SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   Form 10-KSB

          _X_ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                 EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 2002

        ___ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _________

                        Commission File Number 000-49781

                          FIRST SECURITY BANCORP, INC.
                 (Name of Small Business Issuer in Its Charter)
                 ----------------------------------------------


                    Kentucky                    61-1364206
      (State or Other Jurisdiction of (I.R.S. Employer Identification No.)
                 Incorporation or Organization)
 ------------------------------------ -----------------------------------------
                 318 East Main Street, Lexington, Kentucky 40507
              (Address, of Principal Executive Offices) (Zip Code)
                ----------------------------------------- ------

          Issuer's Telephone Number, Including Area Code: (859)367-3700
         --------------------------------------------------------------

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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. _X_

State issuer's revenues for its most recent fiscal year: $15,235,000

State the aggregate market value of the voting stock held by
non-affiliates of the registrant on March 26, 2003: $13,748,894

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Class                                           Outstanding at March 26, 2003
---------------------------                       -----------------------------
Common Stock, no par value                                    1,470,722

Transitional Small Disclosure Format:  Yes ___     No  X

<PAGE>

                          FIRST SECURITY BANCORP, INC.

Table of Contents

Part I

Item                                                                     Page
1. Description of Business
      General.................................................................3
      Selected Consolidated Financial Data....................................3

2. Description of Property...................................................14

3. Legal Proceedings.........................................................15

4. Submission of Matters to a Vote of Security Holders.......................15

Part II
5. Market for Common Equity and Related Stockholder Matters..................15

6. Management's Discussion and Analysis or Plan of Operation.................16

7. Financial Statements
      Report of Independent Auditors.........................................35
      Consolidated Financial Statements......................................36
      Notes on Consolidated Financial Statements.............................42

8. Changes in and Disagreements with Accountants on Accounting and
   Financial Disclosure......................................................56

Part III

9. Directors and Executive Officers of the Registrant........................56

10. Executive Compensation...................................................59

11. Security Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters..............................................61

12. Certain Relationships and Related Transactions...........................63

Part IV

13. Exhibits, Lists and Reports on Form 8-K63................................63

14. Controls and Procedures..................................................65

15. Principal Accountant Fees and Services...................................65

Signatures...................................................................65

Exhibit Index................................................................68
<PAGE>
                                     Part I

Item 1. Description of Business

General

     Substantially all of First Security Bancorp's  business  activities consist
of its ownership of First Security Bank of Lexington,  Inc. First Security Bank,
as presently  constituted,  was organized in 1997.  First Security Bank actively
competes  on the local and  regional  levels  with  other  commercial  banks and
financial  institutions  for all types of deposits,  loans and the financial and
other  services  which it offers.  First  Security  Bank's  general  market area
consists  of  Fayette  County,  Kentucky  and the  surrounding  counties.  First
Security  Bank is subject to  competition  not only from other banks and savings
and loan associations  located in the First Security Bank service area, but from
a number of financial service entities that are competing for deposits and loans
and providing financial management services.  These other entities include money
market funds, finance companies,  investment banking firms, insurance companies,
pension  funds  and  large  retail  organizations.  Many of the  banks and other
financial  institutions with which First Security Bank competes have capital and
resources   substantially  in  excess  of  First  Security  Bank's  capital  and
resources. See "Competition" below.

     First Security Bank is one of 19 commercial  banks and thrift  institutions
with offices  located in Fayette County,  Kentucky,  which is the Bank's primary
market area. As of December 31, 2002,  the Bank had total assets of $231 million
and total deposits of $189 million.

     First  Security  Bank  engages in a wide range of  commercial  and personal
banking  activities,  including  the usual  acceptance of deposits for checking,
savings and time deposit  accounts;  extension of secured and unsecured loans to
corporations,  individuals and others;  issuance of letters of credit; rental of
safe deposit boxes;  and financial  counseling for institutions and individuals.
First Security Bank's lending  services  include  commercial,  industrial,  real
estate, installment, credit cards and participation in loans with other banks.

     First  Security Bank offers  convenient  banking hours with the main office
lobby open from 9:00 a.m. to 5:00 p.m., Monday through Thursday,  from 9:00 a.m.
to 6:00 p.m. on Friday,  and drive  through  service from 8:00 a.m. to 6:00 p.m.
Monday  through  Friday,  and 9:00 a.m.  to 12:00 p.m. on  Saturday.  The branch
office lobbies are open from 9:00 a.m. to 4:00 p.m.,  Monday  through  Thursday,
9:00 a.m. to 6:00 p.m. on Friday and 9:00 a.m. to 12:00 p.m. on Saturday. Branch
office  drive-through  windows  are open  from 8:00 a.m.  to 6:00  p.m.,  Monday
through Friday and 9:00 a.m. to 12:00 p.m. on Saturday.

Selected Consolidated Financial Data

     The following table sets forth First Security Bancorp's selected historical
financial  information for 2000, 2001 and 2002. This information  should be read
in conjunction with the Consolidated  Financial Statements and the related Notes
found in Item 7 herein. Factors affecting the comparability of certain indicated
periods  are  discussed  in  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OR PLAN OF
OPERATION."

                      Years Ended December 31,
                  (dollars in thousands, except per share data)
                                  2002              2001               2000

Income Statement Data:

Interest income                  $13,136         $ 12,107            $ 9,568

Interest expense                   6,950            7,539              5,722

Net interest income                6,186            4,568              3,846

Provision for loan losses          1,472              447                425

Securities Gains                     660              311                 --

Gain on sale of loans                511               --                 --

Loss on disposal of premises
 and equipment                        (1)             (95)                --

Other non-interest income            929              437                209

Non-interest expense               5,442            3,684              2,777

Income tax expense                   322               68

Net income                         1,049            1,022                853

   Balance Sheet Data

Total assets                    $231,086         $202,270           $134,459

Total securities                  43,046           32,309             13,240

Loans held for sale                3,390              ---                 --
Allowance for loan losses          2,459            1,538              1,221

Total deposits                   188,955          168,744            115,543

Repurchase agreements and other
 short-term borrowings             8,211           12,957              1,393

FHLB advances                     14,517            2,336              1,049

Total shareholders' equity        18,464           16,827             15,612

Basic earnings per share             .72              .70                .81

Diluted earnings per share           .69              .69                .79

Book Value                         12.68            11.55              11.03

  Performance ratios:

Return on average assets             .47%             .62%               .74%

Return on average equity            5.86             6.06               8.63

Net interest margin                 2.95             2.91               3.48

Efficiency ratio                      66               71                 69

  Asset quality ratios:

Non-performing assets to
 total loans                         3.75%            .52%               .--%

Net loan charge-offs to
 average loans                        .35%            .10                .02

Allowance for loan losses to
 total loans                         1.46            1.01               1.14

  Capital ratios:

Average shareholders' equity to
 average total assets                8.05%           10.15%             8.66%

Leverage ratio                       7.90             8.80             12.04

Tier 1 risk-based capital ratio
                                     9.80            10.17             13.46
Total risk-based capital ratio
                                    11.00            11.08             14.52

  Other key data:

End-of-period full-time equivalent
 employees                             57               40                30
Number of bank offices                  4                4                 3

Business Overview

     First  Security  Bank conducts a general  banking  business and serves as a
full-service  community financial institution offering a variety of products and
services.  These  services  include  the receipt of  deposits,  making of loans,
issuance  of  checks,  acceptance  of drafts,  consumer  and  commercial  credit
operations and mortgage lending.  First Security Bank's deposit products include
basic,  specialty and low-cost  checking  accounts and  competitive  savings and
certificate of deposit  accounts.  First Security Bank's loan products include a
variety of retail, commercial, mortgage and consumer products.

Business Financial Services. First Security Bank offers products and services
consistent with the goal of attracting a wide variety of customers, including
small- to medium-sized business customers. First Security Bank actively pursues
business checking accounts by offering competitive rates, telephone and Internet
banking and other convenient services to its business customers. In some cases,
First Security Bank requires business customers to maintain minimum balances.
First Security Bank has also established relationships with one or more
correspondent banks and other independent financial institutions to provide
other services requested by customers, including cash management services and
loan participation where the requested loan amount exceeds the lending limits
imposed by law or by First Security Bank policies.

         Consumer Financial Services. The retail banking strategy of First
Security Bank is to offer basic banking products and services that are
attractively priced and easily understood by the customer. First Security Bank
focuses on making its products and services convenient and readily accessible to
the customer. In addition to banking during normal business hours, First
Security Bank's products and services are delivered via multiple channels,
including extended drive-through hours, ATMs, telephone, Internet, mail, and by
personal appointment. First Security Bank has four ATMs at its branch facilities
and is a member of an ATM network which has ATMs at convenience stores and/or
service stations. First Security Bank also provides debit and credit card
services by contracting for such services and also offers safety deposit boxes,
night depository, direct deposits, Series EE Savings Bond redemptions, cashier's
and travelers checks and letters of credit.

         First Security Bank offers a variety of deposit accounts, including
checking accounts, regular savings accounts, NOW accounts, money market
accounts, sweep accounts, IRA accounts and certificate of deposit accounts.
Although First Security Bank offers a range of consumer and commercial deposit
accounts, it does not actively solicit (though it does accept) certificates of
deposit in principal amounts greater than $100,000.

         Lending Practices. First Security Bank makes loans to individuals and
businesses located within its market area. First Security Bank's loan portfolio
consists of commercial loans, residential and commercial mortgage loans and
personal loans. First Security Bank's legal lending limits under applicable
regulations (based on the legal lending limits of 30% and 20%, respectively, of
capital and surplus for secured and unsecured loans, respectively) are currently
approximately $5.4 million and $3.6 million, respectively.

         Commercial loans are made primarily to small- and medium-sized
businesses. These loans are secured and unsecured and are made available for
general operating inventory and accounts receivable, as well as any other
purposes considered appropriate. First Security Bank will generally look to a
borrower's business operations as the principal source of repayment, but will
also receive, when appropriate, security interests in personal property and/or
personal guarantees. In addition, the majority of commercial loans that are not
mortgage loans are secured by a lien on equipment, inventory and/or other assets
of the commercial borrower.

         Commercial lending (including commercial real estate lending) involves
more risk than residential real estate lending because loan balances are greater
and repayment is dependent upon the borrower's operations. Additional risks in
commercial lending include the following:

o
                  local or national economic recession;
o
                  disruption of a business management team through death,
                  removal or resignation;
o
                  disputes with suppliers or governmental regulators; and in
o
                  the case of commercial real estate  lending,  loss of major
                  tenants,  environmental  liabilities, and casualty risks.

         First Security Bank attempts to minimize the risks associated with
these transactions by generally limiting its exposure to owner-operated
properties of customers with an established profitable history. In many cases,
risk can be further reduced by limiting the amount of credit to any one borrower
to an amount less than First Security Bank's legal lending limit and avoiding
types of commercial real estate financing considered risky.

         First Security Bank originates residential mortgage loans with either
fixed or variable interest rates. First Security Bank's general policy is to
place most fixed rate loans in the secondary market. This policy is subject to
review by management and may be revised as a result of changing market and
economic conditions and other factors. First Security Bank does not retain
servicing rights with respect to the secondary market residential mortgage loans
that it originates. First Security Bank also offers home equity loans which are
secured by prior liens on the subject residence, First Security Bank thereby
generally takes a junior lien position on the subject residence.

     On June 3, 2002,  First  Security Bank  purchased  certain  assets of First
Mortgage  Company,  Inc. in an effort to expand its  penetration  of the Central
Kentucky  residential  mortgage loan market.  This  acquisition has enhanced the
Bank's products and service offerings and benefited its customers.  The mortgage
products and services,  now offered through the Bank as First Security  Mortgage
Company, will be a new source of noninterest income.

         First Security Bank makes personal loans and lines of credit available
to consumers for various purposes, such as the purchase of automobiles, boats
and other recreational vehicles, and the making of home improvements and
personal investments. All of such loans are retained by First Security Bank.

         Consumer loans generally have shorter terms and higher interest rates
than residential mortgage loans and usually involve more credit risk than
mortgage loans because of the type and nature of the collateral. Risks
associated with both consumer and residential mortgage lending include the
following:
o
                  financial instability resulting from the loss of a job;
o
                  illness;
o
                  bankruptcy;
o
                  divorce;
o
                  local or national economic recession; and
o
                  decline in real estate values in central Kentucky market.

         In many cases, repossessed collateral for a defaulted consumer loan
will not provide an adequate source of repayment of the outstanding loan balance
because of depreciation of the underlying collateral. First Security Bank
underwrites its loans based on such criteria as the amount of the down payment,
credit quality and history, employment stability and monthly income. These loans
are expected generally to be repaid on a monthly repayment schedule with the
payment amount tied to the borrower's periodic income. The generally higher
yields earned on consumer loans help compensate for the increased credit risk
associated with such loans and that consumer loans are important to First
Security Bank's efforts to serve the credit needs of its customer base.

     Although First Security Bank takes a progressive and  competitive  approach
to lending,  it  stresses  high  quality in its loans.  First  Security  Bank is
subject to written loan policies that contain general lending guidelines and are
subject to  periodic  review and  revision by the First  Security  Bank Board of
Directors Loan Policy  Committee.  These policies  address loan  administration,
documentation, approval and reporting requirements for various types of loans.

     First  Security  Bank  seeks to make sound  loans  while  recognizing  that
lending money  involves a degree of business risk.  First  Security  Bank's loan
policies are designed to assist it in managing  the  business  risk  involved in
making loans.  These  policies  provide a general  framework for First  Security
Bank's  loan  operations  while  recognizing  that not all risk  activities  and
procedures  can be  anticipated.  First Security  Bank's loan policies  instruct
lending  personnel  to use  care  and  prudent  decision-making  and to seek the
guidance  of the Chief  Credit  Officer  or the  President  and Chief  Executive
Officer of First Security Bank where appropriate.

         The loan policies address loan portfolio diversification and prudent
underwriting standards, loan administration procedures, and documentation,
approval and reporting requirements in light of First Security Bank's basic
objectives of:

o
                  granting loans on a sound and collectible basis;
o
                  investing First Security Bank funds  profitably for the
                  benefit of shareholders  and securely for the benefit of
                  depositors; and
o
                  serving the credit needs of the Lexington-Fayette County
                  market.

         Such policies provide that:

o                 individual  officers  of First  Security  Bank have  personal
                  lending  authority  within  varied ranges;
o
                  credits in excess of an officer's lending authority but not in
                  excess of $500,000 require the approval of First Security
                  Bank's Chief Executive Officer or the chief Credit Officer;
                  and
o
                  credits in excess of $500,000 require the approval of the
                  First Security Bank Board of Directors Loan Policy Committee.

         First Security Bank's loan policies provide general guidelines for
loan-to-value ratios that restrict the size of loans to a maximum percentage of
the value of the collateral securing the loans, which percentage varies by the
type of collateral, including the following loan-to-value ratios:

o
                  raw land (65%);

o
                  improved residential real estate lots (80%);

o
                  commercial real estate (80%); and

o
                  residences (90%).

         Regulatory and supervisory loan-to-value limits are established by the
Federal Deposit Insurance Corporation Improvement Act of 1991. First Security
Bank's internal loan-to-value limitations will follow these limits and will
often be more restrictive than those required by the regulators. Loans made in
excess of established supervisory ratios are periodically reported to the Board
of Directors.

     First Security Bank's loan policies  generally  include other  underwriting
guidelines  for  loans  secured  by liens  on real  estate.  These  underwriting
standards  are designed to determine the maximum loan amount that a borrower has
the  capacity to repay based upon the type of  collateral  securing the loan and
the borrower's  income.  Typically the borrower would be expected to have annual
cash flow of 1.25 times  required debt service.  In addition,  the loan policies
require that First Security Bank obtain a written appraisal by a state certified
appraiser  for loans  secured by real estate in excess of  $250,000,  subject to
limited  exceptions.  The appraiser  must be selected by First Security Bank and
must be  independent  and licensed or state  certified.  First Security Bank may
elect to conduct an in-house  real  estate  evaluation  for loans not  exceeding
$50,000.  First Security Bank's loan policies also include maximum  amortization
schedules  and loan terms for each  category  of loans  secured by liens on real
estate.  Loans  secured by  commercial  real estate are  generally  subject to a
maximum term of 5 years and a maximum  amortization  schedule of 25 years. Loans
secured by  residential  real estate with  variable  interest  rates will have a
maximum  term  and  amortization  schedule  of 30  years.  Except  for  three or
five-year fixed rate residential  mortgage loans,  First Security Bank places in
the secondary market all of its residential  fixed-rate mortgage loans,  thereby
reducing its interest  rate risk and credit risk.  Loans  secured by vacant land
are  generally  subject to a maximum term of 3 years and a maximum  amortization
schedule of 10 years.

         First Security Bank's loan policies also establish guidelines on the
aggregate amount of loans to any one borrower, providing as a guideline that no
loan shall be granted where the aggregate liability of the borrower to First
Security Bank will exceed $2.5 million on an unsecured basis or $4.0 million on
a secured basis. This internal lending limit is subject to review and revision
by the First Security Bank Board of Directors Loan Policy Committee from time to
time.

         In addition, First Security Bank's loan policies provide guidelines
for:

o
                  personal guarantees;
o
                  environmental policy review;
o
                  loans to employees, executive officers and directors;
o
                  problem loan identification;
o
                  maintenance of a loan loss reserve; and
o
                  other matters relating to First Security Bank's lending
                  practices

     Investments.  First Security Bank first strives to meet the credit needs of
its community  through making loans.  Loan demand takes preference on investable
funds up to an acceptable  loan-to-deposit ratio, as periodically  determined by
the board of directors.  Loan and investment  opportunities  are fully explored,
and those offering the greatest return considering liquidity risk, and community
requirements,  will be given priority.  First Security Bank's  investment policy
specifies  that the overall  portfolio  objective  is to maximize  the long term
total rate of return through active management of portfolio holdings, consistent
with  asset/liability,  liquidity,  tax equivalent yield,  maturity and pledging
guidelines.  Permissible  investments  include  debt  instruments  such  as U.S.
government securities,  government sponsored agencies, municipal bonds, banker's
acceptances,  commercial paper,  domestic certificates of deposit which are FDIC
insured, mortgage-backed securities and collateralized mortgage obligations, and
small business administration ("SBA") pools.  Participation in the federal funds
market with other  depository  institutions  is permitted.  Investment in equity
securities  is very  limited  and only done in  exceptional  circumstances.  All
investments are made in accordance with investment policy  guidelines  governing
acceptable  yields,   maturities,   investment  selection  and  evaluation,  and
unsuitable investment practices.

         Real estate acquired by First Security Bank in satisfaction of or in
foreclosure upon loans may be held, subject to a determination by a majority of
its board of directors as to the advisability of retaining the property, for a
period not to exceed sixty months after the date of acquisition or such longer
period as the appropriate regulators may approve. Investment in real estate,
including furniture and fixtures, is also permitted as it is necessary for the
convenient transaction of the bank's business. Real estate investments are
subject to regulatory limitations.

         Financial Planning. First Security Bank has made arrangements to offer
financial planning, investment and insurance services through a subsidiary under
the name First Security Capital Management. First Security Capital Management
will offer these services with the support of Consulting Services Support
Corporation. The objective of offering these products and services would be to
generate fee income and strengthen relationships with First Security Bank
customers.

         Trust Services. First Security Bank does not have trust powers, but
expects to explore establishing a relationship with a third-party provider for
administrative trust services.

Data Management and Other Services
         Rather than expending the large sums required to conduct the data
management function directly, First Security Bank has entered into an agreement
with BSC, Inc. BSC provides, among other things, on-line facilities, daily
financial report preparation, loan and deposit data processing and customer
account statement preparation pursuant to an agreement with a remaining term of
eleven months. The fees under the BSC contract are currently $10,000 per month.

         Using BSC for these services is a more cost efficient alternative than
hiring the personnel and purchasing the equipment required to perform such
services in-house. In addition, First Security Bank has attempted to develop and
maintain strong correspondent banking relationships that enable it to purchase
other services such as check collection, purchase and sale of federal funds,
wire transfer services and customer credit services, including selling
participation in loans which would otherwise exceed First Security Bank's legal
lending limits.

Personnel and Benefits

         The operations of First Security Bank are staffed with sixty-two (62)
employees, including eleven (11) part-time employees. The current staffing is
categorized as follows:

                                    Management

                                    Chairman, President and Chief
                                    Executive Officer; Executive
                                    Vice-President and Chief Credit
                                    Officer; First Vice-President and
                                    Chief Financial Officer*; Human
                                    Resources Officer; Assistant
                                    Vice-President and Assistant
                                    Controller*; Vice-President and
                                    Retail Sales Manager; Internal
                                    Auditor; Executive Assistant

                                    Retail Operations

                                    Four Branch Managers;
                                    Twenty-Five Tellers/New Accounts Staff;
                                    One Marketing-Business Dev't
                                    Representative; Information Systems Analyst;
                                    Four Operations Officers-Accounting Clerks

                                    Lending

                                    Consumer/Installment/Mortgage Lender
                                    Two Commercial Lenders
                                    New Business Development Officer
                                    Senior Loan Administrator
                                    Six Loan Support Employees

                                    Mortgage Banking

                                    President; Two Loan Originators;
                                    7 Loan Support Employees

        *These two members of Management left during the first quarter 2003.

Management considers employee relations to be good. None of First Security
Bank's employees are covered by a collective bargaining agreement.

Competition

         The banking business in the Lexington-Fayette County market area is
highly competitive. Competition exists between state and national banks (as well
as federal savings banks) for deposits, loans and other banking services. First
Security Bank is required to compete with numerous well-established financial
institutions with vastly greater financial and human resources than those
available to it.

         First Security Bank's market area has experienced substantial
consolidation in recent years within the banking industry. Many of the area's
locally owned or locally managed financial institutions have either been
acquired by large regional bank holding companies or have been consolidated into
branches. This consolidation has been accompanied by fee changes, branch
closings, the dissolution of local boards of directors, management and branch
personnel changes and, in the judgment of many, a decline in the level of
personalized customer service. With recent changes in interstate banking
regulations, this type of consolidation is expected to continue.

         Currently, there are 15 commercial banks operating 86 offices in
Fayette County as well as 4 federal savings banks operating five offices, eleven
credit unions and several small loan companies. The following table (adapted
from information provided in the Federal Deposit Insurance Corporation Summary
of Deposits) sets forth information respecting commercial banks with offices in
Fayette County, and the deposits (in millions) attributable to such offices, as
of June 30, 2002:

                                     June 30, 2002 Deposits   Number of Offices
 Institution

Bank of the Bluegrass and Trust Company         $  103                   1
Bank One, Kentucky, N.A.                         1,045                  14
Central Bank & Trust Co.                           650                  12
Fifth Third Bank, Kentucky, Inc.                   519                   9
First Southern National Bank                        26                   1
National City Bank of Kentucky                     366                  13
Community Trust Bank, N.A.                          49                   4
PNC Bank of Kentucky                               106                   4
Republic Bank and Trust Co.                        132                   4
Vine Street Trust Co.                               78                   3
Whitaker Bank, N.A.                                 95                   7
Traditional Bank of Kentucky, Inc.                  84                   2
Firstar Bank, N.A.                                 112                   6
First Security Bank                                190                   4
Integra Bank, N.A.                                  11                   2
                                                $3,566                  86


                                   Market Area

         First Security Bank concentrates the majority of its marketing efforts
in the Lexington-Fayette County area. Fayette County is located in central
Kentucky, approximately 75 miles east of Louisville and approximately 85 miles
south of Cincinnati.

         Lexington is the center of a seven-county metropolitan area that has
experienced rapid growth over the past 15 years. Based upon the most recent
information from the U.S. Bureau of Census, the population of Lexington and
surrounding Fayette County grew by 15.6% to 261,000 in the 1990's. The state
population grew by 9.79% to 4.0 million residents. Unemployment levels in the
Lexington Metropolitan Statistical Area (MSA) and Fayette County have remained
historically low. November 2002 unemployment rates were 3.2% for the Lexington
MSA and 2.9% for Fayette County, compared to 5.3% for the Commonwealth of
Kentucky. The U.S. Census Bureau places Fayette County mean household income at
$39,800 versus $33,700 for the Commonwealth of Kentucky.

