were in amounts
     proportional to repayment of the ESOP loan.

                                    Continued
                                       20
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

9.   EMPLOYEE BENEFITS (CONTINUED)

     EMPLOYEE STOCK OWNERSHIP PLAN (CONTINUED)

     The ESOP was  funded by  contributions  made by the  Company or the Bank in
     cash or shares of Common Stock with no cost to participants.  Contributions
     to the ESOP and shares  released from the suspense  account were  allocated
     among  participants  on the basis of their annual wages  subject to federal
     income tax  withholding,  plus any amounts  withheld under a plan qualified
     under  Sections  125 or 401(k) of the Code and  sponsored by the Company or
     the Bank.  Participants had to be employed at least 500 hours in a calendar
     year in order to receive an allocation.  A participant became vested in his
     or her right to ESOP benefits upon his or her  completion of three years of
     service.  Dividends  paid on allocated  shares were  expected to be paid to
     participants  or used to repay the ESOP loan,  and dividends on unallocated
     shares were expected to be used to repay the ESOP loan.  With the exception
     of a special  dividend of $4.00 per share paid on December  17,  1999,  all
     dividends  paid on ESOP  shares in 1999 and 1998 were  applied  to the ESOP
     loan.

     In  order to  terminate  the plan  and to  repay  the ESOP  loan,  the ESOP
     surrendered  155,662 shares valued at $2,471,134 on December 31, 1999. This
     released  all  remaining   shares  from   encumbrance   for  allocation  to
     participants.

     At December 31, 1999 and 1998,  shares  allocated,  and shares remaining in
     suspense were as follows:

                                                     1999                1998
                                                     ----                ----

           Number of Shares
              Released and allocated               167,028               29,423
              Suspense                                   -              293,267
           Fair Value
              Released and allocated            $2,651,570         $    505,714
              Suspense                                   -            5,040,520

     The expenses recorded by the Company during 1999 and 1998 were as follows:

                                                       1999            1998
                                                       ----            ----

        Contributions                              $   364,726   $    270,032
        Dividends applied to ESOP debt                  96,807         41,597
        Excess of fair value of shares released
          and allocated over ESOP's cost             1,899,330        194,085
        Special dividend paid 12/17/99 on
          unallocated and uncommitted shares         1,000,611              -
                                                   -----------   ------------
               Total ESOP compensation costs       $ 3,361,474   $    505,714
                                                   ===========   ============

     The Company's ESOP compensation  costs exclude interest which is eliminated
     in consolidation.

                                    Continued
                                       21
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

9.   EMPLOYEE BENEFITS (CONTINUED)

     MANAGEMENT RECOGNITION PLAN

     On February  24, 1999,  the Board of  Directors of the Company  adopted the
     HopFed  Bancorp,  Inc.  Management  Recognition  Plan (the "MRP") which was
     subsequently approved at the 1999 Annual Meeting of Stockholders. Under the
     MRP,  up to  161,345  shares of Common  Stock may be  awarded  to  selected
     directors  and  employees.  On the  effective  date the Board of  Directors
     awarded 161,342 shares of Common Stock which were subject to automatic plan
     share awards as provided in the MRP document.  Under applicable  accounting
     standards,  the Company recognizes compensation expense of $20.00 per share
     which was the fair market value of the Common Stock on the effective  date,
     with such amount being  amortized over the expected  vesting period for the
     awards.  The MRP provides for the following  vesting  schedule:  33 1/3% at
     date of  awards;  33 1/3% on January 1, 2000 and 33 1/3% on January 1, 2001
     (subject to  immediate  vesting  upon certain  events,  including  death or
     normal retirement of recipient).  The total compensation expense of the MRP
     will be $3,226,840 of which $2,678,284 is recognized in 1999.

