SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                [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

                          Commission File No: 000-49781

                          FIRST SECURITY BANCORP, INC.

                 (Name of small business issuer in its charter)

           Kentucky                                       61-1364206
   (State of jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                      Identification No.)

                 318 East Main Street, Lexington, Kentucky 40507
                    (Address of principal executive offices)

                                 (859) 367-3700
                           (Issuer's telephone number)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

State issue's revenues for its most recent fiscal year: $14,159,000

Aggregate market value of the voting stock held by non-affiliates  (for purposes
of this  calculation,  "affiliates"  are  considered  to be the directors of the
issuer)  computed by reference to the price at which the stock was sold,  or the
average bid and asked  prices of such stock,  as of a specified  date within the
past 60 days: $13,779,000 as of March 8, 2004.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date:  1,558,690 shares of common stock as
of March 8, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  Proxy  Statement  for  the  Annual  Meeting  of  Shareholders,
scheduled to be held May 18, 2004, are  incorporated  by reference into Part III
of this Form 10-KSB.

Transitional Small Business Disclosure format (check one): Yes [ ] No[X]


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                               TABLE OF CONTENTS


PART I

   ITEM 1.      DESCRIPTION OF BUSINESS......................................1

   ITEM 2.      DESCRIPTION OF PROPERTIES...................................14

   ITEM 3.      LEGAL PROCEEDINGS...........................................14

   ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........14


PART II

   ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY
                AND RELATED STOCKHOLDER MATTERS.............................15

   ITEM 6.      MANAGEMENT S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............16

   ITEM 7.      FINANCIAL STATEMENTS........................................36

   ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH
                ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........67

   ITEM 8A.     CONTROLS AND PROCEDURES.....................................67


PART III

   ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..67

   ITEM 10.     EXECUTIVE COMPENSATION......................................68

   ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS..............68

   ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............68

   ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K............................68

   ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES......................70

SIGNATURES, POWER OF ATTORNEY, EXHIBIT INDEX................................71




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FORWARD-LOOKING STATEMENTS

First  Security  Bancorp,  Inc.  ("First  Security")  may from time to time make
written or oral statements, including statements contained in this report, which
may constitute  forward-looking  statements within the meaning of Section 21E of
the Securities  Exchange Act of 1934 (the "Exchange  Act").  The words "expect",
"anticipate",   "intend",   "consider",  "plan",  "believe",  "seek",  "should",
"estimate",   and  similar   expressions   are   intended   to   identify   such
forward-looking  statements, but other statements may constitute forward-looking
statements.  These statements should be considered  subject to various risks and
uncertainties.  Such forward-looking statements are made based upon management's
belief as well as assumptions made by, and information  currently  available to,
management  pursuant  to "safe  harbor"  provisions  of the  Private  Securities
Litigation  Reform Act of 1995.  First  Security  Bancorp's  actual  results may
differ materially from the results anticipated in forward-looking statements due
to a variety of factors.  Such factors are described below and include,  without
limitation,  (i)  unanticipated  deterioration  in the  financial  condition  of
borrowers  resulting in significant  increases in loan losses and provisions for
those losses,  (ii) increased  competition  with other  financial  institutions,
(iii) lack of sustained  growth in the economy in the Lexington,  Kentucky area,
(iv) rapid  fluctuations or  unanticipated  changes in interest  rates,  (v) the
inability of our bank  subsidiary,  First Security Bank of Lexington,  Inc. ("FS
Bank") to satisfy  regulatory  requirements  for its expansion  plans,  and (vi)
changes in the legislative and regulatory environment.  Many of such factors are
beyond First Security's ability to control or predict, and readers are cautioned
not to put undue  reliance on such  forward-looking  statements.  First Security
does not intend to update or reissue any forward-looking statements contained in
this  report  as a result of new  information  or other  circumstances  that may
become known to First  Security.  Forward-looking  statements made by us in this
report are also subject to those risks  identified  within the section  entitled
"RISK FACTORS" BEGINNING ON PAGE 11.

UNLESS THIS FORM 10-KSB INDICATES  OTHERWISE OR THE CONTEXT OTHERWISE  REQUIRES,
THE TERMS "WE," "OUR,"  "US,"  "FIRST  SECURITY",  "FIRST  SECURITY  BANCORP" OR
"COMPANY" AS USED IN THIS REPORT REFER TO FIRST SECURITY  BANCORP,  INC. AND ITS
SUBSIDIARY  FIRST SECURITY BANK OF LEXINGTON,  INC., WHICH WE SOMETIMES REFER TO
AS "FS BANK".  REFERENCES  HEREIN TO THE FISCAL YEARS 2003, 2002, 2001, 2000 AND
1999 MEAN OUR FISCAL YEARS ENDED DECEMBER 31, 2003,  2002,  2001, 2000 AND 1999,
RESPECTIVELY.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

First Security is a Kentucky  corporation  that was incorporated on February 11,
2000 to  organize  and serve as the holding  company  for FS Bank,  a state bank
chartered under the laws of the Commonwealth of Kentucky.  FS Bank commenced its
banking  operations on November 17, 1997, and operates as a community bank in an
urban market emphasizing personalized banking relationships with individuals and
businesses located within the Lexington metropolitan  statistical area (MSA). We
own 100% of the capital stock of FS Bank.

Since its  inception in late 1997, a period of just over six years,  FS Bank has
captured  approximately  11.3% of the growth of total  deposits in the Lexington
MSA. We believe  that one of the  principal  factors  contributing  to our rapid
growth  thus far has been our ability to  effectively  position  ourselves  as a
locally managed  community bank committed to providing  outstanding  service and
trusted financial advice.

As a  community  bank,  we serve the needs of a wide  range of  customers,  from
households  to small and medium  sized  businesses.  Our  services  and products
include  checking  and savings  accounts,  certificates  of deposit and loans to
businesses and individuals, including residential mortgages. Our primary deposit
customers are individuals,  while our primary loan customers are small to medium
sized businesses.


                                  Page 1 of 96

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MARKET AREA.  FS Bank's  primary  service area is the  Lexington  MSA,  which is
composed of the  contiguous  counties of Fayette,  Jessamine,  Woodford,  Clark,
Bourbon, Scott and Madison in general, and specifically Lexington.  Lexington is
located  approximately  70 miles south of Cincinnati,  Ohio and 70 miles east of
Louisville,  Kentucky.  Interstates  75 and 64  intersect in  Lexington,  making
Lexington  a central  point for  commerce.  Lexington  is also the center of the
thoroughbred industry in Kentucky. A number of the most prominent horse farms in
the country are located within the Lexington MSA, as is Keeneland Racetrack, one
of the premier tracks in the nation and the home to a number of world  prominent
auctions of thoroughbred stock.

FS Bank's main office is located in  Lexington's  central  business  district in
downtown  Lexington.  The downtown  market  consists of a variety of  commercial
establishments and entertainment venues. We believe that the downtown area is an
important  location  for  financial  institutions  requiring  visibility  within
Lexington's  prominent commercial and private banking markets.  Accordingly,  we
believe  that this  location is well suited for FS Bank's  business  development
efforts.

In January 1998, FS Bank opened a retail bank branch on Southview  Drive. In May
2000,  FS Bank  opened a retail  bank  branch  office on Tates  Creek  Road.  In
November  2001,  FS Bank opened a retail  branch  office in the Palomar  Centre.
These offices were established to serve retail banking customers and are located
in areas of high  growth in Fayette  County.  In May 2002,  coincident  with the
acquisition  of a mortgage  origination  company,  we acquired two mortgage loan
origination  offices,  one on Lowry  Lane in  Lexington  and the other on Fourth
Street in  Danville,  Kentucky,  a city  located  approximately  45 miles to the
southwest of Lexington. These locations provide for easy access to clients, real
estate brokers and attorneys.

The economic  success of FS Bank's primary service area depends heavily upon the
economic  viability of the  metropolitan  Lexington,  Kentucky area. Our primary
service area's  economic  strength  comes from its large  employer  base,  which
includes several large  enterprises  such as the University of Kentucky,  Toyota
Motor Manufacturing,  USA (an automotive assembly plant located in Scott County,
approximately   18   miles   from   Lexington),   Lexmark   International,   the
Lexington-Fayette  Urban County  Government and the Fayette County Public School
System.   Additionally,   the  market  has  benefited   from  strong  growth  in
manufacturing employment in the last twenty years, particularly in manufacturing
in automotive related industries.

COMPETITION.  The Lexington banking market is highly  competitive.  According to
data released by the Federal Deposit Insurance Corporation ("FDIC"),  there were
approximately 37 banks and thrift institutions  located in the Lexington area at
June 30, 2003. A number of these  institutions  have greater  resources,  higher
lending limits, more banking offices and a larger market share.

According to the FDIC June 30, 2003 deposit  data,  bank and thrift  deposits in
the Lexington MSA grew from approximately $4.9 billion in June 1997 to more than
$6.6  billion  in June  2003.  As of June 30,  2003,  approximately  43% of this
deposit base was  controlled  by seven large,  multi-state  banks  headquartered
outside of Lexington,  which included Bank One, N.A.  (headquartered in Chicago,
Illinois),  National City Bank  (headquartered in Cleveland,  Ohio), Fifth Third
Bank  (headquartered  in Cincinnati,  Ohio),  PNC Bank, N.A.  (headquartered  in
Pittsburgh, Pennsylvania), Branch Banking & Trust Company ("BBT") (headquartered
in  Charlotte,   North  Carolina),  U.S.  Bank  (headquartered  in  Minneapolis,
Minnesota) and Integra Bank (headquartered in Evansville, Indiana).

According  to the FDIC  deposit  information,  the  collective  market  share of
deposits in the  Lexington  MSA for these large banks  declined from 59% in June
1997 to 43% at June 30, 2003, a period  during which their  collective  deposits
decreased  by 2.7%,  compared to an increase of 34.6% for the market as a whole.
Of the seven  regional banks  referred to above,  only three reported  growth in
deposits  above 1% over this time period.  Based on this data, at June 30, 2003,
we held 2.91% of the total of bank and thrift deposits in the Lexington MSA.


                                  Page 2 of 96

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Thus, growth of deposits in the Lexington MSA area over the last seven years has
been seen primarily by locally controlled  community banks, which have increased
their share of the local  market  deposits  from 43% in June 1997 to 59% at June
30, 2003. During this six year period,  only three banks reported their share of
the overall  growth of the market in excess of 10%, two of which  (including  FS
Bank) are locally controlled community banks.

Consequently,  while large, multi-state institutions are well established in our
market  area,  we believe the  general  trends  indicate  that a majority of the
community banks in the Lexington MSA have been able to effectively  compete with
these larger, multi-state banks to increase their deposit market share in recent
years.  In  addition,  during this six year period,  a total of seven  community
banks have entered the market, thus further increasing competition.

We also believe that  positioning FS Bank solely as a community bank will not be
enough  to  compete  in  today's  financial  industry.  In the  wake  of  modern
technology and the prosperity of the United States'  financial  markets over the
past decade,  banking clients have generally become more  sophisticated in their
approach to selecting  financial  services  providers.  We believe that the most
important  criteria to FS Bank's targeted clients when selecting a bank is their
desire  to  receive  exceptional  customer  service  while  being  able to enjoy
convenient  access  to  a  broad  array  of  sophisticated  financial  products.
Additionally,  when presented  with a choice,  we believe that many of FS Bank's
targeted  clients  would  prefer  to  deal  with  a  locally-owned   institution
headquartered  in Lexington,  like FS Bank,  as opposed to a large,  multi-state
bank, where many important  decisions regarding a client's financial affairs are
made elsewhere.

CHALLENGES. We have had a number of challenges to our continued success over the
last  two  years.  These  challenges  are the  result  of a number  of  factors,
including increased  competition within our market, the continual decline in the
interest  rate  environment  that began in 2001 and  turnover of key  management
personnel.  These  factors  have  combined  to  result  in  a  lowering  of  our
historically high growth rates and a decline in  profitability,  as shown in the
following table:

                                               2003         2002         2001
                                           ---------    ---------     ---------

Total assets                               $ 238,258    $ 231,086     $ 202,270
Total loans, net of allowance for
  losses                                     158,733      164,999       150,884
Total deposits                               190,640      188,955       168,744

Growth rates
  Total assets                                  3.1%        14.2%         50.4%
  Total loans, net of allowance for
    loan losses                               -3.81%         9.4%         42.5%
  Total deposits                                 .9%        12.0%         46.0%

Net income                                 $    620    $   1,049      $   1,022

The interest rate market has undergone abrupt changes beginning in 2001, with 12
declines in the prime rate,  taking the prime rate from 9.50% in January 2001 to
4.00% by July 2003. Our financing structure as a community bank is such that our
deposits  tend to reprice at a slower pace than do our loans,  as our  customers
typically purchase  certificates of deposit for periods of a year or longer. The
result of this  factor  has been that our cost of funds has  declined  at a much
slower pace than the general  interest rate environment and much slower than our
loan and  investment  portfolio,  thus causing a compression in our net interest
income.  See also Item 6 -  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations".

In the last two years, we have experienced  turnover of our key personnel in the
positions of president,  senior lending  officer,  chief  financial  officer and
chief operating officer.  These changes have affected our ability to attract and
retain new  customers,  thus  adding to the  slowdown in overall  growth.  These
positions  have been filled and we look forward to a resumption of our growth in
all areas in 2004.


                                  Page 3 of 96

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OPPORTUNITIES. We believe there are three major trends in the Lexington MSA that
strengthen our strategic market position as a locally managed community bank:

o     Customers generally perceive that service levels at banks are declining.
      We believe this is largely  attributable to integration  issues  resulting
      from  consolidation  in the bank and brokerage  industries.  Additionally,
      small  business  owners want a reliable and local point of contact that is
      knowledgeable about their business and the financial products and services
      that are important to the success of their business.

o     Client usage of more sophisticated financial products continues to grow,
      causing traditional banks to lose market share to other types of financial
      services companies, such as mutual fund companies and securities brokerage
      firms.

o     There is significant growth in the demand for convenient access to
      financial  services,  particularly  through  ATMs,  telephone  banking and
      Internet banking.

BUSINESS  STRATEGIES.  To take  advantage  of our  opportunities,  our  business
strategies have been and will continue to be:

o     Hire and retain highly experienced and qualified banking and financial
      professionals  with  successful  track  records  and,  for client  contact
      personnel,  established  books  of  business  with  small  businesses  and
      moderately affluent households within the Lexington MSA.

o     Provide individualized attention with consistent, local decision-making
      authority.

o     Build on our directors' and officers' diverse personal and business
      contacts, community involvement and professional expertise.

o     Establish a distribution strategy designed to prudently expand our
      physical and virtual market presence, thereby providing convenient banking
      access  for our  clients 24 hours a day.  We opened one new retail  branch
      facility in 1998, 2000 and 2001 and we are analyzing the opportunities for
      an  additional  retail  branch  facility for 2004. In 2003, we initiated a
      third party courier deposit pickup service that we intend to significantly
      expand in 2004. Also in 2003, we initiated Internet banking products which
      we believe provide our customers with modern technology and ease of use.

We believe  that our business  strategies  allow us to  effectively  distinguish
ourselves from other financial  institutions  operating within the Lexington MSA
and successfully attract and retain business relationships with small businesses
and moderately affluent households.

Lending  Services.  FS Bank offers a full range of lending  products,  including
commercial,   real  estate  and  consumer  loans  to  individuals  and  small-to
medium-sized  businesses and professional  entities. It competes for these loans
with competitors who are well established in the Lexington MSA.

FS Bank's loan approval  policies  provide for various levels of officer lending
authority.  When the amount of total  loans to a single  borrower  exceeds  that
individual officer's lending authority,  officers with a higher lending limit, a
committee  of FS  Bank's  Board of  Directors  or the  Board of  Directors  will
determine whether to approve the loan request.

FS Bank's lending  activities are subject to a variety of lending limits imposed
by state and federal  law.  Differing  limits apply based on the type of loan or
the nature of the borrower, including the borrower's relationship to FS Bank. In
general,  however,  at  December  31,  2003,  FS Bank  was  able to loan any one
borrower a maximum amount equal to approximately $4.3 million plus an additional
$2.1 million,  or a total of  approximately  $6.4  million,  for loans that meet
certain additional  collateral  guidelines.  These legal limits will increase or
decrease as FS Bank's capital increases or decreases as a result of its earnings
or losses, the injection of additional capital or other reasons.  In addition to
these  regulatory  limits,  FS Bank imposes upon itself various internal lending
limits  based  on the  type of loan  and  collateral  which  are  less  than the
prescribed  legal  lending  limits,  thus  further  reducing its exposure to any
single borrower.


                                  Page 4 of 96

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The principal  economic risk associated with each category of loans that FS Bank
expects  to make  is the  creditworthiness  of the  borrower.  General  economic
factors affecting a commercial or consumer  borrower's  ability to repay include
interest,  inflation and employment  rates, as well as other factors affecting a
borrower's  assets,  clients,   suppliers  and  employees.  Many  of  FS  Bank's
commercial  loans  are made to  small-to  medium-sized  businesses  that  during
periods  of  economic  weakness,  may be more  adversely  affected  than  larger
enterprises, resulting in increased levels of nonaccrual or other problem loans,
loan charge-offs and higher provision for loan losses.

FS  Bank's  commercial  loans  vary by  purpose  and by  type of any  underlying
collateral and include  equipment  loans and working  capital loans.  Commercial
loans may be unsecured or secured by accounts  receivable  or by other  business
assets.  FS  Bank  also  makes  a  variety  of  commercial  real  estate  loans,
residential  real estate  loans and real  estate  construction  and  development
loans.  FS Bank  also  makes a variety  of loans to  individuals  for  personal,
family,  investment  and  household  purposes,  including  secured and unsecured
installment and term loans,  residential first mortgage loans, home equity loans
and home equity lines of credit.

FS Bank also originates  residential  mortgage loans with the  expectation  that
they will be later sold into the secondary  market.  FS Bank acquired the assets
of First  Mortgage  Company,  Inc. in  Lexington,  Kentucky  in March 2002,  and
conducts the mortgage banking operations assumed as a division under the name of
"First Security  Mortgage  Company".  See Note 17 to the Consolidated  Financial
Statements  included in Item 7 of this report for additional  information  about
our acquisition of First Mortgage Company, Inc.

INVESTMENT  SECURITIES.  In  addition  to loans,  FS Bank has other  investments
primarily in obligations of the United States government, obligations guaranteed
as to  principal  and  interest  by  the  United  States  government  and  other
securities.  No investment in any of those  instruments  exceeds any  applicable
limitation  imposed  by  law  or  regulation.   The  Asset  Liability/Investment
Committee  and the Board of  Directors  review the  investment  portfolio  on an
ongoing basis in order to ensure that the investments conform to FS Bank's asset
liability management policy as set by the Board of Directors.

ASSET  AND  LIABILITY  MANAGEMENT.  Our  Asset  Liability/Investment   Committee
("ALCO")  is  composed  of  members  of the  Board of  Directors  and  executive
management  of FS Bank.  The ALCO manages FS Bank's  investments  and assets and
liabilities  and strives to provide a stable,  optimized net interest income and
margin,  adequate liquidity and ultimately a suitable after-tax return on assets
and  return on equity.  ALCO  conducts  these  management  functions  within the
framework of written  policies  that FS Bank's  Board of Directors  has adopted.
ALCO works to maintain a balanced  position  between rate  sensitive  assets and
rate sensitive liabilities.

DEPOSIT  SERVICES.  FS Bank seeks to  establish  a broad base of core  deposits,
including  savings,  checking,   interest-bearing  checking,  money  market  and
certificate of deposit  accounts.  To attract  deposits,  FS Bank has employed a
marketing plan in its overall service area and features a broad product line and
competitive rates and services. The primary sources of deposits are residents of
and  businesses  and their  employees  located  in the  Lexington  MSA.  FS Bank
generally  obtains these deposits through general marketing efforts and personal
solicitation by its officers and directors.

INVESTMENT SERVICES.  FS Bank entered into agreements in 2002 with third parties
as a part of an  overall  strategy  to enable  FS Bank to offer a wide  array of
investments,  insurance and estate planning services.  In addition,  in 2003, FS
Bank  assisted  three  employees in obtaining or updating  their  insurance  and
securities  licenses.  FS Bank is currently  evaluating  delivery strategies for
these products and services and intends to more fully implement these strategies
in 2004.

OTHER  BANKING  SERVICES.  Given  client  demand for  increased  convenience  in
accessing banking and investment services,  FS Bank also offers a broad array of
convenience-centered  products and  services,  including 24 hour  telephone  and
Internet banking,  debit cards,  direct deposit and cash management services for
small-to  medium-sized  businesses.  Additionally,  FS Bank is associated with a
nationwide network of automated teller machines that our clients are able to use
throughout  Kentucky and other regions.  FS Bank does not plan to exercise trust
powers,  but may do so in the future subject to the approval of the Commonwealth
of Kentucky and the Federal Deposit Insurance Corporation ("FDIC").


                                  Page 5 of 96

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FS Bank also offers its targeted  commercial  clients  courier service through a
third party which picks up non-cash deposits from the client's place of business
which also enables us to demonstrate convenience greater than most of the larger
regional competitors.

EMPLOYEES. At March 1, 2004, FS Bank employed 68 employees of which 59 were full
time. FS Bank considers its relationship with all employees to be excellent.


SUPERVISION AND REGULATION

Both First  Security  and FS Bank are  subject to  extensive  state and  federal
banking laws and regulations that impose restrictions on and provide for general
regulatory  oversight of First Security's and FS Bank's  operations.  These laws
and   regulations  are  generally   intended  to  protect   depositors  and  not
shareholders.  The following  discussion  describes the material elements of the
regulatory framework which apply.

FIRST SECURITY

We are a bank holding  company  under the federal  Bank  Holding  Company Act of
1956. As a result, we are subject to the supervision, examination, and reporting
requirements  of the Bank Holding Company Act and the regulations of the Federal
Reserve.

ACQUISITION OF BANKS.  The Bank Holding  Company Act requires every bank holding
company to obtain the Federal Reserve's prior approval before:

o     Acquiring direct or indirect ownership or control of any voting shares of
      any bank if, after the acquisition, the bank holding company will directly
      or indirectly own or control more than 5% of the bank's voting shares;

o     Acquiring all or substantially all of the assets of any bank; or

o     Merging or consolidating with any other bank holding company.

Additionally, the Bank Holding Company Act provides that the Federal Reserve may
not  approve  any  of  these  transactions  if  it  would  substantially  lessen
competition or otherwise  function as a restraint of trade, or result in or tend
to  create a  monopoly,  unless  the  anticompetitive  effects  of the  proposed
transaction  are  clearly  outweighed  by the public  interest  in  meeting  the
convenience  and needs of the  communities to be served.  The Federal Reserve is
also  required to consider the  financial  and  managerial  resources and future
prospects of the bank holding  companies and banks concerned and the convenience
and needs of the communities to be served.  The Federal Reserve's  consideration
of financial resources generally focuses on capital adequacy, which is discussed
below.

Under the Bank Holding  Company Act, if adequately  capitalized  and  adequately
managed, we or any other bank holding company located in Kentucky may purchase a
bank located  outside of Kentucky.  Conversely,  an adequately  capitalized  and
adequately managed bank holding company located outside of Kentucky may purchase
a bank located inside Kentucky.  In each case,  however,  state law restrictions
may be placed on the  acquisition of a bank based on the existence of reciprocal
state law in and based on limitations in specified concentrations of deposits.


                                  Page 6 of 96

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CHANGE IN BANK CONTROL. Subject to various exceptions,  the Bank Holding Company
Act  and  the  Federal  Change  in  Bank  Control  Act,  together  with  related
regulations,  require  Federal  Reserve  approval prior to any person or company
acquiring "control" of a bank holding company.  Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company.  Control is rebuttably presumed to exist
if a person or company  acquires 10% or more, but less than 25%, of any class of
voting securities and either:

o     The bank holding  company has registered  securities  under  Section 12 of
      the Securities Exchange Act of 1934; or

o     No other person owns a greater percentage of that class of voting
      securities immediately after the transaction.

Our common stock is registered  under the  Securities  Exchange Act of 1934. The
regulations  provide  a  procedure  for  challenge  of  the  rebuttable  control
presumption.