         Lexington is the financial, educational, retail, health care, service,
and cultural center of the Bluegrass region in central Kentucky and most of
eastern Kentucky. The healthy economy of Lexington and the surrounding counties
is due in large part to its diversification of employment opportunities. The
MSA's largest employment sector, the services industry, accounts for only 28.5%
of total non-agricultural jobs. Most of the remaining employment is dispersed
among government, retail trade, manufacturing, and construction. Because of the
diverse opportunities, Lexington's unemployment rate (currently at 3.2%) is
typically lower than the rest of the nation. The University of Kentucky, Toyota,
and Lexmark International are among the area's largest employers. Other
employment opportunities include equine-related businesses, health care,
tobacco, retail and services. The following is a list of 15 of the larger
employers in the Lexington MSA:

                         Major Employers - Lexington MSA

                                Company Employees
                         University of Kentucky 10,658
                         Toyota Motor Mfg. USA 7,900
                         Fayette Co. Public Schools 4,906
                         Lexmark International 4,000
                         University of Ky. Hospital 3,100
                         Lex.-Fayette Urban Co.Gov't 2,597
                         Central Baptist Hospital 2,400
                         St. Joseph Hospital 2,000
                         Kentucky Utilities 1,780
                         Eastern Ky. University 1,750
                         Johnson Controls 1,500
                         The Trane Co. 1,500
                         OSRAM Sylvania 1,355
                         Dillards 1,350
                         Veterans Medical Center 1,300

Regulation and Supervision

         As a bank holding company, First Security Bancorp is regulated under
the Bank Holding Company Act of 1956, as amended (the "Act"). The Act limits the
business of bank holding companies to banking, managing or controlling banks and
other subsidiaries authorized under the Act, performing certain servicing
activities for subsidiaries and engaging in such other activities as the Board
of Governors of the Federal Reserve System ("Federal Reserve Board") may
determine to be closely related to banking. First Security Bancorp is registered
with and is subject to regulation by the Federal Reserve Board. Among other
things, applicable statutes and regulations require First Security Bancorp to
file an annual report and such additional information as the Federal Reserve
Board may require pursuant to the Act and the regulations which implement the
Act. The Federal Reserve Board also conducts examinations of First Security
Bancorp.

         The Act provides that a bank holding company must obtain the prior
approval of the Federal Reserve Board to acquire more than 5 percent of the
voting stock or substantially all the assets of any bank or bank holding
company. First Security Bancorp currently has no formal agreement or commitments
for any such transaction. However, First Security Bancorp evaluates
opportunities to invest in or acquire other banks or bank holding companies as
they arise and may engage in these transactions in the future. The Act also
provides that, with certain exceptions, a bank holding company may not (i)
engage in any activities other than those of banking or managing or controlling
banks and other authorized subsidiaries, or (ii) own or control more than 5
percent of the voting shares of any company that is not a bank, including any
foreign company.

         A bank holding company is permitted, however, to acquire shares of any
company, the activities of which the Federal Reserve Board has determined to be
so closely related to banking or managing or controlling banks as to be a proper
incident thereto. The Federal Reserve Board's regulations state specific
activities that are permissible under that exception. First Security Bancorp
does not currently have any agreements or commitments to engage in any
nonbanking activities apart from investment advisory services.

         In approving acquisitions by bank holding companies of banks and
companies engaged in banking-related activities, the Federal Reserve Board
considers whether any such activity by an affiliate of the holding company can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh any
possible adverse effects such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound banking practices. The
Federal Reserve Board has cease-and-desist powers over parent holding companies
and nonbanking subsidiaries if their actions constitute a serious threat to the
safety, soundness, or stability of a subsidiary bank.

         A bank holding company may also acquire shares of a company which
furnishes or performs services for a bank holding company and acquire shares of
the kinds and in the amounts eligible for investment by national banking
associations. In addition, the Federal Reserve Act restricts First Security
Bank's extension of credit to First Security Bancorp.

         On November 12, 1999, Congress enacted the Gramm-Leach-Bliley Act
(previously known as the Financial Services Modernization Act of 1999). The
Gramm-Leach-Bliley Act permits bank holding companies to qualify as "financial
holding companies" that may engage in a broad range of financial activities,
including underwriting, dealing in and making a market in securities; insurance
underwriting and agency activities; and merchant banking. The Federal Reserve
Board is authorized to expand the list of permissible financial activities. The
Gramm-Leach-Bliley Act also authorizes banks to engage through financial
subsidiaries in nearly all of the activities permitted for financial holding
companies. First Security Bancorp has not elected the status of financial
holding company.

         The Gramm-Leach-Bliley Act also imposes significant new financial
obligations and reporting requirements on banks as well as on other financial
institutions. Among other things, financial institutions are required to (a)
establish privacy policies and disclose them to customers both at the time of
establishing the customer relationship and on an annual basis, and (b) permit
customers to opt out of the financial institution's disclosure of customer
nonpublic personal information to third parties that are not affiliated with the
financial institution.

         As a state chartered commercial bank, First Security Bank is subject to
examination, supervision and extensive regulation by the FDIC and the Kentucky
Department of Financial Institutions (the "DFI"). First Security Bank is a
member of and owns stock in the Federal Home Loan Bank ("FHLB") of Cincinnati.
The FHLB institution located in Cincinnati is one of the twelve regional banks
in the FHLB system. First Security Bank is also subject to regulation by the
Federal Reserve Board, which governs reserves to be maintained against deposits
and regulates certain other matters. The extensive system of banking laws and
regulations to which First Security Bancorp is subject is intended primarily for
the protection of their customers and depositors, and not First Security Bancorp
shareholders.

         The FDIC and the DFI s regularly examine First Security Bank and
prepare a report for the consideration of the First Security Bank's Board of
Directors on any deficiencies that it may find in its operations. The
relationship with its depositors and borrowers also is regulated to a great
extent by both federal and state laws, especially in such matters as the form
and content of First Security Bank's mortgage documents and communication of
loan and deposit rates to both existing and prospective customers.

         The FDIC has extensive authority over the operations of all insured
commercial banks. As part of this authority, First Security Bank is required to
file periodic reports with the FDIC and the DFI and is subject to periodic
examinations by both agencies. In the course of these examinations, the
examiners may require First Security Bank to provide for higher general loan
loss reserves. Financial institutions in various regions of the United States
have been called upon by examiners to write down assets to their fair market
values and to establish increased levels of reserves, primarily as a result of
perceived weaknesses in real estate values and a more restrictive regulatory
climate.

         The investment and lending authority of a state-chartered bank is
prescribed by federal laws and regulations, and such banks are prohibited from
engaging in any activities not permitted by such laws and regulations. These
laws and regulations generally are applicable to all state chartered banks.

Federal Regulations

         Sections 22(h) and (g) of the Federal Reserve Act place restrictions on
loans to executive officers, directors and principal stockholders. Under Section
22(h), loans to a director, an executive officer and to a greater than 10%
stockholder of a bank, and certain affiliated interests of either, may not
exceed, together with all other outstanding loans to such person and affiliated
interests, the institution's loans to one borrower limit (20% of First Security
Bank's unimpaired capital and surplus). Section 22(h) also requires that loans
to directors, executive officers and principal stockholders be made on terms
substantially the same as offered in comparable transactions to other persons
and also requires prior board approval for certain loans. In addition, the
aggregate amount of extensions of credit to all insiders cannot exceed the
institution's unimpaired capital and surplus. At December 31, 2002 First
Security Bank was in compliance with the above restrictions.

Safety and Soundness.

         The Federal Deposit Insurance Act (" FDIA"), as amended by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the Riegle
Community Development and Regulatory Improvement Act of 1994, requires the
federal bank regulatory agencies to prescribe standards, by regulations or
guidelines, relating to the internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest-rate-risk
exposure, asset growth, asset quality, earnings, stock valuation and
compensation, fees and benefits and such other operational and managerial
standards as the agencies may deem appropriate. The federal bank regulatory
agencies adopted, effective August 9, 1995, a set of guidelines prescribing
safety and soundness standards pursuant to FDICIA, as amended. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines.

         If an insured depository institution or its holding company fails to
meet any of the standards promulgated by regulation, then such institution or
company will be required to submit a plan within 30 days to the FDIC specifying
the steps it will take to correct the deficiency. In the event that an
institution or company fails to submit or fails in any material respect to
implement a compliance plan within the time allowed by the agency, Section 39 of
the FDIA provides that the FDIC must order the institution or company to correct
the deficiency and may (1) restrict asset growth; (2) require the institution or
company to increase its ratio of tangible equity to assets; (3) restrict the
rates of interest that the institution or company may pay; or (4) take any other
action that would better carry out the purpose of prompt corrective actions.

         The FDIC generally is authorized to take enforcement action against a
financial institution that fails to meet its capital requirements; such action
may include restrictions on operations and banking activities, the imposition of
a capital directive, a cease and desist order, civil money penalties or harsher
measures such as the appointment of a receiver or conservator or a forced merger
into another institution. In addition, under current regulatory policy, an
institution that fails to meet its capital requirements is prohibited from
paying any dividends. Except under certain circumstances, further disclosure of
final enforcement action by the FDIC is required.

     Under  Section  38 of the FDIA,  as  amended by the  FDICIA,  each  federal
banking  agency was required to implement a system of prompt  corrective  action
for institutions which it regulates. The federal banking agencies, including the
FDIC, adopted  substantially  similar regulations to implement Section 38 of the
FDIA,  effective as of December 19, 1992. Under the regulations,  an institution
is deemed to be (i)  "well-capitalized"  if it has total  risk-based  capital of
10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier
1  leverage  capital  ratio of 5.0% or more and is not  subject  to any order or
final  capital  directive to meet and maintain a specific  capital level for any
capital  measure,  (ii)  "adequately-capitalized"  if it has a total  risk-based
capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more
and a Tier 1  leverage  capital  ratio  of  4.0%  or more  (3.0%  under  certain
circumstances)  and does not meet the  definition of "well  capitalized,"  (iii)
"undercapitalized"  if it has a total risk-based capital ratio that is less than
8.0%,  a Tier 1  risk-based  capital  ratio  that is less  than 4.0% or a Tier 1
leverage   capital   ratio  that  is  less  than  4.0%  (  3.0%  under   certain
circumstances),   (iv)  "significantly  undercapitalized"  if  it  has  a  total
risk-based  capital  ratio that is less than 6.0%, a Tier 1  risk-based  capital
ratio  that is less than 3.0% or a Tier II  average  capital  ratio that is less
than 3.0%, and (v) "critically  undercapitalized"  if it has a ratio of tangible
equity to total  assets  that is equal to or less than  2.0%.  Section 38 of the
FDIA and the regulations promulgated thereunder also specify circumstances under
which a federal banking agency may reclassify a well capitalized  institution as
adequately capitalized and may require an adequately capitalized  institution or
an undercapitalized institution to comply with supervisory actions as if it were
in the  next  lower  category  (except  that  the  FDIC  may  not  reclassify  a
significantly  undercapitalized institution as critically undercapitalized).  At
December 31, 2002,  First  Security  Bancorp and First Security Bank were deemed
well-capitalized for purposes of the above regulations.

Federal Home Loan Bank System.

         First Security Bank is a member of the FHLB of Cincinnati. The FHLB of
Cincinnati is one of the 12 regional FHLB's that, prior to the enactment of
FIRREA, were regulated by the Federal Home Loan Bank Board (FHLBB). FIRREA
separated the home financing credit function of the FHLB's from the regulatory
functions of the FHLB's regarding savings institutions and their insured
deposits by transferring oversight over the FHLB's from the FHLBB to a new
federal agency, the Federal Home Financing Board ("FHFB").

     As a member of the FHLB Banking system,  First Security Bank is required to
purchase and maintain stock in the FHLB in an amount equal to the greater of one
percent of its  aggregate  unpaid  residential  mortgage  loans,  home  purchase
contracts or similar obligations at the beginning of each year, or 1/20 (or such
greater  fraction as established by the FHLB) of outstanding  FHLB advances.  At
December 31, 2002,  First  Security Bank had $742,000 in FHLB stock which was in
compliance  with  this  requirement.  In past  years,  First  Security  Bank has
received dividends on its FHLB stock.

         Certain provisions of FIRREA require all 12 FHLB's to provide financial
assistance for the resolution of troubled savings institutions and to contribute
to affordable housing programs through direct loans or interest subsidies on
advances targeted for community investment and low-and moderate-income housing
projects. These contributions could cause rates on the FHLB advances to increase
and could affect adversely the level of FHLB dividends paid and the value of
FHLB stock in the future.

         Each FHLB serves as a reserve or central bank for its members within
its assigned region. It is funded primarily from proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB. At December 31, 2002, First Security Bank had $14.5
million in advances from the FHLB.

Accounting.

     An  FDIC  policy   statement   applicable   to  all  banks   clarifies  and
re-emphasizes  that the  investment  activities  of a bank must be in compliance
with approved and documented  investment  policies and  strategies,  and must be
accounted for in accordance with accounting principles generally accepted in the
United States of America.  Under the policy  statement,  management must support
its  classification  of and accounting for loans and securities  (i.e.,  whether
held to maturity,  available for sale or available for trading) with appropriate
documentation. First Security Bank is in compliance with these amended rules.

Insurance of Accounts.

         First Security Bank's deposits are insured up to $100,000 per insured
member (as defined by law and regulation). Deposits of First Security Bank are
insured by the Bank Insurance Fund ("BIF"). This insurance is backed by the full
faith and credit of the United States Government. The BIF is administered and
managed by the FDIC. As insurer, the FDIC is authorized to conduct examinations
of and to require reporting by BIF insured institutions. It also may prohibit
any insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious threat to either fund. The FDIC also has
the authority to initiate enforcement actions against financial institutions.
The annual assessment for deposit insurance is based on a risk-related premium
system. Each insured institution is assigned to one of three capital groups:
well capitalized, adequately capitalized or under capitalized. Within each
capital group, institutions are assigned to one of three subgroups (A, B, or C)
on the basis of supervisory evaluations by the institution's primary federal
supervisor and if applicable, state supervisor. Assignment to one of the three
capital groups, coupled with assignment to one of three supervisory subgroups,
will determine which of the nine risk classifications is appropriate for an
institution. Institutions are assessed insurance rates based on their assigned
risk classifications. The well capitalized, subgroup "A" category institutions
are assessed the lowest insurance rate, while institutions assigned to the under
capitalized subgroup "C" category are assessed the highest insurance rate. As of
December 31, 2002 First Security Bank was assigned to the well-capitalized,
subgroup "A" category and paid an annual insurance rate of 1.7 cents per $100 of
deposits.

         The FDIC may terminate the deposit insurance of any insured depository
institution if it determines, after a hearing, that the institution has engaged
or is engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations or has violated any applicable law, regulation,
order or any condition imposed by an agreement with the FDIC. The FDIC also may
suspend deposit insurance temporarily for any financial institution during the
hearing process for the permanent termination of insurance, if First Security
Bank has no tangible capital. If insurance of accounts is terminated, the
insured accounts at the institution at the time of the termination, less
subsequent withdrawals, shall continue to be insured for a period of six months
to two years, as determined by the FDIC.

         The FDIC has passed regulations, under the FDIA, that generally
prohibit payments to directors, officers and employees contingent upon
termination of their affiliation with an FDIC-insured institution or its holding
company (i.e., "golden parachute payments") if the payment is received after or
in contemplation of, among other things, insolvency, a determination that the
institution or holding company is in "troubled condition", or the assignment of
a composite examination rating of "4" or "5" for the institution. Certain types
of employee benefit plans are not subject to the prohibition. The regulations,
which are not currently applicable to First Security Bancorp, would also
generally prohibit certain indemnification payments regarding any administrative
proceeding instituted against a person that results in a final order pursuant to
which the person is assessed civil money penalties or subjected to other
enforcement action. The Company has no such agreements with any directors or
employees.

         The Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain reserves against their transaction accounts
and non-personal time deposits. Cash on hand or on deposit with the Federal
Reserve Bank of $2.1 million and $1.2 million was required to meet regulatory
reserve and clearing requirements at year-end 2002 and 2001. These balances do
not earn interest.

         Banks are authorized to borrow from the Federal Reserve Bank "discount
window," but Federal Reserve Board regulations require banks to exhaust other
reasonable alternative sources of funds, including FHLB advances, before
borrowing from the Federal Reserve Bank.

Federal Taxation.

         For federal income tax purposes, First Security Bancorp and its
subsidiaries file a consolidated federal income tax return on a calendar year
basis. Consolidated returns have the effect of eliminating intercompany
distributions, including dividends, from the computation of consolidated taxable
income for the taxable year in which the distributions occur.

         The Company and its subsidiaries are subject to the rules of federal
income taxation generally applicable to corporations under the Internal Revenue
Code of 1986, as amended (the "Code").

         First Security Bancorp is subject to the corporate alternative minimum
tax which is imposed to the extent it exceeds First Security Bancorp's regular
income tax for the year. The alternative minimum tax will be imposed at the rate
of 20 percent of a specially computed tax base. Included in this base will be a
number of preference items, including the following: (i) 100 percent of the
excess of a financial institution's bad debt deduction over the amount that
would have been allowable on the basis of actual experience; (ii) interest on
certain tax-exempt bonds issued after August 7, 1986; and (iii) for years
beginning in 1988 and 1989 an amount equal to one-half of the amount by which a
institution's "book income" (as specially defined) exceeds its taxable income
with certain adjustments, including the addition of preference items (for
taxable years commencing after 1989 this adjustment item is replaced with a new
preference item relating to "adjusted current earnings" as specially computed).
In addition, for purposes of the new alternative minimum tax, the amount of
alternative minimum taxable income that may be offset by net operating losses is
limited to 90 percent of alternative minimum taxable income.

First Security Bancorp has not been audited by the Internal Revenue Service.

Item 2.  Description of Property

         In September, 2001, First Security moved its downtown offices to
318-320 East Main Street. The new main office facility was purchased in December
2000 at an initial cost of $3.5 million, and an additional investment of $1.2
million was incurred for capital improvements. The new location offers
drive-through service and an ATM, not found in the former main office facility.
The building features innovative interior design and technological advancements.

         First Security Bank has three branch offices located at 2100 Southview
Drive, 3616 Walden Drive, and 3750 Palomar Centre Drive, all in Lexington. The
Southview Drive and Palomar Centre Drive facilities have been leased, as is the
land for the other two branch locations.

         First Security Bank's Southview Drive branch office was leased for an
initial term of five years (beginning November 1, 1997). In November 2002 First
Security Bank exercised an option to extend said lease an additional five years.
First Security Bank has the option to extend said lease for two additional terms
of five years each. During the initial term of this lease, First Security Bank
was obligated to make annual rental payments of $46,000. Beginning in November
2002 the annual rental payments increased to $51,000. This rental obligation
would increase in any lease extension period based upon increases in the
consumer price index.

         The Walden Drive branch office is located on land leased for an initial
term of five years, with First Security Bank holding options to extend the lease
for five additional terms of five years each. Under this lease First Security
Bank will pay annual rent ranging from $55,000, $60,000 and $68,000 during the
first, second and third through fifth years of the lease, to $109,515 in the
last of the lease extension periods.

         The Palomar Centre Drive office is leased for an initial term of twenty
years, with First Security Bank holding an option to extend the lease for one
additional term of twenty years. Under this lease First Security will pay annual
rents of $67,200 during the initial twenty one month period, with bi-annual
adjustments of $2,400 until the end of the lease.

Item 3. Legal Proceedings

         In the opinion of management, there is no proceeding pending or, to the
knowledge of management, threatened, in which an adverse decision could result
in a material adverse change in the consolidated financial condition or results
of operations of First Security Bancorp. To the knowledge of management, no
proceedings have been or are contemplated by or against any governmental
authority in connection with First Security Bank.

Item 4. Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 2002.

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters

     The common shares of First Security  Bancorp trade on the  Over-the-counter
Bulleton Board quotation  service under under the symbol "FSLK".  Trading volume
in common  stock is  considered  light and the  stock is  thinly  traded.  As of
December 31, 2002, there were 1,456,250  shares of common stock  outstanding and
beneficially held by approximately 530 shareholders.

         The following represents the reported prices (as well as the total
trading volume) for which shares of First Security Bancorp common stock have
been exchanged during the past two years:

                                         Per Share         No of Shares Traded
                                                               During Period
                                      High      Low

2001    1st Quarter                  17.00     14.00              14,300
        2nd Quarter                  16.50     14.25                1900
        3rd Quarter                  17.00     15.00               8,100
        4th Quarter                  16.00     15.00               9,100

2002    1st Quarter                  16.25     16.00               6,700
        2nd Quarter                  23.00     16.00               2,900
        3rd Quarter                  23.00     20.25              12,300
        4th Quarter                  23.00     20.55              46,100

         These price quotations are derived from data furnished by the National
Association of Securities Dealers and, accordingly, the accuracy or reliability
of such price quotations cannot be guaranteed. Some trades may occur which are
not reported by the NASD. Since there is no established public trading market
for First Security Bancorp, inc. stock, there can be no assurance that the price
information set forth above is representative of prices which could be obtained
from sales of First Security Bancorp common stock in established open market
transactions.

Item 6. Management's Discussion and Analysis or Plan of Operation

                Management's Discussion and Analysis OF FINANCIAL
                         CONDITION or Plan of Operation

     This discussion includes  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  that involve  inherent
risks and  uncertainties.  A number of  important  factors  could  cause  actual
results to differ materially from those in the forward-looking statements. Those
factors include the economic environment,  competition,  products and pricing in
geographic  and  business  areas  in  which  First  Security  Bancorp  operates,
prevailing  interest  rates,  changes in  government  regulations  and  policies
affecting   financial  service   companies,   credit  quality  and  credit  risk
management,   changes  in  the  banking   industry   including  the  effects  of
consolidation   resulting  from  possible  mergers  of  financial  institutions,
acquisitions  and  integration of acquired  businesses.  First Security  Bancorp
undertakes  no  obligation  to  release   revisions  to  these   forward-looking
statements or reflect events or circumstances after the date of this report.

         The data presented in the following pages should be read in conjunction
with the audited Consolidated Financial Statements on pages 34 to 62 of this
Annual Report on Form 10-K.

Overview

         The mission of First Security Bank is to firmly establish itself in
Lexington, Kentucky as a full-service bank providing traditional products and
services typically offered by commercial banks. The Lexington banking market is
highly competitive with 19 commercial banks and thrift institutions currently
serving the market. Most of the banks in Lexington are part of larger bank
holding companies headquartered outside of the Lexington/Fayette County market
and Kentucky. Promoting local management has proven effective for First Security
Bank in attracting customers, fostering loyalty and establishing and maintaining
strong asset quality.

Results of Operations

         The operating results of First Security Bancorp substantially depend on
net interest income, which is the difference between interest income on
interest-earning assets, primarily loans and investment securities, and interest
expense on interest-bearing liabilities, primarily deposits. Net income is also
affected by the amount of the provision for loan loss and other income and
operating expenses.

         Net income for 2002 increased to $1,049,000 as compared to $1,022,000
for the year ended 2001. Return on Average Equity was 5.86% for 2002 versus
6.06% for 2001. Return on Average Assets was .47% versus .62% for the same
periods, respectively. Earning assets increased from $188.1 million as of
December 31, 2001 to $216.2 million as of December 31, 2002. Funding the earning
asset growth were deposit increases of $20.2 million, from $168.7 million as of
December 31, 2001 to $188.9 million as of December 31, 2002, and increases in
advances from the FHLB of $12.2 million from $2.3 million to $14.5 million, for
the same period, respectively. First Security Bancorp's provisions for federal
income taxes increased $254,000, from $68,000 in 2001 to $322,000 in 2002.

         In December, 2000 First Security Bank purchased a former banking
facility at 318-320 East Main Street in downtown Lexington for $3.5 million to
replace its main office. First Security Bank moved its downtown offices to the
new facility in September, 2001. The new location features drive-through
windows, an ATM and innovative interior design features. A total of $1.2 million
was invested on the new facility in addition to its purchase price. A fourth
location was also opened during the fourth quarter of 2001. A building was
purchased and was opened for this purpose at a total cost of $906,000. The land
for this facility will be leased for $5,600 per month. Growth in net income and
book value per share will be negatively impacted until the growth in earnings
resulting from these new locations covers the additional costs. First Security
Bancorp believes however, that the potential longer term benefits, including
prospects for new loan and deposit growth, outweigh the potential near term
costs.

         On June 3, 2002, First Security Bank purchased certain assets of First
Mortgage Company, Inc. in an effort to expand its penetration of the Central
Kentucky residential mortgage loan market. The operations were assumed by First
Security Bank and are promoted and conducted as a division of First Security
Bank under the name "First Security Mortgage Company", the purpose of which is
to originate mortgage loans for sale into the secondary market. The acquisition
agreement included a purchase price of up to $476,000, $69,000 of which was paid
at closing. The remainder of the purchase price is payable contingent upon the
division's earnings over the next four years. The acquisition also included a
four-year employment agreement with First Security Mortgage's shareholder and
president at a salary level similar to that of other executives of First
Security Bank. This acquisition has enhanced First Security Bank's products and
service offerings and benefited its customers. The acquisition is a new source
of non-interest income for First Security Bank.

Net Interest Income

         First Security Bancorp's principal source of revenue is net interest
income. Net interest income is the difference between interest income on
interest-earning assets, such as loans and securities, and the interest expense
on liabilities used to fund those assets, such as interest-bearing deposits and
borrowings. Net interest income is impacted by both changes in the amount and
composition of interest-earning assets and interest-bearing liabilities as well
as market interest rates.

         The change in net interest income is typically measured by changes in
net interest spread and net interest margin. Net interest spread is the
difference between the average yield on interest-earning assets and the average
cost of interest-bearing liabilities. Net interest margin is determined by
dividing net interest income by interest-earning assets.

