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, 2004

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 other jurisdiction of
                  incorporation or organization) |  | (I.R.S. Employer
                     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
issuers revenues for its most recent fiscal year: $12,235,000.

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: $18,259,000 as of March 1,
2005.

State
the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date: 1,560,290 shares of common stock as of March 23, 2005.

DOCUMENTS
INCORPORATED BY REFERENCE

Portions
of the Proxy Statement for the Annual Meeting of Shareholders, scheduled to be held May
17, 2005, 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........................................................................................13

ITEM 3.    LEGAL PROCEEDINGS........................................................................................................13

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

PART II

ITEM 5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
                  
          AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES................14

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  
          CONDITION AND RESULTS OF OPERATION................................................................15

ITEM 7.    FINANCIAL STATEMENTS................................................................................................41

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  
          ACCOUNTING AND FINANCIAL DISCLOSURE............................................................74

ITEM 8A.    CONTROLS AND PROCEDURES....................................................................................74

PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  
          PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT............74

ITEM 10.    EXECUTIVE COMPENSATION.......................................................................................74

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  
            AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS........................75

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................75

ITEM 13.    EXHIBITS...........................................................................................................................75

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES....................................................77

SIGNATURES, POWER OF ATTORNEY, EXHIBIT
INDEX.......................................................................78

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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 may,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) the
inability of our bank subsidiary, First Security Bank of Lexington, Inc. (FS
Bank) to attract and retain key management personnel, (iv) the lack of sustained
growth in the economy in the Lexington, Kentucky area, (v) rapid fluctuations or
unanticipated changes in interest rates, (vi) the inability of FS Bank to satisfy
regulatory requirements and (vii) 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.

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 2004,
2003, 2002, 2001 and 2000 mean our fiscal years ended December 31, 2004, 2003, 2002, 2001
and 2000, respectively.

PART I

ITEM 1.    DESCRIPTION OF BUSINESS

OVERVIEW

First
Security is a Kentucky corporation that was incorporated on February 11, 2000 to 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 and other than FS Bank we have no
material amounts of assets, liabilities or operations.

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.

Between
inception in 1997 and year end 2003, First Security recorded significant growth in its
total assets, its primary earning assets (consisting of federal funds sold, loans and
investment securities) and deposits, which grew to $238.3 million, $224.9 million and
$190.6 million, respectively. Each of these amounts represents the levels achieved in our
history. During 2004, the balances declined to $217.4 million, $204.9 million and $178.9
million, respectively, with the majority of the declines occurring in the last four months
of the year. These declines were caused by the increasingly competitive market in which we
operate and a loss of lending personnel. Although we experienced declines in these
measurements, our net interest income was the highest in the history of the Company. The
increase in this key profitability measurement was the result of significant changes in
the management of our interest rate positions for our primary earning assets and deposits.

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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 and Scott 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 office locations were sold in September 2004, coincident
with a change in the manner in which we offer residential mortgages to our customers.

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 both concentrated and highly competitive.
                    According to data released by the Federal Deposit Insurance Corporation
                    (FDIC), there were 34 bank and thrift institutions with branch
                    offices and deposits located in the Lexington MSA at June 30, 2004. These
                    institutions include a large New York money center bank, three large regional
                    banks and a large locally controlled community bank. These five institutions
                    combined control approximately 54% of the total deposits in the market. These
                    larger institutions have greater resources, higher lending limits and more
                    banking offices. Of the remaining 29 financial institutions operating in this
                    market, FS Bank ranks as the third largest in terms of total deposits according
                    to the FDIC June 30, 2004 deposit data.

According
to the FDIC June 30, 2004 deposit data, bank and thrift deposits in the Lexington MSA grew
by $2.1 billion between June 1997 and June 2004, from $4.4 billion to $6.5 billion.
This growth in deposits occurred primarily in locally controlled community banks, whose
total deposits grew from $1.8 billion to $3.5 billion. Based on this data, at June 30,
2004, we held 2.68% of the total of bank and thrift deposits in the Lexington MSA, as
compared to 3.25% at June 30, 2003.

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 seven year period, a
total of eight community banks have entered the market, thus further increasing
competition.

While
we compete against all financial institutions in this market, we believe that our primary
competitors are the community banks that have offices in this market.

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We
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 provided by
local decision makers. 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 three
                    years. These challenges are the result of a number of factors, including the
                    rapid decline in the interest rate environment that began in 2001, increased
                    competition within our market as discussed above and turnover of key management
                    personnel in 2003 and 2004. These factors have combined to result in a lowering
                    of our historically high growth rates for loans and deposits and a decline in
                    profitability from the record level achieved in 2000. See also Item 6. 
                    Managements Discussion and Analysis of Financial Condition and
                    Results of Operation.

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. Conversely, our loan portfolio has historically been
composed predominately of commercial loans whose interest rates are based on our prime
lending rate.

The
interest rate environment underwent 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.
The result of the rapid declines in the general interest rate environment has been that
our cost of funds declined at a much slower pace than our loan portfolio in the period of
2001 through mid-2004, causing a compression in our net interest income. With the
increases in interest rates that began in July 2004, the opposite has been true, that is,
our yield on our loan portfolio has increased faster than our cost of deposits and other
funding sources. The result is that our net interest income began a strong recovery during
2004, especially in the fourth quarter, and we expect that this recovery will continue for
the immediate future as interest rates continue to increase. See also Item 6. 
Managements Discussion and Analysis of Financial Condition and Results of
Operation.

In
2003, we experienced turnover of key personnel in the positions of president, chief
financial officer and chief operating officer. In 2004, we experienced turnover in the
position of senior lending officer and in other lending officer and branch manager
positions. These changes reflect the intense competitive nature of our market and they
have affected our ability to attract and retain new customers, thus adding to the slowdown
in overall growth. These positions have been filled except for one lending officer
position and we look forward to a resumption of our growth in all areas in 2005.

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, 2004, 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.
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.

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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 conducted the mortgage banking
operations as a department of the bank under the name of First Security Mortgage
Company. The assets used in this department were sold on September 10, 2004 to a
newly formed company owned by Brady Ratliff and Allen Haggard, each former employees of FS
Bank who were employed in this department. Thereafter, we implemented a plan to originate
residential mortgage loans within our retail branch system, as opposed to separate
offices, using our branch and retail staff. We believe that this revised structure will
better enable us to take advantage of personal contact with our customers and by so doing,
will lead to enhanced opportunities for offering increased products and services to our
customers. 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. The ALCO conducts these
management functions within the framework of written policies that FS Banks Board of
Directors has adopted. The ALCO works to maintain a balancing position between rate
sensitive assets and rate sensitive liabilities that is reflective of our expectations for
changes in the general interest rate environment.

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.

Other
Banking Services. Given client demand for increased convenience in accessing banking and
investment services, FS Bank also offers other 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).

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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, 2005, FS Bank employed 53 employees of which 41 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, the convenience and needs of the
communities to be served and the applicants record of compliance with anti-money
laundering regulations. The Federal Reserves consideration of financial resources
generally focuses on capital adequacy, which is discussed below.

With
the required regulatory approvals, 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.

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
|- |  | ---------------------------------------------------------------------------------------------------------------

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|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;Incidental to a financial activity; or
|- |  | ----------------------------------------------------------------------------------

|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;
controlling banks;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Merchant banking through securities or insurance affiliates; and
controlling banks;
|- |  | -----------------------------------------------------------------------------------

|o |  | Insurance company portfolio investments.
controlling banks;
|- |  | -----------------------------------------------------------

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.

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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.

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 both
the Kentucky Department of Financial Institutions (KDFI) and the Federal
Deposit Insurance Corporation (FDIC). KDFI and the FDIC regularly examine FS
Banks operations and have the authority to approve or disapprove mergers, act on the
establishment of branches and similar corporate actions. KDFI and the FDIC also have 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.

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Branching.
                     With prior regulatory approval and/or notices, as applicable, 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 states 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, 2004, our ratio of total capital to risk-weighted assets was
13.8% and our ratio of Tier 1 capital to risk-weighted assets was 12.9%.

In
addition, the Federal Reserve has established minimum leverage ratio guidelines for bank
holding companies. These guidelines have a dual structure for (i) 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, and
(ii) all other bank holding companies, which are typically smaller. We are subject to the
latter, under which we are required to maintain a leverage ratio of at least 4%. At
December 31, 2004, our leverage ratio was 10.8%. 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. See
also the discussion of Financial Condition and Capital Resources in Item 6 
Managements Discussion and Analysis of Financial Condition and Results of Operation.

Page 8 of 79

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FS
Bank experienced significant growth during our first five years of operations, from 1997
to 2001. While we experienced limited growth and some declines in measurements in 2003 and
2004, we plan to emphasize growth in 2005. 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 potential growth, and to enable FS Bank to increase its lending limits, we
borrowed $5 million and infused it into FS Bank on December 30, 2003. Although no
regulatory consent was required for the borrowing and subsequent capital infusion, as a
matter of courtesy, the matter was fully discussed with the regulatory agencies prior to
its adoption.

In
2004, FS Bank paid a dividend of $2 million to First Security, which was used to reduce
the debt to its present balance of $3 million. This dividend was paid from accumulated
retained earnings and while it did reduce the regulatory capital ratios as discussed
above, it did not reduce our legal lending limit, which is determined generally using the
balances of capital stock and additional paid in capital only. No regulatory approval was
required for the payment of this dividend, as the amount was less than the statutory and
regulatory limitations, as discussed below.

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, 2004, 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 repay our loan and 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 9 of 79

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In
connection with our December 30, 2003 borrowing, 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. In
December 2004, we modified the credit agreement to reflect the $2 million principal
reduction and reduced the amount available on the loan to $4 million through December 30,
2005 and $3 million thereafter to the maturity date of December 31, 2006. Since the loan
has already been paid down to the $3 million amount, there are therefore, no further
principal reductions required until its maturity. 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, to 20% of a
banks capital and surplus. In addition to the limitation on the amount of these
transactions, each of the above extensions of credit 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 further restricts First Security from extending or making
arrangements for the extension of credit to any of its directors or executive officers.

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.

Page 10 of 79

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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 and Accurate Credit Transactions Act of 2004, governing the use of provision of
customer information to credit reporting agencies, responding to complaints of inaccurate
information contained in a customers credit bureau database, providing for
procedures to deal with fraud and identity theft and using medical information as a basis
in a decision to grant credit;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 11 of 79

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|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. As an example, the Fair and Accurate Credit Transactions Act of
2004 noted above contains a number of components for which there are presently no related
regulations. 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.

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balance of this page is intentionally left blank)

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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. 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 the Southview Drive branch office from an unrelated party.

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 May 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 $61,700 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.

As
to all leased properties, in the opinion of management, the properties are adequately
covered by insurance.

We
also invest in real estate mortgage loans as a part of our banking business, in the form
of making such loans and in the form of investments made in pooled real estate mortgage
loans issued by various government sponsored entities such as the Federal National
Mortgage Association (FNMA).

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.

(The
balance of this page is intentionally left blank)

Page 13 of 79

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PART II

ITEM 5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
                  SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

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 2004 and 2003, 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    | 
|2004 |                |                     |        |  |        | 
|     | First quarter  |                     | $18.00 |  | $15.90 | 
|     | Second quarter |                     | 18.00  |  | 17.00  | 
|     | Third quarter  |                     | 17.50  |  | 17.00  | 
|     | Fourth quarter |                     | 17.75  |  | 16.75  | 
|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  | 

Trading
volume is considered very light as the stock is thinly traded, as that term is generally
used.

As
of March 1, 2005, First Security had 526 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, 2004 with respect to our
compensation plans under which equity securities of the Company are authorized for
issuance:

|                              |                                                                                           |                                                                              |                                                                                                                                 
|----------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------
|Plan category                 | (a)Number of securities issuedupon the exercise ofoutstanding
options,warrants and rights | (b)Weighted-average exerciseprice of outstanding options,warrants and rights | (c)Number of securities available
for future issuance under equitycompensation plans (excludingsecurities reflected in column a)
|Equity compensation plans     |                                                                                           |                                                                              |                                                                                                                                 
|approved by shareholders (1)  |                                                                                           | 119,650                                                                      |                                                                                                                                 
|Equity compensation plans not |                                                                                          
|approved by shareholders (2)  |                                                                                           | 20,000                                                                       |                                                                                                                                 
|                              |                                                                                           |                                                                              |                                                                                                                                 
|Totals                        |                                                                                           | 139,650                                                                      |                                                                                                                                 
|                              |                                                                                           |                                                                              |                                                                                                                                 

|(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 14 of 79

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

The
following is a discussion of our financial condition at December 31, 2004 and 2003, and
our results of operations for the years ended December 31, 2004, 2003 and 2002. 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 2004, 2003 and
2002. 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.