PERMITTED  ACTIVITIES.  The  Gramm-Leach-Bliley  Act of 1999  amended  the  Bank
Holding Company Act and expanded the activities in which bank holding  companies
and  affiliates of banks are  permitted to engage.  The  Gramm-Leach-Bliley  Act
eliminates many federal and state law barriers to  affiliations  among banks and
securities firms,  insurance  companies,  and other financial service providers.
Generally,  if we qualify and elect to become a financial holding company, which
is described below, we may engage in activities that are:

o     Financial in nature;

o     Incidental to a financial activity; or

o     Complementary to a financial activity and do not pose a substantial risk
      to the safety or soundness of  depository  institutions  or the  financial
      system generally.

The Gramm-Leach-Bliley Act expressly lists the following activities as financial
in nature:

o     Lending, trust and other banking activities;

o     Insuring, guaranteeing, or indemnifying against loss or harm, or providing
      and issuing annuities, and acting as principal, agent, or broker for these
      purposes, in any state;

o     Providing financial, investment, or advisory services;

o     Issuing or selling instruments  representing  interests in pools of assets
      permissible for a bank to hold directly;

o     Underwriting, dealing in or making a market in securities;

o     Activities that the Federal Reserve has determined to be so closely
      related to  banking or  managing  or  controlling  banks as to be a proper
      incident to banking or managing or controlling banks;

o     Activities permitted outside of the United States that the Federal
      Reserve has  determined  to be usual in  connection  with banking or other
      financial operations abroad;


                                  Page 7 of 96


<PAGE>


o     Merchant banking through securities or insurance affiliates; and

o     Insurance company portfolio investments.

The  Gramm-Leach-Bliley Act also authorizes the Federal Reserve, in consultation
with the Secretary of the Treasury, to determine activities in addition to those
listed  above  that are  financial  in nature or  incidental  to such  financial
activity. In determining whether a particular activity is financial in nature or
incidental or  complementary to a financial  activity,  the Federal Reserve must
consider  (1) the purpose of the Bank  Holding  Company  and  Gramm-Leach-Bliley
Acts,  (2) changes or reasonably  expected  changes in the  marketplace in which
financial  holding  companies  compete  and in  the  technology  for  delivering
financial services,  and (3) whether the activity is necessary or appropriate to
allow financial  holding  companies to effectively  compete with other financial
service providers and to efficiently deliver information and services.

To  qualify  to  become  a  financial  holding  company,  any of our  depository
institution subsidiaries must be well capitalized and well managed and must have
a Community Reinvestment Act rating of at least "satisfactory." Additionally, we
must file an  election  with the Federal  Reserve to become a financial  holding
company and provide the Federal  Reserve  with 30 days  written  notice prior to
engaging  in a  permitted  financial  activity.  Although  we do  not  have  any
immediate  plans  to file an  election  with the  Federal  Reserve  to  become a
financial  holding  company,  one of the primary reasons we selected the holding
company  structure was to have  increased  flexibility.  Accordingly,  if deemed
appropriate, we may seek to become a financial holding company in the future.

Under the Bank  Holding  Company  Act,  a bank  holding  company,  which has not
qualified  or  elected  to become a  financial  holding  company,  is  generally
prohibited from engaging in or acquiring direct or indirect control of more than
5% of the voting shares of any company engaged in nonbanking  activities unless,
prior to the enactment of the Gramm-Leach-Bliley  Act, the Federal Reserve found
those  activities to be so closely related to banking as to be a proper incident
to the business of banking.  Activities that the Federal Reserve has found to be
so closely  related to banking as to be a proper  incident  to the  business  of
banking include:

o     Factoring accounts receivable;

o     Acquiring or servicing loans;

o     Leasing personal property;

o     Conducting discount securities brokerage activities;

o     Performing selected data processing services;

o     Acting as agent or broker in selling credit life insurance and other types
      of insurance in connection with credit transactions; and

o     Performing selected insurance underwriting activities.

Despite prior approval,  the Federal Reserve may order a bank holding company or
its  subsidiaries  to terminate  any of these  activities  or to  terminate  its
ownership or control of any subsidiary  when it has reasonable  cause to believe
that the  bank  holding  company's  continued  ownership,  activity  or  control
constitutes a serious risk to the financial safety,  soundness,  or stability of
any of its bank subsidiaries.

SUPPORT  OF  SUBSIDIARY  INSTITUTIONS.  Under  Federal  Reserve  policy,  we are
expected to act as a source of financial  strength for our subsidiary,  FS Bank,
and to commit  resources  to support FS Bank.  This  support  may be required at
times when,  without this Federal  Reserve  policy,  we might not be inclined to
provide it. In the unlikely event of our  bankruptcy,  any commitment by us to a
federal  bank  regulatory  agency to  maintain  the  capital of FS Bank would be
assumed by the bankruptcy trustee and entitled to a priority of payment.


                                  Page 8 of 96

<PAGE>

FS BANK

FS Bank is a state bank chartered under the banking laws of the  Commonwealth of
Kentucky.  As a  result,  it is  subject  to the  supervision,  examination  and
reporting  requirements  of the Kentucky  Department  of Financial  Institutions
("KDFI").  KDFI regularly examines FS Bank's operations and has the authority to
approve or  disapprove  mergers,  the  establishment  of  branches  and  similar
corporate  actions.  KDFI  also has the  power to  prevent  the  continuance  or
development of unsafe or unsound banking  practices or other  violations of law.
Additionally,  FS Bank's  deposits are insured by the FDIC to the maximum extent
provided by law. FS Bank also is subject to numerous state and federal  statutes
and regulations that will affect its business, activities and operations.

BRANCHING.  With prior regulatory approval,  Kentucky law permits banks based in
the state to either establish new or acquire existing branch offices  throughout
Kentucky.  FS Bank and any other national or state-chartered  bank generally may
branch  across  state lines by merging  with banks in other states if allowed by
the applicable states' laws.  Kentucky law (with limited  exceptions)  currently
permits branching across state lines either through  interstate merger or branch
acquisition.  Kentucky law does not  currently  permit an  out-of-state  bank to
branch into Kentucky short of an interstate merger.

FDIC INSURANCE.  The FDIC has adopted a risk-based assessment system for insured
depository  institutions  that  takes into  account  the risks  attributable  to
different  categories and  concentrations of assets and liabilities.  The system
assigns an institution to one of three capital categories: (1) well capitalized;
(2) adequately capitalized; and (3) undercapitalized. These three categories are
substantially  similar  to the prompt  corrective  action  categories  described
below,  with the  "undercapitalized"  category  including  institutions that are
undercapitalized,     significantly     undercapitalized,     and     critically
undercapitalized for prompt corrective action purposes. The FDIC also assigns an
institution  to  one of  three  supervisory  subgroups  based  on a  supervisory
evaluation that the institution's primary federal regulator provides to the FDIC
and  information  that the FDIC  determines to be relevant to the  institution's
financial condition and the risk posed to the deposit insurance funds.

The  FDIC  may  terminate  its  insurance  of  deposits  if it  finds  that  the
institution  has  engaged in unsafe and  unsound  practices,  is in an unsafe or
unsound  condition to continue  operations,  or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.

CAPITAL ADEQUACY

Both First Security and FS Bank are required to comply with the capital adequacy
standards  established by the Federal Reserve, in our case, and the FDIC, in the
case of FS Bank. The Federal Reserve has established a risk-based and a leverage
measure of capital adequacy for bank holding companies.  FS Bank is also subject
to risk-based and leverage capital  requirements  adopted by the FDIC, which are
substantially  similar to those adopted by the Federal  Reserve for bank holding
companies.

The  risk-based  capital  standards  are  designed  to make  regulatory  capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies,  to account for off-balance-sheet  exposure,  and to minimize
disincentives  for holding liquid assets.  Assets and  off-balance-sheet  items,
such as letters of credit and unfunded loan  commitments,  are assigned to broad
risk  categories,  each with  appropriate  risk weights.  The resulting  capital
ratios  represent  capital as a  percentage  of total  risk-weighted  assets and
off-balance-sheet items.

The minimum guideline for the ratio of total capital to risk-weighted  assets is
8%. Total capital consists of two components, Tier 1 capital and Tier 2 capital.
Tier 1 capital  generally  consists of common stock,  minority  interests in the
equity accounts of consolidated subsidiaries,  noncumulative perpetual preferred
stock,  and a limited  amount of  cumulative  perpetual  preferred  stock,  less
goodwill and other  specified  intangible  assets.  Tier 1 capital must equal at
least  4%  of  risk-weighted  assets.  Tier  2  capital  generally  consists  of
subordinated  debt,  other  preferred  stock,  and a limited amount of loan loss
reserves.  The  total  amount  of Tier 2 capital  is  limited  to 100% of Tier 1
capital.  At December  31,  2003,  our ratio of total  capital to  risk-weighted
assets  was 12.1% and our ratio of Tier 1 capital  to  risk-weighted  assets was
10.9%.


                                  Page 9 of 96

<PAGE>

In  addition,  the  Federal  Reserve  has  established  minimum  leverage  ratio
guidelines for bank holding  companies.  These guidelines  provide for a minimum
ratio of Tier 1 capital to average  assets,  less  goodwill and other  specified
intangible  assets,  of 3%  for  bank  holding  companies  that  meet  specified
criteria,  including having the highest  regulatory  rating and implementing the
Federal  Reserve's  risk-based  capital  measure for market risk. All other bank
holding  companies  generally  are  required to maintain a leverage  ratio of at
least 4%. At December 31, 2003, our leverage ratio was 8.7%. The guidelines also
provide that bank holding companies experiencing high internal growth, or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum  supervisory  levels.  Furthermore,  the  Federal  Reserve has
indicated that it will consider a bank holding company's Tier 1 capital leverage
ratio, after deducting all intangibles, and other indicators of capital strength
in evaluating proposals for expansion or new activities.

FS  Bank  experienced   significant  growth  during  our  first  five  years  of
operations,  from 1997 to 2001. While we experienced limited growth in 2003 (and
our loans  declined),  we plan to emphasize  growth in 2004.  If our growth rate
returns to levels we  experienced  in 1997  through  2001,  our assets will grow
faster  than our  capital  and our  capital  ratios  will  decline.  In order to
maintain capital at FS Bank at appropriate  levels,  we may be required to incur
borrowings or issue additional  equity  securities.  To prepare for the expected
growth in 2004,  we  borrowed $5 million and infused it into FS Bank on December
31, 2003.

Failure to meet capital  guidelines could subject a bank or bank holding company
to a variety of enforcement remedies, including issuance of a capital directive,
the  termination  of deposit  insurance by the FDIC, a prohibition  on accepting
brokered deposits,  and other restrictions on its business.  As described above,
significant  additional  restrictions can be imposed on FDIC-insured  depository
institutions that fail to meet applicable capital requirements.

PROMPT CORRECTIVE ACTION

The Federal Deposit Insurance Corporation  Improvement Act of 1991 establishes a
system of prompt corrective  action to resolve the problems of  undercapitalized
financial  institutions.  Under this system, the federal banking regulators have
established five capital categories (well capitalized,  adequately  capitalized,
undercapitalized,      significantly     undercapitalized     and     critically
undercapitalized) into one of which all institutions are placed. Federal banking
regulators are required to take various  mandatory  supervisory  actions and are
authorized to take other  discretionary  actions with respect to institutions in
the three undercapitalized  categories.  The severity of the action depends upon
the capital category in which the institution is placed. Generally, subject to a
narrow  exception,  the banking regulator must appoint a receiver or conservator
for an  institution  that is critically  undercapitalized.  The federal  banking
agencies  have  specified  by  regulation  the relevant  capital  level for each
category.

An  institution   that  is  categorized   as   undercapitalized,   significantly
undercapitalized,  or  critically  undercapitalized  is  required  to  submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding  company must  guarantee that a subsidiary  depository  institution
meets  its  capital  restoration  plan,  subject  to  various  limitations.  The
controlling  holding company's  obligation to fund a capital restoration plan is
limited to the lesser of 5% of an  undercapitalized  subsidiary's  assets or the
amount required to meet regulatory  capital  requirements.  An  undercapitalized
institution  is also  generally  prohibited  from  increasing  its average total
assets,  making  acquisitions,  establishing any branches or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval.   The  regulations  also  establish   procedures  for  downgrading  an
institution and a lower capital category based on supervisory factors other than
capital.  As of December 31, 2003, we believe FS Bank would be considered  "well
capitalized" by its primary regulator.

PAYMENT OF DIVIDENDS

We are a legal entity separate and distinct from FS Bank. The principal  sources
of our cash flow, including cash flow to pay dividends to our shareholders,  are
dividends  that  FS Bank  pays  to us as its  sole  shareholder.  Statutory  and
regulatory  limitations apply to FS Bank's payment of dividends to us as well as
to our payment of dividends to our shareholders.


                                  Page 10 of 96

<PAGE>

FS Bank is  required  by state law to obtain  prior  approval  for  payments  of
dividends if the total of all dividends declared by FS Bank's Board of Directors
in any year will exceed (1) the total of FS Bank's undistributed net profits for
that year,  plus (2) FS Bank's  retained net profits of the preceding two years,
less any  required  transfers  to  surplus.  Under  the above  retained  profits
limitation,  at  December  31,  2003 FS  Bank  could  have  paid a  dividend  of
approximately $2.9 million.

In connection with the borrowing of $5 million used for a capital  infusion into
FS Bank, we entered into a credit  agreement that provides,  among other things,
an  additional  $1 million that can be used for capital  infusion  into FS Bank,
which we do not expect to  utilize.  The credit  agreement  also  prohibits  the
payment of dividends on our common  shares until that debt is retired.  See also
the Notes to Consolidated Financial Statements.

The  payment  of  dividends  by us and FS Bank  may  also be  affected  by other
factors,  such as the requirement to maintain  adequate capital above regulatory
guidelines.  If, in the  opinion of KDFI or the FDIC,  FS Bank was engaged in or
about to engage in an unsafe or  unsound  practice,  they could  require,  after
notice  and a  hearing,  that  FS Bank  stop or  refrain  from  engaging  in the
practice. The federal banking agencies have indicated that paying dividends that
deplete a depository  institution's capital base to an inadequate level would be
an unsafe and unsound  banking  practice.  Under the Federal  Deposit  Insurance
Corporation  Improvement  Act of 1991, a depository  institution may not pay any
dividend if payment would cause it to become  undercapitalized  or if it already
is  undercapitalized.   Moreover,   the  federal  agencies  have  issued  policy
statements  that provide that bank holding  companies  and insured  banks should
generally  only pay dividends  out of current  operating  earnings.  See "Prompt
Corrective Action" above.

RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

Transactions  between  First  Security and FS Bank are subject to Section 23A of
the Federal Reserve Act. Section 23A places limits on the amount of:

o     A bank's loans or extensions of credit to affiliates;

o     A bank's investment in affiliates;

o     Assets a bank may purchase from affiliates,  except for real and  personal
      property exempted by the Federal Reserve;

o     The amount of loans or extensions of credit to third parties
      collateralized by the securities or obligations of affiliates; and

o     A bank's guarantee, acceptance or letter of credit issued on behalf of an
      affiliate.

The total amount of the above  transactions is limited in amount,  as to any one
affiliate,  to 10% of a bank's  capital and surplus and, as to all affiliates of
an insider and the insider combined,  to 20% of a bank's capital and surplus. In
addition  to the  limitation  on the amount of these  transactions,  each of the
above  transactions must also meet specified  collateral  requirements.  FS Bank
must  also  comply  with  other  provisions  designed  to avoid  the  taking  of
low-quality assets.

Transactions  between FS Bank and its affiliates  (including First Security) are
also  subject to Section  23B of the  Federal  Reserve  Act which,  among  other
things,  prohibits an institution from engaging in the above  transactions  with
affiliates  unless the transactions are on terms  substantially  the same, or at
least as favorable to the institution or its  subsidiaries,  as those prevailing
at the time for comparable transactions with nonaffiliated companies.

The Sarbanes-Oxley Act of 2002 prohibits First Security from extending or making
arrangements  for the  extension of credit in the form of a personal loan to any
of its directors or executive officers.


                                  Page 11 of 96

<PAGE>

FS Bank is also subject to restrictions on extensions of credit to its executive
officers,  directors,  principal shareholders and their related interests. These
extensions of credit (1) must be made on substantially the same terms, including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions  with third parties,  and (2) must not involve more than the normal
risk of repayment or present other unfavorable features.

COMMUNITY REINVESTMENT

The Community Reinvestment Act requires that, in connection with examinations of
financial  institutions  within  their  respective  jurisdictions,  the  Federal
Reserve,  the  Office  of the  Comptroller  of the  Currency  or the FDIC  shall
evaluate the record of each financial institution in meeting the credit needs of
its local  community,  including low and  moderate-income  neighborhoods.  These
facts are also considered in evaluating mergers,  acquisitions, and applications
to open a branch or facility.  Failure to adequately  meet these  criteria could
impose additional requirements and limitations on FS Bank.  Additionally,  banks
are required to publicly  disclose the terms of various  Community  Reinvestment
Act-related agreements.

PRIVACY

Under  the  Gramm-Leach-Bliley  Act,  financial  institutions  are  required  to
disclose their policies for collecting and protecting confidential  information.
Customers  generally may prevent  financial  institutions  from sharing personal
financial  information with nonaffiliated third parties except for third parties
that market the institutions' own products and services. Additionally, financial
institutions  generally  may  not  disclose  consumer  account  numbers  to  any
nonaffiliated  third party for use in  telemarketing,  direct mail  marketing or
other marketing through electronic mail to consumers.  FS Bank has established a
privacy policy to ensure compliance with federal requirements.

OTHER CONSUMER LAWS AND REGULATIONS

Interest and other charges collected or contracted for by FS Bank are subject to
state usury laws and federal laws concerning interest rates. For example,  under
the Servicemembers Civil relief Act of 2003 (formerly the Soldiers' and Sailors'
Civil  Relief Act of 1940) a lender is  generally  prohibited  from  charging an
annual  interest rate in excess of 6% on any  obligations for which the borrower
is a person on active  duty with the  United  States  military.  FS Bank's  loan
operations are also subject to federal laws  applicable to credit  transactions,
such as the:

o     Federal Truth-In-Lending Act, governing disclosures of credit terms to
      consumer borrowers;

o     Home Mortgage Disclosure Act of 1975, requiring financial institutions to
      provide information to enable the public and public officials to determine
      whether a financial  institution is fulfilling its obligation to help meet
      the housing needs of the community it serves;

o     Equal Credit Opportunity Act, prohibiting discrimination on the basis of
      race, creed or other prohibited factors in extending credit;

o     Fair Credit  Reporting Act of 1978,  governing the use and provision of
      information to credit reporting agencies;

o     Fair Debt Collection Act, governing the manner in which consumer debts may
      be collected by collection agencies;

o     Servicemembers Civil relief Act of 2003, governing the repayment terms of,
      and property rights underlying, secured obligations of persons in military
      service; and

o     Rules and regulations of the various federal agencies charged with the
      responsibility of implementing the federal laws.


                                  Page 12 of 96

<PAGE>

FS Bank's deposit operations are subject to the:

o     Right to Financial Privacy Act, which imposes a duty to maintain
      confidentiality  of consumer  financial records and prescribes  procedures
      for complying with administrative subpoenas of financial records; and

o     Electronic Funds Transfer Act and Regulation E issued by the Federal
      Reserve to  implement  that act,  which govern  automatic  deposits to and
      withdrawals  from deposit  accounts and customers'  rights and liabilities
      arising from the use of  automated  teller  machines and other  electronic
      banking services.

ANTI-TERRORISM LEGISLATION

On October 26, 2001,  the  President of the United States signed the Uniting and
Strengthening  America by Providing  Appropriate Tools Required to Intercept and
Obstruct  Terrorism  (USA  PATRIOT)  Act of 2001.  Under  the USA  PATRIOT  Act,
financial  institutions are subject to prohibitions  against specified financial
transactions  and account  relationships  as well as enhanced due  diligence and
"know  your  customer"  standards  in  their  dealings  with  foreign  financial
institutions and foreign customers.

In addition,  the USA PATRIOT Act  authorizes  the  Secretary of the Treasury to
adopt rules increasing the cooperation and information sharing between financial
institutions, regulators, and law enforcement authorities regarding individuals,
entities and organizations engaged in, or reasonably suspected based on credible
evidence of engaging in,  terrorist  acts or money  laundering  activities.  Any
financial  institution  complying  with  these  rules will not be deemed to have
violated  the privacy  provisions  of the  Gramm-Leach-Bliley  Act, as discussed
above. FS Bank currently has policies and procedures in place designed to comply
with the USA PATRIOT Act.

PROPOSED LEGISLATION AND REGULATORY ACTION

New  regulations and statutes are regularly  proposed that contain  wide-ranging
proposals for altering the structures, regulations and competitive relationships
of the nation's  financial  institutions.  We cannot predict  whether or in what
form any proposed  regulation  or statute will be adopted or the extent to which
our business may be affected by any new regulation or statute.

EFFECT OF GOVERNMENTAL MONETARY POLICIES

Our earnings are affected by domestic  economic  conditions and the monetary and
fiscal  policies of the United States  government and its agencies.  The Federal
Reserve's  monetary  policies  have had, and are likely to continue to have,  an
important  impact on the  operating  results of  commercial  banks  through  the
Federal  Reserve's  statutory  power to implement  national  monetary  policy in
order, among other things, to curb inflation or combat a recession.  The Federal
Reserve,  through its monetary and fiscal  policies,  affects the levels of bank
loans,  investments and deposits through its control over the issuance of United
States government securities,  its regulation of the discount rate applicable to
member banks and its influence over reserve  requirements  to which member banks
are  subject.  We cannot  predict  the  nature or  impact of future  changes  in
monetary and fiscal policies.


                                  Page 13 of 96

<PAGE>

ITEM 2. DESCRIPTION OF PROPERTIES

First Security  Bancorp's  principal offices are located at 318 East Main Street
in Lexington, Kentucky in Fayette County. FS Bank owns this property.

In  addition  to its main  office  facility,  FS Bank has three  branch  banking
offices in  Lexington,  Kentucky,  located at 3750 Palomar  Centre  Drive,  3616
Walden Drive and 2100 Southview Drive; a mortgage loan production  office at 190
Lowry Lane in Lexington,  and a mortgage loan  production  office located at 455
South  Fourth  Street in  Danville,  Kentucky.  FS Bank  leases the land for its
Palomar  branch office from a related party and leases land for its Walden Drive
branch office from an unrelated party. FS Bank leases three other locations from
unrelated parties: (i) the Southview branch office, (ii) the Lowry Lane mortgage
company office and (iii) the Danville, Kentucky loan production office.

The Palomar  Centre lease has an initial term  extending  until May 2021, and we
have the option to extend the lease for an additional  20 year term.  Rent under
this lease is $69,600  annually until June 2005,  with bi-annual  adjustments of
$2,400 until the end of the lease.

The Walden Drive lease has an initial term of five years, and we have the option
to extend the lease for five  additional  five year  terms.  The annual  rent is
currently  $68,000 and ranges up to $109,515 in the last of the lease  extension
periods.

The Southview Drive lease has a term extending until 2007, at which time we have
the option to extend the lease for two additional  five year terms.  Annual rent
is currently $51,093,  and is subject to increases in any lease extension period
based upon increases in the consumer price index.

The Lowry Lane lease has a term until June 2007. Annual rent is $51,000.

The Danville lease has a term until March 31, 2004. Annual rent is $6,000.


ITEM 3. LEGAL PROCEEDINGS

As of the date hereof,  there are no material pending legal proceedings to which
First  Security  or FS Bank is a party or of  which  any of its  properties  are
subject;  nor are there material  proceedings known to First Security or FS Bank
to be  contemplated  by any  governmental  authority;  nor  are  there  material
proceedings  known to First  Security or FS Bank,  pending or  contemplated,  in
which any  director,  officer or affiliate or any principal  security  holder of
First Security or FS Bank or any associate of any of the  foregoing,  is a party
or has an interest adverse to First Security or FS Bank.


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

None.