         Net interest income increased from $4.6 million in 2001 to $6.2 million
in 2002. The net interest spread increased from 2.30% to 2.55%, and the net
interest margin increased from 2.91% to 2.95%, from 2001 to 2002. The increase
in net interest income primarily was a result of a decline in the cost of
funding deposits and to a lesser extent, increases in the volume of
interest-earning assets more than in the volume of interest-bearing liabilities.
The increase in net interest margin was caused by the repricing of rate
sensitive liabilities (precipitated by the decline in the general level of
interest rates) at a faster rate than rate sensitive assets which had already
repriced. In order to improve net interest margin, First Security Bank deployed
available funding by investing in mortgage-backed securities and federally
tax-exempt bonds. In addition, First Security Bank adjusted its loan pricing
strategies and implemented features such as interest rate floors.

         The following table provides detailed information about average
balances, interest income/expense, and rates by major balance sheet category:

<PAGE>
<TABLE>
<CAPTION>
                        AVERAGE BALANCE SHEETS AND RATES
                              Years ended December 31
                              (dollars in thousands)
                                      2002                                 2001                                 2000
<S>                             <C>        <C>       <C>            <C>         <C>       <C>         <C>         <C>       <C>

                                Average              Average        Average               Average     Average               Average
                                Balance    Interest     Rate        Balance     Interest      Rate     Balance    Interest    Rate
ASSETS
Interest-earning assets:
<FN>
Securities (1)                 $ 46,506    $  2,002     4.30 %     $ 21,950     $ 1,256      5.72 %    $  6,918    $   432    6.24 %
Loans (2)
Commercial                       45,692       2,692     5.89         35,058       2,751      7.85        29,532      2,752    9.32
Real estate commercial           79,121       5,802     7.33         66,543       5,440      8.18        45,429      3,964    8.73
Real estate residential (3)      22,286       1,630     7.31         15,846       1,465      9.25         9,938        907    9.13
Consumer                         14,415         978     6.78         11,743         962      8.19         9,694        939    9.69
   TOTAL                       $161,514    $ 11,102     6.87       $129,190     $10,618      8.22      $ 94,593    $ 8,562    9.05
Federal funds sold               1,748           32     1.83          5,598         233      4.16         8,946        574    6.42
Total interest-earning
   assets                       209,768       13,136    6.26        156,738      12,107      7.72       110,457      9,568    8.66
Allowance for loan losses        (1,678)                             (1,401)                             (1,014)
Noninterest-earning assets:
Premises and equipment            7,905                               6,151                               1,304
Cash and due from banks           4,301                               3,129                               2,512
Interest receivable and
   other assets                   2,109                               1,352                                 847
Total Assets                   $222,405                            $165,969                            $114,106

                                           2002                                  2001                                2000
                                Average              Average        Average               Average       Average              Average
                                Balance    Interest     Rate        Balance     Interest      Rate       Balance    Interest   Rate
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing
liabilities:
Deposits
Interest-bearing demand
   deposits                    $ 20,926     $   282     1.35 %     $ 15,107     $   409      2.71 %    $ 16,217     $   721   4.45 %
Savings deposits                 21,455         412     1.92         14,805         528      3.57         9,754         507   5.20
Time deposits                   125,897       5,718     4.54        101,141       6,313      6.24        69,650       4,407   6.33
Total interest-bearing
   deposits                     168,278       6,412     3.81        131,053       7,250      5.53        95,621       5,635   5.89
Short-term borrowings             9,180         138     1.50          6,860         209      3.05         1,190          78   6.55
FHLB advances                    10,060         400     3.98          1,182          80      6.77           134           9   6.71
Total interest-bearing
   liabilities                  187,518       6,950     3.71        139,095       7,539      5.42        96,945       5,722   5.90
Noninterest-bearing liabilities:
Noninterest-bearing
   demand deposits               15,930                               8,997                               6,615
Interest payable and other
   liabilities                    1,053                               1,026                                 661
Stockholders' equity             17,904                              16,851                               9,885
Total Liabilities and
   Stockholders' Equity        $222,405                            $165,969                            $114,106
Net interest income and
   interest rate spread                   $  6,186      2.55 %                  $  4,568      2.30 %                $  3,846  2.76 %
Net interest rate margin                                2.95 %                                2.91 %                          3.48 %

(1) State and municipal securities are not shown on a tax-equivalent basis.
(2) Non-accrual loans (if any) are included in average loan balances and loan
    fees received are included in interest income.
      Loan fees were $816,000, $615,000 and $428,000 in 2002, 2001 and 2000,
      respectively.
(3) Includes loans held for sale.
</FN>
</TABLE>

The following table depicts the dollar effect of volume and rate changes on
First Security Bancorp from December 31, 2001 to December 31, 2002. Changes not
specifically attributable to volume or rate were allocated proportionately
between rate and volume using absolute values of each for a basis for the
allocation:
<TABLE>
<CAPTION>

                              VOLUME/RATE ANALYSIS
                           Increase (Decrease) Due to
                                 (in thousands)
                                         2002

                                              2002 Compared to 2001                      2001 Compared to 2000
<S>                                   <C>             <C>           <C>           <C>            <C>            <C>

December 31,                          Volume          Rate          Total         Volume         Rate           Total
Interest income

     Securities                       $ 1,120           $ (374)        $ 746       $ 863            $ (39)         $ 824
<FN>

     Loans (1)                          2,394           (1,910)          484       2,901             (845)         2,056

     Federal funds sold                  (111)             (90)         (201)       (176)            (165)          (341)

     Total interest income               3,403          (2,374)        1,029        3,588          (1,049)         2,539

Interest expense

     Interest-bearing demand deposits       123           (250)         (127)         (46)           (266)          (312)

     Savings deposits                       183           (299)         (116)          211           (190)            21

     Time deposits                        1,346         (1,941)         (595)        1,966            (60)         1,906

     Short-term borrowings                   56           (127)          (71)          193            (62)           131

     FHLB advances                          366            (46)          320            71            ---             71

     Total interest expense              2,074          (2,663)         (589)        2,395           (578)        1,817

Net interest income                    $ 1,329          $ 289       $ 1,618        $ 1,193         $ (471)        $ 722

(1) Includes loans held for sale
</FN>
</TABLE>
Non-interest Income and Expense

     Non-interest  income  increased  $1.4 million from $653,000 in 2001 to $2.1
million in 2002.  Components of non-interest  income include service charges and
fees on  deposit  accounts,  securities  gains,  gains and losses on the sale of
loans and other fees.  The primary  increases  in  non-interest  income were the
result of service  charges and fees on deposit  accounts,  gains on the sales of
securities and gains on the sale of loans.  Service charges and fees on deposits
increased  $504,000  from  $284,000 for the year ending 2001 to $788,000 for the
year  ending  December  31,  2002.  The  increase  in  fees  resulted  from  the
introduction  of a new  checking  product and growth in time  deposit  accounts.
Gains on the sale of securities  were  $660,000 for the year ended  December 31,
2002, up from $311,000 in 2001. Securities gains were taken on investments sold,
with the proceeds subsequently  reinvested.  Securities gains were incurred as a
result of the  repositioning  of the investment  portfolio  effected in order to
reduce  interest  rate  risk  and for tax  planning.  Gains of this  nature  are
infrequent  and  irregular  in  amount,  and are not  anticipated  to  regularly
increase  earnings in significant  amounts going  forward.  Gains on the sale of
loans were $511,000 for the year ended  December 31, 2002.  This is a new source
of revenue for First Security Bank, resulting from the acquisition and continued
operations of First Mortgage  Company,  Inc.  Management  anticipates  that this
revenue source will grow going forward,  fluctuating with cycles  experienced in
the secondary mortgage market caused by changes in interest rates.

     Total non-interest expense increased $1.7 million from $3.7 million in 2001
to $5.4  million in 2002.  The primary  causes of the  increase in  non-interest
expense were  increases in salaries and  benefits and  occupancy  and  equipment
costs.

     Salaries and benefits  were $1.9  million in 2001,  increasing  $800,000 to
$2.7 million in 2002.  The number of full-time  equivalent  employees  increased
from 40 at  December  31,  2001 to 57 at  December  31,  2002.  Staffing  levels
increased as a result of the continued  expansion of customer  services of First
Security Bank and the acquisition of First Mortgage Company, Inc.

     Occupancy and  equipment  expenses (net of rental income of $52,000 in 2002
and $105,000 in 2001)  increased  $391,000 to $953,000 in 2002 from  $562,000 in
2001. The increase resulted primarily from operating costs associated with First
Security Bank's fourth branch office (opened in the fourth quarter of 2001), the
new  main  office  facility  and  costs  associated  with the  acquisitions  and
operations of First Mortgage Company, Inc.

     Advertising  expense  increased by $5,000 from $162,000 in 2001 to $167,000
in 2002.  Additional  advertising  expense was incurred in  connection  with the
opening of the fourth branch office and the  acquisition and operations of First
Mortgage Company,  Inc. Data processing expenses increased $18,000 from $197,000
in 2001 to $215,000 in 2002. The increased  data  processing  expenses  resulted
primarily from increases in deposit and loan volume, and the introduction of new
products and services. Professional fees increased $66,000 from $151,000 in 2001
to $217,000 in 2002. The primary reason for the increase were  professional fees
incurred in connection with the acquisition of First Mortgage Company, Inc.

     In the third  quarter  of 2001,  First  Security  Bancorp  began  recording
federal  income tax  expense,  which for the year ended  December  31,  2002 was
$322,000.  Income tax expense was not previously recorded due to both historical
losses and concern about First  Security  Bancorp's  ability to utilize  certain
deferred  tax assets.  Going  forward,  income tax expense  will  continue to be
recorded  at  approximately  34% of taxable  pre-tax  income.  See Note 9 to the
Consolidated Financial Statements found under Item 7 herein.

Financial Condition

     Total assets  increased  14.2% from $202.3  million at December 31, 2001 to
$231.1  million at December  31,  2002.  The increase is primarily a result of a
9.3%  increase  in net loans from  $150.9  million to $165.0  million  and a 33%
increase in securities  available for sale from $32.3 million to $43.0  million.
The  growth in assets  was  funded by a 12.0%  growth in  deposits  from  $168.7
million  at  December  31,  2001  to  $189.0   million  at  December  31,  2002.
Additionally,  the asset growth was funded  through an increase in advances from
the FHLB,  which  increased  from $2.3  million at  December  31,  2001 to $14.5
million at December 31, 2002.

Loans

     Net loans  increased  $14.1  million  or 9.3%  from  December  31,  2001 to
December 31, 2002. The majority of the increase in 2002 was in commercial loans,
commercial real estate loans and construction loans. As of December 31, 2002 and
2001,  approximately 79% of First Security Bank's loan portfolio was in loans to
commercial businesses and commercial real estate borrowers.

     First  Security Bank  anticipates  attracting new commercial and commercial
real estate borrowers,  but desires  increased  penetration in the consumer loan
market and believes that planned  additional  locations  will build new consumer
relationships.  Loans within the consumer sector of the portfolio increased $1.3
million from $33.3 million in 2001 to $34.6 million in 2002, or 3.9%.  The loan
portfolio is primarily to customers within the Fayette County area.

     Approximately  96% of First Security  Bank's loans mature or reprice within
five years or less. Residential (1-4 family) real estate loans held in the First
Security Bank  portfolio  typically  amortize up to thirty years,  but mature or
reprice in five years or less. The acquisition of First Mortgage  Company,  Inc.
has  provided a new venue for  mortgage  products,  and has  enhanced the Bank's
presence  in the  Lexington  market.  See Note 1 to the  Consolidated  Financial
Statements under Item 7 herein.

     In an effort to maintain the quality of the loan portfolio,  First Security
Bank seeks to minimize  higher risk types of  lending.  To the extent  risks are
identified,  additional  precautions  are taken in order to reduce risk of loss.
Commercial loans entail certain additional risks because repayment of such loans
is usually dependent upon the successful operation of the commercial enterprise,
which in turn is subject to  conditions  in the  economy.  Commercial  loans are
generally  riskier than residential real estate loans because they are typically
underwritten  on the  basis  of the  ability  to repay  from the cash  flow of a
business  rather than on the ability of the borrower or any  guarantor to repay.
Furthermore,  the  collateral  underlying  commercial  loans may be  subject  to
greater fluctuations in market value over time than residential real estate, and
may fluctuate in value based on the success of the business.

     While there is no assurance that First Security Bank will not suffer losses
on its commercial loans or its commercial real estate loans, First Security Bank
has  attempted  to reduce the risks  associated  with these  loans by lending to
owner-occupied  projects where the borrower has  demonstrated  that its business
will  generate  sufficient  cash  flow to repay the  loan.  As a  result,  First
Security Bank primarily enters into agreements with individuals who are familiar
to its personnel,  are residents of its primary market area, and are believed to
be creditworthy.

     First Security  Bank's Board of Directors and senior  management  have also
placed  emphasis  on loan review and  underwriting  procedures.  Management  has
established an independent  risk rating and review process with the objective of
quickly  identifying,  evaluating and initiating necessary corrective action for
commercial and commercial real estate loans. The goal of the risk rating process
is to develop a "watch list" of substandard and non-performing loans as early as
possible.  These  components of risk  management are integral  elements of First
Security  Bank's loan program  which have  contributed  to the loan  portfolio's
performance  to date.  Nonetheless,  First  Security  Bank  maintains a cautious
outlook in attempting to anticipate the potential effects of uncertain  economic
conditions (both locally and nationally).

                                 LOANS
December 31,
(in thousands                   2002            2001            2000

Commercial                  $  48,159      $  41,309        $ 31,257
Real Estate - Commercial       84,689         77,838          53,058
Real Estate - Residential      17,871         19,749          11,663
Consumer                       16,739         13,526          11,120
Total                       $ 167,458       $152,422        $107,098

                        SELECTED LOAN DISTRIBUTION
                         As of December 31, 2002
                              (in thousands)

                                                        One Year
                                        One Year     Through Five    Over Five
                                Total    or Less         Years          Years

Fixed rate maturities           $101,764  $24,210       $68,859       $ 8,695
Variable rate
repricing frequency               65,694   64,448         1,246            --
Total                           $167,458   88,658        70,105       $ 8,695

Allowance for Loan Losses and Asset Quality

     During 2002,  the  allowance  for loan loss  increased  $921,000  from $1.5
million in 2001 to $2.5  million in 2002.  The increase in the  allowance  was a
result of the increase in the provision for loan losses,  which  increased  $1.0
million  from  $447,000  in 2001 to $1.5  million in 2002.  The  increase in the
provision for loan losses resulted  principally from an increase in the level of
nonperforming  loans and a related  increase in net  charge-offs,  a development
tied in part to a growth in the level of outstanding  loans, and to a decline in
the national and local economy.  The net charge-offs for the year ended December
31, 2002 were  $551,000  compared to $130,000  for the year ended  December  31,
2001.  The level of  charge-offs  was  significantly  impacted  by a  charge-off
involving two borrowers in the amounts of $335,000 and $100,000.

     The  allowance  for loan losses is regularly  evaluated by  management  and
reported  quarterly to the Board of  Directors,  who maintain the  allowance for
loan losses at a level  believed to be  sufficient  for  probable  losses in the
portfolio  at a point in time.  Management's  allowance  for loan loss  estimate
consists of specific and general  reserve  allocations  as influenced by various
factors.  Such  factors  include  changes in lending  policies  and  procedures;
underwriting standards; collection,  charge-off and recovery history; changes in
national and local economic and business conditions and developments; changes in
the  characteristics  of the portfolio;  ability and depth of lending management
and  staff;  changes  in the  trend of the  volume  and  severity  of past  due,
non-accrual and classified  loans;  troubled debt  restructuring  and other loan
modifications; and results of regulatory examinations.

     During the second half of 2002 and in an effort to improve  its  collection
process and loan review, First Security Bank hired a new Chief Credit Officer, a
Credit Manager and an independent  consultant to perform  reviews of loans. As a
result of this increased  attention and increased  effort to analyze credit risk
and  collateral,  a few loans have  received a downgrade on their risk  ratings.
These  downgrades have led to additional  loan losses being accrued.  Management
believes this process has been effective and that no further provisions for loan
losses  related to these  loans are  necessary  based on  information  currently
available.

     To  evaluate  the loan  portfolio,  management  has also  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 prime, good, satisfactory,  fair, watch, substandard,
doubtful,  and loss.  Specific reserve allocations are calculated for individual
loans having been graded watch or worse based on the specific  collectability of
each loan. Loans graded watch or worse also include loans severely  past-due and
those not accruing  interest.  Loss  estimates are assigned to each loan,  which
results  in a  portion  of the  allowance  for loan  losses  to be  specifically
allocated to that loan.

     The general  reserve  allocation  is computed by loan  category  reduced by
loans with specific reserve allocations,  loans fully secured by certificates of
deposit  with  First  Security  Bank  and  accounts  receivable  financing  with
established  reserve  accounts.  Loss  factors are applied to each  category for
which the cumulative product represents the general reserve.  These loss factors
are typically  developed over time using actual loss experience adjusted for the
various factors discussed above.

     The  allocation of the allowance for loan losses is derived from the sum of
specific  and  general  reserve  estimates  by  loan  type as  discussed  above.
Comparing the loan portfolio categories to the resultant allowance for loan loss
estimates,  commercial  loans (other than real  estate) and  consumer  loans are
disproportionate  to loan categories  secured by real estate.  This results from
higher loss factors  assigned to these  categories  which were based on the peer
data and the various factors also discussed above.

     Management  believes the allowance for loan losses at December 31, 2002 was
adequate.  Although  First  Security Bank believes it uses 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.  The table below illustrates how
the  allowance  for loan losses has been  allocated to the types of loans in the
portfolio:
<TABLE>
<CAPTION>

              MANAGEMENT'S ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31,                    2002                                      2001                               2000
<S>                     <C>                <C>              <C>                 <C>               <C>             <C>

(dollars in thousands)                      Percent of                          Percent of                        Percent of
                                             Loans to                           Loans to                          Loans to
                        Allowance          Total Loans      Allowance           Total Loans       Allowance       Total Loans


Commercial                $ 1,509               28.7 %           $ 639             27.1 %           $ 514            29.2 %

Real Estate -
   Commercial                 576               50.6               561             51.1               364            49.5

Real Estate -
   Residential                125               10.7               138             13.0                85            10.9

Consumer                      249               10.0               200              8.8               258            10.4

Total                     $ 2,459              100.0 %         $ 1,538            100.0 %         $ 1,221           100.0  %
</TABLE>

     The recorded  values of loans  actually  removed from the balance sheet are
referred to as  charge-offs  and,  after  netting out  recoveries  on previously
charged-off  assets,  are referred to as net loan  charge-offs.  First  Security
Bank's policy is to charge-off a loan when,  in the opinion of  management,  the
loan is deemed  uncollectible,  although  concerted efforts are made to maximize
recovery.

The following table sets forth loan charge-offs and recoveries:

                        SUMMARY OF LOAN LOSS EXPERIENCE

Years ended December 31,            2002              2001                2000
(dollars in thousands)
Balance at beginning of period   $ 1,538           $ 1,221               $ 819

Charge-offs

     Commercial                     (472)              (77)                (23)

     Real Estate                     ---               (32)                ---

     Consumer                        (89)              (21)                ---

Total                               (561)             (130)                (23)

Recoveries

     Commercial                      ---                ---                ---

     Real Estate                       7                ---                ---

     Consumer                          3                ---                ---

Total                                 10                ---                ---

Net Charge-offs                     (551)              (130)               (23)

Provisions for loan losses         1,472                447                425

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

Loans at end of period         $ 167,458          $ 152,422          $ 107,098

Average Loans (1)              $ 159,625          $ 129,190           $ 94,593

Ratios:

     Allowance for loan losses
     to total loans                 1.46%             1.01%              1.14%

Net loan charge-offs to average
     loans for the period           0.35%             0.10%              0.02%

(1) Excluding loans held for sale


     The level of  non-performing  loans is an  important  element in  assessing
asset quality and the relevant risk in First Security  Bank's credit  portfolio.
Non-performing  loans include  non-accrual  loans,  loans  delinquent 90 days or
more,  and  restructured   loans.  Loans  are  classified  as  non-accrual  when
management  believes  that  collection  of interest is  doubtful,  but for which
principal is  considered  collectible.  A loan is defined as impaired  when full
payment  under the loan  terms is not  expected.  Impaired  loans  also  include
troubled debt  restructuring.  Impairment is evaluated on an aggregate basis for
smaller  balance  loans of  similar  nature  such as  residential  mortgage  and
consumer loans, and on an individual basis for larger balance  commercial loans.
First  Security  Bank's policy is to charge-off  all or a portion of an impaired
loan  upon a  determination  that it is  probable  the full  amount  will not be
collected. As of December 31, 2002, nonperforming assets totaled $6.3 million as
compared  to  $793,000  as of  December  31,  2001.  Nonperforming  assets  as a
percentage of total loans was 3.75% at December 31, 2002 as compared to 0.52% at
December  31, 2001.  The increase was due to an overall  decline in the economy,
the  seasoning  of the loan  portfolio  (prior to 2002,  First  Security  Bank's
nonperforming assets were minimal due in large part to the portfolio at the time
consisting  of more newly  originated  loans than in 2002 - First  Security Bank
commenced  operation in November  1997),  and commercial  loans to a financially
troubled franchise restaurant operator.  These loans totaled  approximately $2.9
million and are considered to be a troubled debt  restructuring.  The loans were
restructured  effective  December  31,  2002  and  First  Security  Bank  gained
additional  security in the form of cash,  liens on business  assets and certain
franchise  rights  and  mortgages.  Also  included  in  non-performing  assets ,
although  becoming  current  in the  first  quarter  of  2003,  is an  unrelated
non-accrual  commercial real estate loan in the amount of $518,000.  Should this
loan remain  current,  it will be removed from  non-accrual  status.  Management
continues to emphasize  evaluation of loan  portfolio  risks and will pursue all
available means of collection.

                        NON-PERFORMING ASSETS
December 31,                              2002           2001             2000
(dollars in thousands)

Restructured loans                     $ 2,882          $ ---            $ ---
Loans on non-accrual status              1,867            470              ---
Loans past due 90 days or more           1,218            319                2
     Total non-performing loans          5,967            789                2
Other real estate owned and
   repossessed assets                      307              4              ---
Total non-performing assets            $ 6,274          $ 793              $ 2
Non-performing
   loans to total loans                   3.56%          0.52%             ---%
Non-performing
   assets to total loans                  3.75%          0.52%             ---%

Off Balance Sheet Arrangements and Aggregate Contractual Obligations

     Commitments to extend credit are arrangements to lend to a customer as long
as  there  is no  violation  of any  condition  established  in the  commitment.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being used, the total  commitments do not  necessarily  represent
future cash requirements.

     Standby  letters of credit  are  conditional  commitments  to  guarantee  a
customer's  performance to a third party.  The  contractual  amount of financial
instruments with off-balance-sheet risk at year-end was as follows:
<TABLE>
<CAPTION>
<S>                                 <C>       <C>           <C>                  <C>               <C>
                                                            Greater than         Greater than
                                              Less than    one year to 3         3 years to 5      More than 5
                                    Total      one year         years             years            years
                                                         (dollars in thousands)

Commitments to make
   loans                          $ 22,270      $22,270          -                     -                -
Unused lines of credit              19,189        5,873        243                 1,828            11,275
Standby letters of credit            1,103        1,103          -                     -                -
</TABLE>

Investment Securities

     Through  all  the  reported  periods,   First  Security  Bank's  investment
portfolio  consisted  primarily  of  mortgage  backed  securities  and state and
municipal  bonds.  Securities  increased  from $32.3  million as of December 31,
2001,  to $43.0  million as of December 31, 2002.  The  increases in  investment
securities were to redeploy excess liquidity into investment securities in order
to attain higher yields, the majority of which are not subject to federal income
tax. The weighted average tax equivalent  yield of the portfolio  decreased from
5.70% at December 31, 2001 to 4.12% at December 31, 2002.  The weighted  average
maturity  of First  Security  Bank's  investment  portfolio,  which  takes  into
consideration  anticipated  calls and  prepayments,  decreased from 7.1 years at
December 31, 2001 to 3.9 years at December 31, 2002. Securities purchased during
2002 were at lower yields due to the decline in the overall interest rates.

                            INVESTMENT PORTFOLIO

December 31,                                  2002          2001           2000
(in thousands)
Investment securities available for sale

U.S. Treasury and U.S. Government
   Agencies                                $ 1,017         $ 503        $10,945

Mortgage-backed                             27,778        18,873          2,295

State and Municipal                         14,251        12,933           ---

Total available for sale securities        $43,046       $32,309       $13,240

                              Contractual Maturity
                             As of December 31, 2002
                             (dollars in thousands)

                                            Amortized             Tax Equivalent
                                            Cost      Fair Value      Yield
Investment securities available for sale

U.S. Treasury and U.S. Government
   Agencies

Over one year through five years           $ 1,009     $ 1,017           3.09 %

     Total                                   1,009       1,017           3.09

Mortgage-backed

Over one year through five years               332         337           3.06

Over five years through ten years            2,041       2,052           4.03

Over 10 years                               25,209      25,389           3.42
                                            ------      ------
     Total                                  27,582      27,778           3.46

State and Municipal

Over one year through five years             1,748       2,055           4.08

Over five years through ten years            5,788       5,835           5.20

Over 10 years                                6,538       6,361           6.08
                                            ------      ------
     Total                                  14,072      14,251           5.48
                                            ======      ======
Total available for sale securities        $42,663     $43,046           4.12 %
                                            ======      ======
     Unrealized losses and unrealized gains on available for sale securities are
a result of changes in the general level of interest  rates since the securities
were purchased,  and are accordingly due to market risk rather than credit risk.
Through the reported  periods,  all of the securities  comprising the investment
portfolio  were  classified  as  "available  for  sale",  which  requires  these
securities to be carried at fair value. Unrealized gains and losses are included
as a separate  component of equity net of tax. Gains or losses on securities are
realized in the income  statement only when  securities  are sold or called,  or
when  the  unrealized  loss is other  than  temporary.  Investment  transactions
resulting in an actual loss of principal  could occur if liquidity needs dictate
the sale, at a loss, of one or more of the securities,  or if other alternatives
for funding new loans are either unavailable, or more costly.

