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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark One)

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



For the fiscal year ended December 31, 2003



OR



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



For the transition period from  to



Commission file number 000-23667



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HOPFED BANCORP, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 61-1322555                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                               |  |           
|---------------------------------------------- |  | ----------
|2700 Fort Campbell Boulevard, Hopkinsville, KY |  | 42240     
|(Address of principal executive offices)       |  | (Zip Code)



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



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



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



Common Stock, par value $.01 per share

(Title of Class)



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



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



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



The registrants voting stock is traded on the Nasdaq Stock Market. The
aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the price ($16.00 per share) at which the stock was sold on June 30, 2003, was approximately $52,166,656. For purposes of this calculation,
the term affiliate refers to all executive officers and directors of the registrant and all stockholders beneficially owning more than 10% of the registrants Common Stock.



As of the close of business on March 15, 2004, 3,630,396 shares of the
registrants Common Stock were outstanding.



Documents
Incorporated By Reference



Part II:



Annual Report to Stockholders for the year ended December 31, 2003.



Part III:



Portions of the definitive proxy statement for the 2003 Annual Meeting of Stockholders.



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##### Table of Contents

PART I



ITEM 1. BUSINESS



In February 1998, HopFed Bancorp, Inc. (the Company) issued and sold 4,033,625 shares of common stock, par value $.01 per share (the
Common Stock), in connection with the conversion of Hopkinsville Federal Savings Bank (the Bank) from a federal mutual savings bank to a federal stock savings bank and the issuance of the Banks capital stock to HopFed
Bancorp, Inc. (the Company). The conversion of the Bank, the acquisition of all of the outstanding capital stock of the Bank by the Company and the issuance and sale of the Common Stock are collectively referred to herein as the
Conversion. In February 2001, the Bank changed its name to Hopkinsville Federal Bank. On May 14, 2002, the Bank changed its name to Heritage Bank.



HopFed Bancorp, Inc.



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



As a holding company, the Company has greater
flexibility than the Bank to diversify its business activities through existing or newly formed subsidiaries or through acquisition or merger with other financial institutions, although the Company currently does not have any plans, agreements,
arrangements or understandings with respect to any such acquisitions or mergers. The Company is classified as a unitary savings and loan holding company and is subject to regulation by the OTS.



The Companys executive offices are located at 2700 Fort Campbell
Boulevard, Hopkinsville, Kentucky 42240, and its main telephone number is (270) 885-1171.



Heritage Bank



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



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



Growth Opportunities



In 2003, the Bank has relocated retail offices in Calloway and
Marshall County as well as opened a new office in Marshall County due to exceptional growth levels in both locations. In less than three years of operation, the loan portfolio in Marshall County has grown to $87 million and deposits have grown to
$40 million. The Banks growth in the Calloway County market has been equally impressive. In four years, the loan portfolio has grown from $9 million to $68 million and deposits have increased from $12 million to $67 million. Management
believes that these two markets, in addition to Christian County, will continue to provide significant opportunities for growth. Deposit growth in Fulton County has been equally impressive. Since the September 2002 acquisition, deposits in the
Fulton market have increased from $96 million to over $115 million.



Christian County is the Companys headquarters and its largest market. Christian County growth has been strong, especially in the growth of core and municipal deposits. The Company believes that long-term growth prospects in Christian
County meet or exceed those of its other markets due to the overall size of the market.



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The following chart outlines the Banks market share in its four largest markets individually and
its entire market overall at June 30, 2001, June 30, 2002, and June 30, 2003 according to information provided by the FDIC Market Share Report:



|          |  |            |      |  |      |      |  |      |  
|--------- |  | ---------- | ---- |  | ---- | ---- |  | ---- | -
|          |  | At June 30 |     
|          |  | 2001       |      |  | 2002 |      |  | 2003 |  
|Calloway  |  | 5.6        | %    |  | 8.4  | %    |  | 11.8 | %
|Christian |  | 15.2       | %    |  | 16.1 | %    |  | 19.7 | %
|Fulton    |  | 49.7       | %(a) |  | 49.7 | %(a) |  | 51.9 | %
|Marshall  |  | 1.3        | %    |  | 3.8  | %    |  | 7.5  | %
|Overall   |  | 9.0        | %(b) |  | 10.7 | %(b) |  | 18.5 | %

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|(a) | Represents the market share reported by Old National Bank in Fulton County, Kentucky. These deposits were purchased by Heritage Bank in September 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The combined market share of Heritage Bank and Old National Banks Fulton County Office at June 30, 2001 and June 30, 2002 would have been 14.4% and 15.4% respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The majority of the Banks markets continue
to provide growth opportunities for both loans and deposits, as customers are dissatisfied with national and regional banks that have entered the market via acquisitions as well as economic growth in the Banks higher growth markets. The
Banks new internet banking web site with free bill pay, www.bankwithheritage.com, has been a huge success with over 1,200 customers participating in the first year of operation. In 2003, the Bank has experienced positive deposit market share
growth in each of its markets.



While there is ample
opportunities for the Company to grow in its current markets, the Company may have the opportunity to expand into new markets by either branch acquisitions, the purchase of community banks, or new branches. These opportunities may present themselves
as larger banks may decide to exit markets in Western Kentucky, Middle Tennessee and Western Tennessee. Management will continue to evaluate these opportunities when they become available and pursue those opportunities that fit into the business
plan of the Company. Management anticipates that recent growth trends will continue as the Company seeks opportunities in new markets and improves its market share in existing markets.



In November of 2003, the Bank opened Heritage Solutions, a division of Fall & Fall Insurance in Murray, Kentucky.
Heritage Solutions offers property and casualty insurance as well as fixed annuities. Heritage Solutions solicits business across the entire market area of Heritage Bank and is seen as a natural fit as the Bank continues to seek ways to fulfill all
the financial services needs of its customers.



In November of
2003, the Company purchased an additional $5.0 million dollars of life insurance on three of its senior management officers. This insurance was purchased from two of the highest rated insurance companies in the United States. This insurance provides
key man coverage for the Bank in the event of death and is paid in full. For the year ending December 31, 2003, the Bank reported $94,000 in income from bank owned life insurance. At December 31, 2003, the total cash value of the Companys bank
owned life insurance was $6.6 million.



Available Information



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



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Stock Repurchases



On September 20, 2000, the Company announced that its Board of Directors had approved the repurchase of up to 200,000 shares of its common stock. The
stock repurchase program was completed in February 2001. On March 26, 2001, the Company announced that its Board of Directors had approved the repurchase of an additional 300,000 shares. The purchases are being made from time to time on the Nasdaq
Stock Market at prices prevailing on that market or in privately negotiated transactions at managements discretion, depending on market conditions, price of the Companys common stock, corporate cash requirements and other factors. As of
March 15, 2004, 208,909 shares of common stock had been repurchased.



Lending Activities



General. The total
gross loan portfolio totaled $337.3 million at December 31, 2003, representing 62.97% of total assets at that date. Substantially all loans are originated in the Banks market area. At December 31, 2003, $191.0 million, or 56.6% of the loan
portfolio, consisted of one-to-four family, residential mortgage loans. Other loans secured by real estate include non-residential real estate loans, which amounted to $ 39.6 million, or 11.7% of the loan portfolio at December 31, 2003, and
multi-family residential loans, which were $ 6.3 million, or 1.9% of the loan portfolio at December 31, 2003. At December 31, 2003, construction loans were $ 3.5 million, or 1.1% of the loan portfolio, and total consumer and commercial loans totaled
$ 96.9 million, or 28.7% of the loan portfolio.



Analysis of
Loan Portfolio.Set forth below is selected data relating to the composition of the loan portfolio by type of loan at the dates indicated. At December 31, 2003, there were no concentrations of loans exceeding 10% of total loans other than as
disclosed below.



|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|------------------------------ |  | ---------------------- | ------- | ------- | ----- | - | ------ | ---- | ------- |  | ----- | ------ |  | ------- | ------- |  | ------ | - | ------- | - | ------- | ------ | ----- | ------- |  | - | ------- |  | ----- | -
|                               |  | 2003                   |         |         | 2002  |   |        | 2001 |         |  | 2000  |        |  | 1999    |        
|                               |  | Amount                 |         | Percent |       |   | Amount |      | Percent |  |       | Amount |  | Percent |         |  | Amount |   | Percent |   |         | Amount |       | Percent | 
|                               |  | (Dollars in thousands) |        
|Type of Loan:                  |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Real estate loans:             |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|One-to-four family residential |  | $                      | 191,015 |         | 56.6  | % |        | $    | 171,453 |  | 58.4  | %      |  | $       | 111,768 |  | 65.0   | % |         | $ | 91,960  |        | 70.8  | %       |  | $ | 86,345  |  | 75.9  | %
|Multi-family residential       |  |                        | 6,254   |         | 1.9   | % |        |      | 4,547   |  | 1.6   | %      |  |         | 2,448   |  | 1.4    | % |         |   | 2,841   |        | 2.2   | %       |  |   | 2,165   |  | 1.9   | %
|Construction                   |  |                        | 3,544   |         | 1.1   | % |        |      | 1,757   |  | 0.6   | %      |  |         | 5,617   |  | 3.3    | % |         |   | 5,729   |        | 4.4   | %       |  |   | 5,706   |  | 5.0   | %
|Non-residential (1)            |  |                        | 39,615  |         | 11.7  | % |        |      | 32,368  |  | 11.0  | %      |  |         | 18,445  |  | 10.7   | % |         |   | 21,695  |        | 16.7  | %       |  |   | 12,399  |  | 10.9  | %
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total real estate loans        |  |                        | 240,428 |         | 71.3  | % |        |      | 210,125 |  | 71.6  | %      |  |         | 138,278 |  | 80.4   | % |         |   | 122,225 |        | 94.1  | %       |  |   | 106,615 |  | 93.7  | %
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Other loans:                   |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Secured by deposits            |  |                        | 3,062   |         | 0.9   | % |        |      | 3,003   |  | 1.0   | %      |  |         | 2,191   |  | 1.3    | % |         |   | 2,720   |        | 2.1   | %       |  |   | 2,525   |  | 2.2   | %
|Other consumer loans           |  |                        | 43,147  |         | 12.8  | % |        |      | 44,238  |  | 15.1  | %      |  |         | 16,455  |  | 9.6    | % |         |   | 3,971   |        | 3.1   | %       |  |   | 4,356   |  | 3.8   | %
|Commercial loans               |  |                        | 50,679  |         | 15.0  | % |        |      | 36,184  |  | 12.3  | %      |  |         | 14,943  |  | 8.7    | % |         |   | 946     |        | 0.7   | %       |  |   | 314     |  | 0.3   | %
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total other loans              |  |                        | 96,888  |         | 28.7  | % |        |      | 83,425  |  | 28.4  | %      |  |         | 33,589  |  | 19.6   | % |         |   | 7,637   |        | 5.9   | %       |  |   | 7,195   |  | 6.3   | %
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|                               |  |                        | 337,316 |         | 100.0 | % |        |      | 293,550 |  | 100.0 | %      |  |         | 171,867 |  | 100.0  | % |         |   | 129,862 |        | 100.0 | %       |  |   | 113,810 |  | 100.0 | %
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Loans held for sale            |  |                        |        |         |       |   |        |      |        |  |       |        |  |         | 928     |  |        |   |         |   |        |        |       |         |  |   |        |  |       |  
|Allowance for loan losses      |  |                        | 2,576   |         |       |   |        |      | 1,455   |  |       |        |  |         | 923     |  |        |   |         |   | 708     |        |       |         |  |   | 278     |  |       |  
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total                          |  | $                      | 334,740 |         |       |   |        | $    | 292,095 |  |       |        |  | $       | 170,016 |  |        |   |         | $ | 129,154 |        |       |         |  | $ | 113,532 |  |       |  
|                               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  