                                  Page 14 of 96


<PAGE>


PART II

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

Since inception in May 2000,  First  Security's  common stock has been traded on
the OTC Bulletin  Board under the symbol "FSLK".  The following  table shows the
high and low bid price information for First Security Bancorp's common stock for
each quarter in 2003 and 2002,  as derived  from data  furnished by the National
Association of Securities Dealers. These quotations reflect inter-dealer prices,
without retail markup,  markdown,  or commission,  and may not represent  actual
transactions.

                                                   BID PRICE PER SHARE
                                                  High             Low
             2003
             ----
                First quarter                  $ 21.00          $ 16.25
                Second quarter                   21.00            17.05
                Third quarter                    18.50            17.00
                Fourth quarter                   17.00            14.75

             2002
             ----
                First quarter                  $ 21.00          $ 16.25
                Second quarter                   23.00            16.00
                Third quarter                    23.00            20.25
                Fourth quarter                   23.00            20.55


As of March 26, 2004, First Security had 501 owners of record of its shares.

First Security has not paid any cash dividends since inception,  and it does not
anticipate that it will consider  paying  dividends until FS Bank has achieved a
level of  profitability  appropriate  to fund such  dividends  and support asset
growth and until First Security  extinguishes its debt. See Item 1. "Description
of Business - Supervision  and  Regulation - Payment of  Dividends"  and Item 6.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" for additional  information on dividend  restrictions  applicable to
First Security, including the prohibition on payment of dividends under the loan
First Security obtained on December 30, 2003.

EQUITY PLAN COMPENSATION INFORMATION
The following table provides information as of December 31, 2003 with respect to
our  compensation  plans  under  which  equity  securities  of the  Company  are
authorized  for  issuance:
<TABLE>
<CAPTION>

                                 (a)                                                                  (c)
                 Number of securities issued                (b)                        Number ofsecurities available
                   upon the exercise of          Weighted-average exercise             for future issuance  under  equity
                   outstanding  options,         price  of  outstanding  options,      compensation  plans  (excluding
PLAN CATEGORY      warrants and rights               warrants and  rights              securities reflected in column a)
-------------      -------------------               --------------------              ---------------------------------

<S>                            <C>                       <C>                                     <C>

Equity compensation plans
 approved by shareholders(1)     87,750                    $ 18.91                                98,250

Equity compensation plans not
 approved by shareholders(2)     20,000                    $ 14.00                                     -
                              ---------                                                           -------

Totals                          107,750                    $ 18.00                                 98,250
                              =========                                                           =======


</TABLE>

(1) Reflects  shares of our common stock  subject to options and  available  for
issuance under the Company's Stock Award Plan.

(2) Reflects options granted under the Executive Employment Agreement we entered
into with R. Douglas Hutcherson when he joined First Security and FS Bank as our
President  and CEO effective  December 1, 2003.  The options vest 4,000 per year
commencing September 15, 2004, and have an expiration date of December 1, 2013.


                                  Page 15 of 96

<PAGE>

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is a discussion  of our  financial  condition at December 31, 2003
and 2002,  and our results of operations  for the years ended December 31, 2003,
2002 and 2001. The purpose of this  discussion is to focus on information  about
our  financial  condition  and  results  of  operations  which is not  otherwise
apparent  from  the  Consolidated  Financial  Statements.  You  should  read the
following  discussion  and  analysis  along  with  our  Consolidated   Financial
Statements and the related notes included elsewhere herein.

SELECTED CONSOLIDATED FINANCIAL DATA

The following  table sets forth selected  historical  financial  information for
2003, 2002 and 2001.  This  information  should be read in conjunction  with the
Consolidated  Financial Statements and the related Notes found in Item 7 herein.
Factors  concerning the comparability of certain indicated periods are discussed
in this section.

<TABLE>
<CAPTION>

                                                         2003                2002                2001
                                                      ------------        ------------        ------------
<S>                                                  <C>                   <C>                 <C>

Income Statement Data:
     Interest income                                   $   11,401           $  13,136          $   12,107
     Interest expense                                       5,472               6,950               7,539
     Net interest income                                    5,929               6,186               4,568
     Provision for loan losses                                669               1,475                 447
     Securities gains                                         694                 660                 311
     Gain on sale of loans                                  1,084                 511                   -
     Loss on disposal of premises and fixed assets              -                  (1)                (95)
     Other noninterest income
                                                              980                 929                 437

     Noninterest expense                                    7,272               5,442               3,684
     Income tax expense                                       126                 322                  68
     Net income                                               620               1,049               1,022

Balance Sheet Data:
     Total assets                                         238,258             231,086             202,270
     Total securities                                      38,624              43,046              32,309
     Loans held for sale                                      407               3,390                   -
     Total loans, net of allowance                        158,733             164,999             150,884
     Allowance for loan losses                              2,379               2,457               1,538
     Total deposits                                       190,640             188,955             168,744
     Repurchase agreements and other short-term
          borrowings                                        8,874               8,211              12,957
     FHLB advances                                         12,512              14,517               2,336
     Note payable                                           5,000                   -                   -
     Shareholders' Equity                                  20,112              18,464              16,827

Per Share Data:
     Basic earnings per share                            $   0.42            $   0.72           $    0.70
     Dituted earnings per shar                               0.41                0.69                0.69
     Book value per share                                   12.90               12.68               11.55

Performance Ratios:
     Return on average assets                               0.27%               0.47%               0.62%
     Return on average equity                               3.22%               5.86%               6.06%
     Net interest margin (tax equivalent basis)             2.84%               3.11%               3.02%
     Efficiency ratio                                          84                  66                  71

Asset qualty ratios:
     Nonperforming assets to total loans                    2.44%               3.75%               0.52%
     Net loan charge-offs to average loans                  0.46%               0.34%               0.10%
     Allowance for loan losses to total loans               1.48%               1.47%               1.01%

Capital ratios:
     Average shareholders' equity to average total assets   8.36%               8.05%              10.15%
     Leverage ratio                                         8.67%               7.90%               8.80%
     Tier I risk-based capital ratio                       10.85%               9.80%              10.17%
     Total risk-based ratio                                12.10%              11.00%              11.08%

Other Key Data:
     End-of-period full-time equivalent employees              62                  57                  40


</TABLE>

                                  Page 16 of 96


<PAGE>


OVERVIEW

GENERAL.  FS Bank's rapid growth from its inception  through the end of 2003 has
had,  and  continues  to have,  a material  impact on First  Security  Bancorp's
financial  condition and results of  operations.  The following  highlights  the
growth of total assets from its inception in 1997 through 2003:

                                                       Percentage
                    Year             Total Assets         Change
                    ----             ------------      ------------
                    1998             $     47,135
                    1999                   94,515          100.5%
                    2000                  134,459           42.3%
                    2001                  202,270           50.4%
                    2002                  231,086           14.2%
                    2003                  238,258            3.1%

The growth has been  supported  by both new equity  capital  and  earnings.  The
initial  capitalization  for FS Bank in 1997 was $10 million.  Thereafter,  $6.3
million in additional  equity capital was raised through a 2000 second offering,
which  continued into 2001, when an additional  $628,000 was received.  In 2003,
$1,082,000  was  received  from the  exercise  of  warrants  issued  to  certain
organizers  at the time FS Bank was  organized  and from the  exercise  of stock
options granted to employees and directors.

Growth has also been  supported by  earnings,  although to a lesser  extent,  as
First Security  Bancorp  sustained net losses for 1997 and 1998 in the aggregate
amount of  $1,515,000.  As a de novo bank,  the net losses  during the first two
years of operation were  anticipated.  We have operated  profitably  since 1998,
accumulating  retained earnings of $2,052,000 at December 31, 2003. No dividends
have been paid on our  common  stock,  as all  earnings  have been  retained  to
support growth.

FINANCIAL  CONDITION.  During 2003, total assets grew by 3.1% and total deposits
grew by .9%. Net loans declined by 3.8%. A number of factors  contributed to the
limited growth in 2003,  including the  competitive  environment and turnover of
key management personnel.

During 2003,  three banks  entered the local  market.  These  startup  banks are
targeting  the same  customer  segments as FS Bank and are,  at times,  offering
interest  rates  that are below  market  on loans  and in  excess of market  for
deposits.  Although  we have not seen a material  loss of  customers  to the new
banks, their aggressive  interest rates have caused us to become more aggressive
in order to avoid losses in our volumes.

During 2003, the management of FS Bank underwent a number of changes.  In March,
the former chief financial officer's employment was terminated and, in July, the
former chief executive  officer resigned  effective  September 1, 2003 to pursue
other business  opportunities in the banking industry.  The vacancies created in
these key  positions  adversely  impacted the ability of FS Bank to maintain its
momentum in  implementing  its strategic  and tactical  plans.  In addition,  in
January  2004,  the chief  credit  officer of FS Bank  resigned to pursue  other
business opportunities not within the banking industry. These vacancies have all
been filled and we look forward to moving ahead strongly in 2004.

At  year-end  2003,  FS Bank had  completed a plan to  reallocate  its assets to
better  position  itself  for a  resumption  of growth in 2004.  This plan had a
number of elements,  including  enhancing bank equity capital  through a capital
infusion  received from First Security  Bancorp,  the source of which was a loan
First  Security  Bancorp  obtained from an  unaffiliated  bank, and converting a
portion of our lower yielding  investment  securities  into cash  equivalents in
preparation for loan growth in 2004.


                                  Page 17 of 96

<PAGE>



At year-end 2003, the financial condition of FS Bank was strong, as presented in
the following table:

                    Indicator                                  Ratio
              ---------------------                          ---------

              FS Bank
                  Equity Capital to Total Assets                 10.1%
                  Total Risk Based Capital to Risk-
                    weighted Assets                              13.8%
                  Cash Equivalents to Total Assets               12.6%
                  Investments to Total Assets                    16.2%
                  Loans (net) to Total Deposits                  83.9%

              First Security
                  Equity Capital to Total Assets                  8.4%

As is shown above, FS Bank and First Security  Bancorp are well  capitalized and
FS Bank is  positioned  with a strong level of liquid  assets which enable it to
respond to loan growth in 2004, with  approximately  25% of its total asset base
available for redeployment as needed.

The  increase in  liquidity  during 2003 has had an adverse  impact on earnings.
This occurs when earning assets are redeployed into lower yielding  forms,  such
as investments and cash equivalents  (which are primarily in the form of federal
funds sold).  For 2004, we are focused on increasing our overall loan portfolio,
particularly in consumer  financings.  As we seek to increase our loan portfolio
we must also continue to monitor the risks  inherent in our lending  operations.
If our allowance  for loan losses is not  sufficient to cover loan losses in our
loan portfolio, increases to the allowance for loan losses may be required which
would decrease our earnings.

RESULTS OF OPERATIONS.  First Security  Bancorp's net interest  income  declined
from $6.3  million in 2002 to $6.1 million in 2003,  stated on a  tax-equivalent
basis.  This was a result of several factors,  including lower yields on federal
funds  sold,  loans and  investments  not  entirely  offset  by lower  yields on
interest  bearing  liabilities.  The decline of  interest  income from loans and
investments  was $1.0 million and $.9 million,  respectively,  reflecting  lower
yields,  while interest expense on interest bearing liabilities declined by $1.5
million, for a net decline in net interest income of $403,000.

For 2003,  First  Security  Bancorp  recorded a provision for loan losses in the
amount of $669,000.  This  compares to $1,472,000  recorded for 2002.  Net loans
charged off increased in 2003, to $749,000 from the $551,000 level of 2002.

Noninterest  income increased from $2.1 million in 2002 to $2.8 million in 2003.
Much of the increase was due to mortgage loan originations and sales during 2003
which  contributed $1.1 million in fees during the year, as compared to $511,000
in 2002. First Security Bancorp also recorded  $694,000 in gains on the sales of
securities available-for-sale in 2003 as compared to $660,000 in 2002.

Noninterest  expense increased  approximately $1.9 million in 2003.  Noninterest
expense is composed of salaries and employee  benefits,  equipment and occupancy
expenses and other operating  expenses.  Of this total  increase,  approximately
$471,000  related to the mortgage loan  origination  expenses.  This increase in
expense  is offset by the  increase  in  income  on sales of  mortgage  loans as
discussed  above.  The largest portion of the balance of the increase related to
legal and professional fees of $336,000. This increase in legal and professional
fees relates to  administration  of problem loans and to strategic  planning and
evaluation of strategic alternatives by our board of directors.

First Security increased its number of full-time  equivalent employees from 56.5
at December  31, 2002 to 62.0 at December 31,  2003.  Included in this  increase
were employees  whose  compensation  is based on commissions  and other forms of
incentive pay.  During 2003, we experienced an overall  increase in compensation
and  employee  benefit  expense of  approximately  $788,000.  Of this  increase,
approximately  $370,000 related to the mortgage loan  origination  functions and
approximately  $90,000 related to a severance  arrangement with our former chief
executive officer.


                                  Page 18 of 96

<PAGE>

CAPITAL AND LIQUIDITY.  On December 30, 2003, First Security borrowed $5 million
from a commercial  bank and infused the proceeds as  additional  equity  capital
into FS  Bank.  The note is  structured  as a  reducing  revolving  loan,  bears
interest  at a rate of prime less .25% and will  mature on  December  31,  2006.
First Security  believes that the proceeds from this borrowing  should  provide,
under current regulatory guidelines, the regulatory capital First Security needs
to support its targeted growth in 2004 and the foreseeable future.

CRITICAL ACCOUNTING ESTIMATES

The accounting principles we follow and our methods of applying these principles
conform with accounting  principles  generally accepted in the United States and
with general  practices  within the banking  industry.  In  connection  with the
application of those principles,  we have made judgments and estimates which, in
the case of the  determination of our allowance for loan losses (ALL), have been
critical  to  the  determination  of  our  financial  position  and  results  of
operations.

ALLOWANCE FOR LOAN LOSSES (ALL). To evaluate the loan portfolio,  management has
established loan grading procedures. These procedures establish a grade for each
loan upon origination  which is periodically  reassessed  throughout the term of
the loan. Grading categories  include highest quality,  above average,  average,
low average, watch, substandard, doubtful, and loss. Loans graded watch or worse
also include loans severely past-due and those not accruing  interest.  Specific
reserve  allocations  are calculated for specific  individual  loans having been
graded watch,  substandard,  doubtful,  and loss based on the specific estimated
collectability (and by reference, estimated inherent risk of loss) of each loan.
The aggregate of the estimated probable and incurred loss then becomes a portion
of the  allowance  for loan losses to be  specifically  allocated  to that loan.
These calculations are referred to as specific allocations.

For loans not  individually  graded  watch,  substandard,  doubtful or loss,  an
estimated loss factor is calculated and applied to each category, after reducing
the category  amounts for cash  equivalent  collateral  held by FS Bank (such as
certificates of deposit issued by FS Bank and held as collateral) and guaranties
from the  federal  government  (such as SBA  guaranties).  A  general  allowance
allocation is computed using totals of each loan grading  category (as adjusted)
multiplied by an estimated loss factor applied to each grading category. The sum
of the calculation for each grading category  represents the general  allowance.
These  loss  factors  are  typically  developed  over  time  using  actual  loss
experience adjusted for the various factors discussed above.

The sum of the  specific  allocations  and  the  general  allocation  represents
management's best estimate of the probable incurred losses contained in the loan
portfolio  at the  measurement  date.  Even  though the ALL is  composed  of two
components, the entire ALL is available to absorb any credit losses.

In  assessing  the  adequacy of the ALL, we also rely on an ongoing  independent
loan review process.  We undertake this process both to ascertain  whether there
are loans in the  portfolio  whose credit  quality has weakened over time and to
assist in our overall evaluation of the risk  characteristics of the entire loan
portfolio.  Our loan review  process  includes the judgment of  management,  the
input from our independent loan reviewer, who is not an employee of FS Bank, and
reviews  that may have been  conducted  by bank  regulatory  agencies as part of
their usual examination process.

Management  believes  the  allowance  for loan losses at  December  31, 2003 was
adequate.  Although  we believe we use the best  information  available  to make
allowance  provisions,  future  adjustments  which  could  be  material  may  be
necessary if the assumptions  used to determine the allowance differ from future
loan portfolio performance.


                                  Page 19 of 96

<PAGE>

RESULTS OF OPERATIONS

For 2003,  we  experienced a decline in our loans and a slowing in the growth in
other  earning  assets and deposits.  We also  experienced  increased  operating
expenses.  These  factors  combined  to result in a decline in net  income.  Net
income for the year  ended  December  31,  2003 was  $620,000,  as  compared  to
$1,049,000 for 2002.  The following is a more detailed  discussion of results of
our operations.

NET INTEREST INCOME. Net interest income represents the amount by which interest
earned on various  earning  assets  exceeds  interest paid on deposits and other
interest-bearing  liabilities  and  is the  most  significant  component  of our
earnings.  For the year ended December 31, 2003, we recorded net interest income
of $6,125,000 which resulted in a net interest margin of 2.84% for the year. For
the year ended December 31, 2002, we recorded net interest  income of $6,528,000
which resulted in a net interest margin of 3.11% for the year.  During 2001, the
Federal  Reserve  lowered its Federal funds rate 475 basis points and another 50
basis points in 2002. Our management  believes the interest rate environment had
a  negative  impact  on our  net  interest  income  during  these  periods  as a
significant number of our customers have adjustable rate loans tied primarily to
our prime lending rate which declined in lock-step with prime rate, as that rate
declined along with federal funds rate declines.

The  following  table sets forth the amount of our  average  balances,  interest
income or interest  expense for each  category  of  interest-earning  assets and
interest-bearing   liabilities   and  the  average   interest   rate  for  total
interest-earning  assets and total  interest-bearing  liabilities,  net interest
spread and net yield on average interest-earning assets for each of the years in
the three-year period ended December 31, 2003 (dollars in thousands):
<TABLE>
<CAPTION>
                                              2003                       2002                             2001
                                   ---------------------------    --------------------------     ----------------------------
                                   Average             Yields/    Average            Yields/      Average             Yields/
                                   Balances  Interest  Rates      Balances  Interest  Rates      Balances  Interest   Rates
<S>                                 <C>       <C>      <C>        <C>       <C>       <C>        <C>       <C>        <C>
Interest-earning  assets:
  Loans (1,2)                       $164,520  $10,079   6.13%     $161,514  $11,102    6.87%     $129,190   $10,618   8.22%
  Securities  available for sale:
  Taxable                             30,320      836   2.76%       31,813    1,333    4.20%       15,938       932   5.84%
  Tax exempt (3)                       9,858      576   5.84%       14,693    1,011    6.88%        6,012       490   8.15%
  Federal funds sold and other        10,974      106   0.97%        1,748       32    1.83%        5,598       233   4.16%
                                    --------   ------             --------  -------              --------    ------
  Total interest-earning assets      215,672   11,597   5.38%      209,768   13,478    6.43%      156,738    12,273   7.83%
Nonearning assets                     14,552                        12,637                          9,231
                                    --------                      --------                       --------
 Total assets                       $230,224                      $222,405                       $165,969
                                    ========                      ========                       ========

Interest-bearing liabilities:
  Interest-bearing deposits:
     Interest checking              $  18,894 $  136    0.72%     $ 20,926  $   282    1.35%     $ 15,107   $   409   2.71%
     Savings and money
           market                      22,599    230    1.02%       21,455      412    1.92%       14,805       528   3.57%
     Certificates of deposit          124,891  4,508    3.61%      125,897    5,718    4.54%      101,141     6,313   6.24%
                                    --------- ------              --------  -------              --------   -------
  Total interest-bearing deposits     166,384  4,874    2.93%      168,278    6,412    3.81%      131,053     7,250   5.53%
  Securities sold under
    agreements to Repurchase            4,625     40    0.86%        6,765       91    1.35%        6,474       193   2.98%
  Federal funds purchased                 224      1    0.35%        2,415       47    1.95%          386        16   4.14%
  Federal Home Loan Bank
    advances and note payable          13,552    557    4.11%       10,060      400    3.98%        1,182        80   6.77%
                                    ---------  -----              --------  -------              --------   -------
  Total interest-bearing liabilities  184,785  5,472    2.96%      187,518    6,950    3.71%      139,095     7,539   5.42%
                                    ---------  -----              --------  -------              --------   -------
  Noninterest-bearing liabilities:
     Demand deposits                   22,617                       15,930                          8,997
     Other liabilities                  3,575                        1,053                          1,026
                                    ---------                     --------                       --------
  Total liabilities                   210,977                      204,501                        149,118
  Stockholders' equity                 19,247                       17,904                         16,851
                                    ---------                     --------                       --------
  Total liabilities and
    stockholders' equity             $230,224                     $222,405                       $165,969
                                     ========                     ========                       ========
    Net interest income                       $6,125                         $6,528                          $4,734
                                               ======                        ======                          ======
    Net interest spread (4)                             2.42%                          2.72%                          2.41%
    Net interest margin (5)                             2.84%                          3.11%                          3.02%
</TABLE>
(1)  Average balances for nonperforming loans are included in the above amounts.
(2)  Loan fees included in interest income were $575,000, $816,000 and  $615,000
     in 2003,  2002 and 2001, respectively.
(3)  We computed yields based on the carrying value of tax exempt instruments on
     a fully tax equivalent basis. (4) Net interest spread is calculated as the
     mathematical difference between the yield on total
     interest-bearing assets and the cost of total interest-bearing liabilities.
(5)  Net interest margin is calculated as the net interest income divided into
     the total interest-bearing assets.

                                  Page 20 of 96

<PAGE>

Several factors  contributed to the decline in net interest margin for 2003 when
compared to the same period in 2002, including the following:

o     Our loan yields decreased from 6.87% for 2002 to 6.13% for 2003, a
      decrease of 74 basis points. Several factors contributed to this decrease:

o     As of December 31, 2002, approximately 60% of our loans, aggregating $98.9
      million were on fixed rates with various maturities on or after January 1,
      2003.  During  2003, a  substantial  amount of these loans were renewed or
      renegotiated  to a floating  interest rate  structure.  As of December 31,
      2003, our fixed rate loans had declined by approximately  $30.5 million to
      $68.4  million.  These  fixed rate loans had a weighted  yield of 7.22% at
      December 31, 2002, as compared to 6.79% as of December 31, 2003.

o     FS Bank's prime  lending rate for the period from January 1, 2003  through
      June 27,  2003 was 4.25% and then was reduced to 4.00% for the period from
      June 25, 2003 to December 31, 2003.  This  compares to a consistent  4.75%
      for the period of January 1, 2002  through  November 7, 2002 and 4.25% for
      the period of November 8, 2002 through  December 31, 2002.  As of December
      31, 2002,  approximately 40% of our loans, aggregating $65.7 million, were
      on floating rates tied to FS Bank's prime lending rate. During 2003, these
      loans increased by $27 million to $92.7 million.  The yield on these loans
      declined from 4.47% at December 31, 2002 to 4.44% at December 31, 2003.

o     During 2003 and 2002, we sold a substantial amount of our
      available-for-sale securities, recognizing gains of $694,000 and $660,000,
      respectively.  These gains were  attributable  to yields on the securities
      being higher than existed in the market at the time of sale.  The proceeds
      from these sales were reinvested into lower yielding securities.

o     We  have  consistently   maintained  most  of  our  securities
      available-for-sale  in mortgage-backed  securities.  These mortgage-backed
      securities  are comprised of "pools" of individual  mortgage loans granted
      to  homeowners.  During periods of falling  rates,  these  mortgage-backed
      securities  experience  principal  paydowns at a more rapid rate than in a
      flat or rising  interest rate  environment as homeowners take advantage of
      the lower  interest  rates by either  purchasing a new home or refinancing
      their  existing  mortgage.  In either  event,  the existing  mortgages are
      paid-off and, in turn, the  mortgage-backed  security which includes these
      mortgages is paid down.  Accordingly,  any premium amortization associated
      with  these  securities  also  escalates   causing  the  yields  on  these
      securities to decrease. This was particularly true in the second and third
      quarters of 2003 as a significant  number of homeowners  refinanced  their
      existing mortgage loans.

o     Although  deposit rates  decreased  between the two  periods,  those rates
      decreased  at a slower  pace  than  rates  for  loans,  as  deposit  rates
      typically adjust more slowly than loan yields during a period of declining
      interest  rates  due to  the  term  of the  deposit  accounts  and  due to
      competitive market pressures. Thus, deposit-funding costs typically do not
      decrease as quickly as do revenues from interest income on earning assets.
      Additionally,  during  2003,  overall  deposit  rates were less than those
      rates for the  comparable  period in 2002.  In some cases,  rates for 2003
      have  decreased  to such levels that further  decreases  in deposit  rates
      approach what we term  "embedded  floors" or rates that are not reasonable
      or practical to go below,  such that  further  decreases in deposit  rates
      could place us in a  competitive  disadvantage  as  customers  seek higher
      returns on their balances.

o     During 2002, we borrowed $13.2 million in medium term (2 - 5 year) fixed
      rate advances from the Federal Home Loan Bank of Cincinnati  ("FHLB") at a
      weighted average cost of 3.70%.  These advances  generally have prepayment
      penalties. Not all of these borrowings were match funded with loans having
      similarly  structured  prepayment  penalties.  Thus, in some cases, as our
      lending rates  declined,  we adjusted the interest rates downward on those
      loans that were funded with the advances without a corresponding  decrease
      in the cost of the FHLB advances.