`2004            2003            2002
                                                -------------    -----------     -----------
Income Statement Data:
     Interest income                                $ 10,738        $ 11,402        $ 13,136
     Interest expense                                  4,411           5,471           6,950
     Net interest income                               6,327           5,931           6,186
     Provision for loan losses                           297             669           1,475
     Securities gains                                    318             694             660
     Gain on sale of loans                               332           1,067             511
     Loss on disposal of premises and fixed assets         -               -              (1)
     Other noninterest income                            847           1,005             929

     Noninterest expense                               6,538           7,282           5,442
     Income tax expense                                  305             126             322
     Net income                                          684             620           1,049

Balance Sheet Data:
     Total assets                                    217,434         238,258         231,086
     Total securities                                 38,748          38,624          43,046
     Loans held for sale                                   -             407           3,390
     Total loans, net of allowance                   150,856         158,733         164,999
     Allowance for loan losses                         1,720           2,379           2,457
     Total deposits                                  178,862         190,640         188,955
     Repurchase agreements and other short-term
          borrowings                                   5,857           8,874           8,211
     FHLB advances                                     8,246          12,512          14,517
     Note payable                                      3,000           5,000               -
     Shareholders' Equity                             20,608          20,112          18,464

Per Share Data:
     Basic earnings per share                         $ 0.44          $ 0.42          $ 0.72
     Diluted earnings per share                         0.44            0.41            0.69
     Book value per share                              13.22           12.90           12.68

Performance Ratios:
     Return on average assets                          0.31%           0.27%           0.47%
     Return on average equity                          3.37%           3.22%           5.86%
     Net interest margin (tax equivalent basis)        3.05%           2.84%           3.11%
     Efficiency ratio                                     84             84               66

Asset qualty ratios:
     Nonperforming assets to total loans               2.02%           2.44%           3.75%
     Net loan charge-offs to average loans             0.60%           0.46%           0.34%
     Allowance for loan losses to total loans          1.13%           1.48%           1.47%

Capital ratios:
     Average shareholders' equity to average total assets
                                                       9.16%           8.36%           8.05%
     Leverage ratio                                    9.78%           8.67%           7.90%
     Tier I risk-based capital ratio                  11.62%          10.85%           9.80%
     Total risk-based ratio                           12.59%          12.10%          11.00%

Other Key Data:
     End-of-period full-time equivalent employees         49              62              57`

Page 15 of 79

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Overview

General.
                     Startup banks typically have unusually high levels of growth for the first
                    three to four years of operation, as the new entity seeks to capture market
                    share. Thereafter, growth slows as the institution matures and reaches a growth
                    rate that is more reflective of the market as a whole. FS Bank experienced rapid
                    growth of its total assets for its first four full years of operation, from late
                    1997 through the end of 2001. As FS Bank began to mature in 2002, growth of
                    total assets slowed. For the two years ended December 31, 2003, annualized
                    growth in totals assets declined to 8.5% per year. For 2004, total assets
                    declined by 8.7%. The following table highlights growth since 2001:

|                     |      |          |      |         
|-------------------- | ---- | -------- | ---- | --------
|                     | 2004 |          | 2003 |         
|Total assets         |      | $217,434 |      | $238,258
|Net loans (1)        |      | 150,856  |      | 159,140 
|Total earning assets |      | 203,978  |      | 223,729 
|Total deposits       |      | 178,862  |      | 190,640 
|Net interest income  |      | 6,327    |      | 5,931   
|Net income           |      | 684      |      | 620     
|Growth rates         |     
|Total assets         |      | -8.7%    |      | 3.1%    
|Net loans (1)        |      | -5.2%    |      | -5.5%   
|Total earning assets |      | -8.8%    |      | 3.5%    
|Total deposits       |      | -6.2%    |      | .9%     
|Net interest income  |      | 6.7%     |      | -4.1%   
|Net income           |      | 10.3%    |      | -40.9%  

(1)    
          Includes loans held for sale and reduced by the allowance for loan losses.

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. There were no additional
shares issued in 2004.

Growth
has also been supported by earnings, although to a lesser extent, as FS Bank 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 $2,736,000 at December 31, 2004.
No dividends have been paid on our common stock, as all earnings have been retained to
support growth.

Financial
Condition. Between June 2002 and June 2004, the growth of total deposits in our market
area was approximately 9% per year according to data released by the FDIC comparing total
deposits as of June 30, 2004, 2003 and 2002. Total deposits of FS Bank increased by
slightly less than 1% in 2003, and declined by 6.5% in 2004.

Since
growth in deposits is utilized to fund growth in loans, and since loans declined during
2003 and 2004, this lower growth in total deposits in 2003 and the decline of deposits in
2004 reflects the reduction in the need for funding sources. The decline in loans in both
2003 and 2004 is attributable to the increased competitive environment and turnover of key
management personnel, particularly lending officers, as discussed further below.

Since
June 30, 2002, 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. This increased competitive
environment has resulted in some loss of both loans and deposits and has caused us to
become more aggressive in establishing interest rates for both loans and deposits in order
to lessen the loss of our loan and deposit volumes.

Page 16 of 79

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In
2003, we experienced turnover of key personnel in the positions of president, chief
financial officer and chief operating officer. In 2004, we experienced turnover in the
position of senior lending officer and in other lending officer and branch manager
positions. These changes reflect the intense competitive nature of our market and they
have affected our ability to attract and retain new customers, thus adding to the slowdown
in overall growth of loans in 2003 and to the decline in loans in 2004. 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 both 2003 and 2004. As of the
date of this report, all positions have been filled, with the exception of one lending
position, and we are actively seeking an individual to fill that role. The existence of
unfilled positions, especially in the lending area, may have an impact on the ability of
FS Bank to meet its goals for loan growth in 2005.

During
both 2003 and 2004, FS Bank sought to increase the proportion of its variable rate loans
in its loan portfolio so as to take advantage of the widely anticipated increases in the
prime lending rate. The proportion of variable rate loans to total loans was increased
from 39.2% at December 31, 2002 to 56.8% at December 31, 2003 and to 67.1% at December 31,
2004.

During
2004, FS Bank implemented a funding strategy designed to reduce interest costs composed of
the following elements:

|o |  | Reduce the balances of certificates of deposit through more aggressive control of pricing,
which also resulted in reductions in the balances of federal funds sold in excess of our
liquidity needs. This plan element enhanced net interest income, as the rates customarily
paid on certificates of deposit for most maturities are higher than the rates earned on
federal funds sold.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Reduce our dependency on certificates of deposit as the primary funding source by
obtaining a larger proportion of deposits in the form of money market accounts. The
reasons for this plan element are three-fold:
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|i) |  | In the historically low interest rate environment of 2004, customers sought to
               maximize the interest rate they earned on certificates of deposit by extending
               terms. This had the effect of compressing net interest income, margins and
               spreads because of the higher interest rates and associated interest expense.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ii) |  | In mid-2004, we significantly enhanced the interest rates paid on money market
               accounts so as to further reduce both our dependency on certificates of deposit
               and the interest cost to FS Bank, as the cost of money market accounts is
               substantially lower than the cost of certificates of deposit.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|iii) |  | The shifting of deposits from fixed rate term certificates of deposits to
               variable rate immediately repriceable money market accounts better matches the
               loan portfolio in repricing relationships.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These
strategies resulted in a substantial improvement in net interest income as more fully
discussed below in Results of Operations.

At
year end 2004, the financial condition of FS Bank and First Security was strong, as
presented in the following table:

| |                                   | 
| | --------------------------------- | 
| | Indicator                         | 
| | Equity Capital to Total Assets    | 
| | Total Risk Based Capital to Risk- | 
| | weighted Assets                   | 
| | Cash Equivalents to Total Assets  | 
| | Investments to Total Assets       | 
| | Loans (net) to Total Deposits     | 

As
is shown above, FS Bank and First Security are well capitalized, and FS Bank is positioned
with a strong level of liquid assets which enable it to fund loan growth in 2005, with
approximately 26% of its total asset base available for redeployment as needed.

Page 17 of 79

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Results
of Operations. First Securitys net interest income increased from $5.9 million
in 2003 to $6.3 million in 2004, for an increase of $.4 million, or 6.7%. This
increase was a result of several factors, including more effective management of the
funding of deposits and other sources of liquidity, coupled with increases in loan yields
that resulted from increases in the prime rate that occurred during the last six months of
the year. This increase in net interest income was achieved even though the average
balance of interest-bearing assets and liabilities was moderately lower in 2004 than in
2003.

In
2003, our net interest income declined from $6.2 million in 2002 to
$5.9 million. 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 $.8 million, respectively, reflecting lower yields, while interest expense declined by
$1.5 million, for a net decline in net interest income of $257,000, measured without
regard to tax-equivalent adjustments.

For
2004, First Security recorded a provision for loan losses in the amount of $297,000, as
compared to $669,000 for 2003 and $1,472,000 in 2002. Net loans charged off were $956,000
in 2004, as compared to $749,000 in 2003 and $551,000 in 2002. The majority of charge offs
in 2004 relate to loans to a troubled franchise operator which first became problem
loans and were significantly reserved for in 2002, while the majority of charge offs in 2003
relate to a small manufacturer.

Noninterest
income declined from $2.8 million in 2003 to $1.5 million in 2004. Much of the decline was
due to mortgage loan originations and sales during 2004, which contributed $332,000 in
gains during the year, as compared to $1.1 million in 2003. In 2003, noninterest income
increased from $2.1 million to $2.8 million, attributable to increases in mortgage loan
originations and gains on sales, which increased from $511,000 in 2002, to $1.1 million in
2003. First Security also recorded $318,000 in gains on the sales of securities
available-for-sale in 2004 as compared to $694,000 in 2003 and $660,000 in 2002.

Noninterest
expense decreased approximately $744,000 in 2004. Noninterest expense is composed of
salaries and employee benefits, equipment and occupancy expenses and other operating
expenses. Of this total decrease, approximately $333,000 related to the sale of certain
assets and reduction of staff previously associated with the mortgage company department.
The balance of the decrease was in the amount of $411,000 and is primarily attributable to
a decrease of $241,000 in legal and professional fees. Noninterest expenses increased from
$5.4 million in 2002 to $7.3 million in 2003, primarily as a result of the purchase of the
mortgage loan origination business, which was acquired in 2002.

First
Security decreased its number of full-time equivalent employees from 62.0
December 31, 2003 to 49.5 at December 31, 2004. The majority of the decrease is
attributable to the sale of assets used in the mortgage loan origination department and
its associated reduction in staff. During 2004, we experienced an overall decrease in
compensation and employee benefit expense of approximately $475,000. Of this decrease,
approximately $295,000 related to the mortgage loan origination department.

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. In response to a lack of growth in loans as
anticipated in 2004, FS Bank paid a dividend of $2 million to First Security, which in
turn applied this amount to the note, bringing its balance to $3 million at December 31,
2004.

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.

Page 18 of 79

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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, 2004 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.

Results
of Operations

For
2004, we experienced a decline in our loans and a slowing in the growth in other earning
assets and deposits. We also experienced decreased operating expenses. These factors
combined to result in an increase in net income. Net income for the year ended
December 31, 2004 was $684,000, as compared to $620,000 for 2003 and $1,049,000 in
2002. The following is a more detailed discussion of results of our operations for the
years ended December 31, 2004 and 2003.

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, 2004, we recorded net interest income of $6,327,000 which resulted in a
tax-equivalent net interest margin of 3.05% for the year, as compared to $5,931,000 and
2.84% for 2003 and $6,186,000 and 3.11% for 2002, respectively.

In
2003 and 2004, there were significant factors affected the changes in net interest margin
and net interest income. In 2003, a substantial amount of fixed rate loans were repaid or
renegotiated at lower rates as the prime rate declined in June 2003. At the same time, we
sold a substantial amount of available-for-sale securities at gains, which indicates that
the yields were above market, and reinvested at lower rates. Loan balances were only
slightly lower. In 2004, the prime rate increased by 125 basis points between July and
December. These interest rate increases had a positive impact on our net interest income
for 2004, as a significant portion of our loan portfolio is composed of adjustable rate
loans tied primarily to our prime lending rate which increased in lock-step with the
increases in the federal funds rate.

Page 19 of 79

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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, 2004 (dollars in thousands):

|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|------------------------------------ | --------------- | -------- | ------------ | ------- | --------------- | -------- | ------------ | ----- | --------------- | -------- | ------------
|                                     | 2004            |          | 2003         |         | 2002           
|                                     |                 |          |              |         |                
|                                     | AverageBalances | Interest | Yields/Rates |         | AverageBalances | Interest | Yields/Rates |       | AverageBalances | Interest | Yields/Rates
|Interest-earning assets:             |                 |          |              |         |                 |          |              |       |                 |          |             
|Loans (1, 2)                         |                 |          | $            | 159,718 |                 | $        | 9,180        |       |                 | 5        | .75%        
|Securities available-for-sale:       |                 |         
|Taxable                              |                 |          |              | 38,355  |                 |          | 1,416        |       |                 | 3        | .72%        
|Tax exempt (3)                       |                 |          |              | 1,169   |                 |          | 61           |       |                 | 5        | .02%        
|Federal funds sold and other         |                 |          |              | 9,201   |                 |          | 102          |       |                 | 1        | .00%        
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total interest-earning assets        |                 |          |              | 208,443 |                 |          | 10,759       |       |                 | 5        | .14%        
|Nonearning assets                    |                 |          |              | 13,074  |                 |          | 14,552       |       |                 |          | 12,637      
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total assets                         |                 |          | $            | 221,517 |                 | $        | 230,224      |       |                 | $        | 222,405     
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Interest-bearing liabilities:        |                 |         
|Interest-bearing deposits:           |                 |         
|Interest checking                    |                 |          | $            | 19,635  |                 | $        | 126          |       |                 | 0        | .64%        
|Savings and money                    |                 |         
|market                               |                 |          |              | 27,606  |                 |          | 393          |       |                 | 1        | .39%        
|Certificates of deposit              |                 |          |              | 106,552 |                 |          | 3,181        |       |                 | 2        | .97%        
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total interest-bearing deposits      |                 |          |              | 153,793 |                 |          | 3,701        |       |                 | 2        | .39%        
|Securities sold under                |                 |         
|agreements to repurchase             |                 |          |              | 7,483   |                 |          | 51           |       |                 | 0        | .67%        
|Federal funds purchased              |                 |          |              | 607     |                 |          | 15           |       |                 | 2        | .30%        
|Federal Home Loan Bank               |                 |         
|advances                             |                 |          |              | 10,126  |                 |          | 431          |       |                 | 4        | .25%        
|Note Payable                         |                 |          |              | 5,000   |                 |          | 213          |       |                 | 4        | .26%        
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total interest-bearing liabilities   |                 |          |              | 177,010 |                 |          | 4,411        |       |                 | 2        | .48%        
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Noninterest-bearing liabilities:     |                 |         
|Demand deposits                      |                 |          |              | 23,162  |                 |          | 22,617       |       |                 |          | 15,930      
|Other liabilities                    |                 |          |              | 1,053   |                 |          | 3,575        |       |                 |          | 1,053       
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total liabilities                    |                 |          |              | 201,225 |                 |          | 210,977      |       |                 |          | 204,501     
|Stockholders' equity                 |                 |          |              | 20,293  |                 |          | 19,247       |       |                 |          | 17,904      
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Total liabilities and                |                 |         
|stockholders' equity                 |                 |          | $            | 221,517 |                 | $        | 230,224      |       |                 | $        | 222,405     
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Net interest income - tax equivalent |                 |          |              | $       | 6,348           |          |              | $     | 6,126           |          | $           
|Adjustment for tax-equivalent income |                 |          |              |         | (21             | )        |              | (195  | )               |          |             
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Net interest income as reported      |                 |          |              | $       | 6,327           |          | $            | 5,931 |                 |          |             
|                                     |                 |          |              |         |                 |          |              |       |                 |          |             
|Net interest spread (4)              |                 |          |              |         | 2.66%           |          |              | 2.42% |                 |          |             
|Net interest margin (5)              |                 |          |              |         | 3.05%           |          |              | 2.84% |                 |          |             

|(1) | Average balances for nonperforming loans are included in the above amounts.
|--- | ---------------------------------------------------------------------------

|(2) | Loan fees included in interest income were $479,000, $575,000 and $816,000 in
                    2004, 2003 and 2002, 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-earning assets and the cost of total     interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Net interest margin is calculated as the net interest income  tax
          equivalent divided into the total interest-earning assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