     As of December 31,  2001,  the  unrealized  loss in the fair value of First
Security Bank's securities portfolio was $495,000.  As of December 31, 2002, the
portfolio fair value reflected an unrealized gain of $385,000. The change in the
fair value of the  portfolio  was  impacted by changes in the  general  level of
interest  rates as  discussed  above,  and  changes  in the  composition  of the
portfolio resulting from sales and purchase activity.

Deposits and Other Borrowings

     First  Security  Bank's  deposit base provides the major funding source for
earning  assets.  The following table  illustrates  that First Security Bank has
experienced  deposit growth across all categories.  First Security Bank operates
in a highly  competitive  market for  deposits.  As is often the case with newly
chartered  banks,  in order to attract  depositors,  First  Security Bank has at
times paid above  market  rates on a portion of  transaction  deposit  accounts,
savings deposits and time deposits.

                                               DEPOSITS
December 31,                               2002          2001           2000
(in thousands)

Interest-bearing demand deposits        $ 17,601     $ 18,886        $ 15,028

Savings deposits                          22,889       17,113          12,784

Time deposits                             77,732       75,672          57,707

Time deposits $100,000 and over           50,255       44,498          21,750

     Total interest-bearing deposits     168,477      156,169         107,269

     Total noninterest-bearing deposits   20,478       12,575           8,274

     Total                             $ 188,955    $ 168,744       $ 115,543


                  MATURITIES OF TIME DEPOSITS $100,000 AND OVER
                                 December 31, 2002
                                   (in thousands)

                        0 - 3 months           $ 10,412

                        3 - 12 months            22,507

                        1 - 3 years              13,991

                        3 years and over          3,345

                        Total                  $ 50,255
Liquidity

     Liquidity  management is the process by which management attempts to insure
that adequate  liquid funds are  available to meet  financial  commitments  on a
timely basis.  These  commitments  include  withdrawals by  depositors,  funding
credit  obligations  to  borrowers,  servicing  long-term  obligations,   paying
operating  expenses,   funding  capital  expenditures  and  maintaining  reserve
requirements.  Liquidity is monitored closely by the Asset/Liability  Management
Committee of the First Security Bank Board of Directors, which monitors interest
rates and  liquidity  risk while  implementing  appropriate  funding and balance
sheet strategies.

     First  Security Bank has  established a limited  number of  alternative  or
secondary  sources to provide  additional  liquidity  and funding  sources  when
needed to support lending activity or other liquidity needs.  These  alternative
funding sources  currently  include unsecured federal funds lines of credit from
five  correspondent  banks  aggregating  approximately  $27  million;  a secured
repurchase  agreement  line of credit from a  correspondent  bank based upon the
market  value  of  pledged  securities;   and  a  secured  repurchase  agreement
arrangement with an agency of the Commonwealth of Kentucky.  Additionally, First
Security Bank is a member of the FHLB of Cincinnati  which allows First Security
Bank to borrow based on the level of qualifying residential loans which serve as
collateral for this type of borrowing. At December 31, 2002, First Security Bank
could borrow an additional $1.5 million based on available collateral.

     First Security Bank had total borrowings of $22.7 million and $15.3 million
as of December 31, 2002 and 2001, respectively.  Borrowings at December 31, 2002
were in the form of customer repurchase agreements in the amount of $8.2 million
and FHLB advances in the amount of $14.5 million.  The need for future borrowing
arrangements   above  current  levels  will  be  evaluated  by  Management  with
consideration  given to the growth  prospects of the loan  portfolio,  liquidity
needs,  costs of  deposits,  market  conditions  and other  factors.  Short-term
liquidity  needs for periods of up to one year may be met through  federal funds
lines of credit  borrowings and short-term FHLB advances.  The FHLB additionally
offers advance programs of varying maturities for terms beyond one year.

Capital

     First  Security  Bancorp  issued  stock  warrants  to each  of the  initial
investors in First  Security  Bank who  subscribed to $100,000 or more of common
stock  prior to July 4,  1997.  The  warrants  entitle  the  holder to  purchase
additional  shares of First Security Bancorp stock at the price of $10 per share
at any time during 2003. If all warrants are fully  exercised,  the Company will
issue a total of 88,440 shares of common stock,  and the Company's  capital will
be  increased  by  $884,400.  The  warrants  have no  voting  rights  and may be
transferred  without  the  underlying  shares  of  common  stock,  but  are  not
transferable  until the exercise period  commences.  The warrants will expire if
not exercised by December 31, 2003. Management has no reason to think any of the
warrants won't be exercised in 2003. As of March 12, 2003, warrants representing
14,472 shares have been  exercised.  See Note 11 to the  Consolidated  Financial
Statements under Item 7 herein.

     During 2000, a stock option plan was formed in which certain  employees are
eligible  to receive  incentive  stock  options  and other  options  and awards.
Options  granted  are  exercisable  on such  terms and  conditions  as the First
Security  Bancorp Board of Directors may determine,  but if unexercised,  expire
after ten years. If all the options become exercised,  First Security  Bancorp's
capital  will be  increased  by $1.8  million.  See Note 10 to the  Consolidated
Financial Statements under Item 7 herein.

     Regulatory  agencies measure capital adequacy within a framework that makes
capital  requirements,  in part,  dependent on the  individual  risk profiles of
financial institutions.  Total capital increased $1.7 million from $16.8 million
at year-end  2001  (8.30% of total  assets) to $18.5  million at  year-end  2002
(8.00% of total assets).  This increase was  attributable  to an increase in the
accumulated other comprehensive income and net income during 2002.

     First  Security  Bancorp  and First  Security  Bank  exceed the  regulatory
requirements  for all three capital  ratios.  First Security  Bancorp intends to
maintain  a capital  position  that  meets or  exceeds  the  "well  capitalized"
requirements   as  defined  by  these   regulations.   In  addition  to  capital
regulations,  state banking  regulations  limit First Security Bank's ability to
pay dividends without prior approval.  Under these  regulations,  First Security
Bank may pay dividends in any calendar year only to the extent of current year's
net profits plus the retained net profits of the  preceding two years and not in
excess of the balance of retained  earnings then on hand. First Security Bancorp
also has regulatory limits on dividends,  but less  restrictive.  First Security
Bancorp does not anticipate  paying  dividends to shareholders  for at least the
next several years as any earnings generated will need to be retained to support
future  growth  opportunities.   See  Note  12  to  the  Consolidated  Financial
Statements under Item 7 herein.

Item 7. Financial Statements
                          FIRST SECURITY BANCORP, INC.
                               Lexington, Kentucky

                        CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


                         REPORT OF INDEPENDENT AUDITORS


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


We have audited the accompanying  consolidated  balance sheets of First Security
Bancorp,  Inc. as of  December 31,  2002 and 2001 and the  related  consolidated
statements of income,  changes in shareholders'  equity,  and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of First  Security
Bancorp, Inc. as of December 31, 2002 and 2001 and the results of its operations
and its cash flows for the years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.

                                             /s/ Crowe, Chizek, and Company LLP
                                                 Crowe, Chizek and Company LLP
Lexington, Kentucky
January 24, 2003


                          FIRST SECURITY BANCORP, INC.
                             See accompanying notes.

                           CONSOLIDATED BALANCE SHEETS
                                   December 31
                                                      2002             2001
                                                          (in thousands)
ASSETS
Cash and due from banks                        $     4,744       $     4,521
Federal funds sold                                   4,069             4,397
   Total cash and cash equivalents                   8,813             8,918
Securities available for sale                       43,046            32,309
Loans held for sale                                  3,390                 -
Loans                                              167,458           152,422
   Less allowance for loan losses                   (2,459)           (1,538)
Net loans                                          164,999           150,884
Federal Home Loan Bank stock                           742               539
Premises and equipment, net                          7,932             7,656
Accrued interest receivable                          1,176             1,133
Other assets                                           988               831

                                               $   231,086       $   202,270
LIABILITIES AND SHAREHOLDE`RS' EQUITY
Liabilities
   Deposits
     Noninterest bearing                       $    20,478       $    12,575
     Time deposits, $100,000 and over               50,255            44,498
     Other interest bearing                        118,222           111,671
       Total deposits                              188,955           168,744
   Repurchase agreements and short-term
     borrowings                                      8,211            12,957
   Federal Home Loan Bank advances                  14,517             2,336
   Accrued interest payable                            578               832
   Other liabilities                                   361               574
     Total liabilities                             212,622           185,443

Shareholders' equity
   Common stock, no par value:  5,000,000 shares
     authorized; 1,456,250 shares issued and outstanding 8,385         8,385
   Paid-in capital                                    8,385            8,385
   Retained earnings                                  1,432              383
   Accumulated other comprehensive income (loss)        262             (326)
     Total shareholders' equity                      18,464           16,827

                                                $   231,086      $   202,270


                        CONSOLIDATED STATEMENTS OF INCOME
                             Years Ended December 31
                      (In Thousands, Except Per Share Data)

                                                       2002           2001
Interest income
   Loans, including fees                          $  11,102       $  10,618
   Securities
     Taxable                                          1,333             932
     Non-taxable                                        669             324
   Federal funds sold                                    32             233
                                                     13,136          12,107
Interest expense
   Deposits                                           6,412           7,250
   Other                                                538             289
                                                      6,950           7,539

Net interest income                                   6,186           4,568

Provision for loan losses                             1,472             447

Net interest income after provision for loan losses   4,714           4,121

Noninterest income
   Service charges and fees on deposits                 788             284
   Gain on sale of securities                           660             311
   Gain on sale of loans                                511               -
   Loss on disposal of premises and equipment            (1)            (95)
   Other                                                141             153
                                                      2,099             653
Noninterest expense
   Salaries and employee benefits                     2,711           1,885
   Occupancy and equipment                              953             562
   Data processing                                      215             197
   Advertising                                          167             162
   Professional fees                                    217             151
   Taxes other than payroll, property and income        187             143
   Other                                                992             584
                                                      5,442           3,684

Income before income taxes                            1,371           1,090
Provision for income taxes                              322              68

Net income                                        $   1,049       $   1,022


                                                       2002           2001
Weighted average shares common stock outstanding:
   Basic                                              1,456           1,456
   Diluted                                            1,511           1,489
Earnings per share:
   Basic                                          $     .72       $    .70
Diluted                                                 .69            .69
<TABLE>
<CAPTION>


                    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             Years Ended December 31, 2002 and 2001
                                           (In Thousands)
<S>                                    <C>       <C>        <C>         <C>             <C>               <C>

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

Balance, January 1, 2001               1,415    $ 8,071    $  8,071    $   (639)      $     109       $    15,612

Net income                                 -          -           -       1,022               -             1,022

Change in unrealized gain
  (loss) on securities available
  for sale, net of reclassification
  and tax effects                          -          -           -           -            (435)
(435)
    Total comprehensive income                                                                                587

Issuance of common stock, net             41        314         314           -               -               628

Balance, December 31, 2001             1,456      8,385       8,385         383            (326)
16,827

Net income                                 -          -           -       1,049               -             1,049

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

Balance, December 31, 2002             1,456    $ 8,385    $  8,385    $  1,432       $     262       $    18,464
</TABLE>
<TABLE>
<CAPTION>


                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               Years Ended December 31
                                                    (In Thousands)
<S>                                                                              <C>              <C>

                                                                                             2002            2001
Cash flows from operating activities
   Net income                                                                    $        1,049   $       1,022
   Adjustments to reconcile net income to net
     cash from operating activities
       Depreciation and amortization                                                        463             262
       Amortization and accretion on available
         for sale securities, net                                                           467              (3)
       Provision for loan losses                                                          1,472             447
       Federal Home Loan Bank stock dividends                                               (29)            (21)
       Gain on sale of securities                                                          (660)           (311)
       Originations of loans held for sale                                              (36,165)              -
       Proceeds from sale of loans                                                       33,286               -
       Gain on sale of mortgage loans                                                      (511)              -
       Loss on disposal of premises and equipment                                             1               95
       Change in assets and liabilities:
         Accrued interest receivable                                                        (43)            (71)
         Other assets                                                                       148            (663)
         Accrued interest payable                                                          (254)            208
         Other liabilities                                                                 (516)            504
           Net cash from operating activities                                            (1,292)          1,469

Cash flows from investing activities
   Activity in available for sale securities:
     Maturities and principal repayments                                                  11,778           7,451
     Sales                                                                                46,225          19,836
     Purchases                                                                           (67,668)        (46,645)
   Net change in loans                                                                   (15,890)        (45,454)
   Purchase of Federal Home Loan Bank stock                                                 (174)           (294)
   Purchases of premises and equipment, net                                                 (661)         (2,423)
   Cash paid in acquisition                                                                  (69)              -
     Net cash from investing activities                                                  (26,459)        (67,529)

Cash flows from financing activities
   Net change in deposits                                                                 20,211          53,201
   Net change in repurchase agreements and
     short-term borrowings                                                                (4,746)         11,564
   Proceeds from Federal Home Loan Bank advances                                          13,232          9,620
   Repayments of Federal Home Loan Bank advances                                          (1,051)         (8,333)
   Proceeds from issuance of common stock, net                                                 -             628
       Net cash from financing activities                                                 27,646          66,680

                                                                                             2002            2001

Net change in cash and cash equivalents                                                 $    (105)      $     620

Cash and cash equivalents at beginning of period                                            8,918           8,298

Cash and cash equivalents at end of period                                              $   8,813       $   8,918

Supplemental cash flow information:
   Interest paid                                                                        $   7,204       $   7,331
   Income tax paid                                                                             80               9

Supplemental non-cash disclosures:
   Transfers from loans to foreclosed and repossessed assets                                  303               4
</TABLE>


                          FIRST SECURITY BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial
statements of First Security Bancorp, Inc. and its wholly owned subsidiary First
Security Bank of Lexington (the "Bank"),  together referred to as "the Company".
Intercompany transactions and balances are eliminated in consolidation.

The Bank is a Kentucky corporation  operating as a commercial bank under a state
bank charter and  commenced  business on November 17, 1997.  The Bank  generates
commercial,   mortgage,  and  installment  loans,  and  receives  deposits  from
customers located  primarily in the Fayette County,  Kentucky area. The majority
of the Bank's  income is derived  from lending  activities.  The majority of the
Bank's  loans are secured by specific  items of  collateral  including  business
assets,  real estate, and consumer assets,  although borrower cash flow may also
be a primary source of repayment.  Other financial instruments which potentially
represent  concentrations  of credit  risk  include  deposit  accounts  in other
financial institutions and federal funds sold.

On June 3, 2002, the Bank acquired the assets of First Mortgage  Company,  Inc.,
in Lexington, Kentucky. The operations were assumed by the Bank and are promoted
and conducted as a division under the name "First  Security  Mortgage  Company",
the purpose of which is to originate  mortgage loans for sale into the secondary
market.  The acquisition  agreement included a purchase price of up to $476,000,
$69,000 of which was paid at closing  for fixed  assets.  The  remainder  of the
purchase price is payable contingent upon the division's  earnings over the next
four  years.  In  conjunction  with the  purchase  and in  addition to the fixed
assets,  the Bank recorded  $67,000 in intangibles  for a non-compete  agreement
which is being  amortized  over its  three-year  life.  The  remaining  $340,000
contingent purchase price, if earned, will be recorded as goodwill.

Use of Estimates:  The  preparation of financial  statements in conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management  to make  estimates  and  assumptions  based  on  available
information.  These estimates and assumptions affect the amounts reported in the
financial  statements  and the  disclosures  provided,  and future results could
differ.  Estimates that are more susceptible to change include the allowance for
loan losses and fair values of financial instruments.

Cash Flow Reporting:  Cash and cash equivalents are defined as cash and due from
banks and federal funds sold.  Net cash flows are reported for customer loan and
deposit transactions, and repurchase agreements and short-term
borrowings.

Securities:  Securities are classified as available for sale. Available for sale
securities  are those which might be sold before  maturity,  and are reported at
fair value,  with  unrealized  gains or losses  reported in other  comprehensive
income.  Gains and losses on sales are determined based on the amortized cost of
the specific  security  sold.  Other  securities  such as Federal Home Loan Bank
stock are carried at cost.

Interest  income  includes  amortization of premiums and accretion of discounts.
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.

Mortgage Banking Activities:  Mortgage loans originated and intended for sale in
the secondary market are carried at the lower of aggregate cost or market value.
To deliver closed loans to the secondary market and to control its interest rate
risk prior to sale, the Company enters  "best-efforts"  forward sales derivative
contracts.  The aggregate market value of mortgage loans held for sale considers
the price of the sales contracts.

On July 1, 2002,  the Company  became  subject to new  accounting  guidance  for
certain   commitments  to  originate  loans.  The  new  guidance  requires  loan
commitments  related to the  origination  of mortgage  loans held for sale to be
accounted for as derivative instruments. The Company's commitments are for fixed
rate  mortgage  loans,  generally  lasting 60 to 90 days and are at market rates
when initiated. Considered derivatives, the Company had commitments to originate
$887,000 in loans at December  31, 2002 which it intends to sell after the loans
are  closed.  The  impact  of  adopting  this  guidance  was  not  material  and
substantially all of the gain on sale generated from mortgage banking activities
continues  to be  recorded  when  closed  loans  are  delivered  into the  sales
contracts.

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 an allowance for loan losses.

Interest  income is reported on the simple interest  method.  Interest income on
mortgage and commercial  loans is  discontinued  at the time the loan is 90 days
delinquent  unless the  credit is well  secured  and in  process of  collection.
Consumer 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. Interest received on
such loans is accounted for on the  cash-basis or  cost-recovery  method,  until
qualifying for return to accrual.  Loans are returned to accrual status when all
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,  increased by the provision for
loan losses and decreased by charge-offs less recoveries.  Management  estimates
the allowance  balance required based on past loss experience,  general economic
conditions,  information about specific borrower situations,  and other factors.
While  management  may  periodically  allocate  portions  of the  allowance  for
specific problem loan situations,  the whole allowance is available for any loan
losses that occur. Loan losses are charged against the allowance when management
believes the uncollectibility of a loan balance is confirmed.

Loans are  considered  impaired  when full  payment  under the loan terms is not
expected.  Impairment is evaluated in total for smaller-balance loans of similar
nature such as  residential  mortgage and consumer  loans,  and on an individual
loan basis for other loans.  Impaired  loans are carried at the present value of
expected cash flows discounted at the loan's  effective  interest rate or at the
fair value of the collateral if the loan is collateral  dependent.  A portion of
the  allowance  for loan  losses  is  allocated  to  impaired  loans.  Loans are
evaluated for impairment  when payments are delayed or expected to be delayed or
when it is  probable  that  all  principal  and  interest  amounts  will  not be
collected according to the original terms of the loan.

Premises and  Equipment:  Land is carried at cost.  Premises and  equipment  are
reported net of accumulated depreciation. Depreciation expense is computed using
principally the straight-line method over the shorter of the asset's useful life
or lease term with useful  lives  ranging  from 3 to 40 years.  Maintenance  and
repairs are expensed and major  improvements are  capitalized.  These assets are
reviewed for  impairment  when events  indicate  the carrying  amount may not be
recoverable.

Foreclosed and Repossessed  Assets:  Assets acquired  through or instead of loan
foreclosure or repossession are initially  recorded at fair value when acquired,
establishing a new cost basis. If fair value declines,  a valuation allowance is
recorded through expense.  Costs after acquisition are expensed.  Foreclosed and
repossessed assets totaled $307,000 and $4,000 at year-end 2002 and 2001 and are
included in other assets.

Repurchase  Agreements:   Substantially  all  repurchase  agreement  liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.

Benefit Plans:  Profit sharing and 401(k) plan expense is the amount contributed

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

Stock  Compensation:  Employee  compensation  expense  under  stock  options  is
reported using the intrinsic value method.  No stock-based  compensation cost is
reflected in net income,  as all options  granted had an exercise price equal to
or  greater  than the market  price of the  underlying  common  stock at date of
grant. The following table illustrates the effect on net income and earnings per
share if expense was measured  using the fair value  recognition  provisions  of
FASB Statement No. 123, Accounting for Stock-Based Compensation.

                                                       2002                2001

Net income as reported                          $     1,049         $     1,022
Deduct:  Stock-based compensation expense
   determined under fair value based method            (292)                (75)

Pro forma net income                            $       757         $       947

Basic earnings per share as reported            $       .72         $       .70
Pro forma basic earnings per share                      .52                 .65

Diluted earnings per share as reported          $       .69         $       .69
Pro forma diluted earnings per share                    .51                 .64

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

                                                      2002            2001

Risk-free interest rate                               3.96%           5.16%
Expected option life                                   7.2 years      7.0 years
Expected stock price volatility                         42%            34%
Dividend yield                                           -              -
Estimated value per share                             $9.91         $7.44

Earnings  Per Common  Share:  Basic  earnings  per  common  share are net income
divided by the weighted average number of common shares  outstanding  during the
period.  Diluted  earnings  per common  share  include  the  dilutive  effect of
additional potential common shares issuable under warrants and stock options.

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 which are also recognized as a separate
component of equity.

Dividend  Restriction:  The Bank is subject to banking regulations which require
the  maintenance  of  certain  capital  levels  and which  limit  the  amount of
dividends  which  can  be  paid.  For  details  concerning   regulatory  capital
requirements, see Note 12.

Off-Balance  Sheet  Financial   Instruments:   Financial   instruments   include
off-balance  sheet credit  instruments,  such as  commitments  to make loans and
standby 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.

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 impact on the financial statements.

Restrictions  on Cash:  Cash on hand or on deposit with the Federal Reserve Bank
of $2.1  million and $1.2 million was  required to meet  regulatory  reserve and
clearing  requirements  at year-end  2002 and 2001.  These  balances do not earn
interest.

New Accounting  Pronouncements:  A new accounting standard requires all business
combinations  to be recorded  using the purchase  method of  accounting  for any
transaction  initiated  after June 30,  2001.  Under the  purchase  method,  all
identifiable  tangible and  intangible  assets and  liabilities  of the acquired
company must be recorded at fair value at date of acquisition, and the excess of
cost  over  fair  value  of  net  assets   acquired  is  recorded  as  goodwill.
Identifiable  intangible  assets must be separated from  goodwill.  Identifiable
intangible  assets  with finite  useful  lives will be  amortized  under the new
standard,  whereas goodwill, both amounts previously recorded and future amounts
purchased,  will cease  being  amortized  starting  in 2002.  Annual  impairment
testing will be required  for goodwill  with  impairment  being  recorded if the
carrying  amount of goodwill  exceeds its implied  fair value.  Adoption of this
standard  on  January 1, 2002 did not have a  material  effect on the  Company's
financial statements since no goodwill has been recorded in conjunction with its
sole business combination discussed above.

On July 1, 2002,  the Company  became  subject to new  accounting  guidance  for
certain  commitments  to  originate  loans as  described  in  "Mortgage  Banking
Activities".

Newly  Issued  But  Not  Yet  Effective  Accounting  Standards:  New  accounting
standards on asset retirement  obligations,  restructuring  activities and exit
costs,  operating leases, and early  extinguishment of debt were issued in 2002.
Management  determined  that when the new  accounting  standards  are adopted in
2003, they will not have a material impact on the Company's  financial condition
or results of operations.

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:  Internal  financial  information is primarily reported and
aggregated  in two  lines of  business,  banking  and  mortgage  banking.  While
management  monitors 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.


NOTE 2 - SECURITIES

Year-end securities available for sale are as follows:

                                                   Gross              Gross
                                   Fair          Unrealized         Unrealized
                                   Value            Gains             Losses
                                               (in thousands)
December 31, 2002
   U.S. Government agency      $   1,017         $     8           $     -
   State and municipal            14,251             241               (62)
   Mortgage-backed                27,778             200                (2)

     Total                     $  43,046         $   449           $   (64)


December 31, 2001
   U.S. Government agency      $     503         $     3           $     -
   State and municipal            12,933               1              (449)
   Mortgage-backed                18,873              98              (148)

     Total                     $  32,309         $   102           $  (597)

Contractual   maturities  of  securities  at  year-end  2002  were  as  follows.
Securities not due at a single maturity date are shown separately.
                                                     Fair
                                                     Value
                                               (in thousands)

Due in one year or less                        $         -
Due from one to five years                           3,072
Due from five to ten years                           5,835
Due after ten years                                  6,361
Mortgage-backed                                     27,778

   Total                                       $    43,046

Proceeds  from sales of  securities  available  for sale  during 2002 were $46.2
million.  Gross realized gains of $677,000 and gross realized  losses of $17,000
were recognized on those sales.