                                  Page 21 of 96

<PAGE>


RATE AND VOLUME  ANALYSIS.  As noted  above,  net  interest  income  declined by
$403,000 on a tax-equivalent basis between the years ended December 31, 2003 and
2002.  The  following is an analysis of the changes in our net  interest  income
comparing the changes  attributable  to rates and those  attributable to volumes
(dollars in thousands):
<TABLE>
<CAPTION>

                                           2003 Compared to 2002                    2002 Compared to 2001
                                     ---------------------------------        ---------------------------------
                                        Rate         Volume         Net          Rate        Volume         Net
                                        ----         ------         ---          ----        ------         ---
<S>                                    <C>            <C>        <C>           <C>            <C>          <C>
Interest-earning assets:
     Loans                             $(1,226)      $  203      $(1,023)     $(1,910)       $2,394       $  484
     Securities available-for-sale:
        Taxable                           (437)         (60)        (497)        (523)          924          401
        Tax exempt                        (137)        (298)        (435)         708          (187)         521
     Federal funds sold and other          (22)          96           74         (160)          (41)        (201)
                                       -------       ------      --------      ------        ------       ------
     Total interest-earning assets      (1,822)         (59)      (1,881)      (1,885)        3,090        1,205
                                       -------       ------      --------      ------        ------       ------

Interst-bearing liabilities:
     Interest-bearing deposits:
        Interest checking                 (121)         (25)        (146)        (250)          123         (127)
        Savings and money market          (203)          20         (183)        (299)          183         (116)
        Certificates of deposit         (1,164)         (45)      (1,209)      (1,941)        1,346         (595)
                                       -------       ------      --------      ------        ------       ------
     Total interest-bearing deposits    (1,488)         (50)      (1,538)      (2,490)        1,652         (838)
     Securities sold under agreements to
        repurchase                         (27)         (24)         (51)        (110)            8         (102)
     Federal funds purchased               (22)         (24)         (46)         (53)           84           31
     Note payable                             -            -           -            -             -            -
     Federal Home Loan Bank advances        14          143          157          (46)          366          320
                                       -------       ------       -------      ------        ------       -------
     Total interest-bearing liabilities (1,523)          45       (1,478)      (2,699)        2,110         (589)
                                       -------       ------       -------      ------        ------       -------
Net interest income                    $  (299)      $ (104)      $ (403)      $  814        $  980       $1,794
                                       =======       ======       =======      =======       ======       =======

</TABLE>



Changes in net  interest  income  are  attributed  to either  changes in average
balances  (volume  change) or changes in average rates (rate change) for earning
assets and sources of funds on which interest is received or paid. Volume change
is  calculated  as change in volume times the previous rate while rate change is
change in rate times the previous  volume.  The change  attributed  to rates and
volumes  (change in rate times  change in volume) is  allocated  between  volume
change  and rate  change at the ratio of how much  each  component  bears to the
absolute value of their total.

PROVISION FOR LOAN LOSSES.  The provision for loan losses represents a charge to
earnings  necessary to establish an allowance  for loan losses  ("ALL") that, in
our management's evaluation, should be adequate to provide coverage for probable
and incurred loss on outstanding  loans.  The provision for loan losses amounted
to  $669,000  and  $1,472,000  for the years ended  December  31, 2003 and 2002,
respectively.

Based upon our  management's  evaluation of the loan  portfolio,  our management
believes the  allowance for loan losses to be adequate to absorb our estimate of
probable and incurred losses existing in the loan portfolio at the balance sheet
date.  The decrease in the provision for loan losses for the year ended December
31, 2003 when compared to the year ended  December 31, 2002 was primarily due to
the following factors:

o     management's concerted effort in 2002 to improve the quality of the loan
      portfolio  by  adopting  a  revised  loan  policy   coupled  with  revised
      underwriting guidelines.

o     management's critical evaluation of the loan portfolio at year-end  2002,
      resulting in a substantial provision to the allowance for loan losses.

o     management's  extensive  efforts in 2003 to collect or eliminate  poor
      quality loans extended in 2002 and prior years.


                                  Page 22 of 96

<PAGE>


Based upon our management's  assessment of the loan portfolio, we adjust our ALL
to an amount deemed appropriate to adequately cover probable and incurred losses
in the loan  portfolio.  While our policies and procedures  used to estimate the
ALL, as well as the resultant  provision for loan losses  charged to operations,
are considered  adequate by our management and are reviewed from time to time by
FS Bank's  regulators,  they are necessarily  approximate  and imprecise.  There
exist  factors  beyond our control,  such as general  economic  conditions  both
locally and nationally, which may negatively impact, materially, the adequacy of
our ALL and, thus, the resulting provision for loan losses.

NONINTEREST  INCOME.  FS  Bank's  noninterest  income  is  composed  of  several
components,  some of which vary significantly between quarterly periods. Service
charges on deposit accounts and other  noninterest  income generally  reflect FS
Bank's  growth,  while fees from the  origination  of mortgage  loans will often
reflect market conditions and fluctuate from period to period. The opportunities
for  recognition  of  gains  on loan  participations  sold  and gain on sales of
investment securities may also vary widely from quarter to quarter.

The  following  is the  makeup of our  noninterest  income  for the years  ended
December 31, 2003 and 2002 (dollars in thousands):

<TABLE>
<CAPTION>

                                                                                         Change
                                                                                  ---------------------
                                                        2003           2002       Amount        Percent
                                                        ----           ----
<S>                                                <C>           <C>             <C>            <C>

Noninterest income:
     Service charges on deposit accounts            $    707       $    788       $   (81)        -10.3%
     Net gains on the sale of loans                    1,084            511           573         112.1%
     Net gains on the sale of securities                 694            660            34           5.2%
     Other noninterest income                            301            140           161         115.0%
                                                    --------       ---------      -------
     Total                                          $  2,786       $  2,099       $   687          32.7%
                                                    ========       =========      =======
</TABLE>


As shown,  the  largest  component  of  noninterest  income is gains on sales of
loans.  This income category includes income from origination fees and points on
residential  loans made with the  expectation  that they will be later sold into
the secondary market, and from service release fees received on these loans from
the  purchasers.  All loans are sold whereby  servicing  rights  transfer to the
buyer.  Generally,  mortgage  origination  fees increase in lower  interest rate
environments  and decrease in rising  interest rate  environments.  As a result,
mortgage  origination fees may fluctuate  greatly in response to a changing rate
environment.

Service  charge  income  for  2003  decreased  from  that  of  2002  due  to the
termination of our  relationship  with two large volume  customers who generated
large amounts of overdraft and returned check fees.

Also included in  noninterest  income for the year ended  December 31, 2003 were
net gains of  approximately  $694,000  realized  from the sale of  approximately
$11.9 million of  available-for-sale  securities.  This compares to net gains of
approximately  $660,000 realized from the sale of approximately $46.2 million of
available-for-sale securities in 2002.

NONINTEREST  EXPENSE.  Noninterest  expense  consists of salaries  and  employee
benefits,  equipment and occupancy expenses,  and other operating expenses.  The
following is the makeup of our noninterest  expense for the years ended December
31, 2003 and 2002 (dollars in thousands):

                                                              Change
                                                          ------------------

                                         2003     2002    Amount     Percent
                                         ----     ----
  Noninterest expense
   Salaries and employee benefits     $ 3,499   $ 2,711      788       29.1%
   Equipment and occupancy              1,135       953      182       19.1%
   Data processing                        379       241      138       57.3%
   Advertising                            208       167       41       24.6%
   Legal and professional fees            616       280      336      120.0%
   Loss on sales of foreclosed assets      72         -       72         n/a
   Other noninterest expense            1,363     1,090      273       25.0%
                                      -------    ------    -----      ------
   Total                              $ 7,272   $ 5,442    1,830       33.6%
                                      =======   =======    =====      ======


                                  Page 23 of 96

<PAGE>

Expenses have increased  during the above periods due primarily to the following
factors:

o     The full year operation of the mortgage origination function, which
      increased noninterest expenses by approximately $471,000.

o     An increase of approximately $180,000 in legal and professional fees
      relating to strategic planning and evaluation of strategic alternatives by
      our board of directors.

o     An increase of approximately $156,000 in legal and professional fees
      involving administration of problem loans.

o     The implementation of enhanced computer systems capabilities for our
      Internet site and the  installation of remote backup and storage  systems,
      all  recorded  as  data   processing   expense,   caused  an  increase  of
      approximately $140,000.

o     The loss of $72,000 on the liquidation of foreclosed assets in 2003 that
      were acquired in 2002.

o     The recording of a severance expense to our former chief executive officer
      in the amount of $90,000.

Our efficiency  ratio (ratio of  noninterest  expense to the sum of net interest
income and  noninterest  income) was 83.7% in 2003 compared to 65.7% in 2002. We
use the  efficiency  ratio as a way to analyze  the  amount of  expense  that is
incurred to generate a dollar of revenue.  This increase in the efficiency ratio
is  attributable  to the  decline in net  interest  income and the  increase  in
noninterest expense.

INCOME TAXES.  The effective income tax expense rate for the year ended December
31, 2003 was  approximately  16.9%  compared to an effective  income tax expense
rate for the year ended December 31, 2002 of approximately  23.5%.  This rate of
taxation  compares  to the  statutory  rate  of 34%  and  reflects  various  tax
minimization strategies,  including the investing into tax exempt securities and
the investment in tax exempt public facilities that generate income tax credits.





                                  Page 24 of 96

<PAGE>

QUARTERLY INFORMATION. The following is a summary of quarterly balance sheet and
results of operations  information  for 2003  (dollars in thousands,  except per
share data).

<TABLE>
<CAPTION>

                                                  4th Quarter     3rd Quarter     2nd Quarter     1st Quarter
                                                  -----------     -----------     -----------     -----------
<S>                                              <C>              <C>            <C>              <C>

Selected balance sheet data at quarter end:
     Total assets                                 $  238,258      $  225,001      $  232,925      $  230,215
     Total loans (excluding loans held for sale      161,112         162,934         164,721         160,189
     Allowance for loan losses                        (2,379)         (2,224)         (2,294)         (2,570)
     Securities available-for-sale                    38,624          38,386          37,606          41,237
     Total deposits                                  190,640         187,771         192,817         191,596
     Securities sold under agreements to repurchase    8,874           3,723           3,699           4,608
     Advances from FHLB                               12,512          13,065          13,614          14,157
     Total stockholders' equity                       20,112          19,402          19,317          18,932

Balance sheet data, quarterly averages:
     Total assets                                    230,498         229,541         231,177         229,680
     Total loans (excluding loans held for sale)     161,351         163,086         160,590         163,395
     Allowance for loan losses                        (2,277)         (2,257)         (2,509)         (2,573)
     Securities available-for-sale                    39,847          37,578          41,336          41,951
     Total deposits                                  189,090         192,219         192,483         190,874
     Securities sold under agreements to repurchase    6,161           3,806           1,988           4,547
     Advances from FHLB                               12,697          13,248          13,796          14,467
     Total stockholders' equity                       19,807          19,265          19,174          18,743

Income data:
     Interest income                               $   2,733       $   2,768      $    2,911       $   2,989
     Interest expense                                  1,231           1,333           1,410           1,498
                                                   ---------       ---------      ----------       ---------
     Net interest income                               1,502           1,435           1,501           1,491
     Provision for loan losses                          (150)            (50)           (324)           (145)
                                                   ---------       ---------      ----------       ---------
     Net interest income after provision
          for loan losses                              1,352           1,385           1,177           1,346
     Noninterest income                                  564             794             940             460
     Noninterest expense                               1,875           1,855           1,863           1,679
                                                   ---------       ---------      ----------       ---------
     Income before income taxes                           41             324             254             127
     Income taxes                                          5             (75)            (52)             (4)
                                                   ---------       ---------      ----------       ---------
     Net income                                    $      46       $     249      $      202       $     123
                                                   =========       =========      ==========       =========

Per share data:
     Earnings - basic                                   0.03            0.17            0.14            0.08
     Earnings - diluted                                 0.04            0.16            0.13            0.08
     Book value at quarter-end                         12.90           12.89           13.03           12.87

     Weighted average shares - basic               1,522,867       1,491,370       1,472,589       1,463,927
     Weighted average shares - diluted             1,537,380       1,523,189       1,516,575       4,516,962
     Common shares outstanding                     1,558,690       1,504,822       1,482,246       1,470,722

</TABLE>


FINANCIAL CONDITION

Our consolidated balance sheet at December 31, 2003 reflects modest growth since
December 31, 2002. Total assets grew from $231.1 million at December 31, 2002 to
$238.3 million at December 31, 2003, a 3.1%  increase.  Total deposits grew $1.6
million  during 2003, an increase of .9%.  Total loans  declined by $6.3 million
and total securities  available-for-sale  declined by $4.4 million.  We invested
substantially  all of these  sources of funds into  federal  funds  sold,  which
increased by $21.1 million.


                                  Page 25 of 96


<PAGE>



LOANS.  The composition of our loan portfolio at December 31, 2003,  2002, 2001,
2000 and 1999 is summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>

                                                2003          2002             2001            2000         1999
                                        -------------  --------------  -------------  -------------  --------------
<S>                                      <C>            <C>             <C>            <C>             <C>

           Commercial                    $    49,165    $    47,612     $    41,309    $    31,257     $    26,596
           Mortgage loans on real estate:
              Commercial                      61,669         64,325          62,330         41,397          24,556
              Residential                     14,882         17,871          19,749         11,663           7,450
              Construction                    16,990         20,664          15,508         11,661          11,299
              Home equity                     11,488         10,180           7,981          5,871           4,373
              Consumer                         6,035          5,773           4,696          4,501           3,544
              Credit card                        883          1,033             849            748             379
                                         -----------    -----------     -----------    -----------     -----------
           Total Gross Loans             $   161,112    $   167,458     $   152,422    $   107,098     $    78,197
                                         ===========    ===========     ===========    ===========     ===========

</TABLE>

The following table classifies our fixed and variable rate loans at December 31,
2003 according to contractual  maturities of (1) one year or less, (2) after one
year through five years, and (3) after five years. The table also classifies our
variable  rate  loans  pursuant  to  the  contractual  repricing  dates  of  the
underlying loans (dollars in thousands):

<TABLE>
<CAPTION>
                                                  Amounts at December 31, 2003          Percentages
                                               ---------------------------------        -----------
                                                  Fixed      Variable    Total           % Totals
<S>                                           <C>         <C>           <C>              <C>

  Based on contractual repricing dates:
    Daily floating rate                        $      -    $   87,536   $  87,536           54.3%
    Reprice within one year                      33,651         3,559      37,210           23.1%
    Reprice in one year through five years       28,866         1,590      30,456           18.9%
    Reprice after five years                      5,910             -       5,910            3.7%
                                               --------    ----------   ---------        --------
    Total                                      $ 68,427    $   92,685   $ 161,112          100.0%
                                               ========    ==========   =========        ========

</TABLE>

The above  information  does not  consider  the  impact of  scheduled  principal
payments.  Daily floating rate loans are tied to FS Bank's prime lending rate or
a national  interest  rate  index with the  underlying  loan rates  changing  in
relation to changes in these indexes.

NON-PERFORMING  ASSETS.  The specific  economic and credit risks associated with
our loan portfolio,  include,  but are not limited to, a general downturn in the
economy  which could affect  employment  rates in our market area,  general real
estate  market  deterioration,  interest  rate  fluctuations,   deteriorated  or
non-existent  collateral,   title  defects,  inaccurate  appraisals,   financial
deterioration of borrowers and fraud.

We  attempt  to  reduce  these   economic  and  credit  risks  by  adherence  to
loan-to-value   guidelines  for  collateralized   loans,  by  investigating  the
creditworthiness  of the borrower and by  monitoring  the  borrower's  financial
position.  Also, we establish and  periodically  review our lending policies and
procedures.   Banking   regulations  limit  our  exposure  by  prohibiting  loan
relationships  that  exceed  20% of FS Bank's  statutory  capital in the case of
loans  that are not fully  secured by readily  marketable  or other  permissible
types of  collateral,  and further limit the amount of loans that can be made to
related parties.

FS Bank  discontinues  the  accrual  of  interest  income  when  (1)  there is a
significant  deterioration  in the financial  condition of the borrower and full
repayment  of principal  and  interest is not  expected or (2) the  principal or
interest is more than 90 days past due, unless the loan is both well-secured and
in the process of  collection.  At December 31, 2003, we had $3,605,000 in loans
on nonaccrual  compared to  $1,867,000  at December 31, 2002.  The year end 2003
nonaccrual loans include  $3,092,000 in restructured loans which in 2002 were in
an accrual status.


                                  Page 26 of 96

<PAGE>

There were approximately $214,000 in other loans at December 31, 2003 which were
90 days past due and still  accruing  interest,  as  compared to  $1,218,000  at
December 31, 2002. At December 31, 2003, we had $3,092,000 in restructured loans
as compared to $3,268,000 at December 31, 2002.  Restructured  loans at December
31, 2002  consisted of several  loans to a troubled  franchise  operator  which,
during 2003, were reclassified to non-accrual.

The  following  table is a summary of our  nonperforming  loans at December  31,
2003, 2002, 2000, 2001 and 1999 (dollars in thousands):

<TABLE>
<CAPTION>

                                                2003          2002             2001            2000         1999
                                        -------------  --------------  -------------  -------------  --------------
<S>                                     <C>             <C>             <C>          <C>               <C>

         Nonperforming loans
           Nonaccrual loans (1)          $     3,605    $     1,867     $       470    $         -     $         -
           Restructured loans (2)                  -          3,268               -              -               -
           Accruing loans past due 90
              days or more                       214          1,218             319              2               -
                                         -----------    -----------     -----------    -----------     -----------
           Total nonperforming loans           3,819          6,353             789              2               -
         Other real estate owned                 119              -               -              -               -
         Other foreclosed assets held
            pending liquidation                    -            300               -              -               -
                                         -----------    -----------     -----------    -----------     -----------
         Total nonperforming assets      $     3,938    $     6,653     $       789    $         2     $         -
                                         ===========    ===========     ===========    ===========     ===========

         Ratio of nonperforming loans
           to total loans                       2.4%           3.8%             .5%              -               -

         Ratio of nonperforming assets to
           total loans                          2.4%           4.0%             .5%              -               -

         Ratio of nonperforming assets
           to total allowance for loan
           losses at end of period            165.5%         270.6%           51.3%              -               -
</TABLE>

           (1) Interest income that would have been recorded in 2003 related to
                nonaccrual  loans was  $12,000  compared to $21,000 for the year
                ended  December 31, 2002,  none of which is included in interest
                income or net income for the applicable periods.
           (2)  Restructured loans of $3,092 at December 31, 2003 are reflected
                in the totals for nonaccrual loans at that date. These loans had
                a balance of $3,268,000 at December 31, 2002 and are reflected
                as restructured loans at that date.

Potential  problem  assets,  which are not  included  in  nonperforming  assets,
amounted to  $4,050,000 or 2.50% of total loans at December 31, 2003 compared to
$6,763,000 or 4.04% at December 31, 2002.  Potential  problem  assets  represent
those assets with a potential or a well-defined  weakness and where  information
about  possible  credit  problems of  borrowers  has caused  management  to have
serious  doubts about the  borrower's  ability to comply with present  repayment
terms.  This  definition  is believed to be  substantially  consistent  with the
standards  established  by FS Bank's primary  regulator for loans  classified as
substandard.

ALLOWANCE  FOR  LOAN  LOSSES  (ALL).  We  maintain  the ALL at a level  that our
management deems  appropriate to adequately cover the probable and incurred loss
in the loan portfolio.  As of December 31, 2003 and 2002, our allowance for loan
losses was $2,379,000 and $2,459,000,  respectively. Our management deemed these
amounts to be adequate.  The  judgments and  estimates  associated  with our ALL
determination are described under "Critical Accounting Estimates" above.


                                  Page 27 of 96

<PAGE>

At both  December  31, 2003 and 2002,  approximately  79% of our loan  portfolio
consisted of  commercial  loans,  commercial  real estate  loans and  commercial
construction  loans. We  periodically  analyze our loan position with respect to
our borrowers'  industries to determine if a concentration of credit risk exists
to any one or more industries. We do have a significant credit exposure of loans
outstanding  plus  unfunded  lines of credit  to  borrowers  in the  residential
construction industry to owners of nonresidential buildings at December 31, 2003
and 2002. This exposure level is taken into  consideration  by management in its
determination of the adequacy of the allowance for loan losses.  Based upon that
determination,  we believe  that we did not have any  excessive  exposure to any
single industry which would warrant additional allowance allocations.

The  following  table sets  forth,  based on  management's  best  estimate,  the
allocation of the ALL to types of loans as of December 31 and the percentage (%)
of the category of loans to total loans (dollars in thousands):
<TABLE>
<CAPTION>
                                            2003          2002             2001            2000         1999
                                       -----------    -------------   -------------  -------------  --------------
                                       Amount  %      Amount    %     Amount  %      Amount  %      Amount  %
                                       -----------    -------------   -------------  -------------  --------------
<S>                             <C>          <C>      <C>     <C>     <C>     <C>    <C>     <C>    <C>       <C>

Commercial                       $ 1,610     30.6%   $ 1,509   28.5%  $  639   27.0% $  519  29.1%  $  348    34.1%
Mortgage loans on real estate:
  Commercial                         379     38.3%       460   38.4%     450   40.9%    300  38.7%     216    31.4%
  Residential                         80      9.2%       125   10.7%     138   13.0%     85  10.9%      71     9.5%
  Construction                       105     10.5%       116   12.3%     111   10.2%     64  10.9%      54    14.4%
  Home Equity                          -      7.2%         -    6.1%       -    5.2%      -   5.5%       -     5.6%
Consumer                             190      3.7%       224    3.4%     175    3.1%    228   4.2%     110     4.5%
Credit Card                           15       .5%        25     .6%      25     .6%     25    .7%      20      .5%
                                 -------    ------   -------  ------  ------  ------ ------ ------  ------   ------
Total                            $ 2,379    100.0%   $ 2,459  100.0%  $1,538  100.0% $1,221 100.0%  $  819   100.0%
                                 =======    ======   =======  ======  ======  ====== ====== ======  ======   ======
</TABLE>

The  following is a summary of changes in the  allowance for loan losses for the
years ended December 31, 2003,  2002,  2001, 2000 and 1999, and the ratio of the
allowance  for loan losses to total loans as of the end of each period  (dollars
in thousands):

<TABLE>
<CAPTION>

                                   2003         2002         2001         2000         1999
                              ------------- ------------ ------------ ------------ ------------
<S>                           <C>          <C>           <C>        <C>          <C>

Balance at beginning of
  period                      $       2,459 $      1,538 $       1,221 $       819 $        335

Charge-offs:
  Commercial                            727          472            77          23            -
  Real estate                            30            -            32           -            -
  Consumer                              101           89            21           -            3
                              ------------- ------------  ------------ -----------  -----------
  Total charge-offs                     858          561           130          23            3
                              ------------- ------------ ------------- -----------  -----------

 Recoveries:
   Commercial                           104             -            -           -            -
   Real estate                            3             7            -           -            -
   Consumer                               2             3            -           -            -
                                ----------- ------------- ------------ -----------  -----------
   Total recoveries                     109            10            -           -            -
                                ----------- ------------- ------------ -----------  -----------

 Net charge-offs                        749           551          130          23            3
                                ----------- ------------- ------------ -----------  -----------

 Provision for loan losses              669         1,472          447         425          487
                                ----------- ------------- ------------ -----------  -----------

 Balance at end of period       $     2,379  $      2,459 $      1,538 $      1,221 $       819
                                =========== ============= ============ ============ ===========

 Loans at end of period         $   161,112  $    167,456 $    152,422 $    107,098 $    78,197
 Average loans                      164,520       161,514      129,190       94,593      56,134

 Ratios:
   Allowance for loan losses
    to total loans                    1.48%         1.47%        1.02%        1.14%       1.05%
   Net charge-offs to average
    Loans for period                   .46%          .34%         .10%           -            -

</TABLE>

                                  Page 28 of 96

<PAGE>

During 2003,  we charged off $418,000  related to a particular  commercial  loan
which,   prior  to  the  charge-off   date,  had  been  on  nonaccrual   status.
Additionally,  we recorded a loss of $72,000 on the  liquidation  of  foreclosed
assets  received from this same customer.  During 2002, we charged-off  $275,000
related  to  a  single  commercial  borrower.  These  charge-offs  constitute  a
substantial  portion of all  charge-offs  for the years noted.  Other than these
instances,  charge-offs to individual  customers were not large in comparison to
the total  charge-offs.  As a relatively  new  institution,  we do not have loss
experience  comparable to more mature financial  institutions;  however,  as our
loan portfolio matures, we will have additional charge-offs and we will consider
the amount and nature of our  charge-offs  in  determining  the  adequacy of our
allowance for loan losses.