Several
factors contributed to the increase in net interest income and net interest margin for
2004 when compared to the same period in 2003, including the following:

|o |  | Our cost of funding for interest-bearing liabilities declined 48 basis points from 2.96%
in 2003 to 2.48% in 2004. Several factors contributed to this decline:
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | There were a moderate number and amount of certificates of deposit that were issued in
1999 and 2000 for periods as long as five years and issued at rates as high as 7% that
were redeemed or renewed in 2004 at much lower interest rates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | In July 2004, FS Bank implemented an enhanced money market pricing structure that was
designed to reduce the proportion of certificates of deposit to total funding sources.
Since money market interest rates were well below the average rate paid on certificates of
deposit, the effect was to reduce the average cost of deposits.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 20 of 79

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| | o | At various times in the last seven months of 2004, FS Bank utilized federal funds
borrowing lines at other commercial banks. During 2004, the borrowing rate on these lines
was in a range of 1.23% to 2.19%. Since these rates were well below the average rate paid
on certificates of deposit, the effect was to reduce the average cost of funding
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Our loan yields, including fees, declined from 6.13% for 2003 to 5.75% for 2004, a decline
of 38 basis points. The primary reasons for this year to year decline are:
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | During the first six months of 2004, a substantial amount of older fixed rate loans
matured, were paid off or were renegotiated to lower interest rates. In addition, as
discussed elsewhere herein, we continued in our efforts to increase the proportion of
variable rate loans in the loan portfolio in anticipation of interest rate increases, even
though variable rate loans generally have lower yields than fixed rate loans, which are
typically made for longer terms.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Fees charged on loans and included in the calculation of yields declined from $575,000 in
2003 to $479,000 in 2004.
| | - | -------------------------------------------------------------------------------------------------------------------

| | o | Offsetting the above factors were the increases in FS Banks prime lending rate
during 2004, from 4.00% at June 30, 2004 to 5.25% at December 31, 2004. These increases,
coupled with our efforts to increase the proportion of variable rate loans in the loan
portfolio resulted in an increase in the overall interest yields (excluding fees) as shown
below, as measured as of December 31 of the year indicated:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |               |  |          |  |        |  |          |  |       | 
| | ------------- |  | -------- |  | ------ |  | -------- |  | ----- | 
| | 2004          |  | 2003     | 
| |               |  |          | 
| | Amount        |  | Yield    |  | Amount |  | Yield    | 
| | Fixed Rate    |  | $ 50,228 |  | 6.64%  |  | $ 69,681 |  | 6.94%
| | Variable Rate |  | 102,348  |  | 5.33%  |  | 91,431   |  | 4.44%
| |               |  |          |  |        |  |          | 
| | Total         |  | $152,576 |  | 5.76%  |  | $161,112 |  | 5.52%
| |               |  |          |  |        |  |          | 

|o |  | Our interest income on investment securities increased during 2004 as a result of both
increases in average balances and increases in yields. During 2004, as in 2003 and 2002,
we sold a substantial portion of our securities at gains and reinvested at higher rates.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Several
factors contributed to the decline in net interest income and 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 approximately $100
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 $30.3 million to $69.7 million. These fixed rate loans had a weighted yield
of approximately 7.22% at December 31, 2002, as compared to 6.94% 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 approximately $66
million, were on floating rates tied to FS Banks prime lending rate. During 2003,
these loans increased by approximately $25 million to $91.4 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 21 of 79

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|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.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rate
and Volume Analysis. As noted above, our net interest income increased by $222,000 on a
tax-equivalent basis between the years ended December 31, 2004 and 2003. 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):

|                                   |                       |        |                       |      |        |     |     
|---------------------------------- | --------------------- | ------ | --------------------- | ---- | ------ | --- | ----
|                                   | 2004 Compared to 2003 |        | 2003 Compared to 2002 |     
|                                   | Rate                  | Volume | Net                   | Rate | Volume | Net |     
|Interest-earning assets:           |                       |        |                       |      |        |     |     
|Loans                              |                       |        | $                     | (613 | )      | $   | (288
|Securities available-for-sale      |                       |       
|Taxable                            |                       |        |                       | 318  |        |     | 256 
|Tax exempt                         |                       |        |                       | (54  | )      |     | (459
|Federal funds sold and other       |                       |        |                       | 20   |        |     | (18 
|                                   |                       |        |                       |      |        |     |     
|Total interest-earning assets      |                       |        |                       | (329 | )      |     | (509
|                                   |                       |        |                       |      |        |     |     
|Interest-bearing liabilities:      |                       |       
|Interest-bearing deposits:         |                       |       
|Interest checking                  |                       |        |                       | (15  | )      |     | 5   
|Savings and money market           |                       |        |                       | 106  |        |     | 58  
|Certificates of Deposit            |                       |        |                       | (719 | )      |     | (609
|                                   |                       |        |                       |      |        |     |     
|Total interest-bearing deposits    |                       |        |                       | (628 | )      |     | (546
|Securities sold under agreements   |                       |       
|to repurchase                      |                       |        |                       | (7   | )      |     | 20  
|Federal funds purchased            |                       |        |                       | 10   |        |     | 4   
|Note payable                       |                       |        |                       | --   |        |     | 213 
|Federal Home Loan Bank             |                       |       
|advances                           |                       |        |                       | 19   |        |     | (145
|                                   |                       |        |                       |      |        |     |     
|Total interest-bearing liabilities |                       |        |                       | (606 | )      |     | (454
|                                   |                       |        |                       |      |        |     |     
|Net interest income                |                       |        | $                     | 277  |        | $   | (55 
|                                   |                       |        |                       |      |        |     |     

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 $297,000, $669,000 and
$1,472,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

Page 22 of 79

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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, 2004 when compared to the
year ended December 31, 2003, and the decrease in the provision for loan losses for the
year ended December 31, 2003 as compared to the year ended December 31, 2002 were
primarily due to the following factors:

|o |  | In 2002, management made a concerted effort to improve the quality of the loan portfolio
by adopting a revised loan policy coupled with revised and more stringent underwriting
guidelines. Based on managements evaluation, this resulted in a substantial
improvement in the overall credit quality of new loans added to the portfolio in 2003 and
2004.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | In 2003 and 2004, management continued to critically evaluate the loan portfolio following
the methodology implemented in late 2002. The previous recognition of provision expense in
2002 and 2003, coupled with new loans that were of substantially higher credit quality,
based on managements evaluation, resulted in lowered provisions expense in both 2003
and 2004.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | In 2004, management continued its efforts to collect or eliminate poor quality loans
extended in prior years.
|- |  | -------------------------------------------------------------------------------------------------------------

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 and annual periods. Service charges on deposit
accounts and other noninterest income generally reflect FS Banks growth, while fees
from the origination of commercial and mortgage loans will often reflect market conditions
and fluctuate from period to period. The opportunities for recognition of gains on sales
of loans and gains on sales of investment securities may also vary widely from period to
period.

The
following is the makeup of our noninterest income for the years ended December 31, 2004
and 2003 (dollars in thousands):

|                                    |        |      |        |        
|----------------------------------- | ------ | ---- | ------ | -------
|                                    | Change
|                                    |       
|                                    | 2004   | 2003 | Amount | Percent
|Noninterest income:                 |        |      |        |        
|Service charges on deposit accounts |        |      | $      | 624    
|Net gains on sales of loans         |        |      |        | 332    
|Net gains on sales of securities    |        |      |        | 318    
|Other noninterest income            |        |      |        | 223    
|                                    |        |      |        |        
|Total                               |        |      | $      | 1,497  
|                                    |        |      |        |        

The
decline in service charge income for 2004 was primarily due to lower returned check fees
for business accounts, which declined by $58,000, and general activity and service
charges, which declined by $11,000. Other service charges and fees increased by $14,000.

Net
gains on sales of loans 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. In 2004, net gains on sales of loans declined as a result of
two factors:

Page 23 of 79

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|o |  | During 2003, a refinancing boom existed in the United States, evidenced by
record numbers of borrowers refinancing their home loans in order to take advantage of the
historically low long term interest rates. That boom slowed during the fourth quarter of
2003, and remained so throughout 2004. This slowdown affected FS Bank in its mortgage
lending and sales of loans into the secondary market, as shown in the above table.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | On September 10, 2004, FS Bank sold certain assets it used in its mortgage loan
origination department efforts to First Mortgage Company, LLC, an entity formed by Brady
Ratliff and Allen Haggard, who were employed by FS Bank in its mortgage loan department.
That sale resulted in no gains on sales of loans being recognized in the fourth quarter of
2004, although FS Bank retained the ability to originate and sell secondary market
residential loans and in 2005, hired staff to perform this function.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Also
included in noninterest income for the year ended December 31, 2004 were net gains of
approximately $318,000 realized from the sale of approximately $11.1 million of
available-for-sale securities. This compares to net gains of approximately $694,000
realized from the sale of approximately $11.6 million of available-for-sale
securities in 2003. The decline in net gains from sales of securities is the result of the
rising interest rate environment, which erodes the value of longer term fixed rate
investments, and a lesser amount of securities being sold in 2004.

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

|                                    |        |      |        |        
|----------------------------------- | ------ | ---- | ------ | -------
|                                    | Change
|                                    |       
|                                    | 2003   | 2002 | Amount | Percent
|Noninterest income:                 |        |      |        |        
|Service charges on deposit accounts |        |      | $      | 711    
|Net gains on sales of loans         |        |      |        | 1,067  
|Net gains on sales of securities    |        |      |        | 694    
|Other noninterest income            |        |      |        | 294    
|                                    |        |      |        |        
|Total                               |        |      | $      | 2,766  
|                                    |        |      |        |        

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 $11.6 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.

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Page 24 of 79

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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, 2004 and 2003 (dollars in thousands):

|                                   |        |  |      |      
|---------------------------------- | ------ |  | ---- | -----
|                                   | Change
|                                   |       
|                                   | 2004   |  | 2003 |      
|Noninterest expense                |        |  |      |      
|Salaries and employee benefits     |        |  | $    | 3,024
|Equipment and occupancy            |        |  |      | 1,137
|Data processing                    |        |  |      | 547  
|Legal and professional fees        |        |  |      | 422  
|Advertising                        |        |  |      | 209  
|Bankshares tax                     |        |  |      | 176  
|Supplies and printing              |        |  |      | 69   
|Loss on sales of foreclosed assets |        |  |      | --   
|Loss on write off of intangibles   |        |  |      | 100  
|Amortization of intangibles        |        |  |      | 10   
|Other noninterest expense          |        |  |      | 844  
|                                   |        |  |      |      
|Total                              |        |  | $    | 6,538
|                                   |        |  |      |      

Total
noninterest expenses declined in 2004 in the amount of $744,000 composed primarily of
declines in salaries and employee benefits and legal and professional fees. All other
expenses declined by an aggregate amount of $34,000. The changes in total noninterest
expenses were due primarily to the following factors:

|o |  | Salaries and employee benefits declined by $295,000 as a result of the sale of certain
assets used in the mortgage loan department on September 10, 2004. The agreement for sale
provided that individuals employed in this department would be automatically hired by the
purchaser. As a result, the salaries and employee benefits for those individuals were
effectively assumed by the purchaser as of September 1, 2004. The remaining decline of
$180,000 is primarily attributable to the amounts paid our former president pursuant to
his termination agreement in the approximate amount of $90,000 and the $50,000 sign on
bonus paid to our current president and chief executive officer in connection with his
employment agreement.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Legal and professional fees declined $235,000. Of this decline, $48,000 is attributable to
First Security and $187,000 is attributable to FS Bank. Legal and professional fees in
2003 were substantially higher and related to strategic planning at First Security and
problem loan administration at FS Bank.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | The loss of $100,000 relates to the write off of intangibles acquired in connection with
the 2002 purchase of assets used in the mortgage loan department and sold in September
2004.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | The 2003 loss on the sale of foreclosed and repossessed assets of $72,000 relates to the
liquidation of foreclosed assets that were acquired in 2002.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | The decline of $56,000 in supplies and printing expenses is primarily attributable to the
implementation of tighter expense controls implemented in 2004.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Our
efficiency ratio (ratio of noninterest expense to the sum of net interest income and
noninterest income) was 83.5% in 2004 as compared to 83.7% in 2003. We use the efficiency
ratio as a way to analyze the amount of expense that is incurred to generate a dollar of
revenue.

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Page 25 of 79

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

|                                   |        |        |      |       
|---------------------------------- | ------ | ------ | ---- | ------
|                                   | Change
|                                   |       
|                                   | 2003   |        | 2002 |       
|Noninterest expense                |        |        |      |       
|Salaries and employee benefits     |        | $3,499 |      | $2,711
|Equipment and occupancy            |        | 1,161  |      | 953   
|Data processing                    |        | 505    |      | 262   
|Legal and professional fees        |        | 657    |      | 280   
|Advertising                        |        | 209    |      | 167   
|Bankshares tax                     |        | 177    |      | 103   
|Supplies and printing              |        | 125    |      | 107   
|Loss on sales of foreclosed assets |        | 72     |      | --    
|Amortization of intangibles        |        | 14     |      | 10    
|Other noninterest expense          |        | 863    |      | 849   
|                                   |        |        |      |       
|Total                              |        | $7,282 |      | $5,442
|                                   |        |        |      |       

Total
noninterest expenses increased in 2003 in the amount of $1,840,000. The changes in total
noninterest expenses were due primarily to the following factors:

|o |  | The full year operation of the mortgage origination and sales department increased
noninterest expenses in the following areas:
|- |  | -------------------------------------------------------------------------------------------------------------------------------

| |                                |         
| | ------------------------------ | --------
| | Salaries and employee benefits | $394,000
| | Equipment and occupancy        | 48,000  
| | Other noninterest expenses     | 57,000  

|o |  | Salaries and employee benefits also increased by approximately $140,000 relating to the
amounts paid our former president pursuant to his termination agreement in the approximate
amount of $90,000 and the $50,000 sign on bonus paid to our current president and chief
executive officer in connection with his employment agreement.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | The data processing expenses increased as a result of 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 |  | Legal and professional fees increased by $377,000. Of this increase, approximately
$180,000 related to strategic planning and evaluation of strategic alternatives by our
Board of Directors and approximately $156,000 related to legal and professional fees
involving administration of problem loans.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | The increase in bankshares tax relates to the calculation of the taxable capital over a
five year historical period. Our capital was significantly lower in earlier years, and
thus, by eliminating a lower balance year from the calculation, the taxable base
increases.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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.