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



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Loan Maturity Schedule.The following table sets forth certain information at December 31, 2003
regarding the dollar amount of loans maturing in the portfolio based on their contractual maturity dates. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.



|                               |  |                                        |        |                                                     |   |                                                      |  |                                                       |        |                                            |   |        |  |   |        |  |   |        |  |   |         |  |   |        
|------------------------------ |  | -------------------------------------- | ------ | --------------------------------------------------- | - | ---------------------------------------------------- |  | ----------------------------------------------------- | ------ | ------------------------------------------ | - | ------ |  | - | ------ |  | - | ------ |  | - | ------- |  | - | -------
|                               |  | Due during the year endingDecember 31, |        | Due after 3 through 5 years after December 31, 2004 |   | Due after 5 through 10 years after December 31, 2004 |  | Due after 10 through 15 years after December 31, 2004 |        | Due after 15 years after December 31, 2004 |   | Total 
|                               |  | 2004                                   |        | 2005                                                |   | 2006                                                 |  |                                                       |        |                                            |  
|                               |  | (In thousands)                        
|One-to-four family residential |  | $                                      | 1,871  |                                                     | $ | 1,180                                                |  | $                                                     | 1,172  |                                            | $ | 4,807  |  | $ | 18,627 |  | $ | 45,048 |  | $ | 118,310 |  | $ | 191,015
|Multi-family residential       |  |                                        | 220    |                                                     |   |                                                     |  |                                                       |       |                                            |   | 165    |  |   | 636    |  |   | 2,232  |  |   | 3,001   |  |   | 6,254  
|Construction                   |  |                                        | 2,997  |                                                     |   | 547                                                  |  |                                                       |       |                                            |   |       |  |   |       |  |   |       |  |   |        |  |   | 3,544  
|Non-residential                |  |                                        | 2,429  |                                                     |   | 2,648                                                |  |                                                       | 757    |                                            |   | 2,411  |  |   | 6,506  |  |   | 13,655 |  |   | 11,209  |  |   | 39,615 
|Other                          |  |                                        | 10,333 |                                                     |   | 9,030                                                |  |                                                       | 9,142  |                                            |   | 31,336 |  |   | 14,130 |  |   | 14,995 |  |   | 7,922   |  |   | 96,888 
|                               |  |                                        |        |                                                     |   |                                                      |  |                                                       |        |                                            |   |        |  |   |        |  |   |        |  |   |         |  |   |        
|Total                          |  | $                                      | 17,850 |                                                     | $ | 13,405                                               |  | $                                                     | 11,071 |                                            | $ | 38,719 |  | $ | 39,899 |  | $ | 75,930 |  | $ | 140,442 |  | $ | 337,316
|                               |  |                                        |        |                                                     |   |                                                      |  |                                                       |        |                                            |   |        |  |   |        |  |   |        |  |   |         |  |   |        



The following table
sets forth at December 31, 2003, the dollar amount of all loans due after December 31, 2004 which had predetermined interest rates and have floating or adjustable interest rates.



|                               |  |                   |        |                            |   |        
|------------------------------ |  | ----------------- | ------ | -------------------------- | - | -------
|                               |  | PredeterminedRate |        | Floating orAdjustable Rate
|                               |  | (In thousands)   
|One-to-four family residential |  | $                 | 19,602 |                            | $ | 169,542
|Multi-family residential       |  |                   | 388    |                            |   | 5,646  
|Construction                   |  |                   | 63     |                            |   | 484    
|Non-residential                |  |                   | 9,634  |                            |   | 27,552 
|Other                          |  |                   | 54,675 |                            |   | 31,880 
|                               |  |                   |        |                            |   |        
|Total                          |  | $                 | 84,362 |                            | $ | 235,104
|                               |  |                   |        |                            |   |        



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



Originations, Purchases and Sales of Loans. The Bank generally has
authority to originate and purchase loans secured by real estate located throughout the United States. Consistent with its emphasis on being a community-oriented financial institution, the Bank conducts substantially all of its lending activities in
its market area.



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##### Table of Contents

The following table sets forth certain information with respect to loan origination activity for the
periods indicated.



|                                    |  |                         |         |      |   |         |  |   |       
|----------------------------------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | ------
|                                    |  | Year Ended December 31,
|                                    |  | 2003                    |         | 2002 |   | 2001   
|                                    |  | (In thousands)         
|Loan originations:                  |  |                         |         |      |   |         |  |   |       
|One-to-four family residential      |  | $                       | 105,892 |      | $ | 58,024  |  | $ | 47,440
|Multi-family residential            |  |                         | 2,452   |      |   | 4,433   |  |   | 368   
|Construction                        |  |                         | 4,120   |      |   | 2,590   |  |   | 2,627 
|Non-residential                     |  |                         | 13,446  |      |   | 32,635  |  |   | 9,355 
|Other                               |  |                         | 77,805  |      |   | 55,701  |  |   | 34,037
|                                    |  |                         |         |      |   |         |  |   |       
|Total loans originated              |  |                         | 203,715 |      |   | 153,383 |  |   | 93,827
|                                    |  |                         |         |      |   |         |  |   |       
|Loans obtained through acquisition: |  |                         |         |      |   |         |  |   |       
|One-to-four family residential      |  |                         |        |      |   | 12,612  |  |   |      
|Multi-family residential            |  |                         |        |      |   | 2,147   |  |   |      
|Construction                        |  |                         |        |      |   | 518     |  |   |      
|Non-residential                     |  |                         |        |      |   | 12,893  |  |   |      
|Other                               |  |                         |        |      |   | 13,443  |  |   |      
|                                    |  |                         |         |      |   |         |  |   |       
|Total loans purchased               |  |                         |        |      |   | 41,613  |  |   |      
|                                    |  |                         |         |      |   |         |  |   |       
|Loan reductions:                    |  |                         |         |      |   |         |  |   |       
|Change in allowance for loan losses |  |                         | 1,121   |      |   | 532     |  |   | 215   
|Loans sold                          |  |                         | 26,774  |      |   | 15,368  |  |   | 11,235
|Loan principal payments             |  |                         | 133,175 |      |   | 57,017  |  |   | 41,515
|                                    |  |                         |         |      |   |         |  |   |       
|Net increase in loan portfolio      |  | $                       | 42,645  |      | $ | 122,079 |  | $ | 40,862
|                                    |  |                         |         |      |   |         |  |   |       



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



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



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



It is the Banks policy to record a lien on the real estate securing a loan and to obtain a title opinion from Kentucky
counsel which provides that the property is free of prior encumbrances and other possible title defects. Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood hazard area, pay flood insurance
policy premiums.



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The majority of real estate loan applications are underwritten and closed in accordance with the
Banks own lending guidelines, which generally do not conform to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA) guidelines. Although such loans may not be readily saleable
in the secondary market, management believes that, if necessary, such loans may be sold to private investors.



In June of 2001, the Bank began offering a fixed rate loan program with maturities of 15, 20, and 30 years. These loans are underwritten and closed in
accordance with FHLMC standards. These loans are originated with the intent to sell them to FHLMC with servicing retained. At December 31, 2003, the Banks loan servicing portfolio was $40.6 million dollars.



The Bank is permitted to lend up to 100% of the appraised value of the real
property securing a mortgage loan. The Bank is required by federal regulations to obtain private mortgage insurance on that portion of the principal amount of any loan that is greater than 90% of the appraised value of the property. Under its
lending policies, the Bank will originate a one-to-four family residential mortgage loan for owner-occupied property with a loan-to-value ratio of up to 95%. For residential properties that are not owner-occupied, the Bank generally does not lend
more than 80% of the appraised value. For all residential mortgage loans, the Bank may increase its lending level on a case-by-case basis, provided that the excess amount is insured with private mortgage insurance.



Under applicable law, with certain limited exceptions, loans and extensions
of credit outstanding by a savings institution to a person at one time shall not exceed 15% of the institutions unimpaired capital and surplus. Loans and extensions of credit fully secured by readily marketable collateral may comprise an
additional 10% of unimpaired capital and surplus. Applicable law additionally authorizes savings institutions to make loans to one borrower, for any purpose, in an amount not to exceed the lesser of $30.0 million or 30% of unimpaired capital and
surplus to develop residential housing, provided certain requirements are satisfied. Under these limits, the Banks loans to one borrower were limited to $8.0 million at December 31, 2003. At that date, the Bank had no lending relationships in
excess of the loans-to-one-borrower limit. At December 31, 2003, the Banks largest lending relationship was $6.0 million. The loans are to a local grain elevator. The loan proceeds are used in the normal course of business for a grain elevator
and are secured by nonresidential real estate, inventory and accounts receivable. All loans within this relationship were current and performing in accordance with their terms at December 31, 2003.



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



One-to-four Family Residential Lending. The Bank historically has been and continues to be an originator of one-to-four family residential real estate loans in its market area. At December 31, 2003, one-to-four family residential
mortgage loans totaled approximately $ 191.0 million, or 56.6% of the Banks loan portfolio. The Bank originated $ 26.8 million in loans that were sold or may be sold in the secondary market with servicing retained.



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The Bank primarily originates residential mortgage loans with adjustable rates. As of December 31, 2003,
89.7% of one-to-four family mortgage loans in the Banks loan portfolio carried adjustable rates. Such loans are primarily for terms of 25 years, although the Bank does occasionally originate adjustable rate mortgages for 15, 20 and 30 year
terms, in each case amortized on a monthly basis with principal and interest due each month. The interest rates on these mortgages are adjusted once per year, with a maximum adjustment of 1% per adjustment period and a maximum aggregate adjustment
of 5% over the life of the loan. Prior to August 1, 1997, rate adjustments on the Banks adjustable rate loans were indexed to a rate which adjusted annually based upon changes in an index based on the National Monthly Median Cost of Funds,
plus a margin of 2.75%. Because the National Monthly Median Cost of Funds is a lagging index, which results in rates changing at a slower pace than rates generally in the marketplace, the Bank changed to a one-year Treasury bill constant maturity,
which the Bank believes reflects more current market information and thus allows the Bank to react more quickly to changes in the interest rate environment. In previous years, the adjustable rate mortgage loans offered by the Bank also provided for
initial rates of interest below the rates that would prevail when the index used for re-pricing is applied. Such initial rates, also referred to as teaser rates, often reflect a discount from the prevailing rate greater than the 1.0%
maximum adjustment allowed each year. As a result, the Bank may not be able to restore the interest rate of a loan with a teaser rate to its otherwise initial loan rate until at least the second adjustment period that occurs at the beginning of the
third year of the loan. Further, in a rising interest rate environment, the Bank may not be able to adjust the interest rate of the loan to the prevailing market rate until an even later period because of the combination of the teaser discount and
the 1% limitation on annual adjustments. For the last two years, declining interest rates have allowed the Bank to price the one year adjustable rate mortgage at or in excess of the fully indexed one year Treasury bill.