INVESTMENTS.  Our investment  portfolio,  consisting primarily of Federal agency
bonds  and  mortgage-backed  securities,  amounted  to $38.6  million  and $43.0
million  at  December  31,  2003 and 2002,  respectively.  The  following  table
summarizes  the amortized  cost and fair value of our securities at those dates,
all of which we classify as available-for-sale (dollars in thousands):
<TABLE>
<CAPTION>
                                                      Amortized       Unrealized    Unrealized       Fair
                                                         Cost            Gains        Losses        Value
                                                      ---------       ---------     ----------      -----
<S>       <C>                                         <C>           <C>             <C>         <C>
           2003
           ----
              Securities available-for-sale:
                U.S. Government and federal agencies  $   9,368       $     75       $     (6)   $    9,437
                State and municipal                       2,836             41             (4)        2,873
                Mortgage-backed                          26,105            280            (71)       26,314
                                                      ---------       --------       --------    ----------
              Total                                   $  38,309       $    396       $    (81)   $   38,624
                                                       ========        =======        =======     =========

           2002
           ----
              Securities available-for-sale:
                U.S. Government and federal agencies  $   1,009       $      8       $      -    $    1,017
                State and municipal                      14,072            241            (62)       14,251
                Mortgage-backed                          27,580            200             (2)       27,778
                                                      ---------       --------       --------    ----------
              Total                                   $  42,661       $    449       $    (64)   $   43,046
                                                       ========        =======        =======     =========

</TABLE>

During 2003,  we sold $11.9  million of  available-for-sale  securities at a net
gain of  $694,000.  This  compares  to sales of $46.2  million  and net gains of
$660,000 in 2002.  At  December  31,  2003,  approximately  $8.8  million of our
available-for-sale  portfolio  was  pledged  to  secure  public  fund and  other
deposits and securities sold under agreements to repurchase.

The following table shows the carrying value of investment  securities according
to  contractual  maturity  classifications  of one year or less,  after one year
through  five years,  after five years  through ten years,  and after ten years.
Actual  maturities  may differ from  contractual  maturities of  mortgage-backed
securities  because the mortgages  underlying  the  securities  may be called or
prepaid with or without penalty. Therefore, these securities are not included in
the maturity categories noted below as of December 31, 2003 and 2002 (dollars in
thousands):
                                                            2003
                                                          --------

 Due in one year or less                                  $    267
 Due after one year through five years                       7,497
 Due after five years through ten years                      4,185
 Due after ten years                                           361
                                                          --------
 Total                                                    $ 12,310
                                                          ========

We compute income on securities using coupon interest, adding discount accretion
or  subtracting  premium  amortization,   and  for  certain  Treasury  Inflation
Protection  securities,  the  adjustments  to the par values  based on inflation
adjustment  data as  provided  by the federal  government.  The  majority of our
investments  for 2003 and 2002 were in the form of  mortgage-backed  securities.
These investments are typically  acquired at a premium to their par value. Since
these securities are repayable in monthly increments,  based on the repayment of
the  underlying  mortgages,  they are subject to wide  variations in their yield
caused by the increased  write off of the purchase  premiums.  During 2003,  the
interest  rate  market  for  residential  financings  was at a thirty  year low,
causing many  homeowners to refinance their home  mortgages.  As a result,  when
receiving  prepayments,  we  accelerated  premium  amortization.  This  caused a
lowering of the yields on these investments.

                                 Page 29 of 96

<PAGE>


Deposits and Other Borrowings.  We had approximately  $190.6 million of deposits
at December  31, 2003  compared to $189.0  million at  December  31,  2002.  Our
deposits consist of noninterest and interest-bearing  demand accounts,  savings,
money market and time  deposits.  Additionally,  we have  repurchase  agreements
which are essentially  deposit equivalents  collateralized by securities.  These
agreements  amounted to $8.9  million at December  31, 2003 and $8.2  million at
December 31, 2002. Additionally,  at December 31, 2003, we had balances of $12.5
million in advances  from the Federal Home Loan Bank of  Cincinnati  compared to
$14.5 million at December 31, 2002.

Our deposits at December 31, 2003, 2002 and 2001 were as follows:

<TABLE>
<CAPTION>

                                                                      2003             2002          2001
                                                                --------------  -------------- --------------
<S>                                                             <C>             <C>            <C>

              Interest-bearing demand                           $    18,187     $   17,601     $    18,886
              Savings, money market and NOW                          23,204         22,889          17,113
              Time deposits                                          73,461         77,732          75,672
              Time deposits $100,000 and over                        51,207         50,255          44,498
                                                                -----------     ----------     -----------
              Total interest-bearing deposits                       166,059        168,477         156,169
              Noninterest-bearing                                    24,581         20,478          12,575
                                                                -----------     ----------     -----------
              Total deposits                                    $   190,640     $  188,955     $   168,744
                                                                ===========     ===========    ===========

</TABLE>

Information on our repurchase  agreements at December 31, 2003, 2002 and 2001 is
as follows:

<TABLE>
<CAPTION>

                                                                      2003             2002          2001
                                                                --------------  -------------- --------------
<S>                                                             <C>             <C>            <C>

              Average balance during the year                   $     4,901     $      6,832   $     6,474
              Average interest rate during the year                    .78%            1.34%         2.98%
              Maximum month-end balance during the year         $     8,874     $     14,088   $    13,647
              Balance at year-end                               $     8,874     $      8,211   $    12,957

</TABLE>

Information  on our advances  from the Federal Home Loan Bank of  Cincinnati  at
December 31, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>

                                                     Interest                             Balances
                      Date of Advance     Amount        Rate         Maturity           2003       2002
                  -------------------     ------     -- ----    ----------------       -------   -------
<S>               <C>                    <C>         <C>         <C>                  <C>       <C>

                  November 30, 2000       $ 1,050     6.71%     December 1, 2015       $  1,014  $ 1,027
                  November 21, 2001         1,300     5.61%     December 1, 2016          1,265    1,283
                  May 1, 2002               5,000     3.70%     June 1, 2005              2,569    4,042
                  May 31, 2002              2,000     3.73%     May 28, 2004              2,000    2,000
                  June 19, 2002             1,800     4.15%     July 1, 2005              1,716    1,776
                  September 5, 2002           600     2.84%     October 1, 2006             432      576
                  September 5, 2002           600     3.06%     October 1, 2007             468      581
                  December 6, 2002          1,800     3.65%     January 1, 2008           1,661    1,800
                  December 6, 2002          1,432     3.82%     January 1, 2008           1,387    1,432

</TABLE>


All of the above  advances are  amortizing on a monthly  basis through  maturity
except for the May 31, 2002 advance in the amount of $2 million, whose principal
is payable at maturity.


                                  Page 30 of 96

<PAGE>


NOTE PAYABLE.  On December 30, 2003, the Company entered into a credit agreement
with another financial  institution that provides for a reducing  revolving line
of credit in the maximum amount of $6 million,  of which $5 million was drawn at
inception and  contributed  to FS Bank to increase its capital base. The related
note is secured by 100% of the  common  shares of FS Bank and has a maturity  of
December 31,  2006.  The maximum  amount  available  under the credit  agreement
reduces to $5 million on December 31, 2004 and $4 million on December 31, 2005.

The credit agreement contains a number of covenants relating to the operation of
the Bank including the  maintenance of a minimum equity capital ratio, a maximum
ratio of nonperforming assets to total loans, a minimum return on average assets
and  the  maintenance  of a  minimum  dividend  payment  capacity  by the  Bank.
Covenants  applicable  to the Company  include a  prohibition  of the payment of
dividends  on  its  common  stock.   At  year-end  2003,  the  Company  met  all
requirements of the credit agreement.

FUNDING.  Generally, banks classify their funding base as either core funding or
non-core funding. Core funding consists of all deposits other than time deposits
issued in denominations of $100,000 or greater while all other funding is deemed
to be non-core.  The following table represents the balances of our deposits and
other  fundings  and the  percentage  of each type to the total at December  31,
2003,    2002   and   2001    (dollars   in    thousands):

<TABLE>
<CAPTION>

                                                         2003                  2002                2001
                                                   ----------------      -----------------    ----------------
                                                   Amount    Percent     Amount    Percent    Amount   Percent
<S>                                                 <C>          <C>   <C>          <C>    <C>          <C>

           Core funding:
              Noninterest-bearing demand deposits    $  24,581    11.3%   $ 20,478    9.7%  $  12,575     6.8%
              Interest-bearing demand deposits          18,187     8.4%     17,601    8.3%     18,886    10.3%
              Savings and money market deposits         23,204    10.7%     22,889   10.8%     17,113     9.3%
             Time deposits less than $100,000           73,461    33.8%     77,732   36.7%     75,672    41.1%
                                                     ---------    -----   --------   -----  ---------    -----
             Total core funding                        139,433    64.2%    138,700   65.5%  $ 124,246    67.5%
                                                     =========    =====   ========   =====  =========    =====


           Non-core funding:
              Time deposits greater than $100,000       51,207    23.6%     50,255   23.7%     44,498    24.2%
              Securities sold under agreements to
                repurchase                               8,874     4.1%      8,211    3.9%     12,957     7.0%
              Federal Home Loan Bank advances           12,512     5.8%     14,517    6.9%      2,336     1.3%
              Notes Payable                              5,000     2.3%          -      -%          -       -%
                                                     ---------  -------  ---------   -----   --------   ------
              Total non-core funding                    77,593    35.8%     72,983   34.5%     59,791    32.5%
                                                     ---------  -------  ---------   -----   --------   ------
         Total funding                               $ 217,026   100.0%  $ 211,683  100.0%  $ 184,037   100.0%
                                                     =========   ======  =========  ======  =========   ======

</TABLE>

CAPITAL  RESOURCES.  At December  31, 2003 and 2002,  our  stockholders'  equity
amounted  to $20.1  million  and  $18.5  million,  respectively.  The  change in
stockholders'  equity  was  attributable  to our net  income  for the year ended
December 31, 2003 of $620,000 and the net  decrease in  comprehensive  income of
$54,000  attributable  to the  decrease in fair value of our  available-for-sale
securities portfolio.



                                  Page 31 of 96

<PAGE>

Generally, banking laws and regulations require banks and bank holding companies
to  maintain  certain  minimum  capital  ratios in order to  engage  in  certain
activities or be eligible for certain types of  regulatory  relief.  At December
31, 2003 and 2002, our capital ratios,  including FS Bank's capital ratios,  met
regulatory minimum capital requirements.  At December 31, 2003 and 2002, FS Bank
was categorized as "well-capitalized".  To be categorized as "well-capitalized",
FS Bank must maintain minimum Total  risk-based,  Tier I risk-based,  and Tier I
leverage  ratios  as set  forth  in the  following  table.  Additionally,  First
Security and FS Bank must maintain certain minimum capital ratios for regulatory
purposes.  The following table presents actual,  minimum and  "well-capitalized"
capital  amounts and ratios at December 31, 2003 and 2002 (amounts in millions):

<TABLE>
<CAPTION>


                                                                                                  To be Well
                                                                                               Capitalized Under
                                                                            For Capital        Prompt Corrective
                                                   Actual                Adequacy Purposes     Action  Provisions
                                              Amount     Ratio           Amount      Ratio     Amount      Ratio
                                              ------     -----           ------      -----     ------      -----
         <S>                                <C>            <C>        <C>             <C>     <C>          <C>

         2003
              Total Risk Based Capital to
                Risk-weighted  assets:
                  Consolidated               $    22.1      12.1%      $   14.6       8.0%     $   18.3     10.0%
                  Bank only                       26.1      13.8%          15.1       8.0%         18.9     10.0%

              Tier I (Core) Capital to Risk-
                weighted assets
                  Consolidated               $    19.8      10.9%      $    7.3       4.0%     $   11.0      6.0%
                  Bank only                       23.7      12.5%           7.6       4.0%         11.4      6.0%

              Tier I Leverage Capital to
                Average Assets
                  Consolidated               $    19.8       8.7%      $    9.1       4.0%     $   11.4      5.0%
                  Bank only                       23.7      10.4%           9.1       4.0%         11.4      5.0%

           2002
              Total Risk Based Capital to
                Risk-weighted assets:
                  Consolidated              $     20.3      11.0%      $   14.8       8.0%     $   18.5     10.0%
                  Bank only                       20.3      11.0%          14.8       8.0%         18.5     10.0%

              Tier I (Core) Capital to Risk-
                weighted assets
                  Consolidated              $     18.2       9.8%      $    7.4       4.0%     $   11.1      6.0%
                  Bank only                       18.0       9.7%           7.4       4.0%         11.1      6.0%

              Tier I Leverage Capital to
                Average Assets
                  Consolidated              $     18.2       7.9%      $    9.3       4.0%     $   11.6      5.0%
                  Bank only                       18.0       7.8%           9.3       4.0%         11.6      5.0%

</TABLE>


DIVIDENDS.  FS Bank is subject to  restrictions  on the payment of  dividends to
First  Security  under  laws  and  regulations  promulgated  by the FDIC and the
Commonwealth of Kentucky. Currently, FS Bank can pay First Security dividends of
approximately $2.9 million without prior approval of the FDIC or Commonwealth of
Kentucky.

First  Security  is also  subject  to  limits on  payment  of  dividends  to our
shareholders  by  the  rules,   regulations  and  policies  of  federal  banking
authorities. We have not paid any dividends to date, nor do we anticipate paying
dividends to our shareholders for the foreseeable  future.  In order to pay such
dividends,  we will need to receive dividends from FS Bank or have other sources
of funds.  In addition,  in  accordance  with the terms of the credit  agreement
which we entered  into on December  30,  2003,  the payment of  dividends on our
common stock cannot be made, except with the consent of the lending institution.
We do not intend to pay  dividends on our common  stock,  instead  preferring to
retain all earnings to support the growth of our Company.


                                  Page 32 of 96

<PAGE>


MARKET AND LIQUIDITY RISK MANAGEMENT

Our objective is to manage  assets and  liabilities  to provide a  satisfactory,
consistent level of profitability within the framework of established liquidity,
loan,    investment,    borrowing,    and    capital    policies.    Our   Asset
Liability/Investment  Committee  ("ALCO") is charged with the  responsibility of
monitoring these policies,  which are designed to ensure acceptable  composition
of  asset/liability  mix. Two critical areas of focus for ALCO are interest rate
sensitivity and liquidity risk management.

INTEREST RATE SENSITIVITY.  In the normal course of business,  we are exposed to
market risk arising  from  fluctuations  in interest  rates.  ALCO  measures and
evaluates  the  interest  rate  risk so that we can meet  customer  demands  for
various  types of loans  and  deposits.  ALCO  determines  the most  appropriate
amounts of on-balance sheet and off-balance sheet items.  Measurements  which we
use to help us manage interest rate sensitivity  include an earnings  simulation
model and gap analysis computations.  These measurements are used in conjunction
with competitive pricing analysis.

EARNINGS  SIMULATION  MODEL. We believe that interest rate risk is best measured
by our earnings  simulation  modeling.  Forecasted levels of net interest income
based on existing  interest-bearing  earning assets and liabilities are combined
with ALCO  forecasts  of interest  rates for the next 12 months and are combined
with other factors in order to produce various  earnings  simulations.  To limit
interest rate risk,  we have  guidelines  for our net interest  earnings at risk
which  seek  to  limit  the  variance  of  net  interest  income  to  less  than
predetermined  levels  based on the change in the interest  rate market.  At any
point our  calculations  reflect a change  greater  than  this  level  (which is
referred to in our policies and procedures as a Level 1 Alert),  we are required
to take action to mitigate the condition by actively  restructuring  our balance
sheet risk profile.


The  following  data  is  presented  relating  to the  results  of the  earnings
simulation model at December 31, 2003:

<TABLE>
<CAPTION>

                                      Changes in interest rates from current rates stated in basis points
                                  -------------------------------------------------------------------------
<S>                             <C>      <C>      <C>      <C>      <C>      <C>    <C>       <C>      <C>

                                 -400     -300     -200     -100       0       100     200      300      400
                                ------   ------   ------   ------      -      -----  ------   ------   -------

           Forecast net
             interest income   $4,936    $5,208  $5,447   $5,658      $0     $6,291   $6,599  $6,911   $7,217

           Effect on net
             interest income   (1,040)     (768)   (529)    (318)      0        315      623     935    1,241

           Percentage change    -17.4%    -12.9%   -8.9%    -5.3%      0        5.3%    10.4%   15.7%    20.8%

           Level 1 Alert        -25.0%    -20.0%  -15.0%   -10.0%      0       10.0%    15.0%   20.0%    25.0%

</TABLE>


The  results  of the  earnings  simulation  indicate  that  FS  Bank  is  assets
sensitive, meaning that in a rising interest rate environment,  yields on assets
are  likely  to  increase  faster  than  costs of  liabilities,  thus  producing
increases in net interest income.

The above table is intended to present our technique for measuring interest rate
risk on projected net interest  income based on changes in the general  interest
rate  environment at a point in time. Given that interest rates are presently at
historic  lows,  the  calculations  presented  for declines of 300 and 400 basis
points are highly unlikely and thus, are not believed to be relevant.


                                  Page 33 of 96

<PAGE>

GAP ANALYSIS. An asset or liability is considered to be interest  rate-sensitive
if it will  reprice or mature  within the time  period  analyzed;  for  example,
within  three  months  or one year.  The  interest  rate-sensitivity  gap is the
difference between the interest-earning assets and interest-bearing  liabilities
scheduled  to mature or reprice  within such time  period.  A gap is  considered
positive when the amount of interest rate-sensitive assets exceeds the amount of
interest  rate-sensitive  liabilities.  A gap is  considered  negative  when the
amount   of   interest   rate-sensitive   liabilities   exceeds   the   interest
rate-sensitive  assets. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest  income,  while a positive gap would
tend to result in an  increase  in net  interest  income.  Conversely,  during a
period of falling  interest  rates,  a  negative  gap would tend to result in an
increase in net  interest  income,  while a positive gap would tend to adversely
affect net interest income.  If our assets and liabilities were equally flexible
and moved concurrently, the impact of any increase or decrease in interest rates
on net interest income would be minimal.

At December 31, 2003, our cumulative twelve-month interest  rate-sensitivity gap
ratio of earning assets to interest-bearing  liabilities was 11.99%, as compared
to -9.87% at December 31, 2002. Both measurements were within our targeted ratio
of + 15% in this time horizon.  There is a general view held by monetary  policy
analysts that interest rates will eventually rise over the next 12 months which,
given our gap position at December 31, 2003, could have a positive impact on our
net interest income. Since deposit pricing will generally lag both in degree and
timing with any upward interest rate adjustments, our management believes we are
well-  positioned  to manage our net  interest  margins  through an upward  rate
environment.

Each of the above  analyses  may not, on their own, be an accurate  indicator of
how our net  interest  income will be  affected  by changes in  interest  rates.
Income  associated  with  interest-earning  assets  and  costs  associated  with
interest-bearing  liabilities  may  not be  affected  uniformly  by  changes  in
interest rates.  In addition,  the magnitude and duration of changes in interest
rates  may have a  significant  impact  on net  interest  income.  For  example,
although  certain assets and liabilities may have similar  maturities or periods
of repricing,  they may react in different degrees to changes in market interest
rates.  Interest rates on certain types of assets and  liabilities  fluctuate in
advance of changes in general market rates,  while interest rates on other types
may lag behind changes in general  market rates.  In addition,  certain  assets,
such as adjustable rate mortgage loans, have features  (generally referred to as
"interest  rate caps and  floors"),  which  limit  changes  in  interest  rates.
Prepayment and early  withdrawal  levels also could deviate  significantly  from
those assumed in calculating the maturity of certain instruments. The ability of
many borrowers to service their debts also may decrease during periods of rising
interest  rates.  ALCO  reviews  each of the  above  interest  rate  sensitivity
analyses  along with several  different  interest rate  scenarios as part of its
responsibility  to provide a  satisfactory,  consistent  level of  profitability
within the framework of established liquidity, loan, investment,  borrowing, and
capital policies.

LIQUIDITY RISK MANAGEMENT. The purpose of liquidity risk management is to ensure
that  there  are  sufficient   cash  flows  to  satisfy  loan  demand,   deposit
withdrawals,  and our other needs.  Traditional  sources of liquidity for a bank
include asset  maturities  and growth in core  deposits.  A bank may achieve its
desired  liquidity  objectives from the management of its assets and liabilities
and by internally  generated  funding through its operations.  Funds invested in
marketable  instruments that can be readily sold and the continuous  maturing of
other earning  assets are sources of liquidity  from an asset  perspective.  The
liability  base provides  sources of liquidity  through  attraction of increased
deposits and borrowing funds from various other institutions.

Changes in interest rates also affect our liquidity position. We currently price
deposits in response to market rates and our management intends to continue this
policy.  If  deposits  are not priced in  response  to market  rates,  a loss of
deposits could occur which would negatively affect our liquidity position.

Scheduled  loan  payments  are a  relatively  stable  source of funds,  but loan
payoffs and deposit flows fluctuate significantly,  being influenced by interest
rates, general economic conditions and competition.  Additionally, debt security
investments are subject to prepayment and call provisions that could  accelerate
their payoff prior to stated maturity.  We attempt to price our deposit products
to meet our asset/liability  objectives consistent with local market conditions.
Our  ALCO is  responsible  for  monitoring  our  ongoing  liquidity  needs.  Our
regulators also monitor our liquidity and capital resources on a periodic basis.


                                  Page 34 of 96

<PAGE>

In addition, FS Bank is a member of the Federal Home Loan Bank of Cincinnati. As
a  result,  FS Bank  receives  advances  from  the  Federal  Home  Loan  Bank of
Cincinnati,  pursuant to the terms of various borrowing agreements, which assist
it in the  funding  of  its  home  mortgage  and  commercial  real  estate  loan
portfolios.  FS Bank has pledged under the borrowing agreements with the Federal
Home Loan Bank of  Cincinnati  certain  qualifying  residential  mortgage  loans
pursuant to a blanket  lien as  collateral.  Based upon the advance  limitations
based on the  collateral  amounts,  at  December  31,  2003,  FS Bank could have
borrowed additional amounts in the approximate amount of $7.9 million.