Page 26 of 79

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Income
Taxes. The effective income tax expense rate for the year ended December 31, 2004 was
approximately 30.8% compared to 23.5% and 6.2% for the years ended December 31, 2003 and
2002, respectively. This rate of taxation compares to the statutory rate of 34%. The
increase in the effective rate is solely attributable to the significant reduction in tax
exempt income resulting from the sales of tax exempt investment securities in 2003
undertaken in order to reduce our market risk on long term fixed rate investments.

Quarterly
Information. The following is a summary of quarterly balance sheet and results of
operations information for 2004 (dollars in thousands, except per share data).

`4th Quarter     3rd Quarter    2nd Quarter    1st Quarter
Selected balance sheet data at quarter end:
     Total assets                                  $ 217,434       $ 214,010      $ 217,208      $ 226,813
     Total loans (excluding loans held for sale)     152,576         156,629        158,801        161,201
     Allowance for loan losses                        (1,720)         (1,796)        (2,298)        (2,384)
     Securities available-for-sale                    33,748          36,265         42,041         39,516
     Total deposits                                  178,862         170,646        173,483        181,256
     Securities sold under agreements to repurchase    5,857           8,264          8,291          7,563
     Note Payable                                      3,000           5,000          5,000          5,000
     Advances from FHLB                                8,246           8,821          9,389         11,953
     Total stockholders' equity                       20,608          20,338         19,890         20,399

Balance sheet data, quarterly averages:
     Total assets                                    210,659         218,485        225,044        230,628
     Total loans (excluding loans held for sale)     154,838         158,540        161,575        161,079
     Allowance for loan losses                        (1,750)         (2,122)        (2,297)        (2,374)
     Securities available-for-sale                    35,006          40,015         42,685         39,559
     Total deposits                                  170,322         174,067        181,013        185,905
     Securities sold under agreements to repurchase    5,578           8,394          8,122          7,374
     Note Payable                                      5,000           5,000          5,000          5,000
     Advances from FHLB                                8,438           9,011         10,244         12,140
     Total stockholders' equity                       20,535          20,395         19,999         20,298

Income data:
     Interest income                                 $ 2,682         $ 2,639        $ 2,755        $ 2,662
     Interest expense                                 (1,036)         (1,054)        (1,107)        (1,214)
                                                     -------         -------        -------        -------
     Net interest income                               1,646           1,585          1,648          1,448
     Provision for loan losses                            -             (222)           (50)           (25)
                                                     -------         -------        -------        -------
     Net interest income after provision
          for loan losses                              1,646           1,363          1,598          1,423
     Noninterest income                                  225             361            396            515
     Noninterest expense                              (1,456)         (1,735)        (1,698)        (1,649)
                                                     -------          ------        -------        -------
     Income before income taxes                          415             (11)           296            289
     Income taxes                                       (134)             10            (93)           (88)
                                                     -------        --------        -------        -------
     Net income                                      $   281        $     (1)       $   203        $   201
                                                     =======        ========        =======        =======

Per share data:
     Earnings - basic                                   0.18               -           0.13           0.13
     Earnings - diluted                                 0.18               -           0.13           0.13
     Book value at quarter end                       $ 13.17         $ 13.08        $ 12.83        $ 13.02

     Weighted average shares - basic               1,558,690       1,558,690      1,558,690      1,558,690
     Weighted average shares - diluted             1,564,251       1,563,304      1,561,283      1,563,041
     Common shares outstanding                     1,558,690       1,558,690      1,558,690      1,558,690`

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The
quarterly provision for loan losses represents a charge to earnings necessary to establish
the 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
as of the end of each period. During 2004, we followed the same methodology for each
quarter and determined that no provision was needed for the fourth quarter of 2004.

Financial
Condition

Our
consolidated balance sheet at December 31, 2004 reflects a modest decline since December
31, 2003. Total assets declined by $20.9 million from $238.3 million at December 31, 2003
to $217.4 million at December 31, 2004. That decline was made up primarily of
declines of $6.6 million in federal funds sold, $4.9 million in investment securities and
$8.5 million in gross loans. Total deposits declined by $11.8 million during 2004.

Loans.The composition
of our loan portfolio at December 31, 2004, 2003, 2002, 2001
  and 2000 is summarized as follows (dollars in thousands):

|                               |      |           |      |           |     
|------------------------------ | ---- | --------- | ---- | --------- | ----
|                               | 2004 |           | 2003 |           | 2002
|                              
|Commercial                     |      | $  58,125 |      | $  49,165 |     
|Mortgage loans on real estate: |     
|Commercial                     |      | 40,087    |      | 61,669    |     
|Residential                    |      | 10,069    |      | 14,882    |     
|Construction                   |      | 26,299    |      | 16,990    |     
|Home equity                    |      | 11,637    |      | 11,488    |     
|Consumer                       |      | 5,531     |      | 6,035     |     
|Credit card                    |      | 828       |      | 883       |     
|                               |      |           |      |           |     
|Total Gross Loans              |      | $152,576  |      | $161,112  |     
|                               |      |           |      |           |     

The
composition of our loan portfolio underwent only minor changes in 2003, with total and
relative balances similar. In 2004, that composition changed significantly as a result of
increased emphasis in commercial loans and in construction loans. The decline in
commercial loans secured by real estate is largely attributable to less than four large
loans that were paid off during the year.

The
following table classifies our fixed and variable rate loans at December 31, 2004
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):

|                                       |                              |            |             |          
|-------------------------------------- | ---------------------------- | ---------- | ----------- | ---------
|                                       | Amounts at December 31, 2004 |            | Percentages
|                                       |                              |            |            
|                                       | Fixed                        |            | Variable    |          
|                                       |                              |            |             |          
|Based on contractual repricing dates:  |                              |            |             |          
|Daily floating rate                    |                              | $       -- |             | $  97,922
|Reprice within one year                |                              | 18,544     |             | 883      
|Reprice in one year through five years |                              | 28,491     |             | 3,543    
|Reprice after five years               |                              | 3,193      |             | --       
|                                       |                              |            |             |          
|Totals                                 |                              | $50,228    |             | $102,348 
|                                       |                              |            |             |          
|Percentage of total portfolio          |                              | 33.0%      |             | 67.0%    
|                                       |                              |            |             |          

Page 28 of 79

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In
2003, we adopted a strategic loan portfolio management strategy that recognized the strong
likelihood of increases in the interest rate environment. In order to take advantage of
increases in the interest rate environment, we sought to increase the proportion of
immediately repriceable loans and reduce the proportion of fixed rate loans and to reduce
the repricing time frames for all loans. That strategy was followed throughout 2004 and
resulted in a substantial change in the characteristics of our loan portfolio, summarized
as follows:

|                                       |                   |           |                   |       
|-------------------------------------- | ----------------- | --------- | ----------------- | ------
|                                       | December 31, 2004 |           | December 31, 2003
|                                       |                   |           |                  
|Daily floating rate                    |                   | $  97,922 |                   | 64.2% 
|Reprice within one year                |                   | 19,427    |                   | 12.7% 
|Reprice in one year through five years |                   | 32,034    |                   | 21.0% 
|Reprice after five years               |                   | 3,193     |                   | 2.1%  
|                                       |                   |           |                  
|Totals                                 |                   | $152,576  |                   | 100.0%
|                                       |                   |           |                  

We
believe that in the current and expected rising interest rate environment this strategy
will enhance the overall yield in our loan portfolio and will have a positive impact on
our net interest income and net interest margin.

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, 2004, we had $2,969,000 in loans on nonaccrual compared
to $3,605,000 at December 31, 2003.

There
were approximately $10,000 in other loans at December 31, 2004 which were
90 days past due and still accruing interest, as compared to $214,000 at December 31,
2003. At December 31, 2004, we had $1,844,000 in restructured loans as compared to
$3,092,000 at December 31, 2003. The restructured loans consist of several loans to a
troubled franchise operator which, during 2003, were reclassified to nonaccrual. In 2004,
the franchise operator filed bankruptcy. In addition, during 2004, we charged off
approximately $695,000 of the total of these loans.

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The
following table is a summary of our nonperforming loans at December 31, 2004, 2003,
2002, 2001 and 2000 (dollars in thousands):

`2004          2003          2002          2001        2000
                                                ----          ----          ----          ----        ----

         Nonperforming loans
           Nonaccrual loans (1)          $     2,969     $    3,605    $     1,867    $     470     $     -
           Restructured loans (2)                  -              -          3,268            -           -
           Accruing loans past due 90
              days or more                        10            214          1,218          319           2
                                         -----------     ----------     ----------    ---------     -------
           Total nonperforming loans           2,979          3,819          6,353          789           2
         Other real estate owned                   -            119              -            -           -
         Other foreclosed assets held
            pending liquidation                  110              -            300            -           -
                                         -----------     ----------    -----------    ---------     -------
         Total nonperforming assets      $     3,089     $    3,938    $     6,653    $     789     $     2
                                         ===========     ==========    ===========    =========     =======

         Ratio of nonperforming loans
           to total loans                       2.0%           2.4%           3.8%          .5%           -

         Ratio of nonperforming assets to
           total loans                          2.0%           2.4%           4.0%          .5%           -

         Ratio of nonperforming assets
           to total allowance for loan
           losses at end of period            179.6%         165.5%         270.6%        51.3%           -`

|(1) |  | Interest income that would have been recorded in 2004 related to nonaccrual
               loans was $255,000 compared to $12,000 for the year ended December 31,
               2003, none of which is included in interest income or net income for the
               applicable periods.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The restructured loans in the amount of $3,268,000 as of December 31, 2002 were
               placed in nonaccrual status in 2003 and are included in nonaccrual loans at
               December 31, 2004 and 2003. Those same loans, which aggregated $3,268,000 at
               December 31, 2002 had a balance of $1,844,000 at December 31, 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Potential
problem assets, which are not included in nonperforming assets, amounted to $3,199,000 or
2.10% of total loans at December 31, 2004 compared to $4,050,000 or 2.50% at
December 31, 2003. 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, 2004 and 2003, the balance in our allowance for loan losses was
$1,720,000 and $2,379,000, 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.

At
both December 31, 2004 and 2003 approximately 82% of our loan portfolio consisted of
commercial loans, commercial real estate loans and commercial construction loans as
compared to 79% at year end 2002. 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 and to
owners of nonresidential buildings at December 31, 2004 and 2003. 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.

Page 30 of 79

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|                               |        |      |        |       |      |        |       |   |        |      
|------------------------------ | ------ | ---- | ------ | ----- | ---- | ------ | ----- | - | ------ | -----
|                               | 2004   | 2003 | 2002   | 2001  | 2000
|                               | Amount | %    | Amount |       | %    | Amount |       | % | Amount |      
|                              
|Commercial                     |        |      | $      | 1,000 |      |        | 38.1  | % | $      | 1,610
|Mortgage loans on real estate: |        |     
|Commercial                     |        |      |        | 275   |      |        | 26.3  | % |        | 379  
|Residential                    |        |      |        | 75    |      |        | 6.6   | % |        | 80   
|Construction                   |        |      |        | 200   |      |        | 17.2  | % |        | 105  
|Home Equity                    |        |      |        | --    |      |        | 7.6   | % |        | --   
|Consumer                       |        |      |        | 150   |      |        | 3.6   | % |        | 190  
|Credit Card                    |        |      |        | 20    |      |        | .5    | % |        | 15   
|                               |        |      |        |       |      |        |       |   |        |      
|Total                          |        |      | $      | 1,720 |      |        | 100.0 | % | $      | 2,379

The
following is a summary of changes in the allowance for loan losses for the years ended
December 31, 2004, 2003, 2002, 2001 and 2000, and the ratio of the allowance for loan
losses to total loans as of the end of each period (dollars in thousands):

|                           |      |              |      |              |     
|-------------------------- | ---- | ------------ | ---- | ------------ | ----
|                           | 2004 | 2003         | 2002 | 2001         | 2000
|Balance at beginning of    |      |              |      |              |     
|period                     |      | $      2,379 |      | $      2,459 |     
|                           |     
|Charge-offs:               |     
|Commercial                 |      | 830          |      | 727          |     
|Real estate                |      | 99           |      | 30           |     
|Consumer                   |      | 33           |      | 101          |     
|                           |      |              |      |              |     
|Total charge-offs          |      | 962          |      | 858          |     
|                           |      |              |      |              |     
|Recoveries:                |     
|Commercial                 |      | 5            |      | 104          |     
|Real estate                |      | 1            |      | 3            |     
|Consumer                   |      | --           |      | 2            |     
|                           |      |              |      |              |     
|Total recoveries           |      | 6            |      | 109          |     
|                           |      |              |      |              |     
|Net charge-offs            |      | 956          |      | 749          |     
|                           |      |              |      |              |     
|Provision for loan losses  |      | 297          |      | 669          |     
|                           |      |              |      |              |     
|Balance at end of period   |      | $      1,720 |      | $      2,379 |     
|                           |      |              |      |              |     
|Loans at end of period     |      | $  152,576   |      | $  161,112   |     
|Average loans              |      | $  159,718   |      | $  164,520   |     
|Ratios:                    |     
|Allowance for loan losses  |     
|to total loans             |      | 1.13%        |      | 1.48%        |     
|Net charge-offs to average |     
|Loans for period           |      | .60%         |      | .46%         |     

During
2004, we charged off $695,000 on loans to a single customer engaged in the franchise
business. Those loans were reported as restructured loans at December 31, 2002 and as
nonaccrual loans in 2003 and 2004. During 2003, we charged off $418,000 on loans to a
single customer. That loan had been reported as nonaccrual as of December 31, 2002. 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.