The retention of adjustable rate loans in the Banks portfolio helps
reduce the Banks exposure to increases in prevailing market interest rates. However, there are unquantifiable credit risks resulting from potential increases in costs to borrowers in the event of upward repricing of adjustable-rate loans. It
is possible that during periods of rising interest rates, the risk of default on adjustable rate loans may increase due to increases in interest costs to borrowers. Further, although adjustable rate loans allow the Bank to increase the sensitivity
of its interest-earning assets to changes in interest rates, the extent of this interest sensitivity is limited by the initial fixed-rate period before the first adjustment and the lifetime interest rate adjustment limitations. This risk is
heightened by the Banks practice of offering its adjustable rate mortgages with a discount to its initial interest rate that is greater than the annual increase in interest rates allowed under the terms of the loan. Accordingly, there can be
no assurance that yields on the Banks adjustable rate loans will fully adjust to compensate for increases in the Banks cost of funds. Finally, adjustable rate loans increase the Banks exposure to decreases in prevailing market
interest rates, although the 1% limitation on annual decreases in the loans interest rates tend to offset this effect.



The Bank also originates, to a limited extent, fixed-rate loans for terms of 10 and 15 years. Such loans are secured by first mortgages on one-to-four
family, owner-occupied residential real property located in the Banks market area. Because of the Banks policy to mitigate its exposure to interest rate risk through the use of adjustable rate rather than fixed rate products, the Bank
does not emphasize fixed-rate mortgage loans. At December 31, 2003, 10.3% of the Banks loan portfolio consisted of fixed-rate mortgage loans. To further reduce its interest rate risk associated with such loans, the Bank may rely upon FHLB
advances with similar maturities to fund such loans. See  Deposit Activity and Other Sources of Funds  Borrowing.



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



Construction Lending.The Bank engages in construction lending involving loans to individuals for construction of one-to-four family residential
housing located within the Banks market area, with such loans converting to permanent financing upon completion of construction. Such loans are generally made to individuals for construction primarily in established subdivisions within the
Banks market area. The Bank mitigates its risk with construction loans by imposing a maximum loan-to-value ratio of 95% for homes that will be owner-occupied and 80% for homes being built on a speculative basis. At December 31, 2003, the
Banks loan portfolio included $3.5 million of loans secured by properties under construction, including construction/permanent loans structured to become permanent loans upon the completion of construction and interim construction loans
structured to be repaid in full upon completion of construction and receipt of permanent financing.



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



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



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



Multi-Family Residential and Non-Residential Real Estate
Lending. The Banks multi-family residential loan portfolio consists of adjustable rate loans secured by real estate. At December 31, 2003, the Bank had $6.3 million of multi-family residential loans, which amounted to 1.9% of the
Banks loan portfolio at such date. The Banks non-residential real estate portfolio generally consists of adjustable rate loans secured by first mortgages on residential lots and rental property. In each case, such property is located in
the Banks market area. At December 31, 2003, the Bank had approximately $39.6 million of such loans, which comprised 11.7% of its loan portfolio. Multi-family residential real estate loans are underwritten with loan-to-value ratios up to 80%
of the appraised value of the property. Non-residential real estate loans are underwritten with loan-to-value ratios up to 65% of the appraised value for raw land and 75% for land development loans.



Multi-family residential and non-residential real estate lending entails
significant additional risks as compared with one-to-four family residential property lending. Multi-family residential and commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. The
payment experience on such loans typically is dependent on the successful operation of the real estate project, retail establishment or business. These risks can be significantly impacted by supply and demand conditions in the market for the office,
retail and residential space, and, as such, may be subject to a greater extent to adverse conditions in the economy generally. To minimize these risks, the Bank generally limits itself to its market area or to borrowers with which it has prior
experience or who are otherwise known to the Bank. It has been the Banks policy to obtain annual financial statements of the business of the borrower or the project for which multi-family residential real estate or commercial real estate loans
are made. At December 31, 2003, there were no non-residential mortgage loans delinquent by 90 days or more.



Consumer Lending. The consumer loans currently in the Banks loan portfolio consist of loans secured by savings deposits and other consumer
loans. Savings deposit loans are usually made for up to 90% of the depositors savings account balance. The interest rate is approximately 2.0% above the rate paid on such deposit account serving as collateral, and the account must be pledged
as collateral to secure the loan. Interest generally is billed on a quarterly basis. At December 31, 2003, loans on deposit accounts totaled $ 3.1 million, or 0.9% of the Banks loan portfolio. Other consumer loans include automobile loans, the
amount and terms of which are determined by the loan committee, and home equity and home improvement loans, which are made for up to 95% of the value of the property but require private mortgage insurance on 100% of the value of the property.



Consumer loans may entail greater credit risk than do
residential mortgage loans, particularly in the case of



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consumer loans that are unsecured or are secured by rapidly depreciable assets, such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are
dependent on the borrowers continuing financial stability, and therefore are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency
laws, may limit the amount which can be recovered on such loans. At December 31, 2003, there was $276,000 in consumer loans delinquent 90 days or more.



Commercial Lending. The Bank originates commercial loans on a secured and, to a lesser extent, unsecured basis. At December 31, 2003, the
Banks commercial loans amounted to $ 50.7 million, or 15.0% of the Banks loan portfolio. The Banks commercial loans generally are secured by corporate assets. In addition, the Bank generally obtains guarantees from the principals
of the borrower with respect to all commercial loans. At December 31, 2003, there was $32,000 in commercial loans delinquent 90 days or more.



Non-performing Loans and Other Problem Assets



The Banks non-performing loans totaled 0.34% of total loans at December 31, 2003. Loans are placed on a non-accrual status when the loan is past due
in excess of 90 days or the collection of principal and interest is doubtful. The Bank places a high priority on contacting customers by telephone as a primary method of determining the status of delinquent loans and the action necessary to resolve
any payment problem. The Banks management performs quality reviews of problem assets to determine the necessity of establishing additional loss reserves. The Banks total non-performing assets to total asset ratio was 0.27% at December
31, 2003.



Real estate acquired by the Bank as a result of
foreclosure is classified as real estate owned until such time as it is sold. The Bank generally tries to sell the property at a price no less than its net book value; however, it will consider slight discounts to the appraised value to expedite the
return of the funds to an earning status. When such property is acquired, it is recorded at its fair value less estimated costs of sale. Any required write-down of the loan to its appraised fair market value upon foreclosure is charged against the
allowance for loan losses. Subsequent to foreclosure, in accordance with accounting principles generally accepted in the United States of America, a valuation allowance is established if the carrying value of the property exceeds its fair value net
of related selling expenses. At December 31, 2003, the Banks other assets owned totaled $272,000. This amount represents managements best estimate on the fair value of these assets.



The following table sets forth information with respect to the Banks
non-performing assets at the dates indicated. No loans were recorded as restructured loans within the meaning of SFAS No. 15 at the dates indicated.



|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|---------------------------------------------------------------- |  | ---------------------- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - |  | - | ---- | -
|                                                                 |  | At December 31,        |      
|                                                                 |  | 2003                   |       |   | 2002 |   |      | 2001 |  |   | 2000 |   |  | 1999 |     
|                                                                 |  | (Dollars in thousands) |      
|Accruing loans which are contractually past due 90 days or more: |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Residential real estate                                          |  | $                      |      |   |      | $ |     |      |  | $ | 330  |   |  | $    | 371  |   |  | $ | 51   |  
|Non-residential real estate                                      |  |                        |      |   |      |   |     |      |  |   | 60   |   |  |      | 63   |   |  |   |     |  
|Consumer                                                         |  |                        |      |   |      |   |     |      |  |   | 12   |   |  |      |     |   |  |   | 7    |  
|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Total                                                            |  |                        |      |   |      |   |     |      |  | $ | 402  |   |  | $    | 434  |   |  | $ | 58   |  
|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Non-Accrual Loans:                                               |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Residential real estate                                          |  |                        | 836   |   |      |   | 497  |      |  |   |     |   |  |      |     |   |  |   |     |  
|Non residential real estate                                      |  |                        |      |   |      |   | 90   |      |  |   |     |   |  |      |     |   |  |   |     |  
|Consumer                                                         |  |                        | 276   |   |      |   | 246  |      |  |   |     |   |  |      |     |   |  |   |     |  
|Commercial                                                       |  |                        | 32    |   |      |   |     |      |  |   | 149  |   |  |      |     |   |  |   |     |  
|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Total non-performing Loans                                       |  | $                      | 1,144 |   |      | $ | 833  |      |  | $ | 551  |   |  | $    | 434  |   |  | $ | 58   |  
|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Percentage of total loans                                        |  |                        | 0.34  | % |      |   | 0.29 | %    |  |   | 0.32 | % |  |      | 0.34 | % |  |   | 0.05 | %
|                                                                 |  |                        |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  



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At December 31, 2003, the Bank had $1,144,000 in loans outstanding which were classified as non-accrual,
90 days past due or restructured but where known information about possible credit problems of borrowers caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms and may result in
disclosure as non-accrual, 90 days past due or restructured. At December 31, 2003, the Bank had $272,000 in other assets owned. Also, the Bank had impaired loans, as defined by SFAS 114 and 118, totaling $ 1.1 million at December 31, 2003.



Federal regulations require savings institutions to classify
their assets on the basis of quality on a regular basis. An asset meeting one of the classification definitions set forth below may be classified and still be a performing loan. An asset is classified as substandard if it is determined to be
inadequately protected by the current retained earnings and paying capacity of the obligor or of the collateral pledged, if any. An asset is classified as doubtful if full collection is highly questionable or improbable. An asset is classified as
loss if it is considered uncollectible, even if a partial recovery could be expected in the future. The regulations also provide for a special mention designation, described as assets which do not currently expose a savings institution to a
sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving managements close attention. Such assets designated as special mention may include non-performing loans consistent with
the above definition. Assets classified as substandard or doubtful require a savings institution to establish general allowances for loan losses. If an asset or portion thereof is classified loss, a savings institution must either establish a
specific allowance for loss in the amount of the portion of the asset-classified loss, or charge off such amount. Federal examiners may disagree with a savings institutions classifications. If a savings institution does not agree with an
examiners classification of an asset, it may appeal this determination to the OTS Regional Director. The Bank regularly reviews its assets to determine whether any assets require classification or re-classification. At December 31, 2003, the
Bank had $2.5 million in assets classified as special mention, $896,000 in assets classified as substandard and $110,000 in assets classified as doubtful.