Additional  sources of liquidity  are  represented  by federal  funds  borrowing
arrangements  entered  into with other  banks.  At  December  31,  2003,  we had
borrowing lines established in the aggregate amount of $20.5 million. There were
no balances on these lines at December  31, 2003.  In addition to the above,  we
are a participant in a network of financial  institutions that purchase and sell
certificates  of deposit to each  other.  There are no  practical  limits to the
amount of  certificates  of deposit that can be sold or  purchased  through this
network.  At December 31, 2003, we had no sales or purchases of funds using this
network.

At  December  31,  2003,  we  had  no   significant   commitments   for  capital
expenditures.

The  following  table  presents  additional  information  about our  contractual
obligations  as of December  31,  2003,  which by their  terms have  contractual
maturity and  termination  dates  subsequent  to December  31, 2003  (dollars in
thousands):

<TABLE>
<CAPTION>

                                                        Next 12      13-36        37-60        Over 60
                                                        Months      Months        Months       Months
                                                     -----------  ----------    ----------   ----------
<S>                                                 <C>           <C>           <C>       <C>

           Contractual Obligations:
              Certificates of deposit                $   92,759   $  21,356     $ 10,553    $       -
              Securities sold under agreements
                to repurchase                             8,874           -            -            -
              Federal Home Loan advances                  4,266       3,564        2,591        2,091
              Note payable                                    -       5,000            -            -
              Minimum operating lease commitments           256         368          211        1,033
                                                      ---------    --------      -------      -------
              Total                                  $  106,155   $  30,288     $ 13,355     $  3,124
                                                      =========    ========      =======      =======

</TABLE>

Our  management  believes  that we have  adequate  liquidity  to meet all  known
contractual obligations and unfunded commitments, including loan commitments and
reasonable borrower,  depositor,  and creditor requirements over the next twelve
months.

OFF-BALANCE  SHEET  ARRANGEMENTS.  At  December  31,  2003,  we had  outstanding
commitments  to make loans of $0.6  million,  standby  letters of credit of $1.4
million and unfunded loan  commitments  outstanding  of $33.9  million.  Because
these  commitments  generally have fixed  expiration  dates and many will expire
without  being  drawn  upon,  the total  commitment  level does not  necessarily
represent  future  cash  requirements.  If  needed  to  fund  these  outstanding
commitments,  FS  Bank  has the  ability  to  liquidate  Federal  funds  sold or
securities  available-for-sale or, on a short-term basis, to borrow and purchase
Federal  funds  from  other  financial   institutions   or,  finally,   to  sell
certificates  of deposit in the interbank  funding network  discussed  above. At
December 31, 2003, FS Bank had accommodations with upstream  correspondent banks
for unsecured short-term  advances.  These accommodations have various covenants
related to their term and availability,  and in most cases must be repaid within
less than a month. The following table presents additional information about our
unfunded commitments as of December 31, 2003 and 2002, which by their terms have
contractual   maturity  dates  subsequent  to  December  31,  2003  (dollars  in
thousands):

                                       2003                     2002
                                Fixed       Variable      Fixed       Variable

Commitments to make loans     $     -       $     600     $     -     $      -
Unused lines of credit          6,003          27,883       6,789       34,670
Letters of credit                   -           1,360         427          676

Commitments to make loans are generally made for periods of 3 months or less.


                                  Page 35 of 96

<PAGE>

IMPACT OF INFLATION

The Consolidated  Financial Statements and related  consolidated  financial data
presented  herein  have been  prepared in  accordance  with  generally  accepted
accounting  principles and practices  within the banking  industry which require
the  measurement  of  financial  position  and  operating  results  in  terms of
historical  dollars without  considering the changes in the relative  purchasing
power of money over time due to  inflation.  Unlike most  industrial  companies,
virtually all the assets and liabilities of a financial institution are monetary
in  nature.  As a result,  interest  rates have a more  significant  impact on a
financial  institution's  performance  than the  effects  of  general  levels of
inflation.

RECENT ACCOUNTING PRONOUNCEMENTS

ADOPTION OF NEW  ACCOUNTING  STANDARDS:  During 2003,  the Company  adopted FASB
Statement 149, Amendment of Statement 133 on Derivative  Instruments and Hedging
Activities,  FASB Statement 150,  Accounting for Certain  Financial  Instruments
with  Characteristics  of both  Liabilities  and  Equities,  FASB  Statement 132
(revised 2003),  Employers  Disclosures about Pensions and Other  Postretirement
Benefits,   FASB  Interpretation  45,  Guarantor's   Accounting  and  Disclosure
Requirements  for  Guarantees,  and FASB  Interpretation  46,  Consolidation  of
Variable  Interest  Entities.  Adoption of the new standards did not  materially
affect the Company's operating results or financial condition.


ITEM 7. FINANCIAL STATEMENTS

FIRST SECURITY BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Report of Independent Auditors

Consolidated  Financial  Statements:
   Consolidated  balance sheets
   Consolidated statements of income
   Consolidated  statements of changes in shareholders' equity
   Consolidated statements of cash flows
   Notes to consolidated financial statements



                                  Page 36 of 96

<PAGE>








                          FIRST SECURITY BANCORP, INC.
                               Lexington, Kentucky

                        CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002













                                  Page 37 of 96


<PAGE>



                          FIRST SECURITY BANCORP, INC.
                               Lexington, Kentucky

                        CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002




REPORT OF INDEPENDENT AUDITORS..............................................39

CONSOLIDATED FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS..................................................40

CONSOLIDATED STATEMENTS OF INCOME............................................41

CONSOLIDATED STATEMENTS OF CHANGES IN
 SHAREHOLDERS' EQUITY........................................................42

CONSOLIDATED STATEMENTS OF CASH FLOWS........................................43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................................45

















                                  Page 38 of 96

<PAGE>


[GRAPHIC OMITTED]
     Crowe Chizek and Company LLC
     Member Horwath International





                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
First Security Bancorp, Inc.
Lexington, Kentucky


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

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

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



                                       /s/Crowe Chizek and Company LLC
                                       Crowe Chizek and Company LLC

Lexington, Kentucky
February 6, 2004






                                  Page 39 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   December 31
            (Dollar amounts in thousands, except for per share data)

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

                                                       2003              2002
                                                    ---------         ---------
ASSETS
Cash and due from banks                             $   4,820         $   4,744
Federal funds sold                                     25,193             4,069
                                                    ---------         ---------
  Total cash and cash equivalent                       30,013             8,813
Securities available-for-sale                          38,624            43,046
Loans held for sale                                       407             3,390
Loans, net of allowance of $2,379 and $2,459          158,733           164,999
Federal Home Loan Bank stock                              772               742
Foreclosed assets                                         119               300
Premises and equipment, net                             7,585             7,932
Goodwill                                                  106                 -
Other intangible assets                                    43                57
Accrued interest receivable and other assets            1,856             1,807
                                                    ---------          --------

                                                    $ 238,258         $ 231,086
                                                    =========         =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Deposits
    Noninterest bearing                             $  24,581       $    20,478
    Interest bearing                                  166,059           168,477
                                                    ---------       -----------
      Total deposits                                  190,640           188,955
  Federal funds purchased and repurchase agreements     8,874             8,211
  Federal Home Loan Bank advances                      12,512            14,517
  Note Payable                                          5,000                 -
  Accrued interest payable and other liabilities        1,120               939
                                                    ---------       -----------
      Total liabilities                               218,146           212,622

  Shareholders' equity
      Common stock, no par value:  5,000,000 shares
      authorized; 2003 - 1,558,690 shares issued,
      2002 - 1,456,250 shares issued                    8,926             8,385
  Additional paid-in capital                            8,926             8,385
  Retained earnings                                     2,052             1,432
  Accumulated other comprehensive income                  208               262
                                                    ---------       -----------
    Total shareholders' equity                         20,112            18,464
                                                    ---------       -----------

                                                    $ 238,258       $   231,086
                                                    =========       ===========



                                  Page 40 of 96


<PAGE>



                          FIRST SECURITY BANCORP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                             Years Ended December 31
            (Dollar amounts in thousands, except for per share data)

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

                                                       2003           2002
                                                    --------       ---------
Interest income
  Loans, including fees                             $  10,079      $  11,102
  Taxable securities                                      836          1,333
  Tax exempt securities                                   380            669
  Federal funds sold and other                            106             32
                                                    ---------      ---------
                                                       11,401         13,136
Interest expense
  Deposits                                              4,874          6,412
  Federal funds purchased and repurchase agreements        41            138
  Federal Home Loan Bank advances and other debt          557            400
                                                    ---------       --------
                                                        5,472          6,950
                                                    ---------       --------

Net interest income                                     5,929          6,186

Provision for loan losses                                 669          1,472
                                                    ---------       --------
Net interest income after provision for loan losses     5,260          4,714

Noninterest income
  Service charges on deposit accounts                     707            788
  Net gains on sales of loans                           1,084            511
  Net gains on sales of securities                        694            660
  Other                                                   273            140
                                                    ---------       --------
                                                        2,758          2,099
Noninterest expense
  Salaries and employee benefits                        3,499          2,711
  Occupancy and equipment                               1,135            953
  Data processing                                         379            241
  Legal and professional fees                             616            280
  Loss on sale of foreclosed and repossessed assets        72              -
  Federal deposit insurance                                22             31
  Advertising                                             208            167
  Supplies                                                119             92
  Amortization of intangibles                              14             10
  Other                                                 1,208            957
                                                    ---------       --------
                                                        7,272          5,442
                                                    ---------       --------
Income before income taxes                                746          1,371
Income tax expense                                        126            322
                                                    ---------       --------
Net income                                          $     620       $  1,049
                                                    =========       ========

Earnings per share
  Basic                                             $     .42       $    .72
  Diluted                                                 .41            .69





                                  Page 41 of 96


<PAGE>
<TABLE>
<CAPTION>


                                                 FIRST SECURITY BANCORP, INC.
                                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                   Years Ended December 31
                                          (Share and dollar amounts in thousands)

--------------------------------------------------------------------------------------------------------------------
                                                                                        Accumulated
                                                                                            Other            Total
                                          Common Stock      Paid-In     Retained        Comprehensive    Shareholders'
                                       Shares    Amount     Capital     Earnings        Income (Loss)       Equity
                                       ------    ------     -------     --------        ------------        ------

<S>                                     <C>      <C>       <C>         <C>             <C>                <C>

         Balance, January 1, 2002      1,456    $ 8,385    $  8,385    $      383       $    (326)         $ 16,827

         Comprehensive Income:
           Net income                      -          -           -         1,049               -             1,049

         Change in unrealized gain
           (loss) on securities available
           for sale, net of reclassification
           and tax effects                 -          -           -             -             588               588
                                      ------    -------    --------    ----------       ---------       -----------
         Total comprehensive income                                                                           1,637
                                                                                                        -----------

         Balance, December 31, 2002    1,456      8,385       8,385         1,432             262            18,464

         Stock options exercised          14         99          99             -               -               198

         Stock warrants exercised         89        442         442             -               -               884

         Comprehensive income:
           Net income                      -          -           -           620               -               620

         Change in unrealized gain
           (loss) on securities available
           for sale, net of reclassification
           and tax effects                 -          -           -             -             (54)              (54)
                                      ------    -------    --------    ----------       ---------       -----------
         Total comprehensive income                                                                             566
                                                                                                        -----------


         Balance, December 31, 2003    1,559    $ 8,926    $  8,926    $    2,052       $     208       $    20,112
                                      ======    =======    ========    ==========       =========       ===========


</TABLE>


                                  Page 42 of 96


<PAGE>


<TABLE>
<CAPTION>


                                                FIRST SECURITY BANCORP, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  Years Ended December 31
                                  (Dollar amounts in thousands, except for per share data)

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


                                                                                           2003             2002
                                                                                        ---------        ---------
<S>                                                                                   <C>              <C>

         Cash flows from operating activities
             Net income                                                               $       620       $     1,049
             Adjustments to reconcile net income to net
              cash from operating activities
             Provision for loan losses                                                        669             1,472
             Depreciation and amortization                                                    487               463
             Net amortization of securities                                                   723               467
             Net realized gain on sale of securities                                         (694)             (660)
             Federal Home Loan Bank stock dividends                                           (30)              (29)
             Originations of loans held for sale                                          (64,459)          (36,165)
             Proceeds from sale of loans                                                   68,526            33,286
         Net gain on sale of mortgage loans                                                (1,084)             (511)
         Loss on disposal of premises and equipment                                             -                 1
         Loss on sale of foreclosed and repossessed assets                                     72                 -
         Net change in:
             Accrued interest receivable                                                      220               (43)
             Other assets                                                                    (341)              148
             Accrued interest payable                                                         (69)             (254)
             Other liabilities                                                                266              (516)
                                                                                      -----------       -----------
         Net cash from operating activities                                                 4,906            (1,292)

         Cash flows from investing activities Activity in available-for-sale
              securities:
                 Maturities and principal repayments                                       16,897            11,778
                 Sales                                                                     11,886            46,225
                 Purchases                                                                (24,460)          (67,668)
         Net change in loans                                                                5,028           (15,890)
         Proceeds from sale of foreclosed and repossessed assets                              750                 -
         Purchase of Federal Home Loan Bank stock                                               -              (174)
         Purchases of premises and equipment, net                                            (126)             (661)
         Cash paid in acquisition                                                            (106)              (69)
                                                                                      -----------       -----------
         Net cash from investing activities                                                 9,869           (26,459)


</TABLE>



                                  Page 43 of 96

<PAGE>

<TABLE>
<CAPTION>


                                                FIRST SECURITY BANCORP, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  Years Ended December 31
                                  (Dollar amounts in thousands, except for per share data)

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


                                                                                           2003             2002
                                                                                        ---------        ---------
<S>                                                                                    <C>              <C>

         Cash flows from financing activities
              Net change in deposits                                                        1,685            20,211
              Net change in repurchase agreements and
                  short-term borrowings                                                       663            (4,746)
              Proceeds from Federal Home Loan Bank advances                                     -            13,232
              Repayments of Federal Home Loan Bank advances                                (2,005)           (1,051)
              Proceeds from issuance of note payable                                        5,000                 -
              Proceeds from issuance of common stock                                        1,082                 -
                                                                                      -----------       -----------
         Net cash from financing activities                                                 6,425            27,646
                                                                                      -----------       -----------

         Net change in cash and cash equivalents                                      $    21,200       $      (105)

         Cash and cash equivalents at beginning of period                                   8,813             8,918
                                                                                      -----------       -----------

         Cash and cash equivalents at end of period                                   $    30,013       $     8,813
                                                                                      ===========       ===========


         Supplemental cash flow information:
              Interest paid                                                           $     5,541       $     7,204
              Income tax paid                                                                 260                80

         Supplemental non-cash disclosures:
              Transfers from loans to foreclosed and repossessed assets                       569               303


</TABLE>

                                  Page 44 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements of First  Security  Bancorp,  Inc.  ("Bancorp")  and its wholly owned
subsidiary First Security Bank of Lexington, Inc. ("Bank") are together referred
to as the "Company".  Intercompany  transactions  and balances are eliminated in
consolidation.

The  Company is a one-bank  holding  company  and,  other than the Bank,  has no
material business activity.  The Bank commenced  operations on November 17, 1997
and operates as a state chartered  commercial bank, providing financial services
through its offices in Lexington,  Kentucky.  Its primary  deposit  products are
checking, savings, repurchase agreements and term certificates,  and its primary
lending  products are  commercial,  real estate  mortgage  and  consumer  loans.
Substantially  all loans are secured by specific  items of collateral  including
business  assets,  commercial and residential  real estate and consumer  assets.
Commercial  loans are  expected to be repaid from cash flow from  operations  of
businesses and residential mortgage and consumer loans are expected to be repaid
from  the  earnings  of  the  borrowers.  Other  financial  instruments,   which
potentially represent concentrations of credit risk, include deposit accounts in
other financial institutions and federal funds sold.

USE OF ESTIMATES:  To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America,  management makes
estimates and assumptions  based on available  information.  These estimates and
assumptions  affect the amounts  reported in the  financial  statements  and the
disclosures  provided,  and actual results could differ.  The allowance for loan
losses and fair values of  financial  instruments  are  particularly  subject to
change.

CASH  FLOWS:  Cash and cash  equivalents  includes  cash,  deposits  with  other
financial institutions under 90 days, and federal funds sold. Net cash flows are
reported for loan and deposit transactions.

SECURITIES:  All debt  securities are classified as  available-for-sale  and are
carried at fair value,  with  unrealized  holding  gains and losses  reported in
other  comprehensive  income.  Other securities,  such as Federal Home Loan Bank
stock, are carried at cost.

Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are written down to fair value when a decline in fair value is not temporary.

LOANS HELD FOR SALE:  Loans  originated  and intended for sale in the  secondary
market  are  carried  at the  lower  of cost or  market  in the  aggregate.  Net
unrealized losses, if any, are recorded as a valuation  allowance and charged to
earnings. These loans are assessed at least annually for impairment and any such
impairment is recognized in the period identified.

LOANS:  Loans  that  management  has the  intent  and  ability  to hold  for the
foreseeable  future or until  maturity or payoff are  reported at the  principal
balance outstanding, net of unearned interest, deferred loan fees and costs, and
an allowance for loan losses. Interest income is reported on the interest method
and includes  amortization  of net of deferred loan fees and costs over the loan
term.  Interest  income on mortgage and commercial  loans is discontinued at the
time the loan is 90 days  delinquent  unless  the  loan is  well-secured  and in
process of collection.  Consumer and credit card loans are typically charged off
no later than 180 days past due. In all cases, loans are placed on nonaccrual or
charged  off at an earlier  date if  collection  of  principal  or  interest  is
considered doubtful.



                                  Page 45 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

All interest accrued but not received for loans placed on nonaccrual is reversed
against interest income. Interest received on such loans is accounted for on the
cash  basis or cost  recovery  method,  until  qualifying  for return to accrual
status.  Loans are  returned  to accrual  status when all of the  principal  and
interest amounts  contractually  due are brought current and future payments are
reasonably assured.

ALLOWANCE  FOR LOAN  LOSSES:  The  allowance  for  loan  losses  is a  valuation
allowance for probable  incurred credit losses.  Loan losses are charged against
the  allowance  when  management  believes that the  uncollectibility  of a loan
balance  is  confirmed.  Subsequent  recoveries,  if any,  are  credited  to the
allowance.  Management  estimates the allowance balance required using past loan
loss  experience,  the  nature and volume of the  portfolio,  information  about
specific  borrower   situations  and  estimated   collateral  values,   economic
conditions and other factors. Allocations of the allowance are made for specific
loans,  but the entire allowance is available for any loan that, in management's
judgment, should be charged off.

The  allowance  consists  of  specific  and  general  components.  The  specific
component relates to loans that are individually classified as impaired loans or
loans  otherwise  classified as substandard or doubtful.  The general  component
covers  non-classified loans and is based on a number of factors,  including the
nature and volume of the  non-classified  loans,  economic  conditions and other
factors.

A loan is  impaired  when full  payment  under the loan  terms is not  expected.
Commercial  and  commercial  real estate loans are  individually  evaluated  for
impairment.  If a loan is impaired,  a portion of the  allowance is allocated so
that the loan is reported,  net, at the present  value of  estimated  cash flows
using the existing  rate or at the fair value of the  collateral if repayment is
expected solely from the collateral. Large groups of smaller balance homogeneous
loans,  such as consumer and  residential  real estate loans,  are  collectively
evaluated for impairment,  and accordingly,  they are not separately  identified
for impairment disclosures.

FORECLOSED  ASSETS:  Assets acquired  through or instead of loan foreclosure are
initially  recorded at fair value when acquired,  establishing a new cost basis.
Any excess of a loan balance over the recorded fair value of the assets received
is charged to the allowance for loan losses at the time the assets are recorded.
If fair value  declines  subsequent  to  foreclosure,  a valuation  allowance is
recorded through expense.  Costs after  acquisition are expensed.  There were no
additions to the  valuation  allowance  for 2003,  as the fair value equaled the
carrying cost.

PREMISES AND  EQUIPMENT:  Land is carried at cost.  Premises and  equipment  are
stated at cost less accumulated  depreciation.  Buildings and related components
are depreciated using the straight-line method with useful lives ranging from 10
to 40  years.  Furniture,  fixtures  and  equipment  are  depreciated  using the
straight-line method with useful lives ranging from 3 to 7 years.

GOODWILL  AND  OTHER   INTANGIBLE   ASSETS:   Goodwill   results  from  business
acquisitions and represents the excess of the purchase price over the fair value
of acquired  tangible assets and liabilities and identified  intangible  assets.
Goodwill is assessed at least annually for  impairment  and any such  impairment
will be recognized in the period identified.

Other intangible  assets consist of acquired  customer  relationship  intangible
assets arising from acquisitions.  They are initially measured at fair value and
then are amortized using the  straight-line  method over their estimated  useful
lives.



                                  Page 46 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

LONG-TERM  ASSETS:  Premises and  equipment,  core deposit and other  intangible
assets,  and other  long-term  assets are  reviewed for  impairment  when events
indicate  that  their  carrying  amount  may  not  be  recoverable  from  future
discounted cash flows. If impaired, the assets are recorded at fair value.

LOAN  COMMITMENTS  AND  RELATED  FINANCIAL  INSTRUMENTS:  Financial  instruments
include off-balance sheet credit instruments,  such as commitments to make loans
and commercial  letters of credit,  issued to meet customer financing needs. The
face amount for these items represents the exposure to loss, before  considering
customer collateral or ability to repay. Such financial instruments are recorded
when they are funded.  Instruments,  such as standby letters of credit, that are
considered  financial  guarantees in accordance with FASB  Interpretation No. 45
and are not material.

STOCK  COMPENSATION:  Employee  compensation  expense  under  stock  options  is
reported using the intrinsic  value method.  Stock-based  compensation  cost for
options  granted  employees with an exercise price less than the market price of
the underlying common stock at the date of the grant is reflected in net income.
No stock-based  compensation  cost for options  granted  employees and directors
with an  exercise  price  equal  to or  greater  than  the  market  price of the
underlying common stock at the date of grant is reflected in net income.

The following table  illustrates the effect on net income and earnings per share
if expense was measured  for options  granted  using the fair value  recognition
provisions of FASB Statement No. 123,  Accounting for Stock-Based  Compensation.
Amounts are in thousands, except for per share data.

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

Net income as reported                         $      620       $     1,049

Deduct:  Stock-based compensation expense
  determined under fair value based method            (82)             (292)
                                               -----------       ----------

Pro forma net income                           $      538        $      757
                                               ==========        ==========

Basic earnings per share as reported           $      .42       $       .72
Pro forma basic earnings per share                    .36               .52

Diluted earnings per share as reported         $      .41       $       .69
Pro forma diluted earnings per share                  .35               .51

The pro forma  effects are  computed  using  option  pricing  models,  using the
following weighted-average assumptions as of grant date for grants issued during
the year.

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

Risk-free interest rate                              3.18%            3.96%
Expected option life                             5.0 years         7.2 years
Expected stock price volatility                        36%               42%
Dividend yield                                          -                  -


                                  Page 47 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

INCOME TAXES: Income tax expense is the total of the current year income tax due
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences  between  carrying  amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance,  if needed, reduces tax
assets to the amount expected to be realized.

EARNINGS PER COMMON SHARE: Basic earnings per common share is net income divided
by the weighted average number of common shares  outstanding  during the period.
Diluted  earnings per common share  includes the dilutive  effect of  additional
potential common shares issuable under stock options. Earnings and dividends per
share are restated for all stock splits and dividends  through the date of issue
of the financial statements.

COMPREHENSIVE  INCOME:  Comprehensive  income  consists  of net income and other
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities available-for-sale.

ADOPTION OF NEW  ACCOUNTING  STANDARDS:  During 2003,  the Company  adopted FASB
Statement 149, Amendment of Statement 133 on Derivative  Instruments and Hedging
Activities,  FASB Statement 150,  Accounting for Certain  Financial  Instruments
with  Characteristics  of both  Liabilities  and  Equities,  FASB  Statement 132
(revised 2003),  Employers  Disclosures about Pensions and Other  Postretirement
Benefits,   FASB  Interpretation  45,  Guarantor's   Accounting  and  Disclosure
Requirements  for  Guarantees,  and FASB  Interpretation  46,  Consolidation  of
Variable  Interest  Entities.  Adoption of the new standards did not  materially
affect the Company's operating results or financial condition.