     STOCK OPTION PLAN

     On February  24, 1999,  the Board of  Directors of the Company  adopted the
     HopFed  Bancorp,  Inc. 1999 Stock Option Plan (the "Option Plan") which was
     subsequently approved at the 1999 Annual Meeting of Stockholders. Under the
     Option Plan,  the option  committee  has  discretionary  authority to grant
     stock options and stock  appreciation  rights to such employees,  directors
     and advisory  directors as the committee shall  designate.  The Option Plan
     reserves  403,362  shares of Common Stock for issuance upon the exercise of
     options or stock appreciation rights. The Company will receive the exercise
     price for shares of Common  Stock issued to Option Plan  participants  upon
     the exercise of their  option,  and will receive no monetary  consideration
     upon the exercise of stock appreciation  rights. The Board of Directors has
     granted options to purchase 403,360 shares of Common Stock under the Option
     Plan at an  exercise  price of $20.75 per share,  which was the fair market
     value on the date of the  grant.  As a result of the  special  dividend  of
     $4.00  per  share  paid in  December,  1999,  and in  accordance  with plan
     provisions, the number of options and the exercise price have been adjusted
     to 480,475 and $17.42  respectively.  The options  granted to  participants
     became vested and  exercisable as follows:  50% on date of grant and 50% on
     January  1,  2000  (subject  to  immediate  vesting  upon  certain  events,
     including death or normal retirement of participant).

                                    Continued
                                       22
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

9.   EMPLOYEE BENEFITS (CONTINUED)

     STOCK OPTION PLAN (CONTINUED)

     The Company has chosen to account for  stock-based  compensation  using the
     intrinsic  value  method  prescribed  in APB No. 25.  Since each option was
     granted  at a price  equal to the  fair  market  value of one  share of the
     Company's  stock on the date of the grant,  no  compensation  cost has been
     recognized.  The following table compares  reported net income and earnings
     per  share to net  income  and  earnings  per  share on a pro  forma  basis
     assuming that the Company accounted for stock-based compensation under SFAS
     No. 123. The effects of applying SFAS No. 123 in this pro forma  disclosure
     are not indicative of future amounts.

                                            1999             1998         1997
                                            ----             ----         ----
        Net Income

          As reported                    $2,475,269           N/A          N/A
          Pro forma                         211,088
        Earnings per share
          As reported

            Basic                             $0.65
            Diluted                            0.65
          Pro forma

            Basic                              0.06
            Diluted                            0.06

     STOCK OPTION ACTIVITY

     The  following  table sets forth stock  option  activity  and the  weighted
     average fair value of options granted.

                                                                Year Ended
                                                           December 31, 1999
                                            Shares             Exercise Price
                                            ------             --------------

       Outstanding, beginning of year             -
          Granted                           403,360                $20.75
          Adjustment due to special
             dividend                        77,115                 (3.33)
          Exercised                               -                     -
          Forfeited                               -                     -

       Outstanding, end of year             480,475                $17.42
                                            =======                ======

       Options exercisable as of
          December 31, 1999                 240,238
       Weighted average fair value
          of options granted                                        $8.51


                                    Continued
                                       23
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

9.   EMPLOYEE BENEFITS (CONTINUED)

     STOCK OPTION PLAN (CONTINUED)

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model using the following weighted average
     assumptions:  risk free  interest  rate of  6.70%,  volatility  of  37.06%,
     expected dividend yield of 1.5% and expected life of six years.

10.  INCOME TAXES

     The provision for income taxes for the years ended December 31, 1999,  1998
     and 1997 consisted of the following:

                                    1999              1998            1997
                                    ----              ----            ----
           Current:
              Federal           $3,246,851        $1,421,164       $1,282,951
              State                  9,970            37,002                -
                                ----------        ----------       ----------
                                 3,256,821         1,458,166        1,282,951
           Deferred               (491,117)          182,541         (244,697)
                                ----------        ----------       ----------
                                $2,765,704        $1,640,707       $1,038,254
                                ==========        ==========       ==========

     Total income tax expense for the years ended  December  31, 1999,  1998 and
     1997 differed from the amounts computed by applying the U.S. federal income
     tax rate of 34 percent to income before income taxes as follows:

                                            1999          1998          1997
                                            ----          ----          ----
      Expected federal income tax
       expense at statutory tax rate     $1,781,931    $1,561,324    $1,040,680
      State income taxes                     (3,390)      (12,581)            -
      Dividends received                     (8,838)      (14,077)      (11,716)
      Fair market value difference
       of allocated ESOP shares             985,980        71,903             -
      Other                                      51        (2,864)        9,290
                                         ----------    ----------    ----------

      Total federal income tax expense   $2,755,734    $1,603,705    $1,038,254
                                         ==========    ==========    ==========

      Effective rate                          52.6%         34.9%         33.9%
                                         ==========    ==========    ==========

                                    Continued
                                       24
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

10.  INCOME TAXES (CONTINUED)

     The  components  of  deferred  taxes as of  December  31, 1999 and 1998 are
     summarized as follows:

                                                       1999             1998
                                                 ---------------  ----------
        Deferred tax liabilities:
           FHLB stock dividends                  $   (402,961)    $   (357,283)
           Post 1987 bad debt reserves               (199,194)        (248,993)
           Unrealized appreciation

             on securities available for sale               -       (2,831,251)
                                                 ------------     ------------
                                                     (602,155)      (3,437,527)
                                                 ------------     ------------
        Deferred tax assets:
           Bad debt reserves                           93,691           86,755
           Pension cost                                44,862           42,940
           Accrued interest expense                    26,213           23,006
           Accrued professional fees                   17,451           15,861
           Unrealized depreciation on
             securities available for sale            462,917                -
           Provision for MRP                          471,765                -
                                                 ------------     ------------

                                                    1,116,899          168,562
                                                 ------------     ------------
        Net deferred tax asset (liability)       $    514,744     $ (3,268,965)
                                                 ============     ============

     Thrift institutions, in determining taxable income, were previously allowed
     special bad debt deductions based on specified  experience formulae or on a
     percentage of taxable  income before such  deductions.  In August 1996, the
     President  signed the Small  Business  Protection  Act of 1996 that,  among
     other  things,  repealed  the tax  bad  debt  reserve  method  for  thrifts
     effective for taxable years beginning after December 31, 1995. As a result,
     thrifts must recapture  into taxable  income the amount of their  post-1987
     tax bad debt reserves over a six-year  period  beginning  after 1995.  This
     recapture  could be deferred for up to two years if the thrift  satisfied a
     residential  loan portfolio test, and the Bank qualified for that deferral.
     For each of the years ended December 31, 1999 and 1998, the Bank recaptured
     $146,467 of the  $878,800  total  recapture of tax bad debt  reserves  into
     taxable  income.  A similar  amount will be recaptured in each of the years
     2000 through  2003.  The  recapture  does not have any effect on the Bank's
     financial  statements  because the  related  tax  expense has already  been
     accrued.

     Thrifts  such as the Bank  may now  only use the same tax bad debt  reserve
     method that is allowed for banks. Accordingly, a thrift with assets of $500
     million  or less may only add to its tax bad debt  reserves  based upon its
     moving  six-year  average  experience  of actual  loan  losses  (i.e.,  the
     experience  method).  A thrift with assets greater than $500 million can no
     longer use the  reserve  method  and may only  deduct  loan  losses as they
     actually arise (i.e., the specific charge-off method).  The Bank expects to
     continue to use the reserve method.

                                    Continued
                                       25
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

10.  INCOME TAXES (CONTINUED)

     The  portion  of a thrift's  tax bad debt  reserve  that is not  recaptured
     (generally  pre-1988 bad debt reserves)  under the 1996 law is only subject
     to recapture at a later date under  certain  circumstances.  These  include
     stock  repurchase  redemptions by the thrift or if the thrift converts to a
     type of institution  (such as a credit union) that is not considered a bank
     for tax purposes.  However,  no further  recapture would be required if the
     thrift  converted to a  commercial  bank charter or was acquired by a bank.
     The Bank does not anticipate engaging in any transactions at this time that
     would  require  the  recapture  of its  remaining  tax bad  debt  reserves.
     Therefore,  retained  earnings  at  December  31,  1999 and  1998  includes
     approximately  $4,027,400  which  represents  such bad debt  deductions for
     which no deferred income taxes have been provided.