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



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



The Banks methodology for establishing the allowance for loan losses takes into consideration probable losses that have been identified in
connection with specific assets as well as losses that have not been identified but can be expected to occur. Management conducts regular reviews of the Banks assets and evaluates the need to establish allowances on the basis of this review.
Allowances are established by the Board of Directors on a quarterly basis based on an assessment of risk in the Banks assets taking into consideration the composition and quality of the portfolio, delinquency trends, current charge-off and
loss experience, loan concentrations, the state of the real estate market, regulatory reviews conducted in the regulatory examination process and economic conditions generally. Specific reserves will be provided for individual assets, or portions of
assets, when ultimate collection is considered improbable by management based on the current payment status of the assets and the fair value of the security. At the date of foreclosure or other repossession, the Bank would transfer the property to
real estate acquired in settlement of loans initially at the lower of cost or estimated fair value and subsequently at the lower of book value or fair value less estimated selling costs. Any portion of the outstanding loan balance in excess of fair
value less estimated selling costs would be charged off against the allowance for loan losses. If, upon ultimate disposition of the property, net sales proceeds exceed the net carrying value of the property, a gain on sale of other real estate would
be recorded.



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Banking regulatory agencies, including the OTS, have adopted a policy statement regarding maintenance of
an adequate allowance for loan and lease losses and an effective loan review system. This policy includes an arithmetic formula for determining the reasonableness of an institutions allowance for loan loss estimate compared to the average loss
experience of the industry as a whole. Examiners will review an institutions allowance for loan losses and compare it against the sum of: (i) 50% of the portfolio that is classified doubtful; (ii) 15% of the portfolio that is classified as
substandard; and (iii) for the portions of the portfolio that have not been classified (including those loans designated as special mention), estimated credit losses over the upcoming 12 months given the facts and circumstances as of the evaluation
date. This amount is considered neither a floor nor a safe harbor of the level of allowance for loan losses an institution should maintain, but examiners will view a shortfall relative to the amount as an indication that they
should review managements policy on allocating these allowances to determine whether it is reasonable based on all relevant factors.



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



|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|----------------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ---- | - |  | ---- | ---- | - |  | - | ---- | -
|                                                                        |  | Year Ended December 31, |      
|                                                                        |  | 2003                    |       |   | 2002 |   |       | 2001 |  |   | 2000 |   |  | 1999 |     
|                                                                        |  | (Dollars in thousands)  |      
|Balance at beginning of period                                          |  | $                       | 1,455 |   |      | $ | 923   |      |  | $ | 708  |   |  | $    | 278  |   |  | $ | 257  |  
|                                                                        |  |                         |       |   |     
|Loans charged off:                                                      |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Commercial loans                                                        |  |                         | (178  | ) |      |   | (46   | )    |  |   |     |   |  |      |     |   |  |   |     |  
|Consumer loans and overdrafts                                           |  |                         | (401  | ) |      |   | (174  | )    |  |   |     |   |  |      |     |   |  |   |     |  
|Residential real estate                                                 |  |                         | (77   | ) |      |   | (52   | )    |  |   | (7   | ) |  |      | (1   | ) |  |   |     |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Total charge-offs                                                       |  |                         | (656  | ) |      |   | (272  | )    |  |   | (7   | ) |  |      | (1   | ) |  |   |     |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Recoveries                                                              |  |                         | 27    |   |      |   | 9     |      |  |   |     |   |  |      |     |   |  |   |     |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Net loans charged off                                                   |  |                         | (629  | ) |      |   | (263  | )    |  |   | (7   | ) |  |      | (1   | ) |  |   |     |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Provision for loan losses                                               |  |                         | 1,750 |   |      |   | 795   |      |  |   | 222  |   |  |      | 431  |   |  |   | 21   |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Balance at end of period                                                |  | $                       | 2,576 |   |      | $ | 1,455 |      |  | $ | 923  |   |  | $    | 708  |   |  | $ | 278  |  
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|Ratio of net charge-offs to average loans outstanding during the period |  |                         | 0.20  | % |      |   | 0.12  | %    |  |   | 0.01 | % |  |      | 0.00 | % |  |   | 0.00 | %
|                                                                        |  |                         |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  



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



|                                |  |                        |       |                                                  |       |   |        |      |                                                  |  |       |        |  |                                                  |     |  |        |   |                                                  |   |     |  |       |  
|------------------------------- |  | ---------------------- | ----- | ------------------------------------------------ | ----- | - | ------ | ---- | ------------------------------------------------ |  | ----- | ------ |  | ------------------------------------------------ | --- |  | ------ | - | ------------------------------------------------ | - | --- |  | ----- | -
|                                |  | At December 31,        |      
|                                |  | 2003                   |       |                                                  | 2002  |   |        | 2001 |                                                  |  | 2000  |       
|                                |  | Amount                 |       | Percent of Loans in Each Category to Total Loans |       |   | Amount |      | Percent of Loans in Each Category to Total Loans |  |       | Amount |  | Percent of Loans in Each Category to Total Loans |     |  | Amount |   | Percent of Loans in Each Category to Total Loans |  
|                                |  | (Dollars in thousands) |      
|One-to-four family              |  | $                      | 303   |                                                  | 56.6  | % |        | $    | 249                                              |  | 58.4  | %      |  | $                                                | 138 |  | 65.0   | % |                                                  | $ | 71  |  | 70.8  | %
|Construction                    |  |                        | 49    |                                                  | 1.1   | % |        |      | 33                                               |  | 0.6   | %      |  |                                                  | 50  |  | 3.3    | % |                                                  |   | 106 |  | 4.4   | %
|Multi-family residential        |  |                        | 127   |                                                  | 1.9   | % |        |      | 51                                               |  | 1.6   | %      |  |                                                  | 60  |  | 1.4    | % |                                                  |   | 106 |  | 2.2   | %
|Non-residential                 |  |                        | 616   |                                                  | 11.7  | % |        |      | 341                                              |  | 11.0  | %      |  |                                                  | 210 |  | 10.7   | % |                                                  |   | 177 |  | 16.7  | %
|Secured by deposits             |  |                        |      |                                                  | 0.9   | % |        |      |                                                 |  | 1.0   | %      |  |                                                  |    |  | 1.3    | % |                                                  |   |    |  | 2.1   | %
|Other consumer loans            |  |                        | 1,481 |                                                  | 27.8  | % |        |      | 781                                              |  | 27.4  | %      |  |                                                  | 465 |  | 18.3   | % |                                                  |   | 248 |  | 3.8   | %
|                                |  |                        |       |                                                  |       |   |        |      |                                                  |  |       |        |  |                                                  |     |  |        |   |                                                  |   |     |  |       |  
|Total allowance for loan losses |  | $                      | 2,576 |                                                  | 100.0 | % |        | $    | 1,455                                            |  | 100.0 | %      |  | $                                                | 923 |  | 100.0  | % |                                                  | $ | 708 |  | 100.0 | %
|                                |  |                        |       |                                                  |       |   |        |      |                                                  |  |       |        |  |                                                  |     |  |        |   |                                                  |   |     |  |       |  



|                                |  |                      |     |                                                  |       |  
|------------------------------- |  | -------------------- | --- | ------------------------------------------------ | ----- | -
|                                |  | At December 31, 1999 |    
|                                |  | Amount               |     | Percent of Loans in Each Category to Total Loans |      
|                                |  | (In thousands)       |     |                                                  |      
|One-to-four family              |  | $                    | 130 |                                                  | 75.9  | %
|Construction                    |  |                      | 5   |                                                  | 5.0   | %
|Multi-family residential        |  |                      | 8   |                                                  | 1.9   | %
|Non-residential                 |  |                      | 85  |                                                  | 10.9  | %
|Secured by deposits             |  |                      |    |                                                  | 2.2   | %
|Other consumer loans            |  |                      | 50  |                                                  | 4.1   | %
|                                |  |                      |     |                                                  |       |  
|Total allowance for loan losses |  | $                    | 278 |                                                  | 100.0 | %
|                                |  |                      |     |                                                  |       |  



12



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##### Table of Contents

Investment Activities



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



The principal objective of the investment policy is to earn as high a rate of return as possible, but to consider also
financial or credit risk, liquidity risk and interest rate risk.



At December 31, 2003, securities with an amortized cost of $ 144.4 million and an approximate market value of $ 143.5 million were classified as available for sale. Management presently does not intend to sell such securities and, based on
the current liquidity level and the access to borrowings through the FHLB of Cincinnati, management currently does not anticipate that the Company or the Bank will be placed in a position of having to sell securities with material unrealized losses.



Securities designated as held to maturity are
those assets which the Company or the Bank has both the ability and the intent to hold to maturity. Upon acquisition, securities are classified as to the Companys or the Banks intent and a sale would only be affected due to deteriorating
investment quality. The held to maturity investment portfolio is not used for speculative purposes and is carried at amortized cost. In the event securities are sold from this portfolio for other than credit quality reasons, all securities within
the investment portfolio with matching characteristics may be reclassified as assets available for sale. Securities designated as available for sale are those assets which the Company or the Bank may not hold to maturity and thus are
carried at market value with unrealized gains or losses, net of tax effect, recognized in stockholders equity.



Mortgage-Backed and Related Securities. Mortgage-backed securities represent a participation interest in a pool of one-to-four family or
multi-family mortgages, the principal and interest payments on which are passed from the mortgage originators through intermediaries that pool and repackage the participation interest in the form of securities to investors such as the Bank. Such
intermediaries may include quasi-governmental agencies such as FHLMC, FNMA and the Government National Mortgage Association (GNMA) which guarantees the payment of principal and interest to investors. Of the $68.7 million mortgage-backed
security portfolio at December 31, 2003, approximately $7.4 million were originated through GNMA, approximately $ 39.5 million were originated through FNMA and approximately $ 21.8 million were originated through FHLMC.



Mortgage-backed securities typically are issued with stated principal amounts
and the securities are backed by pools of mortgages that have loans with interest rates that are within a range and have similar maturities. The underlying pool of mortgages can be composed of either fixed-rate or adjustable-rate mortgage loans.
Mortgage-backed securities generally are referred to as mortgage participation certificates or pass-through certificates. As a result, the interest rate risk characteristics of the underlying pool of mortgages, i.e., fixed-rate or adjustable-rate,
as well as prepayment risk, are passed on to the certificate holder. The life of a mortgage-backed pass-through security is equal to the life of the underlying mortgages.



The actual maturity of a mortgage-backed security varies, depending on when the mortgagors prepay or repay the underlying
mortgages. Prepayments of the underlying mortgages may shorten the life of the investment, thereby adversely affecting its yield to maturity and the related market value of the mortgage-backed security.



13



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##### Table of Contents

The yield is based upon the interest income and the amortization of the premium or accretion of the
discount related to the mortgage-backed security. Premiums and discounts on mortgage-backed securities are amortized or accreted over the estimated term of the securities using a level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the yield of the mortgage-backed security, and these assumptions are reviewed periodically to reflect the actual prepayment.