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Investments.  Our investment portfolio, consisting primarily of Federal agency bonds and
                    mortgage-backed securities, amounted to $33.7 million and $38.6 million at
                    December 31, 2004 and 2003, 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):

`Amortized       Unrealized    Unrealized      Fair
                                                         Cost            Gains       (Losses)       Value
                                                      ---------       ----------    ----------      -----
           2004
           ----
              Securities available-for-sale:
                U.S. Government and federal agencies  $  13,517       $      2       $    (71)   $   13,448
                State and municipal                         875              7              -           882
                Mortgage-backed                          19,352            116            (50)       19,418
                                                      ---------       --------       --------    ----------
              Total                                   $  33,744       $    125       $   (121)   $   33,748
                                                      =========       ========       ========    ==========

           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
                                                      =========       ========       ========    ==========`

During
2004, we sold $11.2 million of available-for-sale securities at a net gain of
$318,000. This compares to sales of $11.6 million and net gains of $694,000 during 2003.
At December 31, 2004, approximately $13.1 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 differ from
contractual maturities of mortgage-backed securities because these securities may be
called or repaid in whole or in part based on the payments received from the mortgages
underlying the securities. Therefore, these securities are not included in the maturity
categories noted below as of December 31, 2004 and 2003 (dollars in thousands):

|                                                         |      |          
|-------------------------------------------------------- | ---- | ---------
|                                                         | 2004 |          
|                                                         |      |          
|Due in one year or less                                  |      | $  3,194 
|Due after one year through five years                    |      | 10,603   
|Due after five years through ten years                   |      | 533      
|Due after ten years                                      |      | --       
|                                                         |      |          
|Total of investment securities with fixed maturity dates |      | 14,330   
|Mortgage-backed securities                               |      | 19,418   
|                                                         |      |          
|Total investment securities                              |      | $  33,748
|                                                         |      |          

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 2004 and 2003 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 2004 and
2003, the interest rate market for residential financings was at or near a thirty year
low, causing many homeowners to refinance their home mortgages, especially during 2003. As
a result, when receiving prepayments, we accelerated premium amortization. This caused a
lowering of the yields on these investments.

Deposits
and Other Borrowings. We had approximately $178.9 million of deposits at
December 31, 2004 compared to $190.6 million at December 31, 2003. 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 $5.9 million at
December 31, 2004 and $8.9 million at December 31, 2003. Additionally, at December 31,
2004, we had balances of $8.2 million in advances from the Federal Home Loan Bank of
Cincinnati compared to $12.5 million at December 31, 2003.

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Our
deposits at December 31, 2004, 2003 and 2002 were as follows:

|                                |      |           |     
|------------------------------- | ---- | --------- | ----
|                                | 2004 |           | 2003
|                                |      |           |     
|Interest-bearing demand         |      | $  16,657 |     
|Savings, money market and NOW   |      | 38,523    |     
|Time deposits                   |      | 59,374    |     
|Time deposits $100,000 and over |      | 41,638    |     
|                                |      |           |     
|Total interest-bearing deposits |      | 156,192   |     
|Noninterest-bearing             |      | 22,670    |     
|                                |      |           |     
|Total deposits                  |      | $ 178,862 |     
|                                |      |           |     

The
above table reflects the strategic funding plan implemented in 2004 to reduce the
proportion of certificates of deposit to the total of all deposits, particularly through
growth in balances of savings, money market and NOW accounts.

Information
on our repurchase agreements at December 31, 2004, 2003 and 2002 is as follows:

|                                          |      |        |     
|----------------------------------------- | ---- | ------ | ----
|                                          | 2004 |        | 2003
|                                          |      |        |     
|Average balance during the year           |      | $7,483 |     
|Average interest rate during the year     |      | .67%   |     
|Maximum month end balance during the year |      | $8,729 |     
|Balance at year end                       |      | $5,857 |     

Information
on our advances from the Federal Home Loan Bank of Cincinnati and outstanding balances at
December 31, 2004 and 2003 is as follows:

|                  |          |          |          |       | 
|----------------- | -------- | -------- | -------- | ----- | 
|                  | Interest |          | Balances |      
|Date of Advance   |          | Amount   |          | Rate  | 
|November 30, 2000 |          | $  1,050 |          | 6.71% | 
|November 21, 2001 |          | 1,300    |          | 5.61% | 
|May 1, 2002       |          | 5,000    |          | 3.70% | 
|May 31, 2002      |          | 2,000    |          | 3.73% | 
|June 19, 2002     |          | 1,800    |          | 4.15% | 
|September 5, 2002 |          | 600      |          | 2.84% | 
|September 5, 2002 |          | 600      |          | 3.06% | 
|December 6, 2002  |          | 1,800    |          | 3.65% | 
|December 6, 2002  |          | 1,432    |          | 3.82% | 
|                  |          |          |          |       | 
|Totals            |          | $15,582  |          |       | 
|                  |          |          |          |       | 

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 was paid in full at its
May 28, 2004 maturity.

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 Company repaid $2 million of the note in December 2004.

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 2004, all covenants of the credit agreement were either met or waived by the lender.

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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, 2004,
                    2003 and 2002 (dollars in thousands):

`2004               2003                2002
                                            ------------------  ------------------    ----------------
                                            Amount     Percent  Amount     Percent    Amount   Percent
  Core funding:
     Noninterest-bearing demand deposits    $  22,670    11.6% $ 24,581      11.3%  $   20,478   9.7%
     Interest-bearing demand deposits          16,657     8.5%   18,187       8.4%      17,601   8.3%
     Savings and money market deposits         38,523    19.6%   23,204      10.7%      22,889  10.8%
     Time deposits less than $100,000          59,374    30.3%   73,461      33.8%      77,732  36.7%
                                            ---------    ----- --------      -----  ----------  ----
     Total core funding                       137,224    70.0%  139,433      64.2%     138,700  65.5%
                                            ---------    ----- --------      -----  ----------  -----

  Non-core funding:
     Time deposits greater than $100,000       41,638    21.3%   51,207      23.6%      50,255  23.7%
     Securities sold under agreements to
       repurchase                               5,857     3.0%    8,874       4.1%       8,211   3.9%
     Federal Home Loan Bank advances            8,246     4.2%   12,512       5.8%      14,517   6.9%
     Notes Payable                              3,000     1.5%    5,000       2.3%           -     -%
                                            ---------    ----- --------     ------  ----------  -----
     Total non-core funding                    58,741    30.0%   77,593      35.8%      72,983  34.5%
                                            ---------   ------ --------     ------  ---------- ------
  Total funding                             $ 195,965   100.0% $217,026     100.0%  $  211,683 100.0%
                                            =========   ====== ========     ======  ========== ======`

Capital Resources. At December 31, 2004 and 2003, our stockholders equity amounted to
$20.6 million and $20.1 million, respectively. The change in stockholders equity was
attributable to our net income for the year ended December 31, 2004 of $684,000, the
net decrease in comprehensive income of $206,000 attributable to the decrease in fair
value of our available-for-sale securities portfolio and an increase of $18,000 relating
to stock paid compensation.

(The
balance of this page is intentionally left blank)

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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, 2004 and 2003, our capital ratios,
including FS Banks capital ratios, met regulatory minimum capital requirements. At
December 31, 2004 and 2003, 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, 2004 and 2003
(amounts in millions):

`To be Adequately         To be Well
                                                              Capitalized Under     Capitalized Under
                                                              Prompt Corrective     Prompt Corrective
                                            Actual             Action Provisions     Action Provisions
                                      Amount       Ratio      Amount       Ratio     Amount      Ratio
                                      ------       -----      ------       -----     ------      -----
 2004
 ----
      Total Risk Based Capital to
        Risk-weighted assets:
          Consolidated              $    22.3      12.6%      $  14.1       8.0%     $  17.7     10.0%
          Bank only                      24.5      13.8%         14.1       8.0%        17.7     10.0%

      Tier I (Core) Capital to Risk-
        weighted assets
          Consolidated              $    20.6      11.6%      $   7.1       4.0%     $  10.6      6.0%
          Bank only                      22.8      12.9%          7.1       4.0%        10.6      6.0%

      Tier I Leverage Capital to
        Average Assets
          Consolidated              $    20.6       9.8%      $   8.4       4.0%     $  10.5      5.0%
          Bank only                      22.8      10.8%          8.4       4.0%        10.5      5.0%

 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%`

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 $834,000 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.

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Interest 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) of FS Bank 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, which are actively monitored.

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, 2004:

`Changes in interest rates from current rates stated in basis points
                      -------------------------------------------------------------------
                      -400     -300     -200     -100       0       100     200      300      400
                      ----     ----     ----     ----       -       ---     ---      ---      ---
Forecast net
  interest income    $5,057    $5,536  $6,007   $6,416   $6,736   $7,043   $7,344  $7,646   $7,949

Effect on net
 interest income    (1,679)   (1,200)   (729)    (319)      0        307      608     910    1,213

Percentage change    -24.9%    -17.8%  -10.8%    -4.7%      0%      4.6%     9.0%   13.6%    18.0%

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

The
results of the earnings simulation indicate that FS Bank is asset 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 the Federal Reserve implemented its publicly announced policy
of measured and continuing increases in interest rates in July 2004, and has publicly
announced its intention to continue to increase rates at a measured pace over the next
twelve months, the calculations presented for declines are believed by management to be
unlikely and thus, are not believed to be relevant.

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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, 2004, our twelve-month interest rate-sensitivity gap ratio of earning
assets to interest-bearing liabilities was a positive 30.9%, as compared to a positive
22.2% at December 31, 2003. The increase in our positive gap ratio reflects our view that
interest rates will continue to rise over the next 12 months and this will 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.

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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, 2004, FS Bank could have
borrowed additional amounts in the approximate amount of $2.3 million.

Additional
sources of liquidity are represented by federal funds borrowing arrangements entered into
with other banks. At December 31, 2004, we had borrowing lines established in the
aggregate amount of $14 million. There were no balances on these lines at December 31,
2004.

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 and we also receive funds on a
direct and referred basis from other financial institutions and limited public funds, such
as a local school board. There are no practical limits to the amount of certificates of
deposit that can be sold or purchased using these delivery means. At December 31, 2004, we
had approximately $22.5 million in certificates of deposits that were sold to
institutional investors.

We
devised our current funding strategy in 2003 and implemented it in 2004. The strategy is
to issue institutional certificates of deposit with very short maturities (i.e. less than
one year), so as to be able to obtain the funds at the lowest possible cost. In addition,
given that our loan portfolio is primarily composed of loans that are repriceable based on
changes in our prime rate, the interest rate movements on these shorter term institutional
certificates of deposit better match the interest rate movements in our loan portfolio.
The result is that we are less exposed to a significantly adverse impact on our
profitability resulting from a sudden change in the interest rate environment, as the
strategy seeks to better match the repricing period for both assets and liabilities. Prior
to the adoption of the current strategy, FS Bank had issued these certificates of deposit
for terms as long as five years and at substantially higher interest rates, especially in
1998 and 1999, when these certificates of deposit were issued for terms as long as five
years and at rates as high as 7%.

At
December 31, 2004, we had no significant commitments for capital expenditures.

The
following table presents additional information about our contractual obligations as of
December 31, 2004, which by their terms have contractual maturity and termination dates
subsequent to December 31, 2004 (dollars in thousands):

|                                    |               |         |             |        
|----------------------------------- | ------------- | ------- | ----------- | -------
|                                    | Next 12Months |         | 13-36Months |        
|Contractual Obligations:            |               |         |             |        
|Certificates of deposit             |               | $61,964 |             | $31,042
|Securities sold under agreements    |              
|to repurchase                       |               | 5,857   |             | --     
|Federal Home Loan advances          |               | 3,049   |             | 893    
|Note payable                        |               | --      |             | 3,000  
|Minimum operating lease commitments |               | 167     |             | 235    
|                                    |               |         |             |        
|Total                               |               | $71,037 |             | $35,170
|                                    |               |         |             |        

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.

Page 38 of 79

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Off-Balance
Sheet Arrangements. At December 31, 2004, we had outstanding commitments to fund existing
loans of $40.8 million pursuant to credit availability terms in the loan agreements, $4.4
million in loans approved and committed, but not yet closed and standby letters of credit
of $4.0 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 institutional certificates of deposit as discussed
above. At December 31, 2004, 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 a month.

The
following table presents additional information about our unfunded commitments as of
December 31, 2004 and 2003, which by their terms have contractual maturity dates
subsequent to December 31, 2004 (dollars in thousands):

|                          |       |       |          |          
|------------------------- | ----- | ----- | -------- | ---------
|                          | 2004  |       | 2003     |          
|                          |       |       |          |          
|                          | Fixed |       | Variable |          
|Commitments to make loans |       | $  -- |          | $     334
|Unused lines of credit    |       | 477   |          | 40,339   
|Letters of credit         |       | --    |          | 4,038    

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

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: In 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 in 2003 did not materially
affect the Companys operating results or financial condition.

In
March 2004, the Emerging Issues Task Force (EITF) finalized and issued EITF 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
(EITF 03-1). EITF 03-1 provides recognition and measurement guidance regarding when
impairments of equity and debt securities are considered other-than-temporary requiring a
charge to earnings, and also requires additional annual disclosures for investments in
unrealized loss positions. The additional annual disclosure requirements were previously
issued by the EITF in November 2003 and were effective for the Company for the year
ended December 31, 2003. In September 2004, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) EITF 03-1-1, which delays the recognition and
measurement provisions of EITF 03-1 pending the issuance of further implementation
guidance. We are currently evaluating the effect of the recognition and measurement
provisions of EITF 03-1. While our analysis is pending the FASBs revisions to EITF
03-1, we currently believe the adoption of EITF 03-1 will not result in a material impact
on the Companys results of operations or financial condition.

Page 39 of 79

---

On
December 12, 2003, the American Institute of Certified Public Accountants issued Statement
of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a
Transfer (SOP 03-3). SOP 03-3 requires acquired loans with poor credit quality to be
recorded at fair value and prohibits carrying over or creation of valuation allowances in
the initial accounting for the loans. SOP 03-3 also limits the yield that may be accreted
to income. SOP 03-3 applies to the purchase of an individual loan, a pool of loans, a
group of loans, and loans acquired in a business combination. SOP 03-3 is effective for
loans acquired in fiscal years beginning after December 31, 2004. SOP 03-3 is not expected
to have a material impact on the Companys results of operations or financial
condition.