11.  RELATED PARTIES

     The  Bank has  entered  into  transactions  with its  directors  and  their
     affiliates (related parties). The aggregate amount of loans to such related
     parties   at  December  31,  1999  and 1998,  was  $283,602  and  $302,259,
     respectively.  During 1999, new loans to such related  parties  amounted to
     $12,155 and repayments amounted to $30,812.  During 1998, new loans to such
     related parties amounted to $69,914 and repayments amounted to $31,447.

12.  COMMITMENTS AND CONTINGENCIES

     In the  ordinary  course  of  business,  the Bank has  various  outstanding
     commitments  and  contingent  liabilities  that  are not  reflected  in the
     accompanying financial statements.

     The  Bank  had open  loan  commitments  at  December  31,  1999 and 1998 of
     $1,208,900  and  $464,789  respectively.  Of  these  amounts,  $72,150  and
     $267,252 as of December  31,  1999 and 1998,  respectively,  were for fixed
     rate loans. The interest rates for the fixed rate loan  commitments  ranged
     from  7.875% to 9.00% and 7.375% to 8.50% for  December  31, 1999 and 1998,
     respectively.

     In  addition,  the Bank is a  defendant  in legal  proceedings  arising  in
     connection  with its business.  It is the best judgment of management  that
     neither the  financial  position nor results of operations of the bank will
     be materially affected by the final outcome of these legal proceedings.

                                    Continued
                                       26
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

13.  REGULATORY MATTERS

     The Financial  Institutions  Reform  Recovery and  Enforcement  Act of 1989
     ("FIRREA"), which instituted major reforms in the operation and supervision
     of  the  savings  and  loan  industry,   contains  provisions  for  capital
     standards.  These standards require savings  institutions to have a minimum
     regulatory  tangible capital (as defined in the regulation)  equal to 1.50%
     of adjusted  total assets and a minimum  4.00% core capital (as defined) of
     adjusted total assets.  Additionally,  savings institutions are required to
     meet a total risk-based capital requirement of 8.00%.

     The Bank is also subject to the provisions of the Federal Deposit Insurance
     Corporation Improvement Act of 1991 ("FDICIA"). FDICIA includes significant
     changes to the legal and  regulatory  environment  for  insured  depository
     institutions,  including reductions in insurance coverage for certain kinds
     of deposits,  increased  supervision  by the Federal  regulatory  agencies,
     increased  reporting   requirements  for  insured  institutions,   and  new
     regulations  concerning  reporting  on internal  controls,  accounting  and
     operations.

     FDICIA's prompt  corrective  action  regulations  define  specific  capital
     categories   based  on  an  institution's   capital  ratios.   The  capital
     categories,  in  declining  order,  are  "well  capitalized",   "adequately
     capitalized",  "undercapitalized",  "significantly  undercapitalized",  and
     "critically     undercapitalized."      Institutions     categorized     as
     "undercapitalized" or worse are subject to certain restrictions,  including
     the requirement to file a capital plan with OTS, and increased  supervisory
     monitoring,  among other things.  Other  restrictions may be imposed on the
     institution  either by the OTS or by the FDIC,  including  requirements  to
     raise additional capital, sell assets, or sell the entire institution.

     The  following  chart  delineates  the  categories as defined in the FDICIA
     legislation:

                                                Tier I Risk-      Total Risk-
                                Core Capital    Based Capital     Based Capital
                                ------------    -------------     -------------

        "Well capitalized"               5.0%            6.0%             10.0%
        "Adequately
         capitalized"                    4.0%            4.0%              8.0%
        "Undercapitalized"     Less than 4.0%  Less than 4.0%    Less than 8.0%
        "Significantly
         undercapitalized"     Less than 3.0%
        Less than 3.0%         Less than 6.0%

                                    Continued
                                       27
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

