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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                                   FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934

     For the Fiscal Year Ended  December 31, 2002

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the transition period __________ to __________

                          Commission File No. 333-72371

                         KENTUCKY NATIONAL BANCORP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

          Indiana                                               61-1345603
-------------------------------                              ----------------
(State or Other Jurisdiction of                              (I.R.S. Employee
Incorporation or Organization                                Identification No.)


1000 North Dixie Avenue, Elizabethtown, Kentucky                42701
------------------------------------------------                -----
(Address of Principal Executive Offices)                      (Zip Code)

          Issuer's Telephone Number, Including Area Code (270) 737-6000
                                                         --------------

        Securities Registered Pursuant to Section 12(b) of the Act: None
                                                                    ----

        Securities Registered Pursuant to Section 12(g) of the Act: None
                                                                    ----

         Check whether the issuer: (l) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 is not contained in this form, and no disclosure will
be contained  to the best of  registrant's  knowledge,  in  definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent fiscal year: $7,053,731

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant  based on the last sale of which the registrant was aware ($25
per share),  was  approximately  $3.9 million as of March 21,  2003.  Solely for
purposes of this calculation,  the term "affiliate"  refers to all directors and
executive  officers of the registrant and all stockholders  beneficially  owning
more than 5% of the registrant's common stock.

         As of March 21, 2003, there were issued and outstanding  253,800 shares
of the registrant's common stock.

         Transitional Small Business Disclosure Format:   YES        NO  X
                                                              ---       ---

--------------------------------------------------------------------------------
<PAGE>

                                     PART I

Item 1. Business
----------------

         The Company. Kentucky National Bancorp, Inc. (the "Company") became the
holding  company for Kentucky  National  Bank (the  "Bank") on May 18, 1999,  by
issuing and exchanging its stock on a share for share basis for the  outstanding
stock of the Bank.  The  transfer of stock  between the  entities  under  common
control was accounted for at historical cost.

         The Bank. The Bank commenced operations on October 15, 1997. The Bank's
deposits  are  insured to  applicable  limits by the Federal  Deposit  Insurance
Corporation ("FDIC") and the Bank is a member of the Federal Reserve Bank of St.
Louis and the  Federal  Home Loan Bank of  Cincinnati.  The Bank  engages in the
general   commercial   banking   business,   primarily   serving   the  city  of
Elizabethtown,  Kentucky and  surrounding  Hardin County through its main office
and branch in Elizabethtown. The Bank seeks to provide individuals and small and
medium sized  businesses in its market area with responsive and  technologically
advanced  banking  services.  These services  include loans that are priced on a
deposit-based relationship, easy access to the Bank's decision makers, and quick
and innovative  action  necessary to meet a customer's  banking needs.  The Bank
offers a full range of banking and related financial  services focused primarily
towards  serving  individuals,  the small to  medium  size  businesses,  and the
professional  community.  The Bank  strives  to serve the  banking  needs of its
customers  in  the  Elizabethtown  market  while  developing  personal  hometown
relationships  with its  customers.  Management  believes  that the marketing of
customized  services  will enable the Bank to establish a niche in the financial
services marketplace in this market.

         The Bank's principal  executive offices are located at 1000 North Dixie
Avenue,  Elizabethtown,  Kentucky.  Its main telephone number is (270) 737-6000.
The Bank maintains a website at www.kentuckynational.com.

Market Area

         The  Bank's   primary  market  area  consists  of   Elizabethtown   and
surrounding  Hardin  County.  The Bank believes that Hardin County has a growing
and  diversified  economy  and  provides  an  attractive  market  for the Bank's
services.  Employers in Hardin County include the Fort Knox Military Reservation
and a growing  manufacturing and service sector.  The Bank's location allows the
Bank to serve the community of healthcare  service  providers and  professionals
affiliated with Hardin Memorial Hospital which is located across the street from
the Bank's main office.

         Hardin County is currently home to approximately 94,000 persons.  After
contracting  somewhat  during the 1989 to 1994 period due to  down-sizing of the
Fort Knox Military Reservation, the county's population has grown during the two
most  recent  years and is  projected  to  continue to grow during the next five
years.  Although per capita personal income for Hardin County is below the level
for the Commonwealth of Kentucky as a whole,  median household income is higher.
The  county's  current   unemployment  rate  of  6.8%  is  above  that  for  the
Commonwealth  of Kentucky as a whole.  Although  the largest  employer in Hardin
County  continues  to be the Fort Knox  Military  Reservation,  the  county  has
experienced  steady  employment growth in the manufacturing and services sectors
during recent years,  a trend which is expected to continue due to the influence
of automotive plants in the region.