The actual prepayments of the underlying mortgages depend on many factors,
including the type of mortgage, the coupon rate, the age of the mortgages, the geographical location of the underlying real estate collateralizing the mortgages and general levels of market interest rates. The difference between the interest rates
on the underlying mortgages and the prevailing mortgage interest rates is an important determinant in the rate of prepayments. During periods of falling mortgage interest rates, prepayments generally increase, and, conversely, during periods of
rising mortgage interest rates, prepayments generally decrease. If the coupon rate of the underlying mortgage significantly exceeds the prevailing market interest rates offered for mortgage loans, refinancing generally increases and accelerates the
prepayment of the underlying mortgages. Prepayment experience is more difficult to estimate for adjustable-rate mortgage-backed securities. During the summer of 2003, prepayment speeds on mortgage-backed securities accelerated into unprecedented
levels due to declining interest rates and the high rate of mortgage refinancing. These prepayments have sharply reduced the yield of this portion of the portfolio.



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



|                                       |  |                 |         |      |   |         |  |   |        
|-------------------------------------- |  | --------------- | ------- | ---- | - | ------- |  | - | -------
|                                       |  | At December 31,
|                                       |  | 2003            |         | 2002 |   | 2001   
|                                       |  | (In thousands) 
|Securities available for sale:         |  |                 |         |      |   |         |  |   |        
|FHLB and FHLMC stock                   |  | $               | 2,488   |      | $ | 2,391   |  | $ | 2,284  
|U. S. government and agency securities |  |                 | 41,308  |      |   | 24,539  |  |   | 21,111 
|Mortgage-backed securities             |  |                 | 66,947  |      |   | 58,489  |  |   | 72,946 
|Municipal bonds                        |  |                 | 28,523  |      |   | 11,803  |  |   | 4,162  
|Corporate bonds                        |  |                 | 4,233   |      |   | 5,910   |  |   |       
|Other                                  |  |                 | 15      |      |   | 15      |  |   | 15     
|Securities held to maturity:           |  |                 |         |      |   |         |  |   |        
|U.S. government and agency securities  |  |                 | 13,339  |      |   |        |  |   |       
|Mortgage-backed securities             |  |                 | 1,769   |      |   | 2,932   |  |   | 4,462  
|                                       |  |                 |         |      |   |         |  |   |        
|Total investment securities            |  | $               | 158,622 |      | $ | 106,079 |  | $ | 104,980
|                                       |  |                 |         |      |   |         |  |   |        



The following table
sets forth information on the scheduled maturities, amortized cost, market values and average yields for U.S. Government agency securities, corporate bonds and municipal securities in the investment portfolio at December 31, 2003. At such date,
$44.3 million of the agency securities were callable and/or due on or before January 31, 2005. At December 31, 2003, $14.3 of the callable agency securities are structure notes, where the interest rate paid on the bond increases significantly on a
given date, making it more likely that the bond will be called at that date. At December 31, 2003, $14.3 million of municipal securities were callable and/or due between January 2004 and December 2013. All corporate bonds were non callable.



|                                      |  |                        |    |              |                   |   |                |                   |              |  |                 |               |  |                            |        |  |               |   |              |   |        |               |      |             |  |              |        |  |   |        |  |      |  
|------------------------------------- |  | ---------------------- | -- | ------------ | ----------------- | - | -------------- | ----------------- | ------------ |  | --------------- | ------------- |  | -------------------------- | ------ |  | ------------- | - | ------------ | - | ------ | ------------- | ---- | ----------- |  | ------------ | ------ |  | - | ------ |  | ---- | -
|                                      |  | One Year or Less       |    |              | One to Five Years |   |                | Five to Ten Years |              |  | After Ten Years |               |  | Total Investment Portfolio |       
|                                      |  | CarryingValue          |    | AverageYield |                   |   | Carrying Value |                   | AverageYield |  |                 | CarryingValue |  | AverageYield               |        |  | CarryingValue |   | AverageYield |   |        | CarryingValue |      | MarketValue |  | AverageYield |       
|                                      |  | (Dollars in thousands) |   
|U.S. government and agency securities |  | $                      |   |              |                  | % |                | $                 | 8,191        |  | 3.64            | %             |  | $                          | 40,102 |  | 4.81          | % |              | $ | 6,354  |               | 5.41 | %           |  | $            | 54,647 |  | $ | 54,592 |  | 4.70 | %
|                                      |  |                        |    |              |                   |   |                |                   |              |  |                 |               |  |                            |        |  |               |   |              |   |        |               |      |             |  |              |        |  |   |        |  |      |  
|Corporate bonds                       |  | $                      |   |              |                  | % |                | $                 | 4,233        |  | 4.24            | %             |  |                            |       |  |              |   |              |   |       |               |     |             |  | $            | 4,233  |  | $ | 4,233  |  | 4.24 | %
|                                      |  |                        |    |              |                   |   |                |                   |              |  |                 |               |  |                            |        |  |               |   |              |   |        |               |      |             |  |              |        |  |   |        |  |      |  
|Municipal bonds                       |  | $                      | 35 |              | 2.87              | % |                | $                 | 2,893        |  | 2.64            | %             |  | $                          | 12,401 |  | 3.29          | % |              | $ | 13,194 |               | 4.21 | %           |  | $            | 28,523 |  | $ | 28,523 |  | 3.64 | %
|                                      |  |                        |    |              |                   |   |                |                   |              |  |                 |               |  |                            |        |  |               |   |              |   |        |               |      |             |  |              |        |  |   |        |  |      |  



14



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##### Table of Contents

Deposit Activity and Other Sources of Funds



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



Deposits. The Bank attracts deposits principally from within its market area by offering competitive rates on its deposit instruments, including money market accounts, passbook savings accounts, individual retirement accounts, and
certificates of deposit which range in maturity from three months to five years. Deposit terms vary according to the minimum balance required and the length of time the funds must remain on deposit and the interest rate. Maturities, terms, service
fees and withdrawal penalties for its deposit accounts are established by the Bank on a periodic basis. The Bank reviews its deposit mix and pricing on a weekly basis. In determining the characteristics of its deposit accounts, the Bank considers
the rates offered by competing institutions, lending and liquidity requirements, growth goals and federal regulations. The Bank does not accept brokered deposits.



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



Savings deposits in the Bank at December 31, 2003 were represented by the various types of savings programs described below.



|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  
|-------------- |  | ---------------- |  | ----------------------------- |  | -------------- | ----- | ------- | - | ---------------------------- |  | ----- | -
|Interest Rate* |  | Minimum Term     |  | Category                      |  | Minimum Amount |       | Balance |   | Percentage of Total Deposits | 
|               |  |                  |  |                               |  | (In thousands) |      
|  %           |  | None             |  | Non-interest bearing          |  | $              | 100   |         | $ | 27,348                       |  | 6.6   | %
|0.4 %*         |  | None             |  | Demand/NOW accounts           |  |                | 1,500 |         |   | 61,246                       |  | 14.7  | %
|0.7 %          |  | None             |  | Passbook accounts             |  |                | 10    |         |   | 9,817                        |  | 2.3   | %
|1.0 %*         |  | None             |  | Money market deposit accounts |  |                | 2,500 |         |   | 58,593                       |  | 14.0  | %
|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  
|               |  |                  |  |                               |  |                |       |         |   | 157,004                      |  | 37.6  | %
|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  
|               |  |                  |  |                               | 
|               |  |                  |  | Certificates of Deposit       |  |                |       |         |   |                              | 
|0.9 %          |  | 3 months or less |  | Fixed-term, fixed rate        |  |                | 500   |         |   | 50,483                       |  | 12.1  | %
|1.4 %          |  | 3 to 12 months   |  | Fixed-term, fixed-rate        |  |                | 500   |         |   | 80,442                       |  | 19.3  | %
|2.3 %          |  | 12 to 24-months  |  | Fixed-term, fixed-rate        |  |                | 500   |         |   | 42,979                       |  | 10.3  | %
|2.6 %          |  | 24 to 36-months  |  | Fixed-term, fixed-rate        |  |                | 500   |         |   | 54,796                       |  | 13.1  | %
|2.9 %          |  | 36 to 48-months  |  | Fixed-term, fixed-rate        |  |                | 500   |         |   | 14,312                       |  | 3.4   | %
|3.2 %          |  | 48 to 60-months  |  | Fixed-term, fixed rate        |  |                | 500   |         |   | 17,472                       |  | 4.2   | %
|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  
|               |  |                  |  |                               |  |                |       |         |   | 260,484                      |  | 62.4  | %
|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  
|               |  |                  |  |                               |  |                |       |         | $ | 417,488                      |  | 100.0 | %
|               |  |                  |  |                               |  |                |       |         |   |                              |  |       |  

---

|* | Represents weighted average interest rate.
|- | ------------------------------------------



15



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##### Table of Contents

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



|                |  |                                  |         |   |               |   |         |                                  |  |   |               |   |  |                                  |         |   |               |   |        |   |  |   |         |  
|--------------- |  | -------------------------------- | ------- | - | ------------- | - | ------- | -------------------------------- |  | - | ------------- | - |  | -------------------------------- | ------- | - | ------------- | - | ------ | - |  | - | ------- | -
|                |  | Year Ended December 31,          |        
|                |  | 2003                             |         |   | 2002          |   |         | 2001                             | 
|                |  | Interest-bearing demand deposits |         |   | Time deposits |   |         | Interest-bearing demand deposits |  |   | Time deposits |   |  | Interest-bearing demand deposits |         |   | Time deposits |  
|                |  | (Dollars in thousands)           |        
|Average balance |  | $                                | 117,029 |   |               | $ | 260,934 |                                  |  | $ | 63,384        |   |  | $                                | 181,481 |   |               | $ | 44,748 |   |  | $ | 135,432 |  
|Average Rate    |  |                                  | 1.32    | % |               |   | 3.56    | %                                |  |   | 2.26          | % |  |                                  | 3.82    | % |               |   | 2.57   | % |  |   | 5.58    | %