13.  REGULATORY MATTERS (CONTINUED)

     At  December  31,  1999,  the Bank's  core,  tier I  risk-based,  and total
     risk-based capital ratios were 21.60%,  58.24%,  and 58.60%,  respectively.
     The  following  is a  calculation  of the  Bank's  regulatory  capital  (in
     thousands) at December 31, 1999:
<TABLE>
<CAPTION>
                                                          Tier I                                  Total
                                                           Risk-                                  Risk-
                                             GAAP          Based       Tangible      Core         Based
                                            Capital       Capital      Capital      Capital      Capital
                                            -------       -------      -------      -------      -------
        <S>                                 <C>           <C>          <C>          <C>          <C>
        GAAP capital, as reported           $44,072       $44,072      $44,072      $44,072      $44,072
                                            =======

        Unrealized losses on certain
         available-for- sale securities                         -          899          899          899

        General valuation allowance                             -            -            -          278
                                                          -------------------------------------------------
        Regulatory capital                                $44,072       44,971       44,971       45,249
                                                          =======

        Minimum capital requirement %                                    1.50%        4.00%        8.00%

        Minimum capital requirement $                                    3,123        8,327        6,177
                                                                       -------      -------      -------
        Regulatory capital excess                                      $41,848      $36,644      $39,072
                                                                       =======      =======      =======
</TABLE>
     At  December  31,  1998,  the Bank's  core,  tier I  risk-based,  and total
     risk-based capital ratios were 20.36%,  49.76%,  and 50.11%,  respectively.
     The  following  is a  calculation  of the  Bank's  regulatory  capital  (in
     thousands) at December 31, 1998:
<TABLE>
<CAPTION>
                                                            Tier I                                 Total
                                                            Risk-                                  Risk-
                                               GAAP         Based      Tangible        Core        Based
                                              Capital 1     Capital     Capital      Capital      Capital
                                              ---------     -------     -------      -------      -------
        <S>                                 <C>           <C>          <C>          <C>          <C>
        GAAP capital, as reported           $41,369       $41,369      $41,369      $41,369      $41,369
                                            =======

        Unrealized gains on certain
         available-for- sale securities                         -       (5,483)      (5,483)      (5,483)

        General valuation allowance                             -            -            -          257
                                                          -------      -------      -------      -------

        Regulatory capital                                $41,369      $35,886      $35,886      $36,143
                                                          =======

        Minimum capital requirement %                                    1.50%        4.00%        8.00%

        Minimum capital requirement $                                    2,965        7,907        5,769
                                                                       -------      -------      -------
        Regulatory capital excess                                      $32,921      $27,979      $30,374
                                                                       =======      =======      =======
</TABLE>

                                    Continued
                                       28
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998, AND 1997

13.  REGULATORY MATTERS (CONTINUED)

     The OTS risk-based  capital  regulation also includes an interest rate risk
     ("IRR")  component  that requires  savings  institutions  with greater than
     normal  IRR,  when  determining  compliance  with  the  risk-based  capital
     requirements,  to maintain additional total capital.  The OTS has, however,
     indefinitely  deferred  enforcement  of its  IRR  requirements.  Under  the
     regulation,  a  savings  institution's  IRR is  measured  in  terms  of the
     sensitivity  of its "net portfolio  value" to changes in interest  rates. A
     savings  institution is considered to have a "normal" level of IRR exposure
     if the  decline in its net  portfolio  value after an  immediate  200 basis
     point increase or decrease in market  interest rates is less than 2% of the
     current  estimated  economic value of its assets.  If the OTS determines in
     the  future  to  enforce  the  regulation's  IRR  requirements,  a  savings
     institution with a greater than normal IRR would be required to deduct from
     total  capital,   for  purposes  of  calculating  its  risk-based   capital
     requirement,  an  amount  equal  to one  half the  difference  between  the
     institution's  measured IRR and 2%, multiplied by the economic value of the
     institution's   total  assets.   Management  does  not  believe  that  this
     regulation, when enforced, will have a material impact on the Bank.

14.  HOPFED BANCORP, INC.

     The following  condensed  statements of financial  condition as of December
     31, 1999 and 1998 and condensed statements of income and cash flows for the
     year ended  December  31,  1999 and the  period  February  6, 1998  through
     December 31, 1998 of the parent  company only should be read in conjunction
     with the consolidated financial statements and the notes thereto.