Banking Services

         The Bank offers a full range of  short-to-medium  term  commercial  and
personal  loans.  Commercial  loans include both secured and unsecured loans for
working  capital  (including  inventory  and  receivables),  business  expansion
(including  acquisition  of  real  estate  and  improvements)  and  purchase  of
equipment and machinery. The Bank also engages in agricultural lending. Consumer
loans   include   secured  and  unsecured   loans  for  financing   automobiles,
recreational   equipment,   home  improvements,   home  education  and  personal
investments.  The Bank also offers home  equity  loans and lines of credit.  The
Bank originates fixed- and variable-rate  mortgage loans and construction  loans
for its  portfolio.  In October  2000,  the Bank began  originating  residential
mortgage loans for sale into the secondary market.

                                       2
<PAGE>

         Loan Portfolio Composition. The following table provides information on
the composition of the loan portfolio at the indicated dates.

                                                 At December 31,
                                       ------------------------------------
                                             2002                2001
                                       ----------------    ----------------
                                        Amount  Percent     Amount  Percent
                                        ------  -------     ------  -------
                                                (Dollars in thousands)
Real estate - mortgage:
  Residential........................  $ 42,116   55.15%   $ 36,295    55.55%
  Commercial.........................     7,870   10.31       7,553    11.56
  Agricultural.......................     3,007    3.94       1,867     2.86
Real estate - construction...........     7,334    9.60       4,582     7.01
Consumer.............................     8,679   11.36       8,632    13.21
Commercial and industrial............     7,360    9.64       6,409     9.81
                                       --------  ------    --------   ------

  Total loans........................    76,366  100.00%     65,338   100.00%
                                                 ======               ======
  Allowance for credit losses........      (691)               (707)
  Unearned fees and discounts........        (8)                (42)
                                       --------            --------
Loans receivable, net................  $ 75,667            $ 64,589
                                       ========            ========

         In addition to the above, the Bank had  approximately  $1.7 million and
$1.4 million in loans held for sale at December 31, 2002 and 2001, respectively.
These loans consisted of fixed-rate  residential  mortgage loans  originated for
resale  into the  secondary  market all of which  were  originated  pursuant  to
purchase commitments from secondary market investors.

         Loan Maturity  Schedule.  The following table sets forth the maturities
for various  categories of the loan portfolio at December 31, 2002. Demand loans
and loans which have no stated  maturity are treated as due in one year or less.
At December 31, 2002,  the Company had loans  totaling  $3,861,800 due after one
year with variable rates and $53,690,200 in such loans with fixed rates.

                                 Due Within     One to     Due Over
                                  One Year    Five Years  Five Years   Total
                                  --------    ----------  ----------   -----
                                                (In thousands)
Real estate - mortgage:
  Residential..................    $ 4,719     $27,619     $ 9,778    $42,116
  Commercial...................      1,365       4,591       1,914      7,870
  Agricultural.................        332       1,898         777      3,007
Real estate - construction.....      6,449         536         349      7,334
Consumer.......................      2,379       5,743         557      8,679
Commercial and industrial......      3,570       2,767       1,023      7,360
                                   -------     -------     -------    -------
                                   $18,814     $43,154     $14,398    $76,366
                                   =======     =======     =======    =======

         Real Estate Lending. The Bank offers mortgage loans for the purchase or
refinancing of residential  and commercial  real estate as well as  construction
and land  development  loans and  second  mortgages  secured  by the  borrower's
primary residence.  The Bank's commercial  mortgages are secured by multi-family
residential  properties,   agricultural  properties  and  commercial  properties
(primarily   undeveloped  real  estate).   Residential  mortgage  loans  may  be
originated  on  either  a fixed  or  variable  rate  basis.  A  majority  of the
residential and commercial mortgages currently in the Bank's portfolio feature a
30-year amortization period with a balloon payment after five years. Residential
and commercial  construction  loans are generally  originated on a variable rate
basis. Generally, construction loans are for one-year terms and may be converted
to permanent loans at the end of the term.  Substantially all of the Bank's real
estate  loans  are  secured  by  properties  in   Elizabethtown,   Kentucky  and
surrounding areas. Under the Bank's loan

                                       3
<PAGE>

policies,  the permissible  loan-to-value  ratio for owner-occupied  residential
mortgages  is 90% of the  lesser  of the  purchase  price  or  appraised  value.
Residential  mortgage loans may be made with  loan-to-value  ratios in excess of
80%  provided the  borrower  obtains  private  mortgage  insurance  for any loan
amounts in excess of 80%. For  residential  investment  properties,  the maximum
loan-to-value  ratio is 75%.  The maximum  permissible  loan-to-value  ratio for
residential  construction loans is 85% and commercial construction loans is 80%.
The maximum  loan-to-value ratio for permanent  commercial mortgages is 75%. The
maximum loan-to-value ratio for land development loans is 75% and for unimproved
land is 65%.  The Bank also offers home equity loans  secured by the  borrower's
primary residence provided that the aggregate  indebtedness on the property does
not exceed 90% of its value. Loan officers may make exceptions to lending policy
within their lending limits.  Exceptions to lending policy are reviewed  monthly
by the Board of Directors.  At December 31, 2002, there were  approximately $5.6
million in loans  originated as  exceptions  to loan  policies on  loan-to-value
ratios