In
December, 2004, the FASB issued an amendment to SFAS 123 (SFAS 123R) which eliminates the
ability to account for share-based compensation transactions using Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires
that such transactions be accounted for using a fair value-based method. SFAS 123R will be
effective for the Company for the first quarter of 2006.

SFAS 123R
applies to all awards granted after the required effective date and to awards modified,
repurchased, or cancelled after that date. The cumulative effect of initially applying
this Statement, if any, is recognized as of the required effective date.

As
of the required effective date, the Company will apply SFAS 123R using a modified version
of prospective application. Under that transition method, compensation cost is recognized
on or after the required effective date for the portion of outstanding awards for which
the requisite service has not yet been rendered, based on the grant-date fair value of
those awards calculated under SFAS 123 for either recognition or pro forma disclosures.
For periods before the required effective date, a company may elect to apply a modified
version of retrospective application under which financial statements for prior periods
are adjusted on a basis consistent with the pro forma disclosures required for those
periods by SFAS 123.

The
Company will first report compensation cost under SFAS 123R in the first quarter of 2006.
We are currently evaluating the effect of the recognition and measurement provisions of
SFAS 123R but we currently believe the adoption of SFAS 123R will not result in a material
impact on the Companys results of operations or financial condition.

(The
balance of this page is intentionally left blank)

Page 40 of 79

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ITEM 7.    FINANCIAL STATEMENTS

First
Security Bancorp, Inc. and Subsidiary

Consolidated
Financial Statements

Table
of Contents

Report
of Independent Registered Public Accounting Firm  2004

Report
of Independent Registered Public Accounting Firm  2003

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 41 of 79

---

FIRST SECURITY BANCORP,
INC.Lexington, Kentucky

CONSOLIDATED FINANCIAL
STATEMENTS December 31, 2004 and 2003

Page 42 of 79

---

FIRST SECURITY BANCORP,
INC.Lexington, Kentucky

CONSOLIDATED FINANCIAL
STATEMENTSDecember 31, 2004 and 2003

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2004.....................................................44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 2003.....................................................45

CONSOLIDATED FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS...............................................................................................................................46

CONSOLIDATED STATEMENTS OF INCOME................................................................................................................47

CONSOLIDATED STATEMENTS OF CHANGES IN
        SHAREHOLDERS' EQUITY...........................................................................................................................................48

CONSOLIDATED STATEMENTS OF CASH FLOWS......................................................................................................49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................................................51

Page 43 of 79

---

Report of Independent Registered
Public Accounting Firm

Board
of Directors and ShareholdersFirst Security Bancorp, Inc.Lexington, Kentucky

We
have audited the accompanying consolidated balance sheet of First Security Bancorp, Inc.
as of December 31, 2004, and the related consolidated statements of income, retained
earnings and cash flows for the year 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 audit. The financial statements of
First Security Bancorp, Inc. as of and for the year ended December 31, 2003, were
audited by other accountants whose report dated February 6, 2004, expressed an
unqualified opinion on those statements.

We
conducted our audit in accordance with auditing standards of the Public Company Accounting
Oversight Board (United States). 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 audit
provides a reasonable basis for our opinion.

In
our opinion, the 2004 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of First Security Bancorp, Inc. as of
December 31, 2004, and the results of its operations and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the United
States of America.

BKD, LLPIndianapolis, Indiana
February 11, 2005

Page 44 of 79

---

# Report of Independent
Registered Public Accounting Firm

Board of Directors and
ShareholdersFirst Security Bancorp, Inc.Lexington, Kentucky

We have audited the accompanying
consolidated balance sheet of First Security Bancorp, Inc. as of December 31, 2003 and the
related consolidated statements of income, changes in shareholders equity, and cash
flows for the year 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 audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides 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 the result
of its operations and its cash flows for the year then ended, in conformity with the
accounting principles generally accepted in the United States of America.

Crowe, Chizek and Company
LLCLexington, KentuckyFebruary 6, 2004

Page 45 of 79

---

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

---

`2004              2003
                                                                                    ------            ------
         ASSETS
         Cash and due from banks                                                $     4,446       $     4,820
         Federal funds sold                                                          18,568            25,193
                                                                                -----------       -----------
                Total cash and cash equivalent                                       23,014            30,013
         Securities available-for-sale                                               33,748            38,624
         Loans held for sale                                                              -               407
         Loans, net of allowance of $1,720 and $2,379                               150,856           158,733
         Federal Home Loan Bank stock                                                   806               772
         Foreclosed assets                                                              110               119
         Premises and equipment, net                                                  7,141             7,585
         Goodwill                                                                         -               106
         Other intangible assets                                                          -                43
         Accrued interest receivable and other assets                                 1,759             1,856
                                                                                -----------       -----------

                                                                                $   217,434       $   238,258
                                                                                ===========       ===========

         LIABILITIES AND SHAREHOLDERS' EQUITY
         Liabilities
               Deposits
                   Noninterest-bearing                                          $    22,670       $    24,581
                   Interest-bearing                                                 156,192           166,059
                                                                                -----------       -----------
                     Total deposits                                                 178,862           190,640
           Federal funds purchased and repurchase agreements                          5,857             8,874
           Note payable                                                               3,000             5,000
           Federal Home Loan Bank advances                                            8,246            12,512
                Accrued interest payable and other liabilities                          861             1,120
                                                                                -----------       -----------
                     Total liabilities                                              196,826           218,146

         Shareholders' equity
                    Common stock, no par value:  5,000,000 shares
                 authorized; 1,558,690 shares issued                                  8,926             8,926
         Additional paid-in capital                                                   8,944             8,926
         Retained earnings                                                            2,736             2,052
         Accumulated other comprehensive income                                           2               208
                                                                                -----------       -----------
                 Total shareholders' equity                                          20,608            20,112
                                                                                -----------       -----------

                                                                                $   217,434       $   238,258
                                                                                ===========       ===========`

Page 46 of 79

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

---

`2004              2003
                                                                                  -------           -------
         Interest income
             Loans, including fees                                              $     9,180       $    10,081
             Taxable securities                                                       1,416               842
             Tax exempt securities                                                       40               379
             Federal funds sold and other                                               102               100
                                                                                -----------       -----------
                                                                                     10,738            11,402

         Interest expense
             Deposits                                                                 3,701             4,875
             Federal funds purchased and repurchase agreements                           67                39
             Federal Home Loan Bank advances and other debt                             643               557
                                                                                -----------       -----------
                                                                                      4,411             5,471
                                                                                -----------       -----------
   Net interest income                                                                6,327             5,931

         Provision for loan losses                                                      297               669
                                                                                -----------       -----------

         Net interest income after provision for loan losses                          6,030             5,262

         Noninterest income
          Service charges on deposit accounts                                           624               711
          Net gains on sales of loans                                                   332             1,067
          Net gains on sales of securities                                              318               694
          Other                                                                         223               294
                                                                                -----------       -----------
                                                                                      1,497             2,766
         Noninterest expense
          Salaries and employee benefits                                              3,024             3,499
          Occupancy and equipment                                                     1,137             1,161
          Data processing                                                               547               505
          Legal and professional fees                                                   422               657
          Advertising                                                                   209               209
          Bankshares Tax                                                                176               177
          Supplies and Printing                                                          69               125
          Loss on sale of foreclosed and repossessed assets                               -                72
          Loss on sale of assets                                                        100                 -
          Amortization of intangibles                                                    10                14
          Other                                                                         844               863
                                                                                -----------       -----------
                                                                                      6,538             7,282
                                                                                -----------       -----------
         Income before income taxes                                                     989               746
         Income tax expense                                                             305               126
                                                                                -----------       -----------
         Net income                                                             $       684       $       620
                                                                                ===========       ===========

         Earnings per share
          Basic                                                                 $       .44       $      .42
          Diluted                                                                       .44              .41`

Page 47 of 79

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

   Balance, January 1, 2003      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

   Stock options compensation        -          -          18                                          18

   Comprehensive income:
     Net income                      -          -           -         684             -               684

   Change in unrealized gain
     (loss) on securities available
     for sale, net of reclassification
     and tax effects                 -          -           -           -          (206)             (206)
                                 -----    -------    --------    --------     ---------       -----------
  Total comprehensive income                                                                         478
                                                                                              -----------

   Balance, December 31, 2004    1,559    $ 8,926    $  8,944    $    2,736     $     2       $    20,608
                                 =====    =======    ========    ==========     =======       ===========`

Page 48 of 79

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

---

`2004             2003
                                                                                 ----             ----
         Cash flows from operating activities
             Net income                                                    $       684       $       620
             Adjustments to reconcile net income to net
              cash from operating activities
             Provision for loan losses                                             297               669
             Depreciation and amortization                                         484               487
             Net amortization of securities                                        315               723
             Net realized gain on sale of securities                              (318)             (694)
             Federal Home Loan Bank stock dividends                                (32)              (30)
             Originations of loans held for sale                               (18,666)          (64,459)
             Proceeds from sale of loans                                        19,405            68,526
         Net gain on sale of mortgage loans                                       (332)           (1,084)
         Loss on write-off of intangible assets                                    100                 -
         Loss on sale of foreclosed and repossessed assets                           -                72
         Net change in:
             Accrued interest receivable                                           100               220
             Other assets                                                           (3)             (341)
             Accrued interest payable                                             (136)              (69)
             Other liabilities                                                     (18)              266
                                                                           -----------       -----------
         Net cash from operating activities                                      1,880             4,906

         Cash flows from investing activities
              Activity in available-for-sale securities:
                 Maturities, calls and principal repayments                      11,146            17,203
                 Sales                                                           11,164            11,580
                 Purchases                                                      (17,742)          (24,460)
         Net change in loans                                                      7,470             5,028
         Proceeds from sale of foreclosed and repossessed assets                    119               750
         Purchase of Federal Home Loan Bank stock                                    (2)                -
         Purchases of premises and equipment, net                                   (95)             (126)
         Proceeds of sale of premises and equipment, net                             65                 -
         Proceeds of sale of intangible assets                                       39                 -
         Cash paid in acquisition                                                     -              (106)
                                                                            -----------       -----------
         Net cash from investing activities                                      12,164             9,869`

Page 49 of 79

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

---

|                                                          |      |     
|--------------------------------------------------------- | ---- | ----
|                                                          | 2004 | 2003
|Cash flows from financing activities                      |      |     
|Net change in deposits                                    |      |     
|Net change in repurchase agreements and                   |      |     
|short-term borrowings                                     |      |     
|Proceeds from Federal Home Loan Bank advances             |      |     
|Repayments of Federal Home Loan Bank advances             |      |     
|Proceeds from issuance of note payable                    |      |     
|Repayments of note payable                                |      |     
|Proceeds from issuance of options and common stock        |      |     
|                                                          |      |     
|Net cash from financing activities                        |      |     
|                                                          |      |     
|Net change in cash and cash equivalents                   |      |     
|Cash and cash equivalents at beginning of period          |      |     
|                                                          |      |     
|Cash and cash equivalents at end of period                |      |     
|                                                          |      |     
|Supplemental cash flow information:                       |      |     
|Interest paid                                             |      |     
|Income tax paid                                           |      |     
|Supplemental non-cash disclosures:                        |      |     
|Transfers from loans to foreclosed and repossessed assets |      |     

Page 50 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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 include 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 51 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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 2004 or 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.

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.

Page 52 of 79

---

FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 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.

`2004               2003
                                                                               ------             ------

         Net income as reported                                           $       684       $       620

         Deduct:  Stock-based compensation expense
           determined under fair value based method                               (28)              (82)
                                                                          -----------       -----------

         Pro forma net income                                             $       656       $       538
                                                                          ===========       ===========

         Basic earnings per share as reported                             $       .44       $       .42
         Pro forma basic earnings per share                                       .42               .36

         Diluted earnings per share as reported                           $       .44       $       .41
         Pro forma diluted earnings per share                                     .42               .35

         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.

                                                                                2004               2003
                                                                               ------             ------

         Risk-free interest rate                                                3.50%              3.18%
         Expected option life                                                5.0 years          5.0 years
         Expected stock price volatility                                          33%                36%
         Dividend yield                                                            -                  -`

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.

Page 53 of 79

---

FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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: In 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 in 2003 did not materially
affect the Companys operating results or financial condition.

In
March 2004, the Emerging Issues Task Force (EITF) finalized and issued EITF 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
(EITF 03-1). EITF 03-1 provides recognition and measurement guidance regarding when
impairments of equity and debt securities are considered other-than-temporary requiring a
charge to earnings, and also requires additional annual disclosures for investments in
unrealized loss positions. The additional annual disclosure requirements were previously
issued by the EITF in November 2003 and were effective for the [Company] for the year
ended December 31, 2003. In September 2004, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) EITF 03-1-1, which delays the recognition and
measurement provisions of EITF 03-1 pending the issuance of further implementation
guidance. We are currently evaluating the effect of the recognition and measurement
provisions of EITF 03-1. While our analysis is pending the FASBs revisions to EITF
03-1, we currently believe the adoption of EITF 03-1 will not result in a material impact
on the Companys results of operations or financial condition.

On
December 12, 2003, the American Institute of Certified Public Accountants issued Statement
of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a
Transfer (SOP 03-3). SOP 03-3 requires acquired loans with poor credit quality to be
recorded at fair value and prohibits carrying over or creation of valuation allowances in
the initial accounting for the loans. SOP 03-3 also limits the yield that may be accreted
to income. SOP 03-3 applies to the purchase of an individual loan, a pool of loans, a
group of loans, and loans acquired in a business combination. SOP 03-3 is effective for
loans acquired in fiscal years beginning after December 31, 2004. SOP 03-3 is not expected
to have a material impact on the Companys results of operations or financial
condition.

In
December, 2004, the FASB issued an amendment to SFAS 123 (SFAS 123R) which eliminates the
ability to account for share-based compensation transactions using Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires
that such transactions be accounted for using a fair value-based method. SFAS 123R will be
effective for the Company for the first quarter of 2006.

SFAS 123R
applies to all awards granted after the required effective date and to awards modified,
repurchased, or cancelled after that date. The cumulative effect of initially applying
this Statement, if any, is recognized as of the required effective date.