                                    Continued
                                       29
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

14.  HOPFED BANCORP, INC. (CONTINUED)

                   CONDENSED STATEMENT OF FINANCIAL CONDITION
                           DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
                                                                           1999               1998
                                                                           ----               ----
               ASSETS
               <S>                                                    <C>               <C>
                  Cash and due from banks                             $    429,509      $     112,094
                  Federal funds sold                                       200,000            485,000
                  Securities available for sale                                  -         16,015,265
                  Accrued interest receivable                                    -            220,503
                  Other assets                                                   -             14,770
                  Investment in subsidiary                              19,708,291         19,707,645
                  Note receivable-ESOP                                        -             3,226,900
                                                                      ------------      -------------
                        Total assets                                  $ 20,337,800      $  39,782,177
                                                                      ============      =============
               LIABILITIES AND EQUITY
                  Liabilities:
                    Federal income taxes payable:
                        Current                                       $     48,408      $           -
                        Deferred                                                 -              6,800
                    Dividends payable                                      307,364            302,524
                                                                      ------------      -------------
                        Total liabilities                                  355,772            309,324
                                                                      ------------      -------------
                  Equity:
                    Common stock                                            39,425             40,336
                    Additional paid in capital                          19,942,603         39,382,349
                    Retained earnings                                            -             36,968
                    Accumulated other comprehensive income                       -             13,200
                                                                      ------------      -------------
                        Total equity                                    19,982,028         39,472,853
                                                                      ------------      -------------
                        Total liabilities and equity                  $ 20,337,800      $  39,782,177
                                                                      ============      =============

                          CONDENSED STATEMENT OF INCOME
                     FOR THE YEAR ENDED DECEMBER 31,1999 AND
            FOR THE PERIOD FEBRUARY 6, 1998 THROUGH DECEMBER 31, 1998

                  Interest income
                      Loans receivable                                $    230,203      $     246,482
                      Securities available for sale                        620,306            502,884
                      Time deposits                                        192,819            320,040
                                                                      ------------      -------------
                      Total interest income                              1,043,328          1,069,406
                                                                      ------------      -------------
                  Noninterest expenses
                      Salaries and benefits                                179,122             41,597
                      Other                                                158,792             45,765
                                                                      ------------      -------------
                      Total noninterest expenses                           337,914             87,362
                                                                      ------------      -------------

                  Income before income taxes                               705,414            982,044

                  Income tax expense                                       274,408            364,230
                                                                      ------------      -------------
                  Net income                                          $    431,006      $     617,814
                                                                      ============      ==============
</TABLE>
                                    Continued
                                       30
<PAGE>
                       HOPFED BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

14.  HOPFED BANCORP, INC. (CONTINUED)

                        CONDENSED STATEMENT OF CASH FLOWS
                    FOR THE YEAR ENDED DECEMBER 31, 1999 AND
            FOR THE PERIOD FEBRUARY 6, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                            1999            1998
                                                                            ----            ----

              CASH FLOWS FROM OPERATING ACTIVITIES:
              <S>                                                     <C>               <C>
                    Net income                                        $    431,006      $    617,814
                    Adjustments to reconcile net income to
                       net cash provided by operating activities
                    Accretion of investment security discounts            (403,320)          (11,048)
                    Earned ESOP shares                                      82,315            17,395
                    (Increase) decrease in:
                       Accrued interest receivable                         220,503          (220,503)
                       Other assets                                         14,770           (14,770)
                    Increase (decrease) in:
                       Current income taxes payable                         48,408                 -
                                                                      ------------      ------------

                         Net cash provided by operating activities         393,682           388,888
                                                                      ------------      ------------

              CASH FLOWS FOR INVESTING ACTIVITIES:
                    Investment in subsidiary                                     -       (19,707,645)
                    Proceeds from sale of available-for-sale
                       securities                                       32,898,585                 -
                    Purchase of available-for-sale securities          (16,500,000)      (15,984,217)
                    Net (increase) decrease in federal funds sold          285,000          (485,000)
                    Repayment of note receivable-ESOP                      755,766                 -
                                                                      ------------      ------------
                         Net cash provided (used) by investing
                            activities                                  17,439,351       (36,176,862)
                                                                      ------------      ------------