LOSS  CONTINGENCIES:  Loss  contingencies,  including  claims and legal  actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

RESTRICTIONS  ON CASH:  Cash on hand or on deposit with the Federal Reserve Bank
of $154,000  and $30,000 was  required to meet  regulatory  reserve and clearing
requirements at year-end 2003 and 2002. These balances do not earn interest.

FAIR VALUE OF FINANCIAL  INSTRUMENTS:  Fair values of financial  instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value  estimates  involve  uncertainties  and
matters  of  significant   judgment  regarding  interest  rates,   credit  risk,
prepayments  and other  factors,  especially in the absence of broad markets for
particular  items.   Changes  in  assumptions  or  in  market  conditions  could
significantly affect the estimates.

OPERATING SEGMENTS:  While the chief decision-makers monitor the revenue streams
of the various products and services, the identifiable segments are not material
and  operations  are  managed  and  financial  performance  is  evaluated  on  a
Company-wide  basis.  Accordingly,  all of the financial service  operations are
considered by management to be aggregated in one reportable operating segment.

RECLASSIFICATIONS:  Some  items  in the  prior  year  financial  statement  were
reclassified to conform to the current presentation.

PRESENTATION:  Unless otherwise indicated within the text, dollars are presented
in thousands except for per share data.



                                  Page 48 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 2 - SECURITIES

The fair value of available-for-sale securities and the related gross unrealized
gains and losses  recognized in accumulated other  comprehensive  income were as
follows:

<TABLE>
<CAPTION>

                                                                                      Gross                Gross
                                                                   Fair            Unrealized           Unrealized
                                                                   Value              Gains               Losses
                                                                   -----              -----               ------

<S>                                                          <C>                  <C>                 <C>

           2003
           ----
              U.S. Government and federal agency              $     9,437         $          75         $        (6)
              State and municipal                                   2,873                    41                  (4)
              Mortgage-backed                                      26,314                   280                 (71)
                                                              -----------         -------------         -----------

              Total                                           $    38,624         $         396         $       (81)
                                                              ===========         =============         ===========

           2002
           ----
              U.S. Government and federal agency              $     1,017         $           8           $       -
              State and municipal                                  14,251                   241                 (62)
              Mortgage-backed                                      27,778                   200                  (2)
                                                              -----------         -------------         -----------

              Total                                           $    43,046         $         449         $       (64)
                                                              ===========         =============         ===========

</TABLE>

         Securities with unrealized losses at year-end 2003, aggregated by
         investment category and length of time that individual securities have
         been in a continuous unrealized loss position, are as follows:

<TABLE>
<CAPTION>

                                    12 Months or Less              More than 12 Months            Total
                                  ---------------------         ------------------------  -------------------
                                  Fair         Unrealized       Fair         Unrealized    Fair      Unrealized
                                  Value           Loss          Value           Loss       Value         Loss
                                  -----           ----          -----           ----       -----         ----
<S>                                <C>         <C>              <C>           <C>         <C>        <C>

         Description of Securities
         U.S. Government and
            federal agency      $    494       $    (6)       $      -       $    -     $    494     $    (6)
           State and municipal       514            (3)            259           (1)         773          (4)
         Mortgage-backed           5,633           (71)              -            -        5,633         (71)
                                 -------       -------        --------       ------      -------     -------

         Total temporarily
            impaired with stated
            maturities          $  6,641       $   (80)       $    259       $   (1)    $  6,900     $   (81)
                                ========       =======        ========       ======     ========     =======

</TABLE>


Unrealized losses on securities have not been recognized into income because the
securities are of high credit quality,  management has the intent and ability to
hold for the foreseeable  future and the decline in fair value is largely due to
changes  in market  conditions.  The fair  value is  expected  to recover as the
securities approach their maturity date and/or market conditions improve.






                                  Page 49 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 2 - SECURITIES (Continued)

Sales of available-for-sale securities were as follows:

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

Proceeds                                           $ 11,886          $ 46,225
Gross gains                                             698               677
Gross losses                                              4                17

The fair value of debt securities and carrying amount, if different, at year-end
2003 by  contractual  maturity were as follows.  Securities  not due at a single
maturity date, primarily mortgage-backed securities, are shown separately.

                                                        Fair
                                                        Value
                                                        -----

Due in one year or less                            $       267
Due from one to five years                               7,497
Due from five to ten years                               4,185
Due after ten years                                        361
Mortgage-backed                                         26,314
                                                   -----------

Total                                              $    38,624
                                                    ==========

Securities  pledged  at  year-end  2003 and 2002 had  carrying  amounts  of $8.8
million and $6.8  million,  and were pledged to public  deposits and  repurchase
agreements.

At  year-end  2003 and 2002,  there were no holdings  of  securities  of any one
issuer,  other than the U.S.  Government and its agencies,  in an amount greater
than 10% of shareholders' equity.


NOTE 3 - LOANS

Loans at year-end were as follows:

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

  Commercial                                     $    49,165     $   47,612
  Mortgage loans on real estate:
    Commercial                                        61,669         64,325
    Residential                                       14,882         17,871
    Construction                                      16,990         20,664
    Home equity                                       11,488         10,180
  Consumer                                             6,035          5,773
  Credit card                                            883          1,033
                                                 -----------      ---------
  Subtotal                                           161,112        167,458
  Less allowance for loan losses                      (2,379)        (2,459)
                                                 -----------      ---------
  Loans, net                                     $   158,733      $ 164,999
                                                 ===========      =========






                                  Page 50 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 3 - LOANS (Continued)

Substantially  all  residential  mortgage  loans are pledged to the Federal Home
Loan Bank as collateral for advances as additionally discussed in Note 8.

Changes in the allowance for loan losses were as follows:

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

  Beginning balance                               $   2,459        $   1,538
  Loans charged-off                                    (858)            (561)
  Recoveries                                            109               10
  Provision for loan losses                             669            1,472
                                                  ---------        ---------

  Ending balance                                  $   2,379        $   2,459
                                                  =========        =========


Impaired loans were as follows:
                                                     2003             2002
                                                  ---------        ----------
  Year-end loans with no allocated allowance
    for loan losses                               $       -        $        -
  Year-end loans with allocated allowance
    for loan losses                                   3,162             4,059
                                                  ----------       ----------

   Total                                          $   3,162        $    4,059
                                                  =========        ==========

Amount of the allowance for loan losses allocated $   1,300        $    1,070

Average of impaired loans during the year             3,894             1,708
Interest income recognized during impairment            135                 -
Cash-basis interest income recognized                   135                 -

Impaired loans include $3.1 million with a troubled borrower which was
restructured during 2002.

Nonperforming loans were as follows:
                                                     2003             2002
                                                 ----------       ----------

Loans past due 90 days still on accrual          $      214       $    1,218
Nonaccrual loans                                      3,605            1,867


Nonperforming  loans includes both smaller  balance  homogeneous  loans that are
collectively  evaluated for impairment and  individually  classified as impaired
loans.  Nonperforming  loans and impaired  loans are defined  differently.  Some
loans  may be  included  in both  categories,  whereas  other  loans may only be
included in one category.




                                  Page 51 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

         NOTE 4 - PREMISES AND EQUIPMENT

         Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>

                                                                                           2003             2002
                                                                                        ---------        ---------
<S>                                                                                   <C>               <C>

         Land                                                                         $     1,250       $     1,250
         Buildings                                                                          4,956             4,956
         Leasehold improvements                                                               305               305
         Furniture and equipment                                                            2,285             2,461
                                                                                      -----------       -----------
         Total cost                                                                         8,796             8,972
              Accumulated depreciation                                                     (1,211)           (1,040)
                                                                                      -----------       -----------

              Premises and equipment, net                                             $     7,585       $     7,932
                                                                                      ===========       ===========
</TABLE>

         Depreciation expense was $473 and $453 for 2003 and 2002.

         The Company leases its three branch locations and two loan production
         offices under noncancelable operating leases with various terms and
         renewal options. Rent expense under these leases for the years ended
         December 31, 2003 and 2002 was $262 and $206.

         Rent commitments under these noncancelable operating leases were as
         follows, before considering renewal options that are generally present
         (in thousands):

                  2004                            $       256
                  2005                                    194
                  2006                                    174
                  2007                                    137
                  2008                                     74
                  Thereafter                            1,033
                                                  -----------

                  Total                           $     1,868
                                                  ===========


         In addition, the Company leases small items of office equipment, such
         as photocopiers, using agreements from one year to three years. These
         are not considered material and are not included in the above table.


         NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

         The change in the balance for goodwill during the year is as follows:

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

                  Beginning of year            $       -        $       -
                  Acquired goodwill                  106                -
                                               ---------        ---------
                  Total                        $     106        $       -
                                               =========        =========








                                  Page 52 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS (Continued)

ACQUIRED INTANGIBLE ASSETS

Acquired intangible assets were as follows at year-end:


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

                                             Gross                                 Gross
                                            Carrying              Accumulated     Carrying            Accumulated
                                            Amount               Amortization     Amount             Amortization
Amortized intangible assets:
 Other customer relationship
  intangibles                              $          67      $            24     $          67    $           10
                                           =============      ===============     =============    ==============

</TABLE>

Aggregate amortization expense was $14 and $10 for 2003 and 2002.

Estimated  amortization  expense  for each of the next three years is as follows
(no amortization expense is scheduled to be recorded after 2006):

                  2004                   $        14
                  2005                            14
                  2006                            15


NOTE 6 - DEPOSITS

The  scheduled  maturities  of time  deposits  as of  December  31, 2003 were as
follows (in thousands):

                  2004                   $    92,759
                  2005                        15,982
                  2006                         5,374
                  2007                         6,529
                  2008                         4,024
                  Thereafter                       -
                                         -----------

                  Total                  $   124,668
                                         ===========

At year-end 2003 and 2002, time deposits with balances in excess of $100 totaled
$51,207 and $50,255.





                                  Page 53 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities  sold under  agreements to repurchase are secured by U.S.  Government
and agency obligations and by mortgage-backed  securities with a carrying amount
of $8,840 and $6,779 at year-end 2003 and 2002.

Securities sold under agreements to repurchase are financing  arrangements  that
mature within two years. At maturity,  the securities  underlying the agreements
are  returned to the Company.  Substantially  all of the  securities  sold under
agreements  to  repurchase  have a term of one day and are  referred to as sweep
repurchase  agreements.  Information concerning securities sold under agreements
to repurchase is summarized as follows:

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

   Average balance during the year                 $     4,901      $   6,832
   Average interest rate during the year                  .78%          1.34%
   Maximum month-end balance during the year       $     8,874       $ 14,088
   Weighted average interest rate at year-end             .98%           .92%


NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES AND NOTE PAYABLE

At year-end, advances from the Federal Home Loan Bank were as follows:

                                                      2003             2002
                                                   ---------        --------
Monthly maturities of June 2005 through December 2016,
 at fixed rates ranging from 2.84% to 6.71%        $  10,512        $ 12,517

Principal due at maturity in May 2004, at
 fixed rate of 3.73%                                   2,000           2,000
                                                   ---------        --------
 Total                                             $  12,512        $ 14,517
                                                   =========        ========

Advances are secured by the Federal Home Loan Bank stock and  substantially  all
residential mortgage loans under a blanket lien arrangement.

Principal payments over the next five years are as follows (in thousands):

                  2004               $     4,266
                  2005                     3,049
                  2006                       515
                  2007                       378
                  2008                     2,213
                  Thereafter               2,091
                                     -----------
                  Total              $    12,512
                                     ===========



                                  Page 54 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES AND NOTE PAYABLE (Continued)

NOTE PAYABLE:  On December 30, 2003, the Company entered into a credit agreement
with another financial  institution that provides for a reducing  revolving line
of credit in the maximum amount of $6 million,  of which $5 million was drawn at
inception.  The related note is secured by 100% of the common shares of the Bank
and has a maturity of December 31, 2006. The maximum amount  available under the
credit  agreement  reduces to $5 million on December  31, 2004 and $4 million on
December 31, 2005.  The note bears interest at a variable rate, at the option of
the  Company on a  quarterly  basis,  at prime less .25% or at LIBOR plus 2.40%.
Interest is payable  monthly  and,  other than  payments  required to reduce the
balance  to the  maximum  available  amount,  there are no  scheduled  principal
repayments.

The credit agreement contains a number of covenants relating to the operation of
the Bank including the  maintenance of a minimum equity capital ratio, a maximum
ratio of  non-performing  assets to total  loans,  a minimum  return on  average
assets and the maintenance of a minimum  dividend  payment capacity by the Bank.
Covenants  applicable  to the Company  include a  prohibition  of the payment of
dividends  on  its  common  stock.   At  year-end  2003,  the  Company  met  all
requirements of the credit agreement.


NOTE 9 - BENEFIT PLANS

The Bank has a 401(k) benefit plan which allows employee contributions up to 15%
of their  compensation.  The Bank matches  100% of the first 4% of  compensation
contributed.  Expense for the years ended December 31, 2003 and 2002 was $63 and
$60.

NOTE 10 - INCOME TAXES

Income tax expense (benefit) was as follows:
                                           2003             2002
                                        ---------        ---------

  Current federal                      $        -        $     544
  Deferred federal                            126             (222)
                                       ----------        ---------
  Total                                $      126        $     322
                                       ==========        =========

Effective rates differ from the federal  statutory rate of 34% applied to income
before taxes due to the following:

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

  Federal statutory rate times the
    financial statement income         $      254        $      466

  Effect of:
    Tax-exempt income                        (109)             (194)
    Low income housing tax credits            (24)                -
    Other, net                                  5                50
                                       ----------        ----------

    Total                              $      126        $      322
                                       ===========       ==========


                                  Page 55 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES (Continued)

Year-end deferred tax assets and liabilities were due to the following:

                                           2003             2002
                                        ---------        ---------
  Deferred tax assets
    Allowance for loan losses           $     682        $     761
    Unused tax credits                         65                -
    Net operating loss carryforward            16                -
    Organizational costs                        1                1
    Other                                      39               42
                                        ---------        ---------
                                              803              804
                                        ---------        ---------

  Deferred tax liabilities
    FHLB stock dividends                $     (33)       $     (23)
    Depreciation                             (200)            (150)
    Cash to accrual                           (34)             (69)
    Net unrealized security gains            (107)            (122)
    Prepaid expenses                          (62)               -
    Other                                     (80)             (42)
                                        ---------         --------
                                             (516)            (406)
                                        ---------         --------

  Net deferred tax asset                $     287         $    398
                                        =========         ========


NOTE 11 - RELATED PARTY TRANSACTIONS

Loans to executive  officers,  directors,  and their  affiliates in 2003 were as
follows (in thousands):

    Beginning balance                       $     6,937
    New loans                                    12,404
    Effect of changes in related parties              -
    Repayments                                   (4,746)
                                            -----------
    Ending balance                          $    14,595
                                            ===========

Deposits from executive  officers,  directors,  and their affiliates at year-end
2003 and 2002 were approximately $3.7 and $3.0 million.

The Bank leases land from a company controlled by a director upon which the Bank
constructed a branch facility in 2001. The lease agreement provides for a twenty
year  term  with a base  rent  that  increases  biannually  from $70 per year at
inception  to $91 per year  for the  final  two  years of the  term.  The  lease
agreement  also  provides  that  the Bank  will pay  property  taxes  and  other
governmental  levies or  assessments on the property and a portion of the common
area  maintenance  for the  shopping  center in which  the  branch  facility  is
located.



                                  Page 56 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 11 - RELATED PARTY TRANSACTIONS (Continued)

The rent  commitment  under this  noncancelable  operating lease was as follows,
before considering the renewal option that is present (in thousands):

                  2004                          $        70
                  2005                                   71
                  2006                                   72
                  2007                                   74
                  2008                                   74
                  Thereafter                          1,033
                                                -----------
                  Total                         $     1,394
                                                ===========



NOTE 12 - STOCK OPTIONS

STOCK AWARD PLAN  Options to buy stock are granted to  directors,  officers  and
employees under the Company's  Stock Award Plan ("Stock  Plan"),  which provides
for issue of up to 200,000 options.  Pursuant to the Stock Plan,  options may be
issued which are defined as incentive  stock options or as  non-qualified  stock
options. Incentive stock options are intended to qualify under the provisions of
Internal  Revenue Code Section 422 ("IRC"),  which include,  among other things,
that the  option  price be not less than the fair  value of the shares as of the
date of  grant.  Non-qualified  stock  options  are  those  that do not meet the
requirements of the provisions of the IRC, and,  accordingly,  may contain terms
that are different than those in place for incentive  stock  options.  The Stock
Plan is accounted for in accordance  with  Accounting  Principles  Board Opinion
(APB)  No.  25,  "Accounting  for  Stock  Issued  to  Employees",   and  related
interpretations.

A summary of the activity in the Stock Plan is as follows:

<TABLE>
<CAPTION>

                                                                  2003                             2002
                                                        -------------------------        ------------------------
                                                                         Weighted                       Weighted
                                                                          Average                        Average
                                                                         Exercise                       Exercise
                                                           Shares          Price          Shares          Price
                                                           ------          -----          ------          -----
<S>                                                     <C>             <C>           <C>               <C>


           Outstanding at beginning of year                105,200       $    17.33        51,200       $  14.83
           Granted                                          22,000            19.55        54,000          19.71
           Exercised                                       (14,000)           14.07             -              -
           Forfeited                                       (25,450)           15.49             -              -
                                                        ----------                     ----------

           Outstanding at end of year                       87,750       $    18.91       105,200       $  17.33
                                                        ==========                     ==========
           Options exercisable at year-end                  79,650       $    18.80        66,380       $  17.76
                                                        ==========                     ==========

           Weighted average fair value of options
              granted  during year                      $     7.07                           9.91
                                                        ==========                     ==========


</TABLE>



                                  Page 57 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 12 - STOCK OPTIONS (Continued)

Options outstanding under the Stock Plan at year-end 2003 were as follows:

<TABLE>
<CAPTION>

                                        ----------------Outstanding-----------------    --------Exercisable--------
                                                        -----------                             -----------
                                                         Weighted
                                                          Average         Weighted                       Weighted
              Range of                                   Remaining         Average                        Average
              Exercise                                  Contractual       Exercise                       Exercise
               Prices                    Number            Life             Price         Number           Price
               ------                    ------            ----             -----         ------           -----

<S>         <C>                         <C>           <C>               <C>              <C>           <C>

            $13.75-$15.50                  18,250     37 months          $    15.39        16,550       $    15.38
            $16.00-$22.00                  69,500     49 months               19.84        63,100            19.69
                                       ----------                                      ----------

           Outstanding at year-end         87,750     46 months          $    18.91        79,650       $    18.80
                                       ==========                                      ==========

</TABLE>

OTHER STOCK OPTIONS
The Company has granted other options in connection  with the  employment of the
Company's  chief  executive  officer which are separate from the  aforementioned
plan and  tables.  These  options are  non-qualified  and were  granted  with an
exercise  price below the grant date market price.  The  difference  between the
exercise price and the market price will be recognized as  compensation  expense
over the vesting period in accordance with Accounting  Principles  Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees."

Number of options           20,000
Vesting schedule            4,000 options per year commencing September 15, 2004
Maturity                    December 1, 2013
Exercise price              $14.00
Unamortized expense         $40


NOTE 13 - STOCK WARRANTS

The  Company  issued  stock  warrants  to certain  organizers  of the Bank.  The
warrants,  issued in 1997,  entitled the holder to purchase additional shares of
the  Company's  common stock at the offering  price of $10 per share at any time
during 2003. All warrants were exercised during 2003,  resulting in the issuance
of 88,440 shares and the receipt by the Company of $884 in proceeds.

NOTE 14 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

Banks and bank holding companies are subject to regulatory capital  requirements
administered  by federal  banking  agencies.  Capital  adequacy  guidelines and,
additionally  for  banks,   prompt   corrective   action   regulations   involve
quantitative  measures of assets,  liabilities,  and  certain  off-balance-sheet
items  calculated  under regulatory  accounting  practices.  Capital amounts and
classifications are also subject to qualitative judgments by regulators. Failure
to meet various capital requirements can initiate regulatory action.

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized and critically  undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,  capital  distributions  are  limited,  as is asset growth and
expansion,  and capital  restoration  plans are  required.  At year-end 2003 and
2002,  the most recent  regulatory  notifications  categorized  the Bank as well
capitalized under the regulatory  framework for prompt corrective action.  There
are no conditions or events since that  notification  that  management  believes
have changed the institution's  category.




                                  Page 58 of 96


<PAGE>


                          FIRST SECURITY BANCORP,INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
--------------------------------------------------------------------------------


Actual and required capital amounts (in millions) and ratios are presented below
at year-end.

<TABLE>
<CAPTION>

                                                                                                   To be Well
                                                                                                Capitalized Under
                                                                            For Capital         Prompt Corrective
                                                     Actual              Adequacy Purposes      Action Provisions
                                               Amount       Ratio       Amount       Ratio      Amount      Ratio
                                               ------       -----       ------       -----      ------      -----
<S>     <C>                                 <C>             <C>      <C>             <C>       <C>         <C>

           2003
           ----
              Total Risk Based Capital to
                Risk-weighted assets
                  Consolidated               $    22.1      12.1%      $   14.6       8.0%     $   18.3     10.0%
                  Bank only                       26.1      13.8%          15.1       8.0%         18.9     10.0%

              Tier I (Core) Capital to Risk-
                weighted assets
                  Consolidated               $    19.8      10.9%      $    7.3       4.0%     $   11.0      6.0%
                  Bank only                       23.7      12.5%           7.6       4.0%         11.4      6.0%

              Tier I Leverage Capital to
                Average Assets
                  Consolidated               $    19.8       8.7%      $    9.1       4.0%     $   11.4      5.0%
                  Bank only                       23.7      10.4%           9.1       4.0%         11.4      5.0%


           2002
           ----
              Total Risk Based Capital to
                Risk-weighted assets
                  Consolidated              $     20.3      11.0%      $   14.8       8.0%     $   18.5     10.0%
                  Bank only                       20.3      11.0%          14.8       8.0%         18.5     10.0%

              Tier I Capital to Risk-
                weighted assets
                  Consolidated              $     18.2       9.8%      $    7.4       4.0%     $   11.1      6.0%
                  Bank only                       18.0       9.7%           7.4       4.0%         11.1      6.0%

              Tier I Leverage Capital to
                Average assets
                  Consolidated              $     18.2       7.9%      $    9.3       4.0%     $   11.6      5.0%
                  Bank only                       18.0       7.8%           9.3       4.0%         11.6      5.0%


</TABLE>




                                  Page 59 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 14 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (Continued)

Banking  regulations limit the amount of capital  distributions that may be paid
by the Bank without prior approval. Generally, capital distributions are limited
to  undistributed  net  income  for the  current  year and prior two  years.  In
addition,  generally,  capital  distributions  may be made only to the extent of
retained earnings.  At year-end 2003,  approximately  $2,870 is available to pay
dividends to the Company. The Company's ability to pay dividends is dependent on
the Bank. In addition,  in 2003 the Company entered into a credit agreement that
contains restrictions on dividends it can pay. (See Note 8)

Some financial instruments,  such as loan commitments,  credit lines, letters of
credit and overdraft  protection  are issued to meet customer  financing  needs.
These are  agreements to provide  credit or to support the credit of others,  as
long as  conditions  established  in the  contract  are met,  and  usually  have
expiration dates.  Commitments may expire without being used.  Off-balance sheet
risk to credit loss exists up to the face amount of these instruments,  although
material losses are not  anticipated.  The same credit policies are used to make
such  commitments  as are used for  loans,  including  obtaining  collateral  at
exercise of the commitment.


NOTE 15 - LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

The contractual amount of financial instruments with  off-balance-sheet risk was
as follows at year-end:

                                       2003                       2002
                                ---------------------      ---------------------
                                Fixed        Variable      Fixed        Variable
                                -----        --------      -----        --------
                                                 (in thousands)

Commitments to make loans      $    -        $    600      $    -        $     -
Unused lines of credit          6,003          27,883       6,789         34,670
Letters of credit                   -           1,360         427            676

Commitments to make loans are generally made for periods of 3 months or less.