Page 54 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As
of the required effective date, the Company will apply SFAS 123R using a modified version
of prospective application. Under that transition method, compensation cost is recognized
on or after the required effective date for the portion of outstanding awards for which
the requisite service has not yet been rendered, based on the grant-date fair value of
those awards calculated under SFAS 123 for either recognition or pro forma disclosures.
For periods before the required effective date, a company may elect to apply a modified
version of retrospective application under which financial statements for prior periods
are adjusted on a basis consistent with the pro forma disclosures required for those
periods by SFAS 123.

The
Company will first report compensation cost under SFAS 123R in the first quarter of 2006.
We are currently evaluating the effect of the recognition and measurement provisions of
SFAS 123R but we currently believe the adoption of SFAS 123R will not result in a material
impact on the Companys results of operations 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 $248,000 and $154,000
was required to meet regulatory reserve and clearing requirements at year end 2004 and
2003. 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.

(The
balance of this page is intentionally left blank)

Page 55 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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:

`Gross              Gross
                                                              Fair          Unrealized         Unrealized
                                                              Value            Gains             Losses
                                                              -----            -----             ------
           2004
              U.S. Government and federal agency        $    13,448       $           2       $       (71)
              State and municipal                               882                   7                 -
              Mortgage-backed                                19,418                 116               (51)
                                                        -----------       -------------       -----------
              Total                                     $    33,748       $         125       $      (122)
                                                        ===========       =============       ===========

           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)
                                                        ===========       =============       ===========`

Securities
with unrealized losses at year end 2004, aggregated by investment category and length of
time that individual securities have been in a continuous unrealized loss position, are as
follows:

`12 Months or Less             More than 12 Months          Total
                                 -------------------------       ---------------------   --------------------
                                 Fair           Unrealized       Fair       Unrealized   Fair     Unrealized
                                 Value          Loss             Value        Loss       Value      Loss
                                 -----          ----             -----        ----       -----      ----

         Description of Securities
         U.S. Government and
            federal agency      $ 10,448       $   (71)        $      -       $    -     $ 10,448  $   (71)
           State and municipal         -             -                -            -            -        -
         Mortgage-backed           5,126            (4)           3,266          (47)       8,393      (51)
                                --------       -------         --------       ------     --------  -------

         Total temporarily
            impaired with stated
            maturities          $ 15,574       $   (75)        $  3,266       $  (47)    $ 18,841  $  (122)
                                ========       =======         ========       ======     ========  =======`

Page 56 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 2  SECURITIES (Continued)

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:

`12 Months or Less           More than 12 Months                  Total
                                 -------------------------     -----------------------     ----------------------
                                 Fair           Unrealized     Fair         Unrealized     Fair       Unrealized
                                  Value          Loss          Value          Loss         Value         Loss
                                  -----          ----          -----          ----         -----         ----

         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)
                                ========       =======        ========       ======        ========     =======`

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.

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

|             |      |        
|------------ | ---- | -------
|             | 2004 |        
|Proceeds     |      | $11,164
|Gross gains  |      | 318    
|Gross losses |      | --     

Proceeds,
as defined above, do not include proceeds from calls prior to the stated maturities,
proceeds from redemptions at the stated maturity or proceeds received from normal
repayments, as in the case of mortgage-backed securities.

The
fair value of debt securities and carrying amount, if different, at year end 2004 by
contractual maturity were as follows. Securities not due at a single maturity date, but
rather having periodic repayments and a final maturity date consist primarily of
mortgage-backed securities, as shown below.

| |                                               
| | ----------------------------------------------
| | Fair Values                                   
| | Due in one year or less                       
| | Due from one to five years                    
| | Due from five to ten years                    
| | Due after ten years                           
| |                                               
| | Total securities due at a single maturity date
| | Mortgage-backed securities                    
| |                                               
| | Total                                         
| |                                               
| |                                               

Securities
pledged at year end 2004 and 2003 had carrying amounts of $13.1 million and $8.8 million,
and were pledged to public deposits and repurchase agreements.

At
year end 2004 and 2003, 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.

Page 57 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 3  LOANS

Loans at year end were as follows:

`2004              2003
                                                                                     ------            ------
           Commercial                                                           $    58,125       $    49,165
           Mortgage loans on real estate:
                Commercial                                                           40,087            61,669
                Residential                                                          10,069            14,882
                Construction                                                         26,299            16,990
                Home equity                                                          11,637            11,488
           Consumer                                                                   5,531             6,035
           Credit card                                                                  828               883
                                                                                -----------       -----------
           Subtotal                                                                 152,576           161,112
           Less allowance for loan losses                                            (1,720)           (2,379)
                                                                                -----------       -----------
           Loans, net                                                           $   150,856       $   158,733
                                                                                ===========       ===========`

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:

`2004              2003
                                                                                    ------            ------

           Beginning balance                                                    $     2,379       $     2,459
           Loans charged-off                                                           (962)             (858)
           Recoveries                                                                     6               109
           Provision for loan losses                                                    297               669
                                                                                -----------       -----------
           Ending balance                                                       $     1,720       $     2,379
                                                                                ===========       ===========

         Impaired loans were as follows:
                                                                                     2004              2003
                                                                                    ------            ------
           Year end loans with no allocated allowance
                for loan losses                                                 $         -       $         -
           Year end loans with allocated allowance
              for loan losses                                                         3,846             3,162
                                                                                -----------       -----------
           Total                                                                $     3,846       $     3,162
                                                                                ===========       ===========

         Amount of the allowance for loan losses allocated                      $       928       $     1,300

         Average of impaired loans during the year                                    5,075             3,894
         Interest income recognized during impairment                                   109               135
         Cash-basis interest income recognized                                          109               135`

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

Nonperforming
loans were as follows:

`2004              2003
                                                                                    ------            ------

         Loans past due 90 days still on accrual                                $        10       $       214
         Nonaccrual loans                                                             2,969             3,605`

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 58 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 4  PREMISES AND EQUIPMENT

Year
end premises and equipment were as follows:

`2004             2003
                                                                                    ------           ------

         Land                                                                   $     1,250       $     1,250
         Buildings                                                                    4,956             4,956
         Leasehold improvements                                                         342               305
         Furniture and equipment                                                      2,105             2,285
                                                                                -----------       -----------
         Total cost                                                                   8,654             8,796
              Accumulated depreciation                                               (1,513)           (1,211)
                                                                                -----------       -----------

              Premises and equipment, net                                       $     7,141       $     7,585
                                                                                ===========       ===========`

Depreciation
expense was $474 and $473 for 2004 and 2003.

The
Company leases its three branch locations and, until September 10, 2004, its 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, 2004 and 2003
was $231 and $262.

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

`2005                                                          $       167
                  2006                                                                  123
                  2007                                                                  112
                  2008                                                                   74
                  2009                                                                   76
                  Thereafter                                                            957
                                                                                -----------

                  Total                                                         $     1,509
                                                                                ===========`

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:

`2004             2003
                                                                                    ------           ------

                  Beginning of year                                             $       106       $         -
                  Acquired goodwill                                                       -               106
                  Write off of goodwill                                                (106)                -
                                                                                ----------       -----------
                  Total                                                         $         -       $       106
                                                                                ===========       ===========`

Page 59 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 5  GOODWILL AND INTANGIBLE ASSETS (Continued)

Acquired Intangible Assets

Acquired
intangible assets were as follows at year end:

`2004                          2003
                                              -------------------------      -------------------------------
                                                Gross                           Gross
                                              Carrying       Accumulated      Carrying           Accumulated
                                               Amount       Amortization       Amount           Amortization
           Amortized intangible assets:
              Other customer relationship
                intangibles                 $         -     $          -     $        67       $           24
                                            ===========     ============     ===========       ==============`

Aggregate
amortization expense was $10 and $14 for 2004 and 2003. These intangible assets were
written off during 2004 (see Note 17).

NOTE 6  DEPOSITS

The
scheduled maturities of time deposits as of December 31, 2004 were as follows (in
thousands):

`2005                                                                $    61,964
                  2006                                                                     20,426
                  2007                                                                     10,615
                  2008                                                                      7,543
                  2009                                                                        464
                  Thereafter                                                                    -
                                                                                      -----------
                  Total                                                               $   101,012
                                                                                      ===========`

At
year end 2004 and 2003, time deposits with balances in excess of $100 totaled $41,638 and
$51,207, respectively.

(The
balance of this page is intentionally left blank)

Page 60 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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 $13,094 and $8,840 at year end
2004 and 2003.

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:

`2004              2003
                                                                                    ------            ------

           Average balance during the year                                      $    7,483          $  4,901
           Average interest rate during the year                                     0.67%             0.78%
           Maximum month end balance during the year                            $    8,729          $  8,874
           Weighted average interest rate at year end                                1.57%             0.98%`

NOTE 8  FEDERAL HOME LOAN BANK ADVANCES AND NOTE PAYABLE

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

`2004              2003
                                                                                    ------            ------
           Monthly maturities of July, 2005 through December, 2016,
              at fixed rates ranging from 2.84% to 6.71%                        $     8,246         $10,512
           Principal due at maturity in May 2004, at fixed rate of 3.73%                 -            2,000
                                                                                -----------         -------

           Total                                                                $     8,246         $12,512
                                                                                ===========         =======`

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

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

`2005                                                          $     3,049
                  2006                                                                  515
                  2007                                                                  378
                  2008                                                                2,213
                  2009                                                                  959
                  Thereafter                                                          1,132
                                                                                -----------

                  Total                                                         $     8,246
                                                                                ===========`

Page 61 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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 was reduced to $4 million on
December 31, 2004 and will be reduced to $3 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 2004, all covenants of the credit agreement were either met or waived by the lender.

NOTE 9  BENEFIT PLANS

The
Bank has a 401(k) benefit plan which allows employee contributions up to 92% of their
compensation plus an additional sum depending on the age of the participant, all subject
to an annual overall limitation that changes each year in accordance with regulations
issued by the Internal Revenue Service. The Bank matches 100% of the first 4% of
compensation contributed. Expense for the years ended December 31, 2004 and 2003 was $57
and $63.

NOTE 10  INCOME TAXES

Income
tax expense (benefit) was as follows:

`2004             2003
                                                                                    ------           ------

           Current federal                                                      $        71       $         -
           Deferred federal                                                             234               126
                                                                                -----------       -----------
           Total                                                                $       305       $       126
                                                                                ===========       ===========`

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

`2004             2003
                                                                                    ------           ------

           Federal statutory rate times the financial statement income          $       336       $       254

           Effect of:
              Tax-exempt income                                                         (12)             (109)
              Low income housing tax credits                                            (24)              (24)
              Other, net                                                                  5                 5
                                                                                -----------       -----------

              Total                                                             $       305       $       126
                                                                                ===========       ===========`

Page 62 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 10  INCOME TAXES (Continued)

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

`2004             2003
                                                                                    ------           ------
           Deferred tax assets
              Allowance for loan losses                                         $       426       $       682
              Unused tax credits                                                          -                65
              Net operating loss carryforward                                             -                16
              Organizational costs                                                        -                 1
              Other                                                                      47                39
                                                                                -----------       -----------
                                                                                        473               803
                                                                                -----------       -----------

         Deferred tax liabilities
              FHLB stock dividends                                              $       (44)      $       (33)
              Depreciation                                                             (195)             (200)
              Cash to accrual                                                             -               (34)
              Net unrealized security gains                                              (1)             (107)
              Prepaid expenses                                                          (60)              (62)
              Other                                                                     (14)              (80)
                                                                                -----------       -----------
                                                                                       (314)             (516)
                                                                                -----------       ------ ----

         Net deferred tax asset                                                 $       159       $       287
                                                                                ===========       ===========`

NOTE 11  RELATED PARTY TRANSACTIONS

Loans
to executive officers, directors, and their affiliates in 2004 were as follows (in
thousands):

`Beginning balance                                                 $    14,595
              New loans                                                               9,209
              Effect of changes in related parties                                   (1,471)
              Repayments                                                            (10,875)
                                                                                -----------
              Ending balance                                                    $    11,458
                                                                                ===========`

Deposits
from executive officers, directors, and their affiliates at year end 2004 and 2003 were
approximately $6.0 million and $3.7 million, respectively.

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 63 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 11  RELATED PARTY TRANSACTIONS (Continued)

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

`2005                                                          $        71
                  2006                                                                   72
                  2007                                                                   74
                  2008                                                                   74
                  2009                                                                   76
                  Thereafter                                                            957
                                                                                -----------
                   Total                                                        $     1,324
                                                                                ===========`

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 issuance 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:

`2004                    2003
                                                            ---------------------    --------------------
                                                                         Weighted                Weighted
                                                                          Average                 Average
                                                                         Exercise                Exercise
                                                            Shares         Price      Shares       Price
                                                            ------         -----      ------       -----

           Outstanding at beginning of year                 87,750       $  18.91     105,200    $   17.33
           Granted                                          45,350          17.15      22,000        19.55
           Exercised                                             -              -     (14,000)       14.07
           Forfeited                                       (13,450)         19.04     (25,450)       15.49
                                                        ----------                  ---------        -----

           Outstanding at end of year                      119,650       $  18.23      87,750     $  18.91
                                                        ==========                  =========

           Options exercisable at year end                  98,500       $  18.43      79,650      $ 18.80
                                                        ==========                  =========
           Weighted average fair value of options
              granted during year                       $     6.04                  $    7.07
                                                        ==========                  =========`

Page 64 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 12   STOCK OPTIONS (Continued)

Options outstanding
under the Stock Plan at year end 2004 were as follows:

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

            $13.75-$15.50                18,250     24 months        $    15.39        17,400     $    15.39
            $16.00-$22.00               101,400     60 months             18.74        81,100          19.08
                                        -------                                        ------

           Outstanding at year end      119,650     55 months        $    18.23        98,500     $    18.43
                                        =======                                        ======`

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         $22`

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 2004 and 2003, 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 65 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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

`To be Adequately        To be Well
                                                                       Capitalized Under    Capitalized Under
                                                                       Prompt Corrective    Prompt Corrective
                                                     Actual            Action Provisions    Action Provisions
                                               Amount       Ratio      Amount       Ratio    Amount      Ratio
                                               ------       -----      ------       -----    ------      -----

           2004
           ----
              Total Risk Based Capital to
                Risk-weighted assets
                  Consolidated              $     22.3      12.6%      $ 14.1       8.0%     $ 17.7     10.0%
                  Bank only                       24.5      13.8%        14.1       8.0%       17.7     10.0%

              Tier I Capital to Risk-
                weighted assets
                  Consolidated              $     20.6      11.6%      $  7.1       4.0%     $ 10.6      6.0%
                  Bank only                       22.8      12.9%         7.1       4.0%       10.6      6.0%

              Tier I Leverage Capital to
                Average assets
                  Consolidated              $     20.6       9.8%      $  8.4       4.0%     $ 10.5      5.0%
                  Bank only                       22.8      10.8%         8.4       4.0%       10.5      5.0%

           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%`

Page 66 of 79

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FIRST SECURITY BANCORP, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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 2004, approximately $834
was 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:

`2004                            2003
                                                      --------------------             -------------------
                                                      Fixed       Variable            Fixed       Variable
                                                      -----       --------            -----       --------
                                                                          (in thousands)

           Commitments to make loans                $      -      $     334          $       -      $     600
           Unused lines of credit                        477         40,339              6,003         27,883
           Letters of credit                               -          4,038                  -          1,360`

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 2004 and 2003.