              CASH FLOWS FROM FINANCING ACTIVITIES:
                    Issuance of common stock                                     -        36,178,390
                    Dividends paid                                     (17,515,618)         (278,322)
                                                                      ------------      ------------
                         Net cash provided (used) by financing
                            activities                                 (17,515,618)       35,900,068
                                                                      ------------      ------------

                         Net increase in cash                              317,415           112,094

              Cash at beginning of year                                    112,094                 -
                                                                      ------------      ------------
              Cash at end of year                                     $    429,509      $    112,094
                                                                      ============      ============
              SUPPLEMENTAL DISCLOSURE:
                    Income taxes paid                                 $    221,228      $    369,002
                                                                      ============      ============
                    Non-cash transaction-ESOP
                       loan redeemed with stock                       $  2,471,134                 -
                                                                      ============      ============
</TABLE>
                                       31
<PAGE>
CORPORATE INFORMATION
--------------------------------------------------------------------------------

DIRECTORS AND EXECUTIVE OFFICERS


                  WD Kelley                                Clifton H. Cochran
             Chairman of the Board                              Retired
                  Retired

                Bruce Thomas                                Walton G. Ezell
         President and Chief Executive
      Officer of the Company and the Bank                        FARMER


                                                         HARRY J. DEMPSEY, MD
            Peggy R. Noel                                   Anesthesiologist
  Vice President, Chief Financial Officer and
  Treasurer of the Company and Executive Vice

 President, Chief Financial Officer and Chief
        Operations Officer of the Bank

            Boyd M. Clark                                    Gilbert E. Lee
  Vice President and Secretary of the Company
       and Senior Vice President - Loan                    CO-OWNER, RELIABLE
          Administration of the Bank                          FINANCE INC.

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

                                   MAIN OFFICE

                          2700 Fort Campbell Boulevard
                      Hopkinsville, KY 42240 (270/885-1171)

                                 BRANCH OFFICES

          Downtown Branch Office                       Murray Branch Office
         605 South Virginia Street                     7th and Main Streets
   Hopkinsville, KY 42240 (270/885-1171)         Murray, KY 42071 (270/753-7921)

                                       1
<PAGE>
          Cadiz Branch Office                         Elkton Branch Office
             352 Main Street                            West Main Street
    Cadiz, KY 42211 (270/522-6638)               Elkton, KY 42220 (270/265-5628)

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

                               GENERAL INFORMATION
<TABLE>
<CAPTION>
<S>                                        <C>                                       <C>
INDEPENDENT ACCOUNTANTS                    ANNUAL MEETING                            ANNUAL REPORT ON FORM 10-K
York, Neel & Co.--                         The 2000 Annual Meeting of Stockholders   A COPY OF THE COMPANY'S 1999 ANNUAL
   Hopkinsville, LLP                       will be held on May 10, 2000 at 3:00      REPORT ON FORM 10-K WILL BE FURNISHED
1113 Bethel Street                         p.m. at Hopkinsville Federal Savings      WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
Hopkinsville, KY  42240                    Bank, 2700 Fort Campbell Boulevard,       RECORD DATE FOR THE 2000 ANNUAL MEETING
                                           Hopkinsville, KY                          UPON WRITTEN REQUEST TO THE SECRETARY,
                                                                                     HOPFED BANCORP, INC., 2700  FORT
GENERAL COUNSEL                            TRANSFER AGENT                            CAMPBELL BOULEVARD, HOPKINSVILLE, KY
Deatherage, Myers, Self & Lackey           Registrar and Transfer Company            42240
701 South Main Street                      10 Commerce Drive
Hopkinsville, KY 42241                     Cranford, NJ  07016

Special Counsel
Kutak Rock
1101 Connecticut Avenue, N.W.
Washington, D.C.  20036
</TABLE>
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