Securities  pledged at year-end  2002 and 2001 had carrying  amounts of $4.8 and
$13.0 million, and were pledged to secure customer repurchase agreements.


NOTE 3 - LOANS

Loans at year-end were as follows:
                                                   2002                2001
                                                        (in thousands)

Commercial                                   $    48,159         $    41,309
Mortgage loans on real estate:
   Commercial                                     64,025              62,330
   Residential                                    17,871              19,749
   Construction                                   20,664              15,508
   Home equity                                    10,180               7,981
Consumer                                           5,674               4,696
Credit card                                          885                 849

                                             $   167,458         $   152,422

Substantially  all  residential  mortgage  loans are pledged to the Federal Home
Loan Bank as collateral for advances as additionally discussed in Note 7.

Changes in the allowance for loan losses were as follows:

                                                      2002                 2001
                                                           (in thousands)

Beginning balance                              $     1,538         $     1,221
   Loans charged-off                                  (561)               (130)
   Recoveries                                           10                   -
   Provision for loan losses                         1,472                 447

Ending balance                                 $     2,459         $     1,538

Impaired loans were as follows:
                                                      2002                 2001
                                                           (in thousands)
Year-end loans with no allocated allowance
   for loan losses                             $         -         $          -
Year-end loans with allocated allowance
   for loan losses                                    4,059                   -

     Total                                      $     4,059         $         -

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

Average of impaired loans during the year             1,708                  31
Interest income recognized during impairment              -                   -
Cash-basis interest income recognized                     -                   -

Impaired  loans  include  $2.9  million  with  a  troubled  borrower  which  was
restructured during 2002.

Nonperforming loans were as follows:
                                                       2002                2001
                                                            (in thousands)

Loans past due 90 days still on accrual          $     1,218         $      319
Nonaccrual loans                                       1,867                470

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.

Loans to executive  officers,  directors,  and their  affiliates in 2002 were as
follows (in thousands):

Beginning balance                                            $    5,895
New loans                                                         2,853
Repayments                                                       (1,811)
Ending balance                                               $    6,937


NOTE 4 - PREMISES AND EQUIPMENT

Premises and equipment at year-end were as follows:

                                                     2002                2001
                                                         (in thousands)

Land                                           $    1,250         $     1,250
Buildings                                           4,956               4,728
Leasehold improvements                                305                 298
Furniture and equipment                             2,461               1,967
    Total cost                                      8,972               8,243
Accumulated depreciation                           (1,040)               (587)

   Premises and equipment, net                 $    7,932         $     7,656

The Company  leases its three branch  locations  with various  renewal  options.
Lease  expense for the years ended  December  31, 2002 and 2001 was $206,000 and
$187,000.

Future operating lease commitments as of December 31, 2002 (in thousands):

         2003                            $      202
         2004                                   192
         2005                                   140
         2006                                   125
         2007                                   127

           Total                         $      786


NOTE 5 - DEPOSITS

The  scheduled  maturities  of time  deposits  as of  December  31, 2002 were as
follows (in thousands):

         2003                            $    81,774
         2004                                 32,831
         2005                                  5,176
         2006                                  2,213
         2007                                  5,846
         Thereafter                              147

           Total                         $   127,987

Related party deposits totaled $3.0 and $3.9 million at December 31, 2002
and 2001.


NOTE  6 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under  agreements to repurchase  generally  mature within one to
ninety days from the transaction date.  Information  concerning  securities sold
under agreements to repurchase is summarized as follows:
                                                      2002                2001
                                                             (in thousands)

Average balance during the year                  $   6,832           $   6,474
Average interest rate during the year                 1.34%               2.98%
Maximum month-end balance during the year        $  14,088           $  13,647


NOTE  7 - FEDERAL HOME LOAN BANK ADVANCES

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

                                                       2002               2001
                                                            (in thousands)
Monthly  maturities  through  December  2016,      $12,517              $2,336
at fixed rates ranging from 2.84% to 6.71%

                                                       2002               2001
                                                            (in thousands)
Principal  due at  maturity  in May  2004,
at fixed  rate of 3.73%                               2,000                  -

     Total                                        $  14,517          $   2,336

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

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

              2003                                  $ 2,188
              2004                                    4,272
              2005                                    2,901
              2006                                      503
              2007                                    1,350
              Thereafter                              3,303


NOTE  8 - BENEFIT PLANS

The Bank has a 401(k) benefit plan which allows employee contributions up to 15%
of their  compensation.  The Bank matches 100% of the first 4% of  compensation
contributed.  Expense for the years ended December 31, 2002 and 2001 was $60,000
and $35,000.


NOTE 9 - INCOME TAXES

The components of the provision (benefit) for income taxes consists of:

                                                  2002                 2001
                                                       (in thousands)

Current                                    $       544         $       363
Deferred                                          (222)                (77)
Change in valuation allowance                        -                (218)
                                           $       322         $        68


NOTE 9 - INCOME TAXES (Continued)

An analysis of the  differences  between the statutory  U.S.  federal income tax
rate and the effective tax rate is as follows:
                                                   2002             2001
                                                       (in thousands)

U.S. federal income tax rate              $  466    34.0%     $  370    34.0%
Changes from the statutory rate
   Change in valuation allowance              -      0.0%       (218)  (20.1)
   Tax exempt interest income               (194)  (14.1)        (89)   (8.2)
Other                                         50     3.6           5      .5

     Total                                $  322    23.5%      $  68     6.2%

The Company's deferred tax assets and liabilities are shown below.

                                                   2002                2001
                                                       (in thousands)
Deferred tax assets
   Allowance for loan losses                $       761         $       503
   Organizational costs                               1                  25
   Unrealized security losses                         -                 168
   Other                                             42                   -

   Total assets                                     804                 696

Deferred tax liabilities
   FHLB stock dividends                     $       (23)        $         -
   Depreciation                                    (150)                (94)
   Cash to accrual                                  (69)               (103)
   Unrealized security gains                       (122)                  -
   Other                                            (42)                (33)

   Total liabilities                               (406)               (230)

   Net deferred tax asset                   $       398         $       466

NOTE 10 - STOCK OPTIONS

The Company  maintains a stock  option plan  whereby  certain  employees  of the
Company are eligible to receive  incentive stock options.  The Plan is accounted
for in  accordance  with  Accounting  Principles  Board  Opinion  (APB) No.  25,
"Accounting for Stock Issued to Employees",  and related interpretations.  Under
the Plan,  a maximum  of 100,000  shares of the  Company's  common  stock may be
issued  through the exercise of these options.  At year-end  2002,  5,200 of the
options  granted were  outside of the Plan.  The option price is the fair market
value  of the  Company's  share  at the  date  of the  grant.  The  options  are
exercisable  in five to ten  years  from  the  date of  grant  and  vest  either
immediately or over a five-year period.

A summary of the activity in the plan is as follows:
<TABLE>
<S>                                                          <C>       <C>             <C>            <C>

                                                                   2002                       2001
                                                                       Weighted                       Weighted
                                                                        Average                        Average
                                                                       Exercise                       Exercise
                                                            Shares      Price          Shares          Price

Outstanding at beginning of year                            51,200   $    14.83        46,200       $   14.70
    Granted                                                 54,000        19.71         5,000           16.00
Outstanding at end of year                                 105,200   $    17.33        51,200           14.83
Options exercisable at year-end                             66,380   $    17.76        25,440       $   15.24
</TABLE>
<TABLE>

Options outstanding at year-end 2002 were as follows:
<CAPTION>

                                        ----------------Outstanding-----------------    --------Exercisable--------
<S>                                      <C>             <C>           <C>            <C>            <C>

                                                         Weighted
                                                          Average      Weighted                       Weighted
   Range of                                              Remaining      Average                        Average
   Exercise                                             Contractual    Exercise                       Exercise
    Prices                               Number            Life          Price         Number           Price

$13.75-$15.50                              46,200     52.3 months    $    14.70        26,880       $    14.90
$16.00-$22.00                              59,000     65.5 months         19.35        39,500            19.71

Outstanding at year end                   105,200     59.7 months    $    17.33        66,380       $    17.76
</TABLE>


NOTE 11 - STOCK WARRANTS

The  Company  issued  stock  warrants  to certain  organizers  of the Bank.  The
warrants,  issued in 1997,  entitle 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. If all the warrants are fully  exercised,  the Company will issue a
total of 88,440  shares of  common  stock,  and the  Company's  capital  will be
increased by $884,400. The warrants have no voting rights and may be transferred
without the underlying  shares of common stock, but are not  transferable  until
the exercise  period  commences.  The warrants  will expire if not  exercised by
December 31, 2003.


NOTE 12 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS

Common Stock - On September 29, 2000, the Company  initiated the sale of 456,250
shares of  common  stock at $16 per share  through  a public  offering.  Through
December 31, 2000, the Company sold 414,778 shares which, net of direct costs of
issuance,  increased  shareholders'  equity $6.3 million.  The remaining  41,472
shares in the offering  were sold in January 2001 which,  net of direct costs of
issuance, increased shareholder's equity an additional $628,000.

Regulatory Capital  Requirement - The Company and Bank are subject to regulatory
capital requirements administered by federal banking agencies.  Capital adequacy
guidelines  and  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  about  components,  risk
weightings,  and other factors, and the regulators can lower  classifications in
certain  cases.  Failure  to meet  various  capital  requirements  can  initiate
regulatory action.

The prompt corrective action regulations provide five classifications, including
well  capitalized,  adequately  capitalized,  under  capitalized,  significantly
undercapitalized, and critically under capitalized, although these terms are not
used to  represent  overall  financial  condition.  The  Company  and Bank  were
categorized as well capitalized for the periods presented as noted in the tables
that follow.


NOTE 12 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS (Continued)
<TABLE>
<S>                                            <C>          <C>         <C>     <C>              <C>     <C>
                                                                                                 Minimum Amounts
                                                                                                   to be Well
                                                                        Minimum Required          Capitalized
                                                                            for Capital           Under Prompt
                                                     Actual             Adequacy Purposes       Action Provisions
                                               Amount       Ratio       Amount       Ratio      Amount      Ratio
                                                                          (in    thousands)
2002
Total Risk Based Capital to
  Risk Weighted Assets
    Consolidated                            $ 20,311        11.0%      $14,784        8%       $ 18,480     10%
    Bank only                                 20,296        11.0        14,784        8          18,480     10

Tier I Capital to Risk
  Weighted Assets
    Consolidated                            $ 18,202         9.8%      $ 7,392        4%       $ 11,088      6%
    Bank only                                 17,986         9.7         7,392        4          11,088      6

Tier I Leverage Capital to
  Average Assets
    Consolidated                            $ 18,202         7.9%      $ 9,261        4%       $ 11,577      5%
    Bank only                                 17,986         7.8         9,257        4          11,571      5

2001
Total Risk Based Capital to
  Risk Weighted Assets
    Consolidated                            $ 18,691        11.1%      $13,497        8%       $ 16,872     10%
    Bank only                                 18,484        11.0        13,497        8          16,872     10

Tier I Capital to Risk
  Weighted Assets
    Consolidated                            $ 17,153        10.2%      $ 6,749        4%       $ 10,123      6%
    Bank only                                 16,946        10.0         6,749        4          10,123      6

Tier I Leverage Capital to
  Average Assets
    Consolidated                            $ 17,153         8.8%      $ 7,826        4%       $  9,783      5%
    Bank only                                 16,946         8.7         7,797        4           9,746      5
</TABLE>

Banking  regulations  also limit the amount of dividends that may be paid by the
Bank without prior approval.  Under these  regulations,  the amount of dividends
that may be paid in any  calendar  year is  limited  to the  current  year's net
profits, as defined, combined with the retained net profits of the preceding two
years.  Also, no dividends  can be paid that would exceed the retained  earnings
then on hand.  Without  prior  approval,  the Bank had  $1,451,000  in  retained
earnings available for dividends to the Company at December 31, 2002.


NOTE 13 ' COMMITMENTS AND OFF-BALANCE-SHEET RISK

Some financial instruments are used in the normal course of business to meet the
financing  needs of customers  and to reduce  exposure to interest rate changes.
These financial  instruments  include  commitments to extend credit, and standby
letters of credit.  These involve, to varying degrees,  credit and interest-rate
risk in excess of the amount reported in the financial  statements.  Exposure to
credit  loss  if  the  other  party  does  not  perform  is  represented  by the
contractual amount for commitments to extend credit,  standby letters of credit,
and  financial  guarantees  written.  The  same  credit  policies  are  used for
commitments  and  conditional  obligations as are used for loans.  Collateral or
other security is normally not required to support  financial  instruments  with
credit risk.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there  is  no  violation  of  any  condition   established  in  the  commitment.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being used, the total  commitments do not  necessarily  represent
future cash requirements.  Standby letters of credit are conditional commitments
to guarantee a customer's  performance to a third party. The contractual  amount
of financial instruments with off-balance-sheet risk at year-end was as follows:

                                      2002                       2001
                              Fixed        Variable       Fixed       Variable
                                                (in thousands)

Commitments to make loans  $  3,931       $  18,339   $   4,109       $   8,557
Unused lines of credit        2,858          16,331       2,544          18,402
Letters of credit              427             676          723              51

Commitments  to make loans are at market rates and generally made for periods of
6 months or less.  The fixed rate loan  commitments  at  December  31,  2002 had
interest rates ranging from 4.25% to 9.63% and maturities up to five years.

NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying  amount and  estimated  fair values of  financial  instruments  were as
follows at year-end.
<TABLE>
<CAPTION>
<S>                                                  <C>                <C>             <C>               <C>
                                                                2002                               2001
                                                    Carrying            Fair            Carrying           Fair
                                                     Amount             Value            Amount            Value
                                                                            (in thousands)
Financial assets
   Cash and cash equivalents                       $     8,813       $     8,813      $     8,918       $     8,918
   Securities available for sale                        43,046            43,046           32,309            32,309
   Loans held for sale                                   3,390             3,441                -                 -
   Loans, net                                          164,999           170,200          150,884           151,737
   Federal Home Loan Bank stock                            742               742              539               539
   Accrued interest receivable                           1,176             1,176            1,133             1,133


Financial liabilities
   Deposits                                        $   188,955       $   190,885      $   168,744       $   171,173
   Repurchase agreements and
     short-term borrowings                               8,211             8,211           12,957            12,957
   Federal Home Loan Bank advances                      14,517            14,875            2,336             2,236
   Accrued interest payable                                578               578              832               832
</TABLE>

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

Carrying  amount is the  estimated  fair  value  for cash and cash  equivalents,
accrued  interest  receivable and payable,  demand  deposits,  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 15 - PARENT COMPANY ONLY FINANCIAL STATEMENTS


                          FIRST SECURITY BANCORP, INC.
                                  BALANCE SHEET
                                   December 31
                                 (in thousands)


                                                     2002                2001
ASSETS
Cash and due from banks                       $       124         $        98
Investment in subsidiary                           18,248              16,620
Other assets                                          104                 117

                                              $    18,476         $    16,835

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Other liabilities                        $        12         $         8

Shareholders' Equity
     Common stock                                   8,385               8,385
     Paid-in capital                                8,385               8,385
     Retained earnings                              1,432                 383
     Accumulated other comprehensive income (loss)    262                (326)
         Total shareholders' equity                18,464              16,827

                                              $    18,476         $    16,835


                               STATEMENT OF INCOME
                             Years Ended December 31
                                 (in thousands)

                                                       2002                2001
Income
   Interest income                              $         -         $         4
   Dividend from subsidiary                             100                   -
                                                        100                   4
Expenses
   Salaries and employee benefits                        36                  45
   Professional fees                                     44                  35
   Other                                                 11                  24
                                                         91                 104

Income (loss) before income tax and undistributed
   subsidiary income                                      9                (100)
Income tax benefit                                        -                 108

Income (loss) before undistributed earnings
   of subsidiary                                           9                  8
Equity in undistributed earnings of subsidiary         1,040              1,014

   Net income                                    $     1,049         $    1,022


                          FIRST SECURITY BANCORP, INC.
                             STATEMENT OF CASH FLOWS
                             Years Ended December 31
                                 (in thousands)

                                                           2002            2001

Cash flows from operating activities
   Net income                                        $     1,049      $   1,022
   Adjustments to reconcile net income
     to net cash from operating activities
       Equity in undistributed earnings of subsidiary     (1,040)        (1,014)
       Change in other assets                                 13           (109)
       Change in other liabilities                             4            (92)
           Net cash from operating activities                 26           (193)

Cash flows from investing activities
   Investment in subsidiary                                    -         (1,699)

Cash flows from financing activities
   Proceeds from issuance of common stock, net                 -            628

Net change in cash and cash equivalents                       26         (1,264)

Cash and cash equivalents at beginning of period              98          1,362

Cash and cash equivalents at end of period            $       124       $    98


NOTE 16 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow:
                                                           2002           2001
                                                               (in thousands,
                                                         except per share data)
Basic
   Net income                                      $      1,049   $       1,022

   Weighted average common shares                         1,456           1,456

Basic earnings per common share                           $ .72   $         .70
Diluted
   Net income                                       $      1,049  $       1,022

   Weighted average common shares outstanding
     for basic earnings per common share                   1,456          1,456
   Add dilutive effects of assumed exercises:
     Stock warrants                                           43             31
     Stock options                                            12              2

   Average shares and dilutive potential
     common shares                                         1,511          1,489

Diluted earnings per common share                          $ .69        $   .69

The diluted earnings per share computation for 2002 and 2001 excludes 43,750 and
27,200 stock options because they were anti-dilutive.

NOTE  17  - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows:

                                                        2002              2001
                                                            (in thousands)
Unrealized holding gains and losses on
   available-for-sale securities                 $     1,539       $      (293)
Less reclassification adjustments for gains
   and losses later recognized as income                (660)             (311)
Net unrealized gains and losses                          879              (604)
Tax effect                                               291               169

Other comprehensive income (loss)                $       588        $     (435)



Item 8. Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

     Information  concerning  changes in and  disagreements  with accountants is
incorporate"  herein by reference to information under the heading  "Appointment
of Auditors" in First  Security  Bancorp's  definitive  Proxy  Statement for the
Annual Meeting of Shareholders to be held on May 20, 2003.


PART III

Item 9. Directors and Executive Officers of the Registrant

     Information  concerning  Directors  and  executive  officers  of the  First
Security  Bancorp and reporting under Section 16 of the Securities  Exchange Act
of 1934 is  incorporated  herein by reference to information  under the headings
"Election  of  Directors"  and "Section  16(a)  Beneficial  Ownership  Reporting
Compliance"  in First  Security  Bancorp's  definitive  Proxy  Statement for the
Annual Meeting of Shareholders to be held on May 20, 2003.

 Item 10. Executive Compensation

     Information  concerning  executive  compensation is incorporated  herein by
reference to the  information  under the headings  "Executive  Compensation  and
Certain Transactions", "Compensation of Directors", and "Employee Benefit Plans"
in First Security Bancorp's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 20, 2003.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

     Information  concerning security ownership of certain owners and management
is incorporated  herein by reference to the information under the heading "Share
Ownership of Directors,  Executive  Officers and certain  Beneficial  Owners" in
First Security  Bancorp's  definitive  Proxy Statement for the Annual Meeting of
Stockholders to be held on May 20, 2003.

Item 12. Certain Relationships and Related Transactions

     Information  concerning  relationships  and  transactions  is  incorporated
herein by reference to the information  under the heading "Certain  Transactions
with Management" in First Security Bancorp's  definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on May 20, 2003.

Item 13. Exhibits, Lists and Reports on Form 8-K

(a)Exhibits

The following exhibits are filed herein:

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

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

3.3  Bylaws  of  First  Security  Bancorp,  Inc.  (incorporated  by  reference
     to  Exhibit  3.3 of  the  Company's Registration Statement on Form SB-2
     [No. 333-43444]).

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

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

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

10.2 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]).

10.3 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]).

10.4  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]).


10.5 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]).

10.6 Lease 400 East Main Street  between  Isaac and Teresa C. Lawrence and
     First  Security Bank of Lexington,  Inc.(incorporated by reference to
     Exhibit 10.6of the Company's Registration Statement on Form SB-2
     [No. 333-43444]).

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

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

10.9 First Security Bank of Lexington, Inc. Stock Award Plan
     (Amended and Restated as of March 18, 2003).

10.10 Consulting Services Support Corporation Affiliation Agreement.

11 Statement re:  Computation of Per share earnings  (included in Note 16 to
   the Company's  Consolidated  Financial Statement included in this report).

21 Subsidiaries of First Security Bancorp, Inc.

22 Consent of Crowe, Chizek and Company LLP

99.1  Certification of Principal  Executive Officer and Principal  Financial
      Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

   (b)  Reports on Form 8-K.  The Company  filed on October  16,  2002 a report
        on Form 8-K dated  October 16, 2002 reporting the Company's press
        release announcing its earnings for the third quarter of 2002.

Item 14. Controls and Procedures

     Company  management,  including  the  Chief  Executive  Officer  (currently
serving  as  both  the  principal  executive  officer  and  principal  financial
officer),  have  conducted an  evaluation  of the  effectiveness  of  disclosure
controls and  procedures  pursuant to Exchange  Act Rule  13a-14.  Based on that
evaluation,  the Chief Executive Officer concluded that the disclosure  controls
and procedures are effective in ensuring that all material  information required
to be filed  in this  annual  report  has  been  made  known to him in a timely
fashion. Notwithstanding such conclusion, it should be noted that the employment
of the Company's Chief Financial Officer and the Company's Assistant  Controller
was terminated on March 2, 2003. While there have been no significant changes in
internal  controls  subsequent to the date the Chief Executive Officer completed
his  evaluation  of such  controls,  the fact that the Company  currently has no
Chief Financial  Officer or Assistant  Controller could (depending on the length
of time  such  positions  remain  vacant)  affect  (perhaps  significantly)  the
effectiveness of the Company's internal controls.

Item 15. Principal Accountant Fees and Services

     Information   concerning   principal   accountant   fees  and  services  is
incorporated  herein by reference to the  information  under the headings "Audit
Fees,"  "Audit-Related  Fees," "Tax Fees" and "All Other Fees" in First Security
Bancorp's  definitive  Proxy Statement for the Annual Meeting of Shareholders to
be held on May 20, 2003.


                                   SIGNATURES
         In  accordance  with  Section  13 or  15(d) of the  Exchange  Act,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Date:  March 31, 2003                       By:/s/ John S. Shropshire
                                           President and Chief Executive Officer

         In accordance  with the Exchange  Act,  this report has been signed
below by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated.

                  Principal Executive Officer, Principal Financial
                  Officer and Principal Accounting Officer:
Date:   March 31, 2003

                                    /s/ John S. Shropshire
                                    President, Chief Executive Officer
                                    and Director

                  Directors:


                                    /s/ Len Aldridge            March 31, 2003
                                    Len Aldridge


                                    /s/ Dennis R. Anderson      March 31, 2003
                                    Dennis R. Anderson


                                    /s/ John D. Barlow          March 31, 2003
                                    John D. Barlow


                                    /s/ Julian E. Beard         March 31, 2003
                                    Julian E. Beard


                                    /s/ Harold Glenn Campbell   March 31, 2003
                                    Harold Glenn Campbell


                                    /s/ William C. Combs, Jr.   March 31, 2003
                                    William A. Combs, Jr.


                                    /s/ A.F. Dawahare           March 31, 2003
                                    A. F. Dawahare


                                                                March 31, 2003
                                    Dr. Kenneth L. Gerson


                                                                March 31, 2003
                                    Tommy R. Hall


                                    /s/ Erle L. Levy            March 31, 2003
                                    Erle L. Levy


                                                                March 31, 2003
                                    David R. McCulloch


                                    /s/ Dr. Ira P. Mersack      March 31, 2003
                                    Dr. Ira P. Mersack


                                                                March 31, 2003
                                    Robert J. Rosenstein


                                    /s/ Nick O. Rowe            March 31, 2003
                                    Nick O. Rowe


                                                                March 31, 2003
                                    Dr. Ronald J. Saykaly


                                    /s/ Richard S. Trontz       March 31, 2003
                                    Richard S. Trontz


                                    /s/ William T. Vennes       March 31, 2003
                                    William T. Vennes


                                    /s/ Kathy E. Walker         March 31, 2003
                                    Kathy E. Walker


                                                                March 31, 2003
                                    D. Woodford Webb, Jr.

                           CERTIFICATIONS PURSUANT TO

                                 SECTION 302 OF

                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, John S. Shropshire, certify that:
1.       I have reviewed this annual report on Form 10-K of First Security
         Bancorp, Inc.;

2.       Based on my knowledge,  this annual  report does not contain any
         untrue  statement of a material fact or omit to state a material  fact
         necessary to make the statements made,  in light of the  circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition,  results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       I am  responsible  for  establishing  and  maintaining  disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-14 and
         15d-14) for the registrant and I have:

a)       designed  such  disclosure  controls  and  procedures  to ensure that
         material  information  relating to the registrant,  including  its
         consolidated  subsidiaries,  is  made  known  to  me by  others
         within  those  entities, particularly during the period in which this
         annual report is being prepared;

b)       evaluated the  effectiveness  of the registrant's  disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

c)       presented  in this annual  report my  conclusions  about the
         effectiveness  of the  disclosure  controls and procedures based on
         our evaluation as of the Evaluation Date;

5.       I have disclosed,  based on my most recent evaluation,  to the
         registrant's  auditors and the audit committee of registrant's board
         of directors (or persons performing the equivalent function):

         a)       all significant  deficiencies in the design or operation of
                  internal  controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any  fraud,  whether  or not  material,  that  involves
                  management  or other  employees  who have a significant role
                  in the registrant's internal controls; and

         c)       presented in this annual report my conclusions  about the
                  effectiveness of the disclosure  controls and procedures
                  based on our evaluation as of the Evaluation Date;

6.       I have indicated in this annual report  whether or not there were
         significant  changes in internal  controls or in other  factors that
         could  significantly  affect  internal  controls  subsequent  to the
         date of our most recent evaluation, including any corrective actions
         with regard to significant deficiencies and material weaknesses.