Letters of credit are considered  financial guarantees under FASB Interpretation
45.  These  instruments  are  carried at fair  value,  which was  immaterial  at
year-end 2003 and 2002.



                                  Page 60 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying  amount and  estimated  fair values of  financial  instruments  were as
follows at year-end:

<TABLE>
<CAPTION>

                                                               2003                               2002
                                                   ------------------------------------------------------------
                                                    Carrying            Fair            Carrying           Fair
                                                     Amount             Value            Amount            Value
<S>     <C>                                       <C>               <C>              <C>              <C>

         Financial assets
           Cash and cash equivalents               $    30,013       $    30,013      $     8,813       $     8,813
           Securities available-for-sale                38,624            38,624           43,046            43,046
           Loans held for sale                             407               411            3,390             3,441
           Loans, net                                  158,733           160,689          164,999           170,200
           Federal Home Loan Bank stock                    772               772              742               742
           Accrued interest receivable                     956               956            1,176             1,176


         Financial liabilities
           Deposits                                $   190,640       $   192,089      $   188,955       $   190,885
           Repurchase agreements and
              short-term borrowings                      8,874             8,874            8,211             8,211
           Note Payable                                  5,000             5,000                -                 -
           Federal Home Loan Bank advances              12,512            12,959           14,517            14,875
           Accrued interest payable                        509               509              578               578

</TABLE>

The  methods  and  assumptions  used to  estimate  fair value are  described  as
follows:

Carrying  amount is the estimated fair value for cash and cash  equivalents  and
Federal Home Loan Bank stock,  accrued interest  receivable and payable,  demand
deposits,  repurchase  agreements,   short-term  borrowings,  note  payable  and
variable rate loans or deposits that reprice frequently and fully. Security fair
values are based on market prices or dealer quotes,  and, if no such information
is  available,  on the rate and term of the security and  information  about the
issuer. For fixed rate loans or deposits and for variable rate loans or deposits
with infrequent repricing or repricing limits, fair value is based on discounted
cash flows using current  market rates  applied to the estimated  life of credit
risk.  Fair values for impaired loans are estimated  using  discounted cash flow
analysis or underlying collateral values. Fair value of debt is based on current
rates for similar financing.  The fair value of off-balance-sheet items is based
on the  current  fees or cost that would be  charged to enter into or  terminate
such arrangements and is not material.


NOTE 17 - ACQUISITION OF MORTGAGE ORIGINATION COMPANY

On March 15, 2002, the Bank acquired the assets of First Mortgage Company, Inc.,
in Lexington, Kentucky. The operations were assumed by the Bank and are promoted
and conducted as a division under the name "First  Security  Mortgage  Company",
the purpose of which is to originate  mortgage loans for sale into the secondary
market.  The acquisition  agreement included a purchase price of up to $476, $69
of which was paid at closing for fixed  assets.  The  remainder  of the purchase
price is payable  contingent  upon the  division's  earnings  over the next four
years. In conjunction with the purchase and in addition to the fixed assets, the
Bank recorded $67 in intangibles for customer lists and a non-compete  agreement
which is being amortized over five years. Of the remaining  contingent  purchase
price,  $106 was earned in 2003 and recorded as goodwill.  The  remainder of the
purchase  price is  contingent  on future  earnings.  If earned,  an  additional
purchase  price will be paid up to a maximum amount of $234 and will be recorded
as goodwill.



                                  Page 61 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 18 - PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

Condensed financial information of First Security Bancorp, Inc. follows:

CONDENSED BALANCE SHEETS,
December 31

                                                   2003             2002
                                                ---------        ---------
ASSETS
Cash and due from banks                         $     909        $     124
Investment in subsidiary                           24,011           18,248
Other assets                                          197              104
                                                ---------        ---------

                                                $  25,117        $  18,476
                                                =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Note Payable                                    $   5,000        $       -
Other liabilities                                       5               12

Shareholders' Equity
Common stock                                        8,926            8,385
Paid-in capital                                     8,926            8,385
Retained earnings                                   2,052            1,432
Accumulated other comprehensive income (loss)         208              262
                                                ---------         --------
Total shareholders' equity                         20,112           18,464
                                                ---------         --------

                                                $  25,117         $ 18,476
                                                =========         ========






                                  Page 62 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 18 - PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

CONDENSED STATEMENTS OF INCOME
Years Ended December 31

                                                 2003             2002
                                              ---------        ---------
Income
  Interest income                             $       -        $       -
  Other income                                       17                -
  Dividend from subsidiary                            -              100
                                              ---------        ---------
                                                     17              100
Expenses
  Salaries and employee benefits                     55               36
  Professional fees                                 205               44
  Other                                              55               11
                                              ---------        ---------
                                                    315               91
                                              ---------        ---------

Income (loss) before income tax and undistributed
  subsidiary income                                (298)               9
Income tax benefit                                  101                -
                                              ---------        ---------

Income (loss) before undistributed earnings
  of subsidiary                                    (197)               9
Equity in undistributed earnings of subsidiary      817            1,040
                                              ---------        ---------

Net income                                    $     620        $   1,049
                                              =========        =========







                                  Page 63 of 96


<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 18 - PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

CONDENSED STATEMENTS OF CASH FLOW
Years ended December 31

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

Cash flows from operating activities
  Net income                                      $    620          $   1,049
    Adjustments to reconcile net income
      to net cash from operating activities
  Equity in undistributed earnings of subsidiary      (817)            (1,040)
  Change in other assets                               (93)                13
  Change in other liabilities                           (7)                 4
                                                  ---------         ---------
  Net cash from operating activities                  (297)                26

Cash flows from investing activities
  Investment in subsidiary                          (5,000)                 -

Cash flows from financing activities
  Proceeds from borrowing                            5,000                  -
  Proceeds from issuance of common stock             1,082                  -
                                                  --------          ---------
  Net cash from financing activities                 6,082                  -

Net change in cash and cash equivalents                785                 26

Cash and cash equivalents at beginning of period       124                 98
                                                  --------          ---------

Cash and cash equivalents at end of period        $    909          $     124
                                                  ========          =========





                                  Page 64 of 96


<PAGE>




                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 19 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow:
                                                     2003             2002
                                                  ---------        ---------

  Basic
      Net income                                  $      620       $   1,049
                                                  ==========       =========

  Weighted average common shares                       1,488           1,456
                                                  ==========       =========

  Basic earnings per common share                 $      .42        $    .72
                                                  ==========        ========

  Diluted
      Net income                                  $      620        $  1,049
                                                  ==========        ========

  Weighted average common shares outstanding
    for basic earnings per common share                1,488           1,456

  Add: Dilutive effects of assumed exercises of
    Stock warrants                                        27              43
    Stock options                                          8              12
                                                  ----------        --------

Average shares and dilutive potential
  common shares                                        1,523           1,511
                                                  ==========        ========

Diluted earnings per common share                 $      .41        $    .69
                                                  ===========       ========

Stock options for 66,000 and 43,750  shares of common stock were not  considered
in computing diluted earnings per common share for 2003 and 2002,  respectively,
because they were anti-dilutive.


NOTE 20 - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows:


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

Unrealized holding gains and losses on
  available-for-sale securities                   $     624        $   1,539
Less reclassification adjustments for gains
  and losses later recognized as income                (694)            (660)
                                                  ---------        ---------
Net unrealized gains and losses                         (70)              879
Tax effect                                               16              (291)
                                                  ---------        ----------
Other comprehensive income (loss)                 $     (54)       $      588
                                                  =========        ==========





                                  Page 65 of 96

<PAGE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
 -------------------------------------------------------------------------------

NOTE 21 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>

                           Net Interest       Noninterest       Noninterest       Net          Earnings per Share
                                                                                               ------------------
                             Income            Income             Expense       Income        Basic         Diluted
                           -----------        -----------       ----------      ------        -----         -------
<S>                       <C>                <C>               <C>             <C>            <C>             <C>


  2003
   First quarter          $    1,491          $     460         $    1,679      $  123        $  .08         $  .08
   Second quarter              1,501                940              1,863         202           .14            .13
   Third quarter               1,435                794              1,855         249           .17            .16
   Fourth quarter              1,502                564              1,875          46           .03            .04

 2002
   First quarter          $    1,365          $     164          $   1,192      $  160        $  .11          $ .11
   Second quarter              1,608                298              1,268         326           .22            .22
   Third quarter               1,654                770              1,475         471           .32            .31
   Fourth quarter              1,559                867              1,507          92           .07            .05


</TABLE>



                                  Page 66 of 96

<PAGE>

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.


ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

First Security 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 ensure 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 in the
SEC's rules and forms and that such  information is accumulated and communicated
to First Security  Bancorp's  management,  including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required  disclosure.  First  Security  carried  out an  evaluation,  under  the
supervision and with the  participation  of its management,  including its Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design and operation of its disclosure  controls and procedures as of the end of
the period covered by this report.  Based on the evaluation of these  disclosure
controls and procedures, the Chief Executive Officer and Chief Financial Officer
concluded that First Security Bancorp's  disclosure controls and procedures were
effective.

CHANGES IN INTERNAL CONTROLS

There  were no  changes  in  First  Security  Bancorp's  internal  control  over
financial  reporting  during  First  Security  Bancorp's  fiscal  quarter  ended
December 31, 2003 that have  materially  affected,  or are reasonably  likely to
materially  affect,  First Security  Bancorp's  internal  control over financial
reporting.


PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The  information  required by this Item (other  than the  information  presented
below) is contained  under the headings "Item 1 Election of  Directors,"  "Other
Information  About  Management,"  and "Share  Ownership by Directors,  Executive
Officers and Certain  Beneficial  Owners - Section  16(a)  Beneficial  Ownership
Reporting Compliance" in First Security Bancorp's Proxy Statement for the Annual
Meeting of  Shareholders  to be held May 18, 2004,  and  incorporated  herein by
reference.

AUDIT  COMMITTEE  EXPERTISE:  The board of  directors  of First  Security  has a
separately  designated  Audit  Committee.  Our Audit Committee  Charter contains
independence requirements members of the Audit Committee must meet, and requires
each  Audit  Committee  member  to be able to read  and  understand  fundamental
financial  statements,  including the Company's balance sheet,  income statement
and cash flow  statement,  or to be able to do so within a reasonable  period of
time after his or her appointment to the Audit Committee. At least one member of
the Audit  Committee  must have had past  employment  experience  in  finance or
accounting  or  a  professional   certification   in  accounting  or  comparable
experience or background which results in that individual  possessing  financial
sophistication.   Although  not  a  requirement,  our  Audit  Committee  Charter
contemplates  that First  Security  will seek to have at least one member of the
Audit Committee who is considered to be a "financial  expert", as defined by the
Securities and Exchange Commission.

The board of directors has  determined  that First  Security  presently does not
have an "audit committee  financial  expert" serving on its Audit Committee,  as
that term is defined in Item 401 of SEC  Regulation  S-B. The board of directors
believes that the Audit Committee  members meet the  independence and experience
requirements  mandated  by our  Audit  Committee  Charter,  and have  sufficient
knowledge in financial and auditing matters to serve on the committee. The board
of directors will monitor and evaluate its need for an audit committee financial
expert throughout fiscal 2004.


                                  Page 67 of 96

<PAGE>

CODE OF ETHICS: As a banking organization, we have in place various policies and
procedures  designed to promote honest and ethical  conduct  consistent with the
extensive banking laws and regulations that govern our business.  These policies
and  procedures  were last  updated  and adopted in May 2003.  However,  we have
concluded that we did not have in effect a code of ethics as defined in Item 406
of SEC Regulation  S-B, which the SEC adopted in 2003, and we are at the present
time  revising our  policies  and  procedures  so as to be  consistent  with the
criteria set out in the SEC regulations.

ITEM 10. EXECUTIVE COMPENSATION

The information required by this Item is contained under the heading, "Executive
Compensation  and  Certain  Transactions"  in  First  Security  Bancorp's  Proxy
Statement for the Annual Meeting of Shareholders to be held May 18, 2004, and is
incorporated herein by reference. The information under the heading "Equity Plan
Compensation" in Item 5 of this report is incorporated by reference.

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information  required by this Item is contained  under the headings,  "Share
Ownership by Directors,  Executive  Officers and Certain  Beneficial  Owners" in
First Security  Bancorp's Proxy Statement for the Annual Meeting of Shareholders
to be held May 18, 2004, and is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by this Item is contained in First Security  Bancorp's
Proxy  Statement for the Annual Meeting of Shareholders to be held May 18, 2004,
under the headings, "Executive Compensation and Certain Transactions",  "Certain
Transactions  with  Management" and "Employment  Agreements" and is incorporated
herein by reference.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

The following exhibits are filed herein:

3.1  Articles of Incorporation of First Security Bancorp,  Inc. (incorporated by
reference to Exhibit 3.1 of the  Company's  Registration  Statement on Form SB-2
[No. 333-43444]).

3.2  Articles  of  Amendment  to  Articles of  Incorporation  of First  Security
Bancorp,  Inc.  (incorporated  by  reference  to  Exhibit  3.2 of the  Company's
Registration Statement on Form SB-2 [No. 333-43444]).

3.3  Bylaws of First Security Bancorp, Inc.

4.1  Articles of  Incorporation  of First  Security  Bancorp,  Inc. (included in
Exhibit  3.1)  (incorporated  by  reference  to  Exhibit  4.1 of  the  Company's
Registration Statement on Form SB-2 [No. 333-43444]).

4.2  Articles  of  Amendment  of  Articles of  Incorporation  of First  Security
Bancorp,  Inc.  (included in Exhibit 3.2)  (incorporated by reference to Exhibit
4.2 of the Company's Registration Statement on Form SB-2 [No. 333-43444]).

10.1 Employment  Agreement  between First  Security  Bancorp,  Inc. and  John S.
Shropshire   (incorporated  by  reference  to  Exhibit  10.1  of  the  Company's
Registration Statement on Form SB-2 [No. 333-43444]).

10.2 Severance  Agreement for John S.  Shropshire  incorporated  by reference to
Exhibit  10.2 of the  Company's  Quarterly  Report on Form 10-Q for the  quarter
ended June 30, 2003[Commission File No. 000-49781]).

10.3 Contract for  Electronic  Data  Processing  Services  between BSC, Inc. and
First  Security Bank of Lexington,  Inc.  (incorporated  by reference to Exhibit
10.2 of the Company's Registration Statement on Form SB-2 [No.333-43444]).

                                  Page 68 of 96

<PAGE>

10.4 Outsource  Contract between BSC, Inc. and First Security Bank of Lexington,
Inc.  (incorporated  by reference to Exhibit 10.3 of the Company's  Registration
Statement on Form SB-2 [No. 333-43444]).

10.5 Business/Manager License Agreement between Private Business, Inc. and First
Security Bank of Lexington,  Inc.  (incorporated by reference to Exhibit 10.4 of
the Company's Registration Statement on Form SB-2 [No.333-43444]).

10.6  Agreement  for  Administration  of Credit Card  Program  between  Crittson
Financial,  LLC and First  Security Bank of  Lexington,  Inc.  (incorporated  by
reference to Exhibit 10.5 of the Company's  Registration  Statement on Form SB-2
[No. 333-43444]).

10.7 Leases  between  THOMCO,  Inc. and First  Security Bank of Lexington,  Inc.
(incorporated  by  reference  to  Exhibit  10.7  of the  Company's  Registration
statement on Form SB-2 [No. 333-43444]).

10.8 Grounds lease between Cherrywood  Development,  LLC and First Security Bank
of Lexington,  Inc.  (incorporated by reference to Exhibit 10.8 of the Company's
Registration Statement on Form SB-2 [No. 333-43444]).

10.9 First  Security  Bank of  Lexington,  Inc.  Stock Award Plan  (Amended  and
Restated as of March 18, 2003).(incorporated by reference to Exhibit 10.9 to the
Form 10-K of First Security  Bancorp,  Inc. for the year ended December 31, 2002
[Commission File No. 000-49781]).

10.10   Consulting   Services   Support   Corporation    Affiliation   Agreement
(incorporated  by reference to Exhibit 10.10 to the Form 10-K of First  Security
Bancorp,  Inc.  for the  year  ended  December  31,  2002  [Commission  File No.
000-49781]).

10.11 Employment  Agreement between First Security Bancorp,  Inc. and R. Douglas
Hutcherson.

11.1 Statement re: Computation of Per share earnings (included in Note 20 to the
Company's Consolidated Financial Statement included in this report).

21.1 Subsidiaries of First Security Bancorp, Inc.

23.1 Consent of Crowe Chizek and Company LLC.

31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2 Certification pursuant to Rule 13a-14(a)/15d-14(a).

32.1 Certification pursuant to 18 USC Section 1350 - Sarbanes-Oxley Act of 2002.

32.2 Certification pursuant to 18 USC Section 1350 - Sarbanes-Oxley Act of 2002.





                                  Page 69 of 96

<PAGE>

(b) Reports

1.    A current report on Form 8-K dated October 28, 2003, as amended by Form
      8-K/A, was filed with the Securities and Exchange Commission under Item 7.
      "Financial Statements, Pro Forma Financial Information and Exhibits", Item
      9  "Regulation  FD  Disclosure"  and Item 12  "Results of  Operations  and
      Financial Condition" of such form, and was furnished to disclose the press
      release  issued by the  Registrant  on October  28,  2003  announcing  the
      Registrant's results for the third quarter of 2003.

2.    A current report on Form 8-K dated November 10, 2003, was filed with the
      Securities and Exchange  Commission  under Item 7. "Financial  Statements,
      Pro Forma  Financial  Information  and  Exhibits"  and Item 12 "Results of
      Operations  and  Financial  Condition"  of  such  form,  to  disclose  the
      distribution  of a message to  shareholders  which discussed its financial
      results for the quarter ended September 30, 2003.

3.    A current report on form 8-K dated December 1, 2003, was filed with the
      Securities  and Exchange  Commission  to report under Item 5 "Other Events
      and Regulation FD Disclosure" and Item 7 "Financial Statements,  Pro Forma
      Financial  Information  and  Exhibits"  of such  form,  to file the  press
      release  issued by the Registrant on December 1, 2003  announcing  that R.
      Douglas Hutcherson had been named as President and Chief Executive Officer
      of  both  the  Registrant  and  its  subsidiary,  First  Security  Bank of
      Lexington, Inc. effective December 1, 2003.

4.    A current report on Form 8-K dated January 27, 2004, was filed with the
      Securities and Exchange  Commission  under Item 7. "Financial  Statements,
      Pro Forma  Financial  Information  and  Exhibits"  and Item 12 "Results of
      Operations  and  Financial  Condition" of such form, to disclose the press
      release  issued by the  Registrant  on January  27,  2004  announcing  the
      Registrant's  results  for the  quarter  and  year-to-date  periods  ended
      December 31, 2003.

5.    A current report on form 8-K dated January 15, 2004,  was filed with the
      Securities  and Exchange  Commission  to report under Item 5 "Other Events
      and Regulation FD Disclosure"  the resignation of Dr. Ronald J. Saykaly as
      director of First Security Bancorp,  Inc. and the resignation of Andrew C.
      Hils  as  Secretary/Treasurer  of  First  Security  Bancorp,  Inc.  and as
      Executive Vice President and Senior Lending Officer of First Security Bank
      of Lexington, Inc.

6.    A current report on form 8-K dated January 15, 2004, was filed with the
      Securities  and Exchange  Commission  to report under Item 5 "Other Events
      and Regulation FD Disclosure"  the  resignation of John Barlow as director
      of First Security Bancorp, Inc.


ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  information  required by this Item is included in First Security  Bancorp's
Proxy  Statement for the Annual Meeting of  Shareholders to be held May 18, 2004
under the heading,  "Independent  Public Accountants" and is incorporated herein
by reference.





                                  Page 70 of 96

<PAGE>



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 its
behalf by the undersigned, thereunto duly authorized.

FIRST SECURITY BANCORP, INC.

By:  /s/  R. Douglas Hutcherson
President and Chief Executive Officer
Date:  March 24, 2004

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 and on the dates indicated.

<TABLE>
<CAPTION>

<S>                                <C>                                           <C>


        Signature                           Title                                          Date
----------------------------       ----------------------                       --------------------
/s/ Len Aldridge                   Chairman of the Board                             March 24, 2004
----------------
  Len Aldridge

/s/ R. Douglas Hutcherson          President and Chief Executive Officer             March 24, 2004
-------------------------
R. Douglas Hutcherson              (Principal Executive Officer)

/s/ John G. Sullivan               Chief Financial Officer                           March 24, 2004
--------------------
 John G. Sullivan                  (Principal Financial and Accounting Officer)

/s/ Dennis R. Anderson             Director                                          March 24, 2004
----------------------
  Dennis R. Anderson

/s/ Julian E. Beard                Director                                          March 24, 2004
-------------------
 Julian E. Beard

/s/ Harold Glenn Campbell          Director                                          March 24, 2004
------------------------
  Harold Glenn Campbell

/s/ William A. Combs               Director                                          March 24, 2004
--------------------
  William A. Combs

                                   Director
------------------
 A. F. Dawahare

/s/ Kenneth L. Gerson              Director                                          March 24, 2004
---------------------
  Kenneth L. Gerson

/s/ Tommy R. Hall                  Director                                          March 24, 2004
-----------------
  Tommy R. Hall

/s/ Erle L. Levy                   Director                                          March 24, 2004
----------------
 Erle L. Levy

/s/ David R. McCulloch             Director                                          March 24, 2004
----------------------
  David R. McCulloch

/s/ Ira P. Mersack                 Director                                          March 24, 2004
------------------
 Ira P. Mersack

                                   Director
------------------------
 Robert J/ Rosenstein

/s/ Richard S. Trontz              Director                                          March 24, 2004
---------------------
 Richard S. Trontz

/s/ William T. Vennes              Director                                          March 24, 2004
---------------------
 William T. Vennes

/s/ Kathy E. Walker                Director                                          March 24, 2004
-------------------
 Kathy E. Walker

/s/ D. Woodford Webb               Director                                          March 24, 2004
--------------------
 D. Woodford Webb

</TABLE>

                                  Page 71 of 96

<PAGE>

EXHIBIT INDEX

Exhibit No. Description

3.1     Articles of Incorporation of First Security Bancorp, Inc.*
3.2     Articles of Amendment to Articles of Incorporation*
3.3     Bylaws of First Security Bancorp, Inc.*
4.1     Articles of Incorporation of First Security Bancorp, Inc.*
4.2     Articles of Amendment  of Articles of  Incorporation  of First Security
        Bancorp,  Inc. (included in Exhibit 3.2)
4.3     Amended and Restated Bylaws of First Security Bancorp, Inc.*
10.1    Employment Agreement between First Security Bancorp, Inc. and John S.
        Shropshire*
10.2    Severance Agreement for John S. Shropshire
10.3    Contract for Electronic Data Processing  Services  between BSC, Inc.
        and First Security Bank of Lexington, Inc.*
10.4    Outsource Contract between BSC, Inc. and First Security Bank of
        Lexington, Inc.*
10.5    Business/Manager License Agreement between Private Business, Inc. and
        First Security Bank of Lexington, Inc.*
10.6    Agreement for  Administration of Credit Card Program between Crittson
        Financial, LLC and First Security Bank of Lexington, Inc.*
10.7    Leases between THOMCO, Inc. and First Security Bank of Lexington, Inc.*
10.8    Grounds lease between Cherrywood Development, LLC and First Security
        Bank of Lexington, Inc.*
10.9    First Security Bank of Lexington,  Inc. Stock Award Plan (Amended and
        Restated as of March 18, 2003)*
10.10   Consulting Services Support Corporation Affiliation Agreement*
10.11   Employment Agreement between First Security Bancorp, Inc. and R.
        Douglas Hutcherson
11.1    Statement re: Computation of Per share earnings (included in Note 19 to
        the Company's Consolidated Financial Statement included in this report).
21.1    Subsidiaries of First Security Bancorp, Inc.
23.1    Consent of Crowe Chizek and Company LLC
31.1    Certification pursuant to Rule 13a-14(a)/15d-14(a)
31.2    Certification pursuant to Rule 13a-14(a)/15d-14(a)
32.1    Certification pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002
32.2    Certification pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002


*     Incorporated by reference.  See Item 13.



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