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



|                        |  |                              |         |               |        |   |                                            |   |                              |  |               |         |  |                                            |   |  |   |         |  
|----------------------- |  | ---------------------------- | ------- | ------------- | ------ | - | ------------------------------------------ | - | ---------------------------- |  | ------------- | ------- |  | ------------------------------------------ | - |  | - | ------- | -
|                        |  | Balance at December 31, 2003 |         | % of Deposits |        |   | Increase (Decrease) from December 31, 2002 |   | Balance at December 31, 2002 |  | % of Deposits |         |  | Increase (Decrease) from December 31, 2001 |  
|                        |  | (Dollars in thousands)       |        
|Non-interest bearing    |  | $                            | 27,348  |               | 6.6    | % |                                            | $ | 8,228                        |  | $             | 19,120  |  | 5.4                                        | % |  | $ | 11,904  |  
|Demand and NOW Accounts |  |                              | 61,246  |               | 14.7   | % |                                            |   | 28,031                       |  |               | 33,215  |  | 9.4                                        | % |  |   | 20,796  |  
|Money market            |  |                              | 58,593  |               | 14.0   | % |                                            |   | 11,233                       |  |               | 47,360  |  | 13.4                                       | % |  |   | 15,187  |  
|Passbook savings        |  |                              | 9,817   |               | 2.3    | % |                                            |   | 710                          |  |               | 9,107   |  | 2.6                                        | % |  |   | (115    | )
|Other time deposits     |  |                              | 260,484 |               | 62.4   | % |                                            |   | 15,631                       |  |               | 244,853 |  | 69.2                                       | % |  |   | 105,567 |  
|                        |  |                              |         |               |        |   |                                            |   |                              |  |               |         |  |                                            |   |  |   |         |  
|Total                   |  |                              | 417,488 |               | 100.00 | % |                                            |   | 63,833                       |  |               | 353,655 |  | 100.0                                      | % |  |   | 153,339 |  
|                        |  |                              |         |               |        |   |                                            |   |                              |  |               |         |  |                                            |   |  |   |         |  



|                        |  |                              |         |               |       |   |                                            |   |        |                              |  |               |         |  |       |  
|----------------------- |  | ---------------------------- | ------- | ------------- | ----- | - | ------------------------------------------ | - | ------ | ---------------------------- |  | ------------- | ------- |  | ----- | -
|                        |  | Balance at December 31, 2001 |         | % of Deposits |       |   | Increase (Decrease) from December 31, 2000 |   |        | Balance at December 31, 2000 |  | % of Deposits |        
|                        |  | (Dollars in thousands)       |        
|Non-interest bearing    |  | $                            | 7,216   |               | 3.6   | % |                                            | $ | 3,388  |                              |  | $             | 3,828   |  | 2.3   | %
|Demand and NOW accounts |  |                              | 12,419  |               | 6.2   | % |                                            |   | 2,892  |                              |  |               | 9,527   |  | 5.8   | %
|Money market            |  |                              | 32,173  |               | 16.0  | % |                                            |   | 7,458  |                              |  |               | 24,715  |  | 14.9  | %
|Passbook savings        |  |                              | 9,222   |               | 4.6   | % |                                            |   | (434   | )                            |  |               | 9,656   |  | 5.8   | %
|Other time deposits     |  |                              | 139,286 |               | 69.6  | % |                                            |   | 21,408 |                              |  |               | 117,878 |  | 71.2  | %
|                        |  |                              |         |               |       |   |                                            |   |        |                              |  |               |         |  |       |  
|Total                   |  | $                            | 200,316 |               | 100.0 | % |                                            | $ | 34,712 |                              |  | $             | 165,604 |  | 100.0 | %
|                        |  |                              |         |               |       |   |                                            |   |        |                              |  |               |         |  |       |  



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



|             |  |                 |         |      |   |         |  |   |        
|------------ |  | --------------- | ------- | ---- | - | ------- |  | - | -------
|             |  | At December 31,
|             |  | 2003            |         | 2002 |   | 2001   
|             |  | (In thousands) 
|1.00 - 2.00% |  |                 | 57,772  |      |   | 7,406   |  |   | 95     
|2.01 - 4.00% |  |                 | 143,632 |      |   | 130,718 |  |   | 51,804 
|4.01 - 6.00% |  |                 | 46,309  |      |   | 77,765  |  |   | 57,821 
|6.01 - 8.00% |  |                 | 12,771  |      |   | 28,964  |  |   | 29,566 
|             |  |                 |         |      |   |         |  |   |        
|Total        |  | $               | 260,484 |      | $ | 244,853 |  | $ | 139,286
|             |  |                 |         |      |   |         |  |   |        



16



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##### Table of Contents

The following table sets forth the amount and maturities of time deposits at December 31, 2003.



|             |  |                    |         |           |   |           |  |               |        |       |   |        |  |   |        
|------------ |  | ------------------ | ------- | --------- | - | --------- |  | ------------- | ------ | ----- | - | ------ |  | - | -------
|             |  | Amount Due        
|             |  | Less Than One Year |         | 1-2 Years |   | 2-3 Years |  | After 3 Years |        | Total
|             |  | (In thousands)    
|0.00 - 2.00% |  | $                  | 45,474  |           | $ | 10,993    |  | $             | 1,241  |       | $ | 64     |  | $ | 57,772 
|2.01 - 4.00% |  |                    | 57,979  |           |   | 24,485    |  |               | 45,572 |       |   | 15,596 |  |   | 143,632
|4.01 - 6.00% |  |                    | 19,467  |           |   | 2,945     |  |               | 7,773  |       |   | 16,124 |  |   | 46,309 
|6.01 - 8.00% |  |                    | 8,005   |           |   | 4,556     |  |               | 210    |       |   |       |  |   | 12,771 
|             |  |                    |         |           |   |           |  |               |        |       |   |        |  |   |        
|Total        |  | $                  | 130,925 |           | $ | 42,979    |  | $             | 54,796 |       | $ | 31,784 |  | $ | 260,484
|             |  |                    |         |           |   |           |  |               |        |       |   |        |  |   |        



The following
table indicates the amount of the Banks certificates of deposit of $100,000 or more by time remaining until maturity as of December 31, 2003.



|                              |  |                         |     
|----------------------------- |  | ----------------------- | ----
|Maturity Period               |  | Certificates of Deposit
|                              |  | (In millions)          
|Three months or less          |  | $                       | 10.7
|Over three through six months |  |                         | 11.5
|Over six through 12 months    |  |                         | 19.3
|Over 12 months                |  |                         | 40.6
|                              |  |                         |     
|Total                         |  | $                       | 82.1
|                              |  |                         |     



Certificates of
deposit at December 31, 2003 included approximately $82.1 million of deposits with balances of $100,000 or more, compared to $61.7 million and $25.3 million at December 31, 2002 and 2001, respectively. Such time deposits may be risky because their
continued presence in the Bank is dependent partially upon the rates paid by the Bank rather than any customer relationship and, therefore, may be withdrawn upon maturity if another institution offers higher interest rates. The Bank may be required
to resort to other funding sources such as borrowings or sales of its securities available for sale if the Bank believes that increasing its rates to maintain such deposits would adversely affect its operating results. At this time, the Bank does
not believe that it will need to significantly increase its deposit rates to maintain such certificates of deposit and, therefore, does not anticipate resorting to alternative funding sources. See Note 7 of Notes to Financial Statements.



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



|                                      |  |                         |          |   |      |   |          |      |  |   |          |  
|------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                      |  | Year Ended December 31, |         
|                                      |  | 2003                    |          |   | 2002 |   |          | 2001 | 
|                                      |  | (In thousands)          |         
|Deposits                              |  | $                       | 415,711  |   |      | $ | 348,196  |      |  | $ | 293,038  |  
|Obtain through acquisition            |  |                         |         |   |      |   | 96,532   |      |  |   |         |  
|Withdrawals                           |  |                         | (359,372 | ) |      |   | (300,462 | )    |  |   | (267,043 | )
|                                      |  |                         |          |   |      |   |          |      |  |   |          |  
|Net increase before interest credited |  |                         | 56,339   |   |      |   | 144,266  |      |  |   | 25,995   |  
|Interest credited                     |  |                         | 7,494    |   |      |   | 9,073    |      |  |   | 8,717    |  
|                                      |  |                         |          |   |      |   |          |      |  |   |          |  
|Net increase in deposits              |  | $                       | 63,833   |   |      | $ | 153,339  |      |  | $ | 34,712   |  
|                                      |  |                         |          |   |      |   |          |      |  |   |          |  



In the unlikely event
the Bank is liquidated after the Conversion, depositors will be entitled to full payment of their deposit accounts prior to any payment being made to the sole stockholder of the Bank, which is the Company.



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



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As a member of the FHLB System, the Bank is required to own stock in the FHLB of Cincinnati and is
authorized to apply for advances. Advances are pursuant to several different programs, each of which has its own interest rate and range of maturities. The Bank has entered into a Cash Management Advance program with FHLB. See Note 8 of Notes to
Financial Statements. Advances from the FHLB of Cincinnati were $54.4 million at December 31, 2003 and are secured by a blanket security agreement in which the Bank has pledged its 1-4 family first mortgage loans held in the Banks loan
portfolio.



On September 25, 2003, the Company issued
$10,310,000 in floating rate junior subordinated debentures with a thirty year maturity and callable at the Companys discretion quarterly after September 25, 2008. The subordinated debentures are priced at a variable rate equal to the three
month libor (London Inter Bank Offering Rate) plus 3.10%. The current three-month libor rate is 1.14%. The securities are immediately callable in the event of a change in tax or accounting law that has a significant negative impact to issuing these
securities.



The Company invested $8.0 million in the Bank
immediately after this transaction. For regulator purposes, subordinated debentures may be treated as Tier I capital. Federal regulations limit the use of subordinated debentures to 25% of total Tier I capital. Discussions among regulatory agencies
are underway that may limit the current and future use of subordinated debentures as Tier I capital. The Companys decision to issue subordinated debentures was in part influenced by potential regulatory actions in the future. The Company
anticipates above average growth to continue and anticipates a time in the future when capital ratios are lower and additional capital may be need.



Subsidiary Activities



As a federally chartered savings bank, the Bank is permitted to invest an amount equal to 2% of its assets in subsidiaries, with an additional investment
of 1% of assets where such investment serves primarily community, inner-city and community development purposes. The Banks lone subsidiary is Fall and Fall Insurance Agency (Fall and Fall) of Fulton, Kentucky. Fall & Fall was
acquired in the Fulton acquisition on September 5, 2002. The Banks investment in the agency is approximately $380,000. In December of 2003, Fall & Fall opened an office in Murray, Kentucky using the title of Heritage Solutions.
Heritage Solutions sells fixed annuities and property and casualty insurance.



Competition



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



At June 30, 2003, the Banks most significant competition across its entire market area was Branch Bank & Trust of North Carolina with a 22.3% deposit market share, US Bank of Minnesota with a 7.21% deposit market share and Union
Planters of Tennessee with a 9.4% deposit market share. In addition, each market contains other community banks that provide competitive products and services within individual markets.



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



The Bank is a community and retail-oriented financial institution. Management
considers the Banks branch network and reputation for financial strength and quality customer service as its major competitive advantage in attracting and retaining customers in its market area. A number of the Banks competitors have
been acquired by



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##### Table of Contents

statewide/nationwide banking organizations. While the Bank is subject to competition from other financial institutions
which may have greater financial and marketing resources, management believes the Bank benefits by its community orientation and its long-standing relationship with many of its customers.



Employees



As of December 31, 2003, the Company and the Bank had 103 full-time and 13 part-time employees, none of whom were
represented by a collective bargaining agreement. Management considers the Banks relationships with its employees to be good.



SarbanesOxley Act of 2002



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



USA Patriot Act



In 2001, the President of the United States signed the USA Patriot Act into law. The USA Patriot Act authorizes new regulatory powers to combat
international terrorism. The provisions that affect financial institutions most directly provide the federal government with enhanced authority to identify, deter, and punish international money laundering and other crimes. Among other things, the
USA Patriot Act prohibits financial institutions from doing business with foreign shell banks and requires increased due diligence for private banking transactions and correspondent accounts for foreign banks. In addition, financial
institutions have to follow new minimum verification of identity standards for all new accounts and are permitted to share information with law enforcement authorities under circumstances that were not previously permitted.