(The
balance of this page is intentionally left blank)

Page 67 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 16  FAIR VALUES OF FINANCIAL INSTRUMENTS

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

`2004                               2003
                                              -------------------------         ---------------------------                                          Carrying            Fair            Carrying           Fair
                                               Amount            Value            Amount           Value
                                               ------            -----            ------           -----
         Financial assets
           Cash and cash equivalents         $    23,014      $    23,014      $    30,013      $    30,013
           Securities available-for-sale          33,748           33,748           38,624           38,624
           Loans held for sale                         -                -              407              411
           Loans, net                            150,856          151,078          158,733          160,689
           Federal Home Loan Bank stock              806              806              772              772
           Accrued interest receivable               856              856              956              956


         Financial liabilities
           Deposits                          $   178,862      $   179,621      $   190,640      $   192,089
           Repurchase agreements and
              short-term borrowings                5,857            5,857            8,874            8,874
           Note Payable                            3,000            3,000            5,000            5,000
           Federal Home Loan Bank advances         8,246            8,428           12,512           12,959
           Accrued interest payable                  373              373              509              509`

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 AND SALE 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 were promoted under the
name First Security Mortgage Company, the purpose of which was 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 was payable contingent upon the departments earnings
over the ensuing 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 was being amortized over five years. Of the remaining contingent purchase
price, $106 was earned in 2003 and recorded as goodwill. In September 2004, the assets
used in this department were sold to First Mortgage, LLC, an entity created by the two
principal bank employees of the department. In connection with this transaction, First
Mortgage, LLC assumed the operating leases and hired bank employees who were employed
within this department. The Bank recorded a loss of $100 in connection with this sales
transaction, which was the write off of the investment in goodwill and other intangible
assets.

Page 68 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 18  PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

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

CONDENSED
BALANCE SHEETS,
December 31

`2004             2003
                                                                                    ------           ------
         ASSETS
         Cash and due from banks                                                $       325       $       909
         Investment in subsidiary                                                    22,783            24,011
         Other assets                                                                   505               197
                                                                                -----------       -----------

           Total assets                                                         $    23,613       $    25,117
                                                                                ===========       ===========

         LIABILITIES AND SHAREHOLDERS' EQUITY
         Liabilities
           Note Payable                                                         $     3,000       $     5,000
           Other liabilities                                                              5                 5
                                                                                -----------       -----------

           Total liabilities                                                          3,005             5,005
                                                                                ===========       ===========

         Shareholders' Equity
           Common stock                                                               8,926             8,926
           Paid-in capital                                                            8,944             8,926
           Retained earnings                                                          2,736             2,052
           Accumulated other comprehensive income (loss)                                  2               208
                                                                                          -               ---
           Total shareholders' equity                                                20,608            20,112
                                                                                -----------       -----------

                Total liabilities and shareholders' equity                      $    23,613       $    25,117
                                                                                ===========       ===========`

Page 69 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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

CONDENSED
STATEMENTS OF INCOMEYears Ended December 31

`2004             2003
                                                                                    ------           ------
         Income
           Interest income                                                      $         1       $         -
           Other income                                                                   -                17
           Dividend from subsidiary                                                   2,000                 -
                                                                                -----------       -----------
                                                                                      2,001                17
         Expenses
           Salaries and employee benefits                                                18                55
           Professional fees                                                            188               205
           Interest Expense                                                             213                 -
           Other                                                                         27                55
                                                                                         --                --
                                                                                        446               315
                                                                                -----------       -----------

         Income (loss) before income tax and undistributed
           subsidiary income                                                          1,555              (298)
         Income tax benefit                                                             151               101
                                                                                -----------       -----------

         Income (loss) before undistributed earnings
           of subsidiary                                                              1,706              (197)
         Equity in undistributed earnings of subsidiary                              (1,022)              817
                                                                                -----------       -----------

         Net income                                                             $       684       $       620
                                                                                ===========       ===========`

Page 70 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

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

CONDENSED
STATEMENTS OF CASH FLOWYears ended December 31

`2004             2003
                                                                                    ------           ------

         Cash flows from operating activities
           Net income                                                           $    684          $     620
              Adjustments to reconcile net income
                to net cash from operating activities
           Equity in undistributed earnings of subsidiary                          1,022               (817)
           Change in other assets                                                   (308)               (93)
           Change in other liabilities                                                 -                 (7)
                                                                                --------          ---------
           Net cash from operating activities                                      1,398               (297)

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

         Cash flows from financing activities
           Proceeds from borrowing                                                     -              5,000
           Repayments on note                                                     (2,000)
           Proceeds from issuance of options and common stock                         18              1,082
                                                                                --------          ---------
           Net cash from financing activities                                     (1,982)             6,082
                                                                                --------          ---------

         Net change in cash and cash equivalents                                    (584)               785

         Cash and cash equivalents at beginning of period                            909                124
                                                                                --------          ---------
         Cash and cash equivalents at end of period                             $    325          $     909
                                                                                ========          =========`

Page 71 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 19  EARNINGS PER SHARE

The
factors used in the earnings per share computation follow:

`2004             2003
                                                                                    ------           ------

                      Basic
                           Net income                                           $       684       $       620
                                                                                ===========       ===========

                           Weighted average common shares                             1,559             1,488
                                                                                ===========       ===========

                           Basic earnings per common share                      $       .44       $       .42
                                                                                ===========       ===========

                      Diluted
                           Net income                                           $       684       $       620
                                                                                ===========       ===========

                      Weighted average common shares outstanding
                         for basic earnings per common share                          1,559             1,488

                      Add: Dilutive effects of assumed exercises of
                         Stock warrants                                                   -                27
                         Stock options                                                    5                 8
                                                                                -----------       -----------

                      Average shares and dilutive potential
                         common shares                                                1,564             1,523
                                                                                ===========       ===========

                      Diluted earnings per common share                         $       .44       $       .41
                                                                                ===========       ===========`

Stock
options for 58,000 and 66,000 shares of common stock were not considered in computing
diluted earnings per common share for 2004 and 2003, respectively, because they were
anti-dilutive.

NOTE 20  OTHER COMPREHENSIVE INCOME

Other
comprehensive income components and related taxes were as follows:

`2004             2003
                                                                                    ------           ------

                    Unrealized holding gains and losses on
                      available-for-sale securities                               $      7          $    624
                    Less reclassification adjustments for gains
                      and losses later recognized as income                           (318)             (694)
                                                                                  --------          --------
                    Net unrealized gains and losses                                   (311)              (70)
                    Tax effect                                                         105                16
                                                                                  --------          --------
                    Other comprehensive income (loss)                             $   (206)         $    (54)
                                                                                  ========          ========`

Page 72 of 79

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FIRST SECURITY BANCORP,
INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2004 and
2003

---

NOTE 21  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

`Net Interest     Noninterest      Noninterest         Net     Earnings per Share
                             Income          Income           Expense      Income       Basic        Diluted
                             ------          ------           -------      ------       -----        -------

    2004
       First quarter     $  1,448         $    515         $    1,649      $  201       $ .13          $.13
       Second quarter       1,648              396              1,698         203         .13           .13
       Third quarter        1,585              361              1,735         (1)           -             -
       Fourth quarter       1,646              225              1,456         281         .18           .18

   2003
       First quarter     $  1,491         $    460         $    1,679      $  123       $ .08          $.08
       Second quarter       1,480              961              1,863         202         .14           .13
       Third quarter        1,435              794              1,855         249         .17           .16
       Fourth quarter       1,525              551              1,885         46          .03           .04`

(The balance
of this page is intentionally left blank)

Page 73 of 79

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

On
March 24, 2004, the Board of Directors of First Security determined to engage BKD, LLP
(BKD) as its independent auditors for the fiscal year ended December 31, 2004.
The determination to replace Crowe Chizek and Company, LLP (Crowe Chizek) was
recommended by the Audit Committee and approved by the full Board of Directors.

The
report of Crowe Chizek for the year ended December 31, 2003 contained no adverse opinion
or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope,
or accounting principles. During the year ended December 31, 2003 and during the period
from December 31, 2003 to March 24, 2004, there were no disagreements between First
Security and Crowe Chizek concerning accounting principles or practices, financial
statement disclosures, or auditing scope or procedure or any reportable events.

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, 2004 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 17, 2005, and incorporated herein by reference.

Page 74 of 79

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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 2005.

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 have been updated
throughout 2004, and we believe that our current code of ethics that applies to our senior
financial officers (Chief Executive Officer and Chief Financial Officer) is in conformity with the
requirements for a code of ethics as defined in Item 406 of SEC Regulation S-B, which the
SEC adopted in 2003. A copy of our Code of Ethics is posted on our website at
http://www.myfsb.net.  It can be accessed from Investor Relations.

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 17, 2005, and is
incorporated herein 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 17,
2005, 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 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 17, 2005, under the
headings, Executive Compensation and Certain Transactions  Certain
Transactions with Management and Executive Compensation and Certain Transactions 
Employment Agreements and is incorporated herein by reference.

ITEM 13.    EXHIBITS

The
following exhibits are furnished with this report (* denotes a management contract or
compensatory plan arrangement):

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]).

Page 75 of 79

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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.  incorporated  by  reference to Exhibit 3.3 of the Companys Form
10-KSB filed for the year ended December 31, 2003 [No. 000-49781]).

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]).

4.3      Amended and Restated
Bylaws of First Security  Bancorp,  Inc.  incorporated by reference to Exhibit 4.3 of the
Companys Form 10-KSB filed for the year ended December 31, 2003 [No. 000-49781]).

*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]).

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      
Grounds lease between LEX/108, LLC and First Security Bank of Lexington, Inc. for the
lease of land and improvements in Palomar Centre in Lexington, Kentucky used for the
purpose of a First Security Bank branch office.

10.10      
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]).

10.11      
Contract for  Electronic  Data  Processing  Services  between BSC, Inc. and First Security Bank of Lexington,
                  Inc. dated as of November 14, 2003.

10.12      
Outsource Contract between BSC, Inc. and First Security Bank of Lexington, Inc.

Page 76 of 79

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10.13      
Data  Processing  Agreement  between Fifth Third Bank and First Security Bank of Lexington,  Inc. dated March
                  30, 2004.

*10.14      
Employment  Agreement  between  First  Security  Bancorp,  Inc. and R.  Douglas  Hutcherson  (incorporated  by
reference to Exhibit 10.11 of the Company's 10-KSB filed for the year ended December 31, 2003 [No. 000-49781]).

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 BKD, LLC.

23.2      
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.

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 17, 2005 under the
heading, Independent Public Accountants and is incorporated herein by
reference.

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balance of this page is intentionally left blank)

Page 77 of 79

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SIGNATURES

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

FIRST SECURITY BANCORP, INC.
By:/s/  R. Douglas Hutcherson
President and Chief Executive Officer
Date:  March 30, 2005

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.

|                                               |  |                                                                     |  |               
|---------------------------------------------- |  | ------------------------------------------------------------------- |  | --------------
|Signature                                      |  | Title                                                               |  | Date          
|                                               |  |                                                                     |  |               
|/s/ Len AldridgeLen Aldridge                   |  | Chairman of the Board                                               |  | March 30, 2005
|                                              
|/s/ R. Douglas HutchersonR. Douglas Hutcherson |  | President and Chief Executive Officer(Principal Executive Officer)  |  | March 30, 2005
|/s/ John G. SullivanJohn G. Sullivan           |  | Chief Financial Officer(Principal Financial and Accounting Officer) |  | March 30, 2005
|/s/ Julian E. BeardJulian E. Beard             |  | Director                                                            |  | March 30, 2005
|Harold Glenn Campbell                          |  | Director                                                            |  |               
|/s/ A. F. DawahareA. F. Dawahare               |  | Director                                                            |  | March 30, 2005
|/s/ Kenneth L. GersonKenneth L. Gerson         |  | Director                                                            |  | March 30, 2005
|/s/ Tommy R. HallTommy R. Hall                 |  | Director                                                            |  | March 30, 2005
|/s/ Erle L. LevyErle L. Levy                   |  | Director                                                            |  | March 30, 2005
|/s/ Ira P. MersackIra P. Mersack               |  | Director                                                            |  | March 30, 2005
|Robert J. Rosenstein                           |  | Director                                                            |  |               
|/s/ Richard S. TrontzRichard S. Trontz         |  | Director                                                            |  | March 30, 2005
|/s/ William T. VennesWilliam T. Vennes         |  | Director                                                            |  | March 30, 2005
|/s/ Kathy E. WalkerKathy E. Walker             |  | Director                                                            |  | March 30, 2005
|/s/ D. Woodford WebbD. Woodford Webb           |  | Director                                                            |  | March 30, 2005

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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  |  | Grounds lease between LEX/108, LLC and First Security Bank of Lexington, Inc.                                                                               
|10.10 |  | First Security Bank of Lexington, Inc. Stock Award Plan (Amended and Restated as of March 18, 2003)*                                                        
|10.11 |  | Contract for Electronic Data Processing Services between BSC, Inc. and First Security Bank of Lexington, Inc.                                               
|10.12 |  | Outsource Contract between BSC, Inc. and First Security Bank of Lexington, Inc.                                                                             
|10.13 |  | Data Processing Agreement between Fifth Third Bank and First Security Bank of Lexington, Inc.                                                               
|10.14 |  | 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 BKC, LLP                                                                                                                                         
|23.2  |  | 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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