Date:    March 31, 2003
/s/ John S. Shropshire
John S. Shropshire
President, Chief Executive Officer and Principal Financial Officer


EXHIBIT INDEX
The following exhibits are filed herein:

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

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

3.3      Bylaws  of  First  Security  Bancorp,  Inc.  (incorporated  by
         reference  to  Exhibit  3.3 of the  Company's Registration Statement
         on Form SB-2 [No. 333-43444]).

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

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

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

10.2     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]).

10.3     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]).

10.4     Business/Manager  (R) 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]).

10.5     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]).

10.6     Lease 400 East Main Street between Isaac and Teresa C. Lawrence and
         First Security Bank of Lexington, Inc.(incorporated by reference to
         Exhibit 10.6 of the Company's Registration Statement on Form SB-2
         [No. 333-43444]).

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

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

10.9     First Security Bank of Lexington, Inc. Stock Award Plan (Amended and
         Restated as of March 18, 2003)

10.10    Consulting Services Support Corporation Affiliation Agreement.

11       Statement re Computation of Per share Earnings (included in Note 16 to
        the Company's Consolidated Financial Statement included in this report).

21       Subsidiaries of First Security Bancorp, Inc.

22       Consent of Crowe, Chizek and Company LLP

99.1     Certification of Principal  Executive Officer and Principal
         Financial Officer pursuant to 18 U.S.C. Section1350, as Adopted to
         Section 906 of the Sarbanes-Oxley Act of 2002.

                                  EXHIBIT 10.9

FIRST SECURITY BANCORP, INC.
STOCK AWARD PLAN
(AMENDED AND RESTATED AS OF MARCH 18, 2003)

     1. Purpose.  The purpose of the First  Security  Bancorp,  Inc. Stock Award
Plan  (the  "Plan")  is to secure  for  First  Security  Bancorp,  Inc.  and its
successors and assigns (the "Company") and its  stockholders the benefits of the
additional  incentive,  inherent in the ownership of the Company's common stock,
no par value per share (the "Common Stock"),  by selected  employees,  directors
and advisory  directors of the Company and its subsidiaries who are important to
the success and growth of the business of the Company and its  subsidiaries  and
to help the Company and its subsidiaries  secure and retain the services of such
persons.  Compensation  awarded  under  the  Plan in  appropriate  instances  is
intended  to qualify  for tax  deductibility  pursuant  to the  requirements  of
Section  162(m) of the Internal  Revenue  Code of 1986,  as amended from time to
time or any successor  statute or statutes  (the  "Code"),  to the extent deemed
appropriate by the Board (as defined in Paragraph 2. 1 hereof).

     Pursuant to the Plan, selected employees,  directors and advisory directors
of the Company will be offered the  opportunity  to acquire Common Stock through
the grant of options,  stock appreciation rights in tandem with such options and
awards of restricted stock. Any options,  rights or awards granted hereunder are
a matter  of  separate  inducement  and are not in lieu of any  salary  or other
compensation  for the services of any advisory  director,  director or employee.
Options  granted  under  the Plan  will be  either  "incentive  stock  options,"
intended to qualify as such under the  provisions of Section 422 of the Code, or
"nonqualified  stock  options." For purposes of the Plan, the terms "parent" and
"subsidiary"  shall mean  "parent  corporation"  and  "subsidiary  corporation,"
respectively, as such terms are defined in Sections 424(e) and (f) of the Code.

2.       Committee.

     2.1  Administration.  The  Plan  shall  be  administered  by the  board  of
directors  of the Company or by a committee  appointed by the board of directors
from among its members (collectively, the "Board"). Any such committee appointed
shall be  comprised,  unless  otherwise  determined  by the board of  directors,
solely of not less than two  members who shall be (i)  "Non-Employee  Directors"
within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under
the Securities  Exchange Act of 1934, as amended (the  "Exchange  Act") and (ii)
"disinterested directors." For purposes of the Plan, a person shall be deemed to
be a  "disinterested  person" if, at the time of reference,  such person is not,
and has not been at any time during the preceding  one-year period,  eligible to
participate  in the  Plan  or  any  other  plan  of  the  Company  or any of its
affiliates  entitling  participants  therein to acquire stock,  stock options or
stock   appreciation   rights  of  the   Company  or  any  of  its   affiliates.
Notwithstanding  any of the foregoing,  the board of directors may designate one
or more  persons,  who at the  time of such  designation  are not  disinterested
persons,  to serve on any such committee  effective upon the date such person or
persons  qualify as  disinterested  persons.  Any vacancy on any such committee,
whether due to action of the board of directors  or due to any other cause,  may
be filled,  and shall be filled if required to maintain any such committee of at
least  two  disinterested  persons,  by  resolution  adopted  by  the  board  of
directors.

     2.2  Procedures.  The Board  shall adopt such rules and  regulations  as it
shall deem appropriate  concerning the administration of the Plan. A majority of
the whole Board  shall  constitute  a quorum,  and the acts of a majority of the
members of the Board present at a meeting at which a quorum is present,  or acts
approved in writing by all of the members of the Board, shall be the acts of the
Board.

     2.3  Interpretation.  The Board  shall  have full  power and  authority  to
interpret the  provisions of the Plan and any  agreement  evidencing  options or
restricted  stock awards  granted  under the Plan,  and to determine any and all
questions  arising under the Plan, and its decisions  shall be final and binding
on all  participants  in the Plan. The Board shall have  exclusive  authority to
select the  individuals  to be granted  awards under the Plan,  to determine the
type,  size and terms of all such  awards,  to modify the terms of any awards so
granted  and to make  any  other  determinations  which it  deems  necessary  or
desirable for the administration of the Plan.

     2.4 Liability.  No member of the Board and no employee of the Company shall
be liable  for any act or  failure  to act  hereunder,  except in  circumstances
involving his or her bad faith, gross negligence or willful  misconduct,  or for
any act or failure to act  hereunder  by any other  member or employee or by any
agent to whom duties in  connection  with the  administration  of this Plan have
been delegated.  The Company shall indemnify  members of the Board and any agent
of the Board who is an employee of the  Company,  a  subsidiary  or an affiliate
against any and all  liabilities  or expenses to which they may be  subjected by
reason of any act or  failure to act with  respect to their  duties on behalf of
the Plan,  except in  circumstances  involving  such  person's bad faith,  gross
negligence or willful misconduct.

     The Board may  delegate  to one or more of its  members,  or to one or more
agents, such administrative  duties as it may deem advisable,  and the Board, or
any person to whom it has delegated duties as aforesaid,  may employ one or more
persons to render  advice with respect to any  responsibility  the Board or such
person  may have  under the  Plan.  The Board  may  employ  such  legal or other
counsel,  consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion or computation  received from any such
counsel,  consultant or agent.  Expenses incurred by the Board in the engagement
of such  counsel,  consultant  or  agent  shall be paid by the  Company,  or the
subsidiary  or  affiliate  whose  employees  have  benefited  from the Plan,  as
determined by the Board.

3.       Shares Subject to Grants.

     3.1 Number of Shares.  Subject to the  provisions  of  Paragraph  19 hereof
(relating  to  adjustments  upon  mergers,  reorganizations  or like  changes in
capitalization), the number of shares of Common Stock subject at any one time to
options or awards of restricted  stock or deferred stock units granted under the
Plan, plus the number of shares of Common Stock theretofore  issued or delivered
pursuant to the exercise of options granted,  and awards of restricted stock and
deferred  stock units made,  under the Plan,  shall not exceed  200,000  shares;
provided,  that  no more  than  one-fifth  of  such  shares  may be  awarded  as
restricted  stock  awards.  If and to the extent that options  granted under the
Plan  terminate,  expire or are  canceled  without  having  been  exercised,  or
restricted stock or deferred stock units are forfeited, new options,  restricted
stock or deferred  stock units may be granted under the Plan with respect to the
shares of Common Stock covered by such  terminated,  expired or canceled options
or forfeited shares of restricted stock or deferred stock units; provided,  that
the granting and terms of such new options, restricted stock awards and deferred
stock units shall in all respects comply with the provisions of the Plan.

     3.2 Character of Shares.  Shares of Common Stock  delivered  under the Plan
may be authorized  and unissued  Common  Stock,  issued Common Stock held in the
Company's treasury, or both.

     3.3 Reservation of Shares. There shall be reserved at all times for sale or
award under the Plan a number of shares of Common Stock (authorized and unissued
Common Stock, issued Common Stock held in the Company's treasury, or both) equal
to the maximum number of shares set forth in Paragraph 3.1 hereof.

     4. Eligibility. Options and awards of restricted stock may be granted under
the Plan to any employee, director or advisory director of the Company or any of
its subsidiaries,  or to any prospective employee, director or advisory director
of the Company or any of its  subsidiaries,  conditioned upon, and effective not
earlier than,  such person's  becoming an employee or director.  Notwithstanding
the foregoing:

     (a)  Only  non-qualified  stock  options  may be  granted  to  non-employee
directors or advisory directors of the Company;

     (b) No incentive  stock options may be granted under the Plan to any person
who owns,  directly or indirectly  (within the meaning of Sections 422(b)(6) and
424(d) of the Code),  at the time the incentive  stock option is granted,  stock
possessing  more than 10% of the total  combined  voting power of all classes of
stock of the employee's employer corporation or of its parent, if any, or any of
its  subsidiaries,  unless the option  price is at least 110% of the fair market
value of the shares subject to the option,  determined on the date of the grant,
and the  option by its terms is not  exercisable  after the  expiration  of five
years from the date such option is granted; and

     (c) In each  calendar  year during any part of which the Plan is in effect,
no  Participant  (as  defined  below) may be  granted  options  relating  in the
aggregate to more than 10,000 shares of Common  Stock,  subject to adjustment as
provided in Paragraph 19 hereof.

     An  individual  receiving  any option,  restricted  stock award or deferred
stock units under the Plan is hereinafter  referred to as a  "Participant."  Any
reference herein to the employment of a Participant by the Company shall include
(i) his or her  employment by the Company or any of its  subsidiaries,  and (ii)
with respect to a  Participant  who was not an employee of the Company or any of
its  subsidiaries at the time of grant of his or her option or award, his or her
period of service in the capacity for which the option or award was granted. For
all purposes of this Plan, the time at which an option or award is granted shall
be deemed to be the  effective  date of such  grant.  The Plan does not create a
right in any person to  participate  in the Plan,  nor does it create a right in
any person to have any options or rights granted to him or her.

     5. Grant of Options.  The Board shall determine,  within the limitations of
the Plan,  the persons to whom  options are to be granted,  the number of shares
that may be  purchased  under  each  option  and the  option  price,  and  shall
designate  options at the time of grant as either  "incentive  stock options" or
"nonqualified  stock  options";  provided,  that the aggregate fair market value
(determined  as of the time the  option is  granted)  of the  Common  Stock with
respect to which incentive  stock options become  exercisable for the first time
by any  Participant  (as  defined in  Paragraph 4 hereof) in any  calendar  year
(under all stock option plans of the  employee's  employer  corporation  and its
parent, if any, and its subsidiaries)  shall not exceed $100,000 (the provisions
of Section  422(d) of the Code are  intended  to  govern).  In  determining  the
persons to whom options  shall be granted and the number of shares to be covered
by each option, the Board shall take into consideration the person's present and
potential  contribution to the success of the Company and its  subsidiaries  and
such  other  factors  as the Board may deem  proper and  relevant.  Each  option
granted  under the Plan shall be  evidenced by a written  agreement  between the
Company and the  Participant  containing  such terms and  conditions and in such
form,  not  inconsistent  with the  provisions  of the Plan or, with  respect to
incentive stock options, Section 422 of the Code, as the Board shall provide.

     6. Option Price.  Subject to Paragraph 19 hereof,  the option price of each
share of Common Stock purchasable under any incentive stock option granted under
the Plan  shall be not less than the fair  market  value of such share of Common
Stock at the time the option is granted,  and the option  price of each share of
Common Stock purchasable under any non-qualified  stock option granted under the
Plan shall not be less than 50% of the fair market value of such share of Common
Stock at the time the option is granted. The option price of an option issued in
a transaction  described in Section  424(a) of the Code shall be an amount which
conforms to the requirements of that Section and the regulations thereunder.

     For purposes of this Plan,  the "fair market  value" of the Common Stock on
any date  means  (i) if the  Common  Stock is listed  on a  national  securities
exchange  or  quotation  system,  the closing  sales  price on such  exchange or
quotation system on such date or, in the absence of reported sales on such date,
the closing sales price on the  immediately  preceding  date on which sales were
reported,  (ii) if the  Common  Stock is not  listed  on a  national  securities
exchange or quotation  system,  the mean  between the bid and offered  prices as
quoted  by the  National  Association  of  Securities  Dealers,  Inc.  Automated
Quotation  System  ("NASDAQ")  for such  date or (iii)  if the  Common  Stock is
neither listed on a national  securities exchange or quotation system nor quoted
by  NASDAQ,  the fair  value as  determined  by such  other  method as the Board
determines in good faith to be reasonable.

     7. Stock  Appreciation  Rights.  In the  discretion  of the Board,  a stock
appreciation right may be granted (a) alone, (b)  simultaneously  with the grant
of an option (either incentive or non-qualified) and in conjunction therewith or
in the  alternative  thereto or (c)  subsequent to the grant of a  non-qualified
option and in conjunction therewith or in the alternative thereto.

     The exercise  price of a right  granted  alone shall be  determined  by the
Board but shall not be less than one hundred  percent  (100%) of the fair market
value of one share of Common  Stock on the date of grant of such right.  A right
granted  simultaneously  with or  subsequent  to the grant of an  option  and in
conjunction therewith or in the alternative thereto shall have the same exercise
prices as the related option, shall be transferable only upon the same terms and
conditions  as the related  option,  and shall be  exercisable  only to the same
extent as the related  option;  provided,  however,  that a right, by its terms,
shall be  exercisable  only when the fair market value of the shares  subject to
the right and related option exceeds the exercise price thereof.

     Upon  exercise of a right granted  simultaneously  with or subsequent to an
option  and in the  alternative  thereto,  the  number of  shares  for which the
related option shall be exercisable shall be reduced by the number of shares for
which the right  shall  have been  exercised.  The  number of shares for which a
right  shall be  exercisable  shall be reduced  upon any  exercise  of a related
option by the number of shares for which such option shall have been exercised.

     Any right shall be exercisable upon such additional terms and conditions as
may from time to time be prescribed by the Board.

     A right shall entitle the holder upon exercise  thereof to receive from the
Company,  upon a written  request filed with the Secretary of the Company at its
principal  offices,  a number  of shares  (with or  without  restrictions  as to
substantial risk of forfeiture and  transferability,  as determined by the Board
in its sole  discretion),  an amount of cash, or any  combination  of shares and
cash, as specified in the request (but subject to the approval of the Board,  in
its sole discretion,  at any time up to and including the time of payment, as to
the making of any cash payment),  having an aggregate fair market value equal to
the  product  of (a) the  excess of the fair  market  value,  on the day of such
request,  of one share over the exercise price per share specified in such right
or its  related  option,  multiplied  by (b) the number of shares for which such
right shall be exercised;  provided, however, that the Board, in its discretion,
may impose a maximum  limitation on the amount of cash, the fair market value of
shares,  or a  combination  thereof,  which  may be  received  by a holder  upon
exercise of a right.

     Any  election  by a holder of a right to  receive  cash in full or  partial
settlement of such right,  and any exercise of such right for cash,  may be made
only by a request filed with the Corporate  Secretary of the Company  during the
period beginning on the third business day following the date of the release for
publication by the Company of quarterly or annual summary statements of earnings
and ending on the twelfth  business day following such date.  Within thirty (30)
days after the  receipt by the  Company of a request to receive  cash in full or
partial  settlement of a right or to exercise  such right for cash,  the Company
shall, in its sole discretion,  either consent to or disapprove,  in whole or in
part, such request.

     If the Board  disapproves  in whole or in part any  election by a holder to
receive cash in full or partial  settlement of a right or to exercise such right
for cash, such disapproval shall not affect such holder's right to exercise such
right at a later  date,  to the  extent  that  such  right  shall  be  otherwise
exercisable,  or to elect the form of payment at a later date,  provided that an
election  to  receive  cash upon such  later  exercise  shall be  subject to the
approval  of the Board.  Additionally,  such  disapproval  shall not affect such
holder's right to exercise any related option or options  granted to such holder
under the Plan.

     A holder of a right  shall not be  entitled  to request or receive  cash in
full or partial  payment  of such  right  during the first six (6) months of its
term,  provided however,  that such prohibition shall not apply if the holder of
such right is not subject to the reporting  requirements of Section 16(a) of the
Exchange Act.

     For all purposes of this Paragraph 7, the fair market value of shares shall
be determined in accordance with the principles set forth in Paragraph 6 hereof.

8.       Exercisability and Duration of Options.

     8.1  Determination  of Board;  Acceleration.  Each option granted under the
Plan shall be exercisable at such time or times,  or upon the occurrence of such
event  or  events,  and in such  amounts,  as the  Board  shall  specify  in the
agreement  evidencing the option.  Subsequent to the grant of an option which is
not  immediately  exercisable  in full, the Board,  at any time before  complete
termination  of such  option,  may  accelerate  the time or times at which  such
option may be exercised in whole or in part.

     8.2 Automatic  Termination.  The unexercised  portion of any option granted
under the Plan shall  automatically and without notice terminate and become null
and void at the time of the earliest to occur of the following:

     (a) The  expiration  of ten years  from the date on which  such  option was
granted;


     (b) The  expiration  of three  months from the date of  termination  of the
Participant's  employment  by the  Company or service as a director  or advisory
director with the Company unless a longer period is provided by the Board (other
than a termination described in subparagraph (c) or (d) below); provided that if
the  Participant  shall  die  during  such  three-month   period,  the  time  of
termination  of the  unexercised  portion of any such option shall be determined
under the provisions of subparagraph (c) below;

     (c)  The  expiration  of six  months  following  the  issuance  of  letters
testamentary or letters of  administration to the executor or administrator of a
deceased  Participant,  if the  Participant's  death  occurs  either  during his
employment  by the  Company or service as a director  or  advisory  director  or
during  the  three-month  period  following  the  date  of  termination  of such
employment  or  service  as a  director  or  advisory  director  (other  than  a
termination described in subparagraph (d) below), but in no event later than one
year after the Participant's death;

     (d) The termination of the Participant's  employment by the Company if such
termination  constitutes or is attributable to a breach by the Participant of an
employment or consulting  agreement with the Company or any of its subsidiaries,
or if the  Participant is discharged from employment or service as a director or
advisory  director or his or her  services  are  terminated  for cause or if the
Participant  voluntarily  terminates  his  or her  employment  or  service  as a
director or advisory director; or

     (e) The  expiration of such period of time or the  occurrence of such event
as the Board in its discretion may provide upon the granting thereof.

     The Board or the board of directors  shall have the right to determine what
constitutes  cause  for  discharge  or  termination  of  services,  whether  the
Participant has been discharged or his or her services  terminated for cause and
the date of such discharge or termination of services, and such determination of
the Board or the board of directors shall be final and conclusive.


     9. Exercise of Options.  Options  granted under the Plan shall be exercised
by the Participant (or by his or her executors or administrators, as provided in
Paragraph  10 hereof) as to all or part of the shares  covered  thereby,  by the
giving of written  notice of exercise to the Company,  specifying  the number of
shares to be purchased accompanied by payment of the full purchase price for the
shares  being  purchased.  Payment of such  purchase  price shall be made (a) by
check payable to the Company,  (b) with the consent of the Board, by delivery of
shares of Common Stock already owned by the  Participant for at least six months
(which may  include  shares  received  as the result of a prior  exercise  of an
option)  having a fair market  value  (determined  as of the date such option is
exercised)  equal to all or part of the aggregate  purchase price,  (c) with the
consent of the Board and at the election of the Participant, by withholding from
those  shares that would  otherwise  be obtained  upon  exercise of the option a
number of shares having a fair market value equal to the option  exercise price,
(d) in accordance with a "cashless exercise" program established by the Board in
its sole discretion under which if so instructed by the Participant,  shares may
be issued  directly to the  Participant's  broker or dealer upon  receipt of the
purchase price in cash from the broker or dealer, (e) by any combination of (a),
(b),  (c) or (d) above or (f) by other means that the Board  deems  appropriate.
Such notice of exercise,  accompanied by such payment, shall be delivered to the
Company at its principal  business  office or such other office as the Board may
from time to time  direct,  and shall be in such form,  containing  such further
provisions  consistent  with the  provisions  of the Plan, as the Board may from
time to time prescribe.  The date of exercise shall be the date of the Company's
receipt of such notice.  The Company  shall effect the transfer of the shares so
purchased  to the  Participant  (or such  other  person  exercising  the  option
pursuant to Paragraph 10 hereof) as soon as practicable. No Participant or other
person exercising an option shall have any of the rights of a stockholder of the
Company with respect to shares subject to an option granted under the Plan until
due  exercise and full payment has been made as provided  above.  No  adjustment
shall be made for cash  dividends  or other  rights for which the record date is
prior to the date of such due  exercise  and full  payment.  In no event may any
option granted hereunder be exercised for a fraction of a share.

     10. Non-Transferability of Options and Stock Appreciation Rights. Except as
provided herein, no option granted under the Plan or any right evidenced thereby
shall be transferable  by the  Participant  other than by will or by the laws of
descent and distribution, and an option may be exercised, during the lifetime of
a Participant, only by such Participant. Notwithstanding the preceding sentence:
(a) in the event of a  Participant's  death during his or her  employment by the
Company or his or her service as a director or advisory director of the Company,
its parent, if any, or any of its subsidiaries, or during the three-month period
following the date of termination of such  employment,  his or her options shall
thereafter  be  exercisable,  during the period  specified in  Paragraph  8.2(c)
hereof, by his or her executors or administrators; and (b) the Participant, with
the approval of the Board, may transfer his or her options (other than incentive
stock options) for no consideration  to or for the benefit of the  Participant's
spouse,  parents,   children  (including  stepchildren  or  adoptive  children),
grandchildren or siblings, or to a trust for the benefit of any of such persons.

     11.  Restricted  Stock.  Participants  may be granted  awards of restricted
stock  under  the  Plan,  subject  to the  applicable  provisions  of the  Plan,
including  the  following  terms and  conditions,  and to such  other  terms and
conditions not inconsistent therewith, as the Board shall determine:

     (a) Awards of  restricted  stock may be in addition to or in lieu of option
grants;

     (b) During a period  set by,  and/or  until the  attainment  of  particular
performance  goals based upon criteria  established  by the Board at the time of
each award of restricted stock (the "restriction period"), the Participant shall
not be permitted to sell,  transfer,  pledge or otherwise encumber the shares of
restricted stock;  except that such shares may be used, if the Board permits, to
pay the option  price of any option  granted  under the Plan;  provided  that an
equal number of shares  delivered to the Participant upon exercise of the option
shall carry the same restrictions as the shares of restricted stock so used;

     (c) If so provided by the Board,  the applicable  restriction  period shall
expire,  and shares of restricted stock shall become free of all restrictions if
(i)  the  Participant  dies,  (ii)  the  Participant's   employment  or  service
terminates by reason of permanent disability,  as determined by the Board, (iii)
the Participant  retires or (iv) a "Change in Control" of the Company occurs (as
defined in  Paragraph  16  hereof).  The Board may require  medical  evidence of
permanent  disability,  including medical examinations by physicians selected by
it. If the Board determines that any such recipient is not permanently  disabled
the restricted stock held by such recipient shall be forfeited and revert to the
Company;

     (d)  Unless  and  to the  extent  otherwise  provided  in  accordance  with
Paragraph 11(c) hereof, shares of restricted stock shall be forfeited and revert
to the Company  upon the  Participant's  termination  of  employment  or service
during the  restriction  period,  except to the  extent  the Board,  in its sole
discretion,  finds  that such  forfeiture  is not in the best  interests  of the
Company and, therefore,  waives all or part of the application of this provision
to the restricted stock held by such Participant;

     (e) Stock certificates for restricted stock shall be registered in the name
of the  Participant  but shall be  appropriately  legended  and  returned to the
Company by the  Participant,  together with a stock power,  endorsed in blank by
the Participant.  The Participant shall be entitled to vote shares of restricted
stock and shall be entitled to all dividends paid thereon, except that dividends
paid in Common Stock or other property shall be subject to the same restrictions
as apply to the restricted stock with respect to which they are paid; and

     (f) Restricted stock shall become free of the foregoing  restrictions  upon
expiration  of the  applicable  restriction  period and the  Company  shall then
deliver certificates evidencing such Common Stock to the recipient.