Regulation



General. The Bank is chartered as a federal savings bank under the Home Owners Loan Act, as amended (the
HOLA), which is implemented by regulations adopted and administered by the OTS. As a federal savings bank, the Bank is subject to regulation, supervision and regular examination by the OTS. The OTS also has extensive enforcement
authority over all savings institutions and their holding companies, including the Bank and the Company. Federal banking laws and regulations control, among other things, the Banks required reserves, investments, loans, mergers and
consolidations, payment of dividends and other aspects of the Banks operations. The deposits of the Bank are insured by the BIF administered by the FDIC to the maximum extent provided by law. In addition, the FDIC has certain regulatory and
examination authority over OTS-regulated savings institutions and may recommend enforcement actions against savings institutions to the OTS. The supervision and regulation of the Bank is intended primarily for the protection of the deposit insurance
fund and the Banks depositors rather than for holders of the Companys stock or for the Company as the holder of the stock of the Bank.



As a savings and loan holding company, the Company is registered with the OTS and subject to OTS regulation and supervision under the HOLA. The Company
also is required to file certain reports with, and otherwise comply with the rules and regulations of, the Commission under the federal securities laws.



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The following discussion is intended to be a summary of certain statutes, rules and regulations affecting
the Bank and the Company. A number of other statutes and regulations have an impact on their operations. The following summary of applicable statutes and regulations does not purport to be complete and is qualified in its entirety by reference to
such statutes and regulations.



Regulatory Capital.The
OTS capital adequacy regulations require savings institutions such as the Bank to meet three minimum capital standards: a core capital requirement of 4% of adjusted total assets (or 3% if the institution is rated Composite 1 under
the CAMELS examination rating system), a tangible capital requirement of 1.5% of adjusted total assets, and a risk-based capital requirement of 8% of total risk-based capital to total risk-weighted assets. In addition, the
OTS has adopted regulations imposing certain restrictions on savings institutions that have a total risk-based capital ratio of less than 8%, a ratio of Tier 1 capital to risk-weighted assets of less than 4% or a ratio of Tier 1 capital to total
assets of less than 4%. See Note 15 of Notes to Consolidated Financial Statements.



Prompt Corrective Regulatory Action. Under the OTS prompt corrective action regulations, the federal banking regulators are required to take prompt corrective action in respect of depository institutions that
do not meet certain minimum capital requirements, including a leverage limit and a risk-based capital requirement. All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management
fees that would cause the institution to become undercapitalized. The federal banking regulators, including the OTS, have issued regulations that classify insured depository institutions by capital levels and provide that the applicable agency will
take various prompt corrective actions to resolve the problems of any institution that fails to satisfy the capital standards.



Under the joint prompt corrective action regulations, a well-capitalized institution is one that is not subject to any regulatory order or
directive to meet any specific capital level and that has or exceeds the following capital levels: a total risk-based capital ratio of 10%, a Tier 1 risk-based capital ratio of 6%, and a ratio of Tier 1 capital to total assets (leverage
ratio) of 5%. An adequately capitalized institution is one that does not qualify as well capitalized but meets or exceeds the following capital requirements: a total risk-based capital of 8%, a Tier 1 risk-based capital
ratio of 4%, and a leverage ratio of either (i) 4% or (ii) 3% if the institution has the highest composite examination rating. An institution not meeting these criteria is treated as undercapitalized, significantly
undercapitalized, or critically undercapitalized depending on the extent to which its capital levels are below these standards. An institution that fails within any of the three undercapitalized categories will be
subject to certain severe regulatory sanctions required by OTS regulations. As of December 31, 2003, the Bank was well-capitalized as defined by the regulations.



Qualified Thrift Lender Test.The HOLA and OTS regulations require all savings institutions to satisfy one of
two Qualified Thrift Lender (QTL) tests or to suffer a number of sanctions, including restrictions on activities. A savings institution must maintain its status as a QTL on a monthly basis in at least nine out of every 12 months. An
initial failure to qualify as a QTL results in a number of sanctions, including the imposition of certain operating restrictions and a restriction on obtaining additional advances from its Federal Home Loan Bank.



If a savings institution does not requalify under the QTL test within the
three-year period after it fails the QTL test, it would be required to terminate any activity not permissible for a national bank and repay as promptly as possible any outstanding advances from its Federal Home Loan Bank. In addition, the holding
company of such an institution, such as the Company, would similarly be required to register as a bank holding company with the Federal Reserve Board. At December 31, 2003, the Bank qualified as a QTL.



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



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Under OTS regulations, the Bank would not be permitted to pay dividends on its capital stock if its
regulatory capital would thereby be reduced below the amount then required for the liquidation account established for the benefit of certain depositors of the Bank at the time of the Conversion. In addition, under the prompt corrective action
regulations of the OTS, the Bank would be prohibited from paying dividends if the Bank were classified as undercapitalized under such rules. See  Prompt Corrective Regulatory Action.



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



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



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



Reserve Requirements. Pursuant to regulations of the Federal Reserve Board (the FRB), all FDIC-insured depository institutions must maintain average daily reserves at specified levels against their
transaction accounts. As of December 31, 2003, the Bank met these reserve requirements.



Federal Home Loan Bank System. The Federal Home Loan Bank System consists of 12 district Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board (FHFB). The Federal Home Loan Banks provide a central credit facility primarily for member institutions. As a member of the FHLB, the Bank is required to acquire and hold shares of capital
stock in the FHLB in an amount at least equal to 1% of the aggregate unpaid principal of its home mortgage loans, home purchase contracts, and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the FHLB,
whichever is greater. The Bank was in compliance with this requirement, with an investment in FHLB stock at December 31, 2003 of $ 2.5 million.



Regulation of the Company



The Company is a unitary savings and loan holding company subject to OTS regulation, supervision and examination. In addition, the OTS has enforcement
authority over the Company and its non-savings institution subsidiaries and may restrict or prohibit activities that are determined to represent a serious risk to the safety, soundness or stability of the Bank or any other subsidiary savings
institution.



Under the HOLA, a savings and loan holding
company is required to obtain the prior approval of the OTS before acquiring another savings institution or savings and loan holding company. A savings and loan holding company may not (i) acquire, with certain exceptions, more than 5% of a
non-subsidiary savings institution or a non-subsidiary savings and loan holding company; or (ii) acquire or retain control of a depository institution that is not insured by the FDIC. In addition, while the Bank generally may acquire a savings
institution by merger in any state without restriction by state law, the Company could acquire control of an additional savings institution in a state other than Kentucky only if such acquisition is permitted under the laws of the target
institutions home state or in a supervisory acquisition of a failing institution.



As a unitary savings and loan holding company, the Company generally is not subject to activity restrictions. If the Company were to acquire control of another savings institution as a separate subsidiary, it would
become a multiple savings and loan holding company, and the activities of the Company and any of its subsidiaries (other than the Bank or any other SAIF-insured savings institution) would become subject to such restrictions unless such other
institutions each qualify as a QTL and were acquired in a supervisory acquisition.



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If the Bank fails the QTL test, the Company must obtain the approval of the OTS prior to continuing after
such failure, directly or through its other subsidiaries, any business activity other than those approved for multiple savings and loan holding companies or their subsidiaries. In addition, within one year of such failure the Company would be
required to register as, and would become subject to, the restrictions applicable to the bank holding companies. The activities authorized for a bank holding company are more limited than are the activities authorized for a unitary or multiple
savings and loan holding company.



Forward-Looking Statements



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



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



At December 31, 2003, the Company estimates that is has approximately 2,700 shareholders, with 1,217 reported in the name of
the shareholder and the remainder recorded in street name.



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##### Table of Contents

ITEM 2. PROPERTIES



The following table sets forth information regarding the Banks offices at December 31, 2003.



|                                                                      |  |             |  |                 |  |                |       |                                     |       
|--------------------------------------------------------------------- |  | ----------- |  | --------------- |  | -------------- | ----- | ----------------------------------- | ------
|                                                                      |  | Year Opened |  | Owned or Leased |  | Book Value (1) |       | Approximate Square Footage ofOffice
|                                                                      |  |             |  |                 |  | (In thousands) |       |                                    
|Main Office:                                                          |  |             |  |                 |  |                |       |                                     |       
|2700 Fort Campbell Boulevard Hopkinsville, Kentucky                   |  | 1995        |  | Owned           |  | $              | 1,790 |                                     | 17,625
|                                                                      |  |             |  |                
|Branch Offices:                                                       |  |             |  |                 |  |                |       |                                     |       
|Downtown Branch Office605 South Virginia StreetHopkinsville, Kentucky |  | 1997        |  | Owned           |  | $              | 179   |                                     | 756   
|Murray Branch Office210 N. 12thStreetMurray, Kentucky                 |  | 2003        |  | Owned           |  | $              | 1,113 |                                     | 3,650 
|Cadiz Branch Office352 Main StreetCadiz, Kentucky                     |  | 1998        |  | Owned           |  | $              | 365   |                                     | 2,200 
|Elkton Branch OfficeWest Main StreetElkton, Kentucky                  |  | 1976        |  | Owned           |  | $              | 98    |                                     | 3,400 
|Benton Branch Office105 W. 5thStreet Benton,Kentucky                  |  | 2003        |  | Owned           |  | $              | 817   |                                     | 4,800 
|Calvert City Office35 Oak Plaza DriveCalvert City, Kentucky           |  | 2003        |  | Owned           |  | $              | 472   |                                     | 1,100 
|Carr Plaza Office607 N. Highland DriveFulton, Kentucky                |  | 2002        |  | Owned           |  | $              | 85    |                                     | 800   
|Lake Street Office306 Lake StreetFulton, Kentucky                     |  | 2002        |  | Owned           |  | $              | 816   |                                     | 15,000
|Fall & Fall Insurance OfficeFulton, Kentucky                          |  | 2002        |  | Owned           |  | $              | 271   |                                     | 3,200 

---

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



ITEM 3. LEGAL PROCEEDINGS



From time to time, the Company or the Bank is a party to various legal proceedings incident to its business. At December 31, 2003, there were no legal
proceedings to which the Company or the Bank was a party, or to which any of their property was subject, which were expected by management to result in a material loss to the Company or the Bank. There are no pending regulatory proceedings to which
the Company or the Bank is a party or to which any of their properties is subject which are currently expected to result in a material loss.



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



Not applicable.



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EXECUTIVE OFFICERS OF THE REGISTRANT



John E. Peck. Mr. Peck, 39, has served as President and Chief Executive Officer of the Company and the Bank since
July 2000. Prior to that, he was President and Chief Executive Officer of United Commonwealth Bank and President of Firstar Bank-Calloway County.



Boyd M. Clark. Mr. Clark, 58, has served as Senior Vice President  Loan Administration of the Bank since 1995. Prior to his current position,
Mr. Clark served as First Vice President of the Bank. He has been an employee of the Bank since 1973. Mr. Clark also serves as Vice President and Secretary of the Company. From May to July 2000, Mr. Clark served as Acting President of both the
Company and the Bank.