     12. Deferred Stock Units.  Participants  may be granted units  representing
the right to receive  shares of Common Stock at the end of a specified  deferral
period ("deferred stock units"),  subject to applicable  provisions of the Plan,
including  the  following  terms and  conditions,  and to such  other  terms and
conditions not inconsistent therewith, as the Board shall determine:

     (a) Deferred  stock units shall be  exercisable  for shares of Common Stock
after the  period  and upon the terms set by the Board.  If so  provided  by the
Board,  the  applicable  deferral  period shall expire when (i) the  Participant
dies,  (ii) the  Participant's  employment  or service  terminates  by reason of
permanent disability,  as determined by the Board, (iii) the Participant retires
or (iv) a "Change in Control" of the Company  occurs (as defined in Paragraph 16
hereof).  The  Board may  require  medical  evidence  of  permanent  disability,
including  medical  examinations  by  physicians  selected  by it.  If the Board
determines  that any such recipient is not  permanently  disabled,  the deferred
stock units held by such recipient shall be forfeited and revert to the Company;

     (b)  Unless  and  to the  extent  otherwise  provided  in  accordance  with
Paragraph  12(a),  deferred  stock  units shall be  forfeited  and revert to the
Company upon the  Participant's  termination of employment or service during the
deferral period,  except to the extent the Board, in its sole discretion,  finds
that such forfeiture is not in the best interest of the Company and,  therefore,
waives all or part of the  application  of this  provision to the deferred stock
units held by such Participant; and

     (c)  Unless  otherwise  determined  by the  Board  at the  date  of  grant,
dividends  on the  specified  number of shares of Common  Stock  covered  by the
deferred  stock units will be paid at the dividend  payment date in cash, or the
payment of such dividends  shall be deferred  and/or the amount or value thereof
automatically  reinvested in additional deferred stock units, as the Board shall
determine or permit the Participant to elect. Unless otherwise determined by the
Board,  shares of Common Stock  distributed in connection  with a stock split or
stock dividend,  and other property distributed as a dividend,  shall be subject
to  restrictions,  risk of forfeiture  and/or deferral to the same extent as the
deferred  stock units with respect to which such Common Stock or other  property
has been distributed.

     13.  Reload  Options.  At the time an option  (the  "original  option")  is
granted,  the Board may also  authorize  the grant of a "reload  option,"  which
shall be subject to the following terms:

     (a) The number of shares of Common Stock subject to the reload option shall
be the number of shares,  if any,  used by the  Participant  to pay the purchase
price upon exercise of the original option,  plus the number of shares,  if any,
delivered by the Participant to satisfy the tax withholding requirement relating
to such exercise;

     (b) The reload option shall be a nonqualified stock option;

     (c) The grant of the  reload  option  shall be  effective  upon the date of
exercise of the original option,  and the term of the reload option shall be the
period,  if any,  remaining  from that date to the date upon which the  original
option would have expired;

     (d) The grant of the reload  option shall not be effective  if, on the date
of exercise of the  original  option,  the  Participant  is not  employed by the
Company; and

     (e) Except as specified  in (a) through (d) above,  the terms of the reload
option shall be as prescribed in the preceding Paragraphs of this Plan.

14.      Withholding Tax.

     (a)  Whenever  under  the Plan  shares of stock  are to be  delivered  upon
exercise of a  nonqualified  stock  option or deferred  stock unit,  the Company
shall be  entitled to require as a condition  of delivery  that the  Participant
remit or, in appropriate  cases, agree to remit when due an amount sufficient to
satisfy all  federal,  state and local  withholding  tax  requirements  relating
thereto.  At the option of the  Company,  such  amount may be  remitted by check
payable to the  Company,  in shares of Common  Stock  (which may include  shares
received as the result of a prior exercise of an option or deferred stock unit),
by the  Company's  withholding  of  shares  of Common  Stock  issuable  upon the
exercise of any option or stock  appreciation  right or pursuant to any award of
restricted stock or deferred stock unit pursuant to the Plan, or any combination
thereof.  Whenever an amount shall become payable to a Participant in connection
with the exercise of a stock  appreciation  right, the Company shall be entitled
to withhold  therefrom an amount  sufficient  to satisfy all federal,  state and
local withholding tax requirements relating to such amount.

     (b) Recipients of restricted stock,  pursuant to Paragraph 11 hereof, shall
be  required  to remit to the  Company  an  amount  sufficient  to  satisfy  all
applicable tax withholding  requirements upon expiration of restriction  periods
or upon such  earlier  date(s)) as may be elected  pursuant to Section 83 of the
Code, unless other  arrangements  satisfactory to the Company have been made for
the withholding of applicable  taxes.  At the option of the Company,  the amount
referred to in the  preceding  sentence may be remitted by check  payable to the
Company,  in shares of Common  Stock  (which may include  shares of Common Stock
received  as the result of a prior  exercise  of an  option),  by the  Company's
withholding  of shares of Common Stock  issuable upon the exercise of any option
or stock  appreciation  right or  pursuant to any award of  restricted  stock or
deferred stock unit pursuant to the Plan, or any combination thereof.

     15. Restrictions on Delivery and Sale of Shares. Each option and restricted
stock award and  deferred  stock unit  granted  under the Plan is subject to the
condition that if at any time the Board, in its discretion, shall determine that
the listing,  registration or qualification of the shares covered by such option
or award  upon any  securities  exchange  or under any state or  federal  law is
necessary or desirable as a condition of or in  connection  with the granting of
such  option or award or the  purchase or  delivery  of shares  thereunder,  the
delivery  of any or all  shares  pursuant  to  exercise  of the  option  or upon
expiration  of the  restriction  or deferral  period may be withheld  unless and
until such listing,  registration or qualification shall have been effected. The
Board may  require,  as a condition  of  exercise  of any option,  or grant of a
restricted  stock award or deferred stock unit, that the Participant  represent,
in writing,  that the shares  received are being acquired for investment and not
with a view to  distribution  and agree that the shares  will not be disposed of
except pursuant to an effective registration statement, unless the Company shall
have  received  an opinion  of counsel  satisfactory  to the  Company  that such
disposition  is exempt from such  requirement  under the Securities Act of 1933.
The Board may require that the sale or other  disposition of any shares acquired
upon exercise of an option  hereunder or upon  expiration  of a  restriction  or
deferral  period  shall be subject  to a right of first  refusal in favor of the
Company, which right shall permit the Company to repurchase such shares from the
Participant  or  his  or  her  representative  prior  to  their  sale  or  other
disposition  at their then  current fair market  value in  accordance  with such
terms and conditions as shall be specified in the agreement evidencing the grant
of the option,  restricted  stock award or deferred  stock unit. The Company may
endorse on  certificates  representing  shares  issued  upon the  exercise of an
option or expiration of a restriction or deferral period, such legends referring
to  the  foregoing  representations  or  restrictions  or any  other  applicable
restrictions  on  resale  as  the  Company,   in  its  discretion,   shall  deem
appropriate.

16.      Change in Control.

     (a) In the event of a Change in Control of the Company,  as defined  below,
the  Board  may,  in its sole  discretion,  provide  that  any of the  following
applicable  actions be taken as a result, or in anticipation,  of any such event
to assure fair and equitable treatment of Participants:

     (i)  accelerate  the  exercisability  of any  outstanding  options,  or the
expiration  of  restriction  periods of  restricted  stock or the  expiration of
deferral periods of deferred stock units awarded pursuant to this Plan;

     (ii) offer to  purchase  any  outstanding  options or shares of  restricted
stock or deferred stock units made pursuant to this Plan from the holder for its
equivalent  cash value, as determined by the Board, as of the date of the Change
in Control; or

     (iii)make  adjustments or modifications to outstanding options,  restricted
stock or deferred  stock units as the Board deems  appropriate  to maintain  and
protect the rights and interests of the  Participants  following  such Change in
Control.

Any such action  approved by the Board  shall be  conclusive  and binding on the
Company, its subsidiaries and all Participants.

     (b) In no event,  however,  may (i) any  option be  exercised  prior to the
expiration of six (6) months from the date of grant (unless  otherwise  provided
in the agreement  evidencing the option),  or (ii) any option be exercised after
ten (10) years from the date it was granted.

     (c) To the extent not otherwise  defined in this Plan, the following  terms
used in this Paragraph 16 shall have the following meanings:

"Affiliate"  means any other  corporation  or other  entity which  controls,  is
controlled,  directly or  indirectly,  by, or under  common  control  with,  the
Company and which the Board  designates  as an  "Affiliate"  for purposes of the
Plan.

"Associate" of a Person means (a) any  corporation or organization of which such
Person is an officer or partner or is,  directly or  indirectly,  the Beneficial
Owner of 10% or more of any class of equity  securities,  (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person  serves as trustee or in a similar  fiduciary  capacity  and (c) any
relative or spouse of such Person,  or any relative of such spouse,  who has the
same home as such  Person or who is a director  or officer of such Person or any
of its parents or subsidiaries.

"Beneficial  Owner" has the  meaning  ascribed  thereto in Rule 13d-3  under the
Exchange Act,  except that, in any case, a Person shall be deemed the Beneficial
Owner of any securities  owned,  directly or  indirectly,  by the Affiliates and
Associates of such Person.

"Change in  Control"  means (a) a majority of the board of  directors  ceases to
consist of Continuing Directors;  (b) any Person becomes the Beneficial Owner of
25%  or  more  of the  outstanding  voting  power  of the  Company  unless  such
acquisition  is  approved  by a majority of the  Continuing  Directors;  (c) the
stockholders  of the Company  approve an agreement to merge or consolidate  into
any other entity,  unless such merger or consolidation is approved by a majority
of the Continuing  Directors;  or (d) the stockholders of the Company approve an
agreement to dispose of all or  substantially  all of the assets of the Company,
unless such disposition is approved by a majority of the Continuing Directors.

"Continuing Director" means any member of the board of directors who is a member
on the effective  date of the Plan as set forth in Paragraph 21 hereof or who is
elected to the board of  directors  after such date upon the  recommendation  or
with the approval of a majority of the Continuing  Directors at the time of such
recommendation or approval.

"Person" means an individual, a corporation,  a partnership,  an association,  a
joint stock company, a trust, any unincorporated organization or a government or
a political subdivision thereof or any other entity

     17.  Right to  Terminate  Employment.  Nothing in the Plan or in any option
granted under the Plan shall confer upon any  Participant  the right to continue
as an  employee  of the Company or affect the right of the Company or any of its
subsidiaries  to terminate the  Participant's  employment at any time,  subject,
however,   to  the  provisions  of  any  agreement  of  employment  between  the
Participant and the Company, its parent, if any, or any of its subsidiaries.

     18. Transfer or Leave of Absence.  For purposes of this Plan, neither (i) a
transfer of an employee from the Company to a subsidiary  or other  affiliate of
the Company,  or vice versa,  or from one subsidiary or affiliate of the Company
to  another,  nor (ii) a duly  authorized  leave of  absence,  shall be deemed a
termination of employment.

     19. Adjustment Provisions:  Effect of Certain Transactions.  If there shall
be any change in the Common Stock of the Company, through merger, consolidation,
reorganization,  recapitalization,  stock dividend,  stock split,  reverse stock
split, split up, spin-off,  combination of shares,  exchange of shares, dividend
in  kind  or  other  like  change  in  capital   structure  or  distribution  to
shareholders  of the Company  (other than  normal cash  dividends),  in order to
prevent  dilution or  enlargement  of  participants'  rights under the Plan, the
Board (or the  counterpart  Board of any entity  assuming the obligations of the
Plan) shall adjust, in an equitable  manner,  the number and kind of shares that
may be  issued  under  the  Plan,  the  number  and kind of  shares  subject  to
outstanding  options and rights,  the consideration to be received upon exercise
of options or in respect of rights, the exercise price applicable to outstanding
options and rights,  and/or the fair market  value of the shares and other value
determinations  applicable  to  outstanding  options  and  rights.   Appropriate
adjustments  may  also be made by the  Board  (or the  counterpart  Board of any
entity  assuming  the  obligations  of the Plan) in the terms of any options and
rights under the Plan to reflect such changes or distributions and to modify any
other  terms of  outstanding  options  and  rights  on an  equitable  basis.  In
addition,  the  Board  (or the  counterpart  Board of any  entity  assuming  the
obligations  of the Plan) is  authorized  to make  adjustments  to the terms and
conditions  of, and the criteria  included in, options and rights in recognition
of  unusual or  nonrecurring  events  affecting  the  Company  or the  financial
statements  of the  Company,  or in  response  to  changes in  applicable  laws,
regulations or accounting principles.

20.      Expiration and Termination of the Plan.

     20.1  General.  Options and awards of restricted  stock and deferred  stock
units  may be  granted  under  the Plan at any time and from  time to time on or
prior to the tenth anniversary of the effective date of the Plan as set forth in
Paragraph 21 hereof (the "Expiration  Date"), on which date the Plan will expire
except as to  options  then  outstanding  and stock  subject to  restriction  or
deferral periods under the Plan. Such outstanding options shall remain in effect
until they have been  exercised,  terminated  or have expired;  such  restricted
stock shall remain subject to restriction  until  expiration of the  restriction
period in  accordance  with  Paragraph 11 hereof and such  deferred  stock units
shall remain  subject to deferral  until  expiration  of the deferral  period in
accordance with Paragraph 12. The Plan may be terminated, modified or amended by
the board of directors at any time on or prior to the  Expiration  Date,  except
with respect to any options then outstanding under the Plan; provided,  however,
that  the  approval  of the  Company's  stockholders  will be  required  for any
amendment  which (i)  changes the class of  employees  eligible  for grants,  as
specified in Paragraph 4, (ii) increases the maximum number of shares subject to
grants,  as  specified  in  Paragraph  3 hereof  (unless  made  pursuant  to the
provisions  of Paragraph 19 hereof) or (iii)  materially  increases the benefits
accruing  to  participants  under the Plan,  within  the  meaning  of Rule 16b-3
promulgated under the Exchange Act.

     20.2 Modifications. No modification,  extension, renewal or other change in
any option or award of restricted stock or deferred stock unit granted under the
Plan  shall  be made  after  grant,  unless  the  same is  consistent  with  the
provisions of the Plan and does not  disqualify an incentive  stock option under
the provisions of Section 422 of the Code.

     21. Effective Date of Plan. The Plan (as amended and restated) shall become
effective on March 21, 2000, the date of its adoption by the board of directors,
subject,  however,  to the  approval of the Plan by the  Company's  stockholders
within 12 months of such adoption.


                                  EXHIBIT 10.10

                  2001, Consulting Services Support Corporation

                     CONSULTING SERVICES SUPPORT CORPORATION
                              AFFILIATION AGREEMENT

     The  undersigned   bank  ("Bank"),   separate   consulting   services  firm
("Consulting   Services  Entity")  and  individuals   ("Program   Participants")
(collectively   and,  as   applicable   individually,   referred  to  herein  as
"Affiliates"),  by signing this Affiliation  Agreement,  agree to affiliate with
Consulting  Services  Support  Corporation,  and its  subsidiaries,  (Consulting
Services  Support  Corporation  and its  subsidiaries  are  herein  collectively
referred to as "CSSC"),  which  collectively  accept such affiliation upon their
execution of this Agreement, subject to the following terms and conditions. CSSC
provides training, a financial services business development Program, consulting
service support,  and other service and assistance to banks,  such as Affiliates
(hereinafter referred to as "Consulting Services Support ProgramSM" or "Program)
(as such terms are regulatorily  defined),  all subject the provisions set forth
below.

     The  parties  below,  intending  to be  legally  bound,  hereby  represent,
warrant, and agree as follows:

     1. The Consulting Services Support ProgramSM.

     1.1  Payment  of  Affiliation  Fee and  Access to the  Consulting  Services
Support  ProgramSM.  Upon payment of the Affiliation Fee set forth on Schedule A
to this  Agreement,  and after  Program  Participants  obtain the  licenses  and
registrations  required to participate  in CSSC's  Consulting  Services  Support
ProgramSM, Affiliates will actively participate in CSSC's Program, through which
CSSC will provide  Affiliates  with access to the financial  services  described
above;  training  and  support  in the  areas  of  financial  services  business
development and consulting services support;  protocols and procedures to enable
the  Affiliates  to ethically  provide  financial  services in  compliance  with
federal and state laws and  regulations,  and the rules of  regulatory  entities
with jurisdiction over the providers of the services contemplated herein ("other
regulatory entities"); and the materials,  systems,  procedures,  methodologies,
and forms used in the Program.  Affiliates  understand  and agree this Agreement
does not confer on  Affiliates  any right of  geographical  or any other form of
exclusivity with respect to the Program.

     1.2 Licensing and  Registration of Program  Participants.  CSSC will assist
Program  Participants in obtaining the required  licenses and  registrations set
forth in Schedule B ("Licenses  &  Registrations").  If any Program  Participant
does not already hold the required  Licenses & Registrations,  CSSC will provide
Program Participant with one set of study materials,  along with admittance to a
license  preparation  classroom  course (if available in the local area,  and if
desired)  for such  Program  Participant.  CSSC  will  schedule  and pay for the
examination(s)  and state  required  for  Program  Participants  to  obtain  the
Licenses & Registrations.  If a Program Participant must retake any examination,
or if any  examination  or  course  needs to be  rescheduled,  then the  Program
Participant  shall be responsible for any additional  rescheduling fees or other
expenses required to obtain the Licenses & Registrations.

     1.3 Holding of Licenses and  Registrations.  Affiliates  agree to place and
maintain  their  Licenses and  Registrations,  in compliance  with all state and
federal laws and regulations and the rules of other  regulatory  entities,  with
such entities as CSSC shall,  from time to time,  designate  with Mutual Service
Corporation ("MSC"), a registered broker/dealer through which brokerage services
are  currently  provided  to  Program  Participants.   Each  individual  Program
Participant  agrees  to  execute  and  comply  with  the  provisions  of an  MSC
Registered  Representative  Agreement in such form as CSSC has  negotiated  with
MSC. The cost of annual renewal of state securities,  investment  advisory,  and
insurance registrations,  if any, shall be the responsibility of each registered
Program Participant.

     The SEC requires  that all licensed  individuals'  accounts be monitored by
the  broker-dealer's  Compliance  Department for insider trading  activities and
other potential compliance  violations.  As a result, all licensed  Participants
and their  immediate  family  members  (i.e.,  spouse  and minor  children)  who
maintain  a  securities  account  with  another  broker-dealer  must  either (i)
transfer their accounts to CSSC's  designated  broker-dealer  (currently  Mutual
Service  Corporation),  or (ii) direct the other broker-dealer to send duplicate
copies of the  statements  for such accounts to the MSC  Compliance  Department.
When directed to do so by CSSC,  Affiliates  agree to take all  necessary  steps
(including the termination of Registered  Representative Agreements with MSC) to
have their Licenses and  Registrations,  as well as such underlying  accounts as
may be affected thereby,  transferred to such registered broker/dealer,  general
insurance  agent/agency,  and/or  registered  investment  advisor  as CSSC shall
designate.  CSSC shall have the right to modify this  Agreement  to add such new
broker/dealer or other entity as a party hereto.

     1.4 Minimum Computer, Software, and Technical Requirements.  As a condition
of participating  in CSSC's Program,  Affiliates agree to obtain and maintain at
their own cost and  expense  hardware  and  software  needed  to meet  technical
requirements, as set forth in Schedule C, as said Schedule may from time to time
be amended.

     1.5 Providing  Solutions to Affiliate's  Clients' Needs.  Affiliates  shall
accurately  and  completely  obtain and  transmit  to CSSC such client and other
information  as CSSC may  require  in order to  accomplish  an  analysis  of the
specific  financial  or other  service  needs  corresponding  to the  particular
service needs which CSSC assists Affiliates in meeting for their clients.  After
completing  its  analysis,  CSSC will  provide  Affiliates  with the results for
review  and  presentation  to  Affiliates'  clients.   CSSC  will  also  provide
applications,  new account forms,  prospectuses  and/or other documents required
for  the   implementation  of  such  resulting   conclusions   and/or  suggested
alternatives  as Affiliates  shall have approved  (subject to CSSC's  Compliance
Department's review and approval).  If Affiliate requests support and assistance
from CSSC in presenting and explaining its analysis and/or resulting conclusions
or  alternatives  to  Affiliates'  client,  then CSSC will provide the necessary
support by means including conference telephone calls and/or  videoconferencing.
Affiliates shall bear such teleconferencing and  videoconferencing  costs (e.g.,
the  costs  of  Affiliates'  acquisition  and use of such  equipment,  including
Affiliates'  ISDN or other  transmission  line usage charges incurred in on-line
conferences  with CSSC,  but not including the costs of CSSC's  equipment or its
access charges.)

     1.6 Compensation of Affiliate.  If Affiliate successfully  "Implements" all
or any  portion of a  financial  services  solution  on behalf of a client,  the
client executes all required  documents,  and takes all other actions  necessary
(e.g.,  pays the required  insurance  premiums,  pays for securities  purchased,
etc.) to implement the particular financial services solutions),  then CSSC will
cause to be paid to the appropriately licensed Program Participants the share of
the commissions or other compensation  generated by him or her, all as set forth
in Schedule D. No commissions or other  compensation will be due until the funds
to which  Affiliates'  revenue shares apply are actually received by CSSC or its
subsidiaries.  If an  Affiliate's  client  fails to pay an invoice for a service
rendered by an Affiliate  through CSSC's Program,  then CSSC may, at its option,
deduct its share of such unpaid amount (i.e.,  the amount of the unpaid  invoice
multiplied by CSSC's revenue share set forth on the current Schedule D) from any
amounts  due the  Affiliate  hereunder,  or  charged  to any  credit  card which
Affiliate has  previously  authorized  CSSC to charge.  Any unpaid balance shall
accrue  interest  at the lesser of (a) 18% per annum;  or (b) the  maximum  rate
permissible  by the laws of the  state in which  Consulting  Services  Entity is
located.

    2. Training, Continuing Education, Compliance, and Liability Insurance.

     2.1 Training and Continuing  Education.  As a condition of participation in
CSSC's  Program,  Program  Participants  shall  participate  in such programs of
training and continuing  education,  as CSSC shall  prescribe.  CSSC will inform
Program  Participants  from  time to time of the  specific  requirements  of its
training  and  continuing   education  programs  but,  at  a  minimum,   Program
Participants  will be required to attend initial  training at CSSC's offices and
at least one CSSC Affiliate  Meeting/Compliance  Conference per year.  CSSC will
provide  Program  Participants  with  continuing  education  modules,  which the
Program  Participants  must complete and return to CSSC,  within the time period
prescribed by CSSC. Program Participants shall be responsible for transportation
to  CSSC's  offices  for the  aforementioned  training  program  and  compliance
conference, and for lodging and meals during the training program and compliance
conference.

     2.2 Compliance.

     2.2.1 Compliance Manual. Program Participants agree to read and be familiar
with he contents of MSC's Compliance  Manual,  as it may be amended from time to
time,  or any other  compliance  manual  that CSSC may adopt  and/or  substitute
therefor.  In addition,  Affiliates agree to comply with the terms,  conditions,
and  procedures  set forth  therein,  and agree  that a material  or  continuing
failure to do so may result in the  termination  of this  Agreement  by CSSC for
cause in accordance with Section 3.2 below.

     2.2.2 Full Bank  Participation.  Affiliates  agree that any employee of the
Bank or the Consulting  Services  Entity who holds any of the required  Licenses
and Registrations,  whether obtained through CSSC's Program or otherwise,  shall
participate in CSSC's Program through the Consulting  Services Entity, and shall
either  execute  this  Agreement  or  a  supplemental  signature  page  to  this
Agreement.

     2.2.3  Recording  of  Telephone   Conversations.   Affiliates  acknowledge,
consent, and agree that telephone conversations between CSSC and Affiliates,  or
with Affiliates' clients, may be recorded by CSSC or its representatives.

     2.2.4 Required Consulting Services Entity Materials. In order to be able to
render financial services through their Consulting Services Entity, and prior to
rendering any such services,  Affiliate agrees to utilize  separate  stationary,
business  cards,  and  fax  cover  sheets.  This  can  either  be  done  through
Affiliates' own marketing/graphic  vendors or through CSSC's staff, according to
fees set forth in Schedule F.

     2.3 Liability Insurance.  Affiliates shall pay to Trading Support, Inc., or
to such other entity as CSSC shall designate, the sum of per Program Participant
per year,  payable by the 1st of December,  to cover the costs of their Errors &
Omissions Insurance  Coverage.  This amount may be adjusted by CSSC from time to
time upon not less than 30 days prior notice to  Affiliates.  At CSSC's  option,
this expense may be deducted  from any amounts due to Affiliates  hereunder,  or
charged to any credit card which  Affiliates have previously  authorized CSSC to
charge.  Any unpaid  balance shall accrue  interest at the lesser of (a) 18% per
annum;  or (b) the maximum  rate  permissible  by the laws of the state in which
Consulting Services Entity is located.

     2.4 Other Fees and Expenses. Affiliates agree to pay the following fees, as
set forth in Schedule F, in order to hold and  maintain the  following  licenses
and bond so that they may render financial services:

NASD Filing Fee

State Branch Registration & Renewal Fee
NASD Fidelity Bond Fee
OSJ Satellite Branch Fee

Miscellaneous Fees

     This amount may be adjusted by CSSC from time to time upon not less than 30
days prior notice to Affiliates.  At CSSC's option, this expense may be deducted
from any  amounts  due to  Affiliates  hereunder,  or charged to any credit card
which Affiliates have previously  authorized CSSC to charge.  Any unpaid balance
shall  accrue  interest  at the lesser of (a) 18% per annum;  or (b) the maximum
rate permissible by the laws of the state in which Consulting Services Entity is
located.

    3. Term and Termination.

     3.1 Term.  The initial  term of this  Agreement  is five years,  subject to
earlier  termination,  as set forth herein. This Agreement will be automatically
renewed for additional five-year periods, unless a party gives written notice of
intention  not to renew this  Agreement  to the others at least 90 days prior to
the expiration of its then current term.

     3.2  Termination.  Affiliate or CSSC may  terminate  this  Agreement for no
cause,  upon ninety (90) days prior written notice to the terminated  party. The
notice  period  provided for above shall not apply in the event of a termination
for cause,  in which event the notice and cure periods  shall be as set forth in
Schedule G. If one party gives another  notice of an intention to terminate this
agreement for cause,  then the party to which such notice is directed shall have
the times set forth in Schedule G to cure the matter.

     Upon  termination  of this Agreement by one or more  Affiliate(s),  if such
terminating  Affiliate(s)  desire  assistance  from CSSC in the  transferring of
their clients'  securities and investment  advisory  accounts,  such  Affiliates
shall pay CSSC an Account Transfer  Assistance Fee, to be determined by CSSC, in
order to help  defray  CSSC's  administrative  and other costs  associated  with
rendering such  assistance.  This fee shall be paid on the effective date of the
termination. At CSSC's option, this expense may be deducted from any amounts due
to Affiliates  hereunder,  or charged to any credit card which  Affiliates  have
previously  authorized CSSC to charge.  Any unpaid balance shall accrue interest
at the lesser of (a) 18% per annum;  or (b) the maximum rate  permissible by the
laws of the state in which Consulting Services Entity is located.

     Nothing  in this  Section  shall  be  construed  to mean  or  imply  that a
terminating  Affiliate  may  make  any use of any of  CSSC's  training  or other
materials following  termination of the Agreement,  all of which (and any copies
or other  reproductions of the same) Affiliate agrees to return to CSSC promptly
upon  termination of the  Agreement,  by either party and with or without cause.
Confidentiality,  Copyrights,  Confidential  and  Proprietary  Information,  and
Non-competition.

     4.1 Confidentiality.

     4.1.1 Affiliates' Duty of Confidentiality.  Affiliates understand and agree
that CSSC  owns,  uses,  and  develops  valuable  proprietary  and  confidential
information  for  use  in  connection  with  its  Consulting   Services  Support
ProgramSM.  This proprietary and confidential  information includes,  but is not
limited to, the following documents and information, which may exist in printed,
magnetic, digital, or other forms (hereinafter "Confidential Information"):  all
descriptions of procedures, systems, concepts,  methodologies, and know-how used
in the  organization,  operation,  or  management  of the Program;  all internal
forms, training and other materials; all compliance,  procedural, operating, and
other manuals, booklets, bulletins, memoranda, and similar documents, pertaining
to the Program;  all affiliate,  or  prospective  affiliate,  names,  addresses,
telephone numbers and related information disclosed in writing or orally by CSSC
or  their  representatives  from  time to time;  all  marketing  strategies  and
marketing materials pertaining to the organization,  operation,  or promotion of
the Program; all computer software programs that are not commercially  available
to the  public  that are used in  connection  with the  Program;  and all  other
documents,  systems, procedures, forms, data, or information as may be disclosed
to  Affiliates  from  time  to time by CSSC  in  connection  with  the  Program.
Affiliates shall not disclose or use, except:  (i) as is necessary in connection
with their  participation  in the Program;  (ii) as may be necessary in order to
enforce  Affiliates'  rights  hereunder in a Court  proceeding,  as long as such
confidential  information is protected from outside disclosure or use; and (iii)
as may be  required  by  Court  order,  subject  to  CSSC's  right  to  secure a
protective order or other order ensuring that such use is protected from outside
disclosure or use, the  Confidential  Information in any way,  either during the
term of this  Agreement or  following  the  expiration  or  termination  of this
Agreement  (with or without  cause).  Upon the expiration or termination of this
Agreement  (with or without  cause),  Affiliates  shall  immediately  return all
Confidential  Information and Proprietary  Information  (defined below), and any
and all copies, duplicates, and/or extracts of the same, to CSSC, and CSSC shall
be  entitled  to  withhold  any and all  amounts  due to  Affiliates  until such
Information is returned to CSSC.

     4.1.2  CSSC's  Duty  of  Confidentiality.  During  and  after  the  term of
thisAgreement,  CSSC shall maintain the confidentiality of Affiliates'  clients,
only using the information that it obtains regarding such clients to further the
intent and  purposes of this  Agreement  and/or  assist in the  providing of the
financial  services  needed by Affiliates'  clients.  After  termination of this
Agreement,  CSSC  agrees  not to  directly  or  indirectly  solicit  Affiliates'
clients,  and shall only provide routine  servicing and account  maintenance for
Affiliates'  clients and such  additional  services as  Affiliates'  clients may
request  and/or  reasonably  need.  This  paragraph  does not  prohibit  general
advertising by CSSC not specifically targeted to Affiliates' clients.

     4.2  Copyrights  and  Proprietary  Information.  Affiliates  agree that any
Confidential Information and forms, agreements,  contracts, procedures, publicly
used with clients,  prospective clients, or other persons in connection with the
Program;  promotional,  marketing, or advertising materials that may be publicly
distributed  in  connection  with the  Program;  and  such  other  documents  or
information  created  or  developed  by  CSSC  or by  Affiliates,  or  to  which
Affiliates  contribute  while  affiliated  with CSSC,  are valuable  assets that
belong to CSSC  ("Proprietary  Information").  Affiliates  acknowledge that CSSC
claims a copyright with respect to all such Proprietary Information,  whether or
not it may contain a copyright  symbol.  At no time will Affiliates  acquire any
ownership interest in the Proprietary Information, nor may Affiliates attempt to
place a copyright symbol on any such Proprietary Information.

     4.3  Non-Competition.  Affiliates shall, at all times,  retain the right to
perform and  continue  to perform  the types and levels of services  provided by
Affiliates  prior  to the  execution  of  this  Agreement,  provided  that  such
activities can be offered under existing  federal,  state,  and other regulatory
exemptions  from  the  licensing  and  registration  requirements  set  forth in
Schedule  B.  Outside  of the  scope of the  foregoing  reservation  of  rights,
Affiliates  shall not,  either  directly or indirectly,  during the term of this
Agreement,  without the prior  written  consent of CSSC,  engage in any business
activities within the scope of CSSC's service  capabilities with, through, or in
relationship  with  any  person(s)  and/or   entity(ies)  other  than  CSSC.  It
isunderstood  that  this  prohibition  includes,  but is not  limited  to: o the
placing,  securing,  or sale of any stocks,  bonds,  mutual  funds,  securities,
annuities,  insurance,  or any other type of financial services or products,  to
clients,  or other  entities  and/or  individuals;  or o assisting  other firms,
entities or individuals to render,  provide, or sell such products and financial
services,  in any manner involving  Affiliates' receipt of compensation from the
firms, entities or individuals providing such products or services (whether on a
commission,  referral fee, fee for service, or other basis).  During the term of
this Agreement,  and for a period of three (3) years following its  termination,
Affiliates shall not, either directly or indirectly, engage in any employment or
business  activities  that  compete,  directly or  indirectly,  with CSSC.  This
prohibition is intended to prevent  Affiliates from in any way  participating in
or  assisting in the  marketing to other  accounting  firms,  law firms,  banks,
advisory professionals (of all types), financial planners, and others of support
services,  programs  or  methodologies  similar to those  offered by CSSC.  This
includes,  but is not limited to,  assisting  such firms,  professionals  and/or
entities in rendering  financial  services or other  consulting  services to the
clients of such firms,  professionals  and/or entities  through the provision of
any knowledge, information, services or support of any nature other than: to the
making of  uncompensated  referrals of clients of Affiliates  during the term of
this Agreement (after the termination of this Agreement,  there shall be no such
restriction  on the  making of  compensated  referrals  of  clients),  or to the
provision of normal accounting  services to them. This provision is not intended
to prevent the rendering of financial  services by Affiliates to Bank's clients,
through any relationship with any other financial  services  entity(ies),  after
the termination of this Agreement.

     4.4 Other Contracts and Relationships. Affiliates understand and agree that
CSSC has contracts  and/or business  affiliations and  relationships  with other
companies,  entities,  and  individuals  (collectively  referred  to  as  "Other
Affiliates"),  both inside and outside of the  accounting  industry.  Affiliates
agree not to solicit such Other Affiliates.

     5. Arbitration.  It is understood that the following AGREEMENT TO ARBITRATE
does not constitute a waiver of the right to seek a judicial forum to the extent
that such a waiver would be void under applicable law.

     5.1IT IS AGREED THAT ANY  CONTROVERSY  BETWEEN  THE PARTIES  ARISING OUT OF
THIS AGREEMENT SHALL BE SUBMITTED TO ARBITRATION  CONDUCTED  BEFORE THE NATIONAL
ASSOCIATION OF SECURITIES  DEALERS,  INC., AND IN ACCORDANCE WITH ITS RULES. THE
ARBITRATION  PROCEEDING  IS COMMENCED  ONLY BY SERVICE UPON THE OTHER PARTY OF A
WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO ARBITRATE. IT
IS THE INTENT OF THE  PARTIES  THAT THIS  ARBITRATION  AGREEMENT  SHALL APPLY TO
CSSC,  AND  ANY  AFFILIATE  OR  EMPLOYEE  OF  THE  CONSULTING  SERVICES  ENTITY.
NOTWITHSTANDING THE FOREGOING, THE PARTIES HERETO AGREE THAT CSSC MAY APPLY TO A
JUDICIAL  COURT TO SEEK THE INJUNCTIVE AND OTHER RELIEF SET FORTH IN SECTION 6.5
OF THIS AGREEMENT.

     5.2  ARBITRATION  IS FINAL AND  BINDING ON THE  PARTIES.  THE  PARTIES  ARE
WAIVING  THEIR RIGHT TO SEEK  REMEDIES IN COURT,  INCLUDING  THE RIGHT TO A JURY
TRIAL.  PRE-ARBITRATION  DISCOVERY GENERALLY IS MORE LIMITED THAN, AND DIFFERENT
FROM,  COURT  PROCEEDINGS.  THE  ARBITRATORS'  AWARD IS NOT  REQUIRED TO INCLUDE
FACTUAL FINDINGS OR LEGAL REASONING,  AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION  OF RULINGS BY THE  ARBITRATORS IS STRICTLY  LIMITED.  THE PANEL OF
ARBITRATORS  TYPICALLY  WILL INCLUDE A MINORITY OF  ARBITRATORS  WHO WERE OR ARE
AFFILIATED WITH THE SECURITIES INDUSTRY.

     5.3 NO  PERSON  SHALL  BRING  A  PUTATIVE  OR  CERTIFIED  CLASS  ACTION  TO
ARBITRATION,  NOR SEEK TO ENFORCE ANY PRE-DISPUTE  ARBITRATION AGREEMENT AGAINST
ANY  PERSON WHO HAS  INITIATED  IN COURT A PUTATIVE  CLASS  ACTION;  OR WHO IS A
MEMBER OF A  PUTATIVE  CLASS  ACTION  WHO HAS NOT  OPTED  OUT OF THE CLASS  WITH
RESPECT TO ANY CLAIMS  ENCOMPASSED BY THE PUTATIVE  CLASS ACTION UNTIL:  (i) THE
CLASS  CERTIFICATION IS DENIED;  (ii) THE CLASS ACTION IS DECERTIFIED;  OR (iii)
THE PERSON IS EXCLUDED FROM THE CLASS BY THE COURT.  SUCH FORBEARANCE TO ENFORCE
AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS
AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.

     5.4 Any arbitration pursuant to this Agreement shall be in accordance with,
and  governed  by, the rules and  regulations  of the  National  Association  of
Securities  Dealers,  Inc. The award of the  arbitrators,  or of the majority of
them,  will be final and binding upon the parties,  and judgment  upon the award
rendered may be entered in any federal or state court having  jurisdiction.  Any
arbitration  shall be  commenced  by  delivery  to the other  party of a written
demand for  arbitration  setting forth in detail the claim or  controversy to be
arbitrated.

     5.5 The arbitrators shall be entitled to order specific  performance of the
obligations imposed by this Agreement.

     6. Miscellaneous.

     6.1  Relationship  Between  Affiliates and CSSC.  CSSC must,  through those
persons and entities designated by it, supervise Affiliates pursuant to federal,
state, and regulatory entity laws, rules and regulations, including the National
Association of Securities Dealers,  Inc. ("NASD")  Membership,  Registration and
Conduct  Rules,  and  Affiliates  must comply with all  applicable  statutes and
regulations  pertaining to the conduct  covered hereby (as well as the rules and
procedures  from time to time  adopted by CSSC  respecting  its methods of doing
business).   Nevertheless,   Affiliates   shall  at  all  times  be  independent
contractors  with  respect  to  CSSC  and  otherwise   control  the  details  of
Affiliates'  work.  "Supervision,"  as required by the NASD's  Conduct Rules and
certain  other  securities  regulations,   relates  only  to  the  propriety  or
impropriety of making offers, sales and purchases of securities, and is not used
to connote,  or be deemed to mean, the exercise of any degree of control by CSSC
which would cause Affiliates to be anything other than  independent  contractors
in their relations with CSSC.

     Affiliates  will not at any time be a franchisee or be treated as employees
of CSSC for any  purposes,  and  Affiliates  will take any and all necessary and
appropriate  steps to ensure that no person or entity  misperceives  Affiliates'
relationship  with CSSC.  Affiliates  shall  bear all  expenses  for  conducting
Affiliates' business under this Agreement.

     In the event any state and/or federal agency and/or court  determines  that
Affiliate  is not an  independent  contractor,  CSSC  shall  be  entitled  to be
reimbursed by Affiliates for any costs,  taxes and/or  expenses  related to such
determination and CSSC shall be entitled to set the same off against any amounts
due to Affiliates hereunder.

     CSSC shall be  responsible  for all service  obligations  on any  insurance
policies  or  related  insurance  products,  and  all  agent  rights,  including
commissions  are  deemed  assigned  to  CSSC.  In the  event  that an  Affiliate
terminates  this  Agreement,  then CSSC shall assign the  Commission  Assignment
Rights and Principal  Servicing  Agent rights to said Affiliate  after the first
year commissions have been paid in full.  Affiliates grant an irrevocable  power
of attorney to, and hereby appoint as their lawful attorney-in-fact, CSSC or its
designee,  for the purpose of  executing,  on their  behalf,  any  assignment of
commission or similar forms, and any appointment forms. The parties  understand,
acknowledge,  and agree that the aforementioned power of attorney is irrevocable
and coupled with an interest.

     6.2 Audits.  Affiliates  agree that CSSC shall have the right,  at any time
during  the term of this  Agreement,  and for a period  of one year  beyond  the
effective  time of any duty or obligation of Affiliates to CSSC  thereafter,  to
require  Affiliates to undergo an audit of  Affiliates'  books and records by an
independent auditor selected by CSSC, as CSSC may deem necessary, to verify that
Affiliates  have not engaged in  transactions in violation of Sections 2.2.2 and
4.3, or violations of other provisions of this Agreement and any Schedule.  CSSC
will pay the costs of such audit  unless the results of the audit  confirm  that
Affiliates have violated this Agreement,  in which case Affiliates  agree to pay
the costs of the audit  (which  CSSC may  deduct  from any sums due and owing to
Affiliates,  or charge to any  credit  card  which  Affiliates  have  previously
authorized CSSC to charge).  The audit provision described herein is in addition
to such audits as may be required by the United States  Securities  and Exchange
Commission,  the National  Association  of Securities  Dealers,  Inc., and other
self-regulatory  organizations  and  governmental  authorities  which  may  have
jurisdiction over portions of CSSC's Program.

     6.3  Indemnification.  The  provisions  of this Section  shall  survive the
termination of this Agreement.

     6.3.1 By  Affiliates.  Affiliates  shall  indemnify  CSSC and its officers,
directors,  employees,  and agents  against,  and hold them harmless  from,  all
losses,  liabilities,  damages,  expenses,  investigative  costs, or other costs
(including,  without limitation,  reasonable attorneys' and paralegals' fees and
other  litigation  expenses),  incurred  by any of them  arising  out of,  or in
connection with, any violation by Affiliates  and/or their employees or staff of
any statute,  regulatory rule, or regulation,  or the policies,  procedures,  or
instructions set forth in the compliance  manuals provided to Affiliates by CSSC
(as said  manuals may be amended  and/or  substituted  from time to time).  CSSC
shall  be  entitled  to  this  indemnification  whether  or not  any  action  or
proceeding  is  prosecuted  to a final  judgment  or  award or is  settled,  and
regardless  of whether or not such  claim also  involves a failure to  supervise
claim against CSSC.

     6.3.2 By CSSC.  CSSC shall indemnify  Affiliates and Affiliates'  officers,
directors,  employees,  and agents  against,  and hold them harmless  from,  all
losses,  liabilities,  damages,  expenses,  investigative  costs, or other costs
(including,  without limitation,  reasonable attorneys' and paralegals' fees and
other  litigation  expenses),  incurred  by any of them  arising  out of,  or in
connection  with,  any  violation  by CSSC and/or its  employees or staff of any
statute, regulatory rule, or regulation,  excluding a failure to supervise claim
against  CSSC  as a  result  of  an  underlying  or  associated  action  against
Affiliates.  Affiliates shall be entitled to this indemnification whether or not
any  action or  proceeding  is  prosecuted  to a final  judgment  or award or is
settled.

     6.3.3  Right of Offset.  The parties  shall be  entitled,  upon  reasonable
notice to the other and without any  further  action,  to offset any amount that
may become due and owing  under this  Agreement  against  any  consideration  or
compensation  that may become due or owing to the other.  In the event the other
party  shall  contest  the  prospective   offset  by  submitting  the  issue  to
Arbitration,  pursuant to Section 5, above,  no such offset shall be made unless
and until the offset shall be sanctioned by a ruling in that proceeding.

     6.4 Choice of Law.  This  Agreement  was made and accepted in, and shall be
construed in  accordance  with the laws of (without  regard to conflicts of laws
principles), the state of Michigan.

     6.5 Specific  Performance/Enforcement.  Affiliates agree that any breach of
the provisions of Sections  2.2.2,  4.1, 4.2, 4.3, and other  provisions of this
Agreement  and  any  Schedule   (from  time  to  time   amended)   dealing  with
confidentiality,  non-competition,  regulatory  compliance  and fair and  honest
dealings by Affiliates (which,  together with the provisions for indemnification
and collection of amounts due CSSC,  will survive any  termination or expiration
of  this  Agreement  and  remain  binding  on  Affiliates),   would  cause  CSSC
irreparable  damage,  and that, in addition to any other  remedies  available to
CSSC,  and  notwithstanding  the  Agreement to Arbitrate  set forth in Section 5
herein, CSSC shall be entitled to a restraining or injunctive order from a court
of competent jurisdiction  restraining or preventing Affiliates'  anticipated or
actual breach of these Sections.

     In the event that CSSC obtains such a restraining order or injunctive order
restraining or preventing  Affiliates  anticipated or actual breach of the above
described  provisions of the Agreement,  but not as a precondition to such, CSSC
shall also be entitled to an award of the direct and consequential  damages that
it has sustained as a result of said breach or  anticipated  breach,  but in any
event in an amount not less than the income  obtained  by  Affiliates,  or those
acting in concert with Affiliates,  in using said Confidential  Information.  In
addition, if it is determined that Affiliates have violated the terms of Section
4.3, then Affiliates  shall pay to CSSC damages in an amount equal to the amount
of revenue generated by Affiliates in violation of Section 4.3 multiplied by the
percentage revenue share for CSSC set forth on Schedule D.

     The prevailing  party shall be entitled to an award of its attorneys'  fees
and  other  costs  and  expenses  associated  with any  action  to  enforce  the
provisions of this Agreement or the collection of any amounts due hereunder.

     6.6 General. No modification or amendment of this Agreement shall be valid,
and no term,  provision,  or right granted  pursuant to this Agreement  shall be
deemed  waived,  and no  breach  of this  Agreement  shall  be  excused,  unless
documented in a writing  signed by the parties.  Any consent by any party to, or
waiver of, a breach by the other party, whether expressed or implied,  shall not
constitute  consent to,  waiver of, or excuse of, any  different  or  subsequent
breach.  The invalidity of any provision in this Agreement  shall not affect the
validity of any other provision.  If any one or more of the provisions contained
in this Agreement  shall be held to be excessively  broad as to time,  duration,
geographical scope, activity, or subject, it shall be construed,  by limiting or
reducing  it,  so as to be  enforceable  to  the  fullest  extent  permitted  by
applicable law.  Headings in this Agreement are provided solely for convenience,
and shall be of no effect in construing this Agreement.  Notices,  when required
by this  Agreement,  shall be deemed  given  when sent to the  parties  at their
respective  addresses set forth on the signature page, by certified mail, return
receipt requested, or by overnight delivery service.

     IN WITNESS WHEREOF, the Parties hereto,  intending to be fully bound by the
terms hereof and all Schedules hereto,  have hereby  individually  executed this
Agreement  (in  the  case  of  Individual  Program  Participants)  and  by  duly
authorized  officers,  members and/or partners (in the case of other  entities),
all effective on the 29 day of January,2002.

BANK:

First Security Bank of Lexington         /s/ John S. Shropshire
___________________________________ By:
(Please print or type Bank name)
                                    Its:    President & CEO
                                    Date:   1-29-02
                                    Address:318 East Main Street
                                            Lexington, KY  40507

CONSULTING SERVICES ENTITY:

First Security Capital Management, Inc.
_________________________________   By: /s/ John S. Shropshire
(Please print or type name of Consulting
Services Entity)                    Its:     President
                                    Date:    1-29-02
                                    Address: 318 East Main Street
                                             Lexington, KY  40507


PROGRAM PARTICIPANTS:
Each  individual  associated  with the  Consulting  Services  Entity who becomes
affiliated  with CSSC must execute this  Agreement  below,  or later  execute an
Addition  of  signature  page  adding the  individual  as a bound  party to this
Agreement.

Individual's Name (printed or typed)       Individual's Signature      Date


John S. Shropshire                      /s/John S. Shropshire        1-29-02
         Address: 656 Tally Road, Lexington, KY  40502


Wayne Stefanovich                       /s/Wayne Stefanovich         1-29-02
         Address:  1353 Corona Drive, Lexington, KY  40514


D.Keith Preston                         /s/D.Keith Preston           1-29-02
         Address:  1348 Tanforan Drive, Lexington, KY  40517


Paul Victor Rowe                        /s/Paul Victor Rowe          1-29-02
         Address:1368 Deer Lake Circle, Lexington, KY  40515

R.Greg Kessinger                        /s/R.Greg Kessinger          1-29-02
        Address: 2063 Old Nassau Road, Lexington, KY  40504


 Exhibit 21
                                 Subsidiaries

     Subsidiaries of First Security Bancorp, Inc.

     First Security Bank of Lexington, Inc.

 Exhibit 22
                    Consent of Independent Public Accountants

We hereby consent to the incorporation by reference in the Form S-8 Registration
Statement  No.  333-98625 of First  Security  Bancorp,  Inc. of our report dated
January 24, 2003 on the  consolidated  financial  statements  of First  Security
Bancorp,  Inc. as of and for the years December 31, 2002 and 2001 as included in
the registrant's annual report on From 10-KSB.

/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP

Lexington, Kentucky
March 28, 2003

Exhibit 99.1

CERTIFICATION OF PRINCIPAL  EXECUTIVE  OFFICER AND PRINCIPAL  FINANCIAL  OFFICER
PURSUANT TO 18 U.S.C.  SECTION 1350,  AS ADOPTED  PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

     In connection with the  accompanying  Form 10-K of First Security  Bancorp,
Inc.  for the year  ended  December  31,  2002,  I,  John S.  Shropshire,  Chief
Executive  Officer and Principal  Financial  Officer of First Security  Bancorp,
Inc. hereby certify  pursuant to 18 U.S.C. Section 1350, as adopted  pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) Such Form 10-K for the year ended December 31, 2002 fully complies with
the  requirements  of section 13(a) or 15(d) of the  Securities  Exchange Act of
1934; and

     (2) The information contained in such Form 10-K for the year ended December
31, 2002 fairly presents, in all material respects,  the financial condition and
results of operation of First Security Bancorp, Inc.


By:/s/ John S. Shropshire
       John S. Shropshire
President, Chief Executive Officer and
Principal Financial Officer

Date:  March 31, 2003