Michael L. Woolfolk. Mr.
Woolfolk, 50, has served as Executive Vice President and Chief Operations Officer of the Bank since August 2000. Prior to that, he was President of Firststar BankMarshall County, President and Chief Executive Officer of Bank of Marshall County
and President of Mercantile Bank.



Billy C. Duvall. Mr.
Duvall, 38, has served as Vice President, Chief Financial Officer and Treasurer of the Company and the Bank since June 1, 2001. Prior to that, he was an Auditor with Rayburn, Betts & Bates, P.C., independent public accountants and a Principal
Examiner with the National Credit Union Administration.



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



PART II



ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.



The information set forth under the caption Market
and Dividend Information in the Companys Annual Report to Stockholders for the year ended December 31, 2003 (Exhibit No. 13) is incorporated herein by reference.



ITEM 6. SELECTED FINANCIAL DATA



The information set forth under the caption Selected Financial Information and Other Data in the Companys Annual Report to Stockholders
for the year ended December 31, 2003 (Exhibit No. 13) is incorporated herein by reference.



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



The information set forth under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations in the
Companys Annual Report to Stockholders for the year ended December 31, 2003 (Exhibit No. 13) is incorporated herein by reference.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The information set forth under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations 
Interest Rate Sensitivity Analysis in the Companys Annual Report to Stockholders for the year ended December 31, 2003 (Exhibit No. 13) is incorporated herein by reference.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The Companys Financial Statements together with the related notes and the report of Rayburn, Betts & Bates, P.C.,
independent public accountants, all as set forth in the Companys Annual Report to Stockholders for the year ended December 31, 2003 (Exhibit No. 13) are incorporated herein by reference.



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##### Table of Contents

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



Not Applicable



ITEM 9A. CONTROLS AND PROCEDURES



The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the
Exchange Act) that are designed to insure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified under the SECs rules and forms and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision
making regarding required disclosure. The Company, under the supervision and participation of its management, including the Companys Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the
design and operation of the Companys disclosure controls and procedures as of the end of the period covered by this report pursuant to the Exchange Act. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in ensuring that all material information required to be disclosed is this annual report has been accumulated and communicated to them in a manner appropriate to
allow timely decisions regarding required disclosures. During the quarter ended December 31, 2003, there have been no changes in the Companys internal control over financial reporting that have materially affected or are reasonably likely to
materially affect, the Companys internal control over financial reporting.



PART III



ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT



Information
regarding directors of the Company is omitted from this Report as the Company will file a definitive proxy statement (the Proxy Statement) not later than 120 days after December 31, 2003, and the information included therein under
Proposal I  Election of Directors is incorporated herein by reference. Information regarding the executive officers of the Company is included under separate caption in Part I of this Form 10-K



Information regarding Section 16(a) beneficial ownership reporting compliance
is omitted from this Report as the Company will the Proxy Statement not later than 120 days after December 31, 2003, and the information included therein under Section 16(a) Beneficial Ownership Reporting Compliance is incorporated
herein by reference.



Information regarding audit committee
financial expert compliance is omitted from this Report as the Company will file the Proxy Statement not later than 120 days after December 31, 2003, and the information contained therein under Committees of the Board of Directors is
incorporated herein by reference.



The Company has adopted a
code of ethics that applies to all directors and employees, including without exception, the principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. The code of
ethics is attached as Exhibit 14 to this Form 10-K.



ITEM 11. EXECUTIVE
COMPENSATION



Information regarding executive compensation
is omitted from this Report as the Company will file the Proxy Statement not later than 120 days after December 31, 2003, and the information included therein under Proposal I  Election of Directors is incorporated herein by
reference.



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##### Table of Contents

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS



Information required by this Item is omitted from this
Report as the Company will file the Proxy Statement not later than 120 days after December 31, 2003, and the information included therein under Voting Securities and Principal Holders Thereof and Proposal I  Election of
Directors is incorporated herein by reference.



ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS



Information
required by this Item is omitted from this Report as the Company will file the Proxy Statement, not later than 120 days after December 31, 2003, and the information included therein under Proposal I  Election of Directors is
incorporated herein by reference.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES



Information required by this item is omitted
from this report as the Company will file the Proxy Statement not later than 120 days after December 31, 2003, and the information included therein under Independent Auditors is incorporated herein by reference.



PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K



(a)(1) The following
consolidated financial statements of the Company included in the Annual Report to Stockholders for the year ended December 31, 2003, are incorporated herein by reference in Item 8 of this Report. The remaining information appearing in the Annual
Report to Stockholders is not deemed to be filed as part of this Report, except as expressly provided herein.



|   |  |                                                                                                                  |  |     
|-- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|   |  |                                                                                                                  |  | Page
|1. |  | Independent Auditors Report.                                                                                    |  | F-1 
|   |  |                                                                                                                 
|2. |  | Consolidated Balance Sheets - December 31, 2003 and 2002.                                                        |  | F-2 
|   |  |                                                                                                                 
|3. |  | Consolidated Statements of Income for the Years Ended December 31, 2003, 2002 and 2001.                          |  | F-4 
|   |  |                                                                                                                 
|4. |  | Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2003, 2002 and 2001.            |  | F-6 
|   |  |                                                                                                                 
|5. |  | Consolidated Statements of Changes in Stockholders Equity for the Years Ended December 31, 2003, 2002 and 2001. |  | F-7 
|   |  |                                                                                                                 
|6. |  | Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001.                      |  | F-8 
|   |  |                                                                                                                 
|7. |  | Notes to Consolidated Financial Statements.                                                                      |  | F-10



(a)(2) All schedules
for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.



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(a)(3) The following exhibits either are filed as part of this Report or are incorporated herein by
reference:



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



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



Exhibit No. 3.2. Bylaws. Incorporated herein by reference to Exhibit No. 3.2 to Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1998.



Exhibit No. 10.1. Employment Agreement by and between Hopkinsville
Federal Savings Bank and Boyd M. Clark. Incorporated herein by reference to Exhibit No. 10.1 to Registrants Registration Statement on Form S-1 (File No. 333-30215).



Exhibit No. 10.2. Employment Agreement by and between HopFed Bancorp, Inc. and Boyd M. Clark. Incorporated herein by
reference to Exhibit No. 10.2 to Registrants Registration Statement on Form S-1 (File No. 333-30215).



Exhibit No. 10.3. Employment Agreement Amendment by and between Hopkinsville Federal Savings Bank and Boyd M. Clark. Incorporated herein by
reference to Exhibit No. 10.3 to Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1998.



Exhibit No. 10.4. Employment Agreement Amendment by and between HopFed Bancorp, Inc. and Boyd M. Clark. Incorporated herein by reference to Exhibit
10.4 to Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1998.



Exhibit No. 10.5. HopFed Bancorp, Inc. Management Recognition Plan. Incorporated herein by reference to Exhibit 99.1 to Registration Statement on
Form S-8 (File No. 333-79391).



Exhibit No. 10.6. HopFed
Bancorp, Inc. 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 99.2 to Registration Statement on Form S-8 (File No. 333-79391).



Exhibit No. 10.7. Employment Agreement by and between Hopkinsville Federal Savings Bank and John E. Peck. Incorporated herein by reference to
Exhibit No. 10.2 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.



Exhibit No. 10.8. Employment Agreement by and between HopFed Bancorp, Inc. and John E. Peck. Incorporated herein by reference to Exhibit No. 10.1
to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.



Exhibit 10.9. HopFed Bancorp, Inc. 2000 Stock Option Plan. Incorporated herein by reference to Exhibit 10.10 to Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2000.



Exhibit 10.10. Employment Agreement by and between HopFed Bancorp, Inc. and Billy C. Duvall. Incorporated herein by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2001.



Exhibit 10.11. Employment Agreement by and between
Hopkinsville Federal Bank and Billy C. Duvall. Incorporated herein by reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.



Exhibit 10.12. Employment Agreement by and between HopFed Bancorp, Inc.
and Michael L. Woolfolk. Incorporated herein by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.



Exhibit 10.13. Employment Agreement by and between Heritage Bank and Michael L. Woolfolk.. Incorporated herein by
reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.



Exhibit 10.14. Fulton Division Acquisition Agreement dated as of March 1, 2002, by and between Old National Bank and Hopkinsville Federal Bank.
Incorporated herein by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K dated March 1, 2002.



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Exhibit No. 13. Annual Report to Stockholders Except for those portions of the Annual Report to
Stockholders for the year ended December 31, 2003, which are expressly incorporated herein by reference, such Annual Report is furnished for the information of the Commission and is not to be deemed filed as part of this Report.



Exhibit No. 14. Code of Ethics. The Company has
adopted a code of ethics that applies to all directors and employees including without exception, the principal executive officer, principal financial officer, principal accounting officer and /or controller, or persons performing similar functions.



Exhibit No. 21. Subsidiaries of the Registrant.



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



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



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



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



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



| | (b) | Reports on Form 8-K. Current Report on Form 8-K, dated October 23, 2003, reporting under Item 12 (Results of Operations and Financial Condition) results of operations
for the three and nine months ended September 30, 2003.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Exhibits to this Form 10-K are attached or incorporated by reference as stated above.
| | --- | -------------------------------------------------------------------------------------



| | (d) | None.
| | --- | -----



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SIGNATURES



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



|                     |  |                      |  |                        
|-------------------- |  | -------------------- |  | -----------------------
|                     |  | HOPFED BANCORP, INC.
|                     |  | (Registrant)        
|                     |  |                     
|Date: March 30, 2004 |  | By:                  |  | /s/ John E. Peck       
|                     |  |                      |  | John E. Peck           
|                     |  |                      |  | President and          
|                     |  |                      |  | Chief Executive Officer



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



DATE: SIGNATURE AND TITLE:



|                                                                                                                             |  |               
|---------------------------------------------------------------------------------------------------------------------------- |  | --------------
|/s/ John E. Peck                                                                                                             |  | March 30, 2004
|John E. Peck Director, President and Chief Executive Officer (Principal Executive Officer)                                   |  |               
|                                                                                                                             | 
|/s/ Billy C. Duvall                                                                                                          |  | March 30, 2004
|Billy C. Duvall Director, Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |  |               
|                                                                                                                             | 
|/s/ WD Kelley                                                                                                                |  | March 30, 2004
|WD Kelley Chairman of the Board                                                                                              |  |               
|                                                                                                                             | 
|/s/ Boyd M. Clark                                                                                                            |  | March 30, 2004
|Boyd M. Clark Director, Vice President and Secretary                                                                         |  |               
|                                                                                                                             | 
|/s/ Walton G. Ezell                                                                                                          |  | March 30, 2004
|Walton G. Ezell Director                                                                                                     |  |               
|                                                                                                                             | 
|/s/ Gilbert E. Lee                                                                                                           |  | March 30, 2004
|Gilbert E. Lee Director                                                                                                      |  |               



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|                          |  |               
|------------------------- |  | --------------
|/s/ Harry J. Dempsey      |  | March 30, 2004
|Harry J. Dempsey Director |  |               
|                          | 
|/s/ Kerry Harvey          |  | March 30, 2004
|Kerry Harvey Director     |  |               
|                          | 
|/s/ Thomas I. Miller      |  | March 30, 2004
|Director                  |  |               



30