         The Bank began originating residential mortgage loans for sale into the
secondary market in October,  2000. The secondary market loan division primarily
sells  fixed-rate  originations in the secondary  market and does not retain the
servicing  rights on these loans.  The Bank is an approved  seller/servicer  for
Government National Mortgage Association (Ginnie Mae), Federal National Mortgage
Association  (Fannie Mae) and Federal Home Loan  Mortgage  Corporation  (Freddie
Mac) loans with sales to a variety of investors.

         Commercial  and  Industrial  Lending.  The Bank  offers a full range of
financing for local businesses and professionals including installment loans for
financing purchases of equipment, receivable financing, and lines and letters of
credit.  Such loans may be made on a secured  or an  unsecured  basis.  All such
loans are  underwritten on the basis of the borrower's  creditworthiness  rather
than the value of the collateral.  The Bank's  commercial loan customers consist
primarily of professionals and small to medium-sized  businesses  located in the
Elizabethtown  area.  The Bank believes that its  commercial  loan  portfolio is
diversified as to industry.

         Consumer  Lending.  The Bank  offers a wide range of  consumer  lending
services.  The  Bank  makes  consumer  installment  loans  for the  purchase  of
automobiles,  boats and other  consumer  durable  goods.  Such loans provide for
repayment  in regular  installments  and are secured by the goods  financed.  In
addition,  the Bank offers lines of credit and personal  loans which may be made
on either a secured or unsecured basis. Security for the Bank's secured personal
loans and lines of credit  generally  consists of deposits in the Bank. The Bank
also offers VISA(R) and MasterCard(R) credit cards through an arrangement with a
correspondent bank.

         Although the risk of non-payment  for any reason exists with respect to
all loans,  certain other specific risks are associated  with each type of loan.
The primary risks associated with commercial  loans,  including  commercial real
estate  loans,  are the  quality of the  borrower's  management  and a number of
economic and other factors which induce  business  failures and  depreciate  the
value of  business  assets  pledged to secure the loan,  including  competition,
insufficient capital,  product obsolescence,  changes in the cost of production,
environmental  hazards,  weather,  changes in laws and  regulations  and general
changes in the  marketplace.  Primary risks  associated  with  residential  real
estate loans include  fluctuating  land and property  values and rising interest
rates with respect to  fixed-rate,  long-term  loans.  Residential  construction
lending exposes the Bank to risks related to builder performance. Consumer loans
are affected primarily by domestic instability and a variety of factors that may
lead to the borrower's unemployment, including deteriorating economic conditions
in one or more segments of a local or broader economy.

         The  Bank's  lending  activities  are  conducted  pursuant  to  written
policies approved by the Board of Directors intended to ensure proper management
of credit risk. Loans are subject to a well defined credit process that includes
credit evaluation of borrowers,  establishment of lending limits and application
of lending  procedures,  including  the holding of adequate  collateral  and the
maintenance  of  compensating  balances,  as well  as  procedures  for  on-going
identification and management of credit deterioration. Regular portfolio reviews
are  to  be  performed   by  an  outside   consultant   to  identify   potential
underperforming credits, estimate loss exposure and to ascertain compliance with
the Bank's policies.  For significant problem loans,  management review consists
of evaluation of the financial strengths of the borrower and the guarantor,  the
related collateral, and the effects of economic conditions.

         The  Bank's  loan  approval  policy  provides  for  various  levels  of
individual lending authority.  The maximum lending authority granted by the Bank
to any one  individual  is $125,000.  A  combination  of approvals  from certain
officers  may be used  to  lend  up to an  aggregate  of  $250,000.  The  Bank's
Executive Committee is authorized to approve loans up to $600,000.  Larger loans
must be approved by the full Board of Directors.

                                       4

<PAGE>

         The  maximum  amount  which  the Bank is  permitted  to lend not  fully
secured to any one borrower and their related interests may generally not exceed
15% of the Bank's  unimpaired  capital and surplus  (defined to include a bank's
total capital for regulatory  capital purposes plus any loan loss allowances not
included in regulatory  capital).  Provided the amount in excess of 15% is fully
secured by marketable  collateral  such as investment  securities,  the Bank may
make loans up to 25% of unimpaired  capital and surplus.  Under these  formulas,
the Bank would have been  permitted  to lend up to  $1,207,400  and  $2,012,300,
respectively,  to any one borrower at December  31, 2002.  At December 31, 2002,
the largest amount  outstanding to any one borrower and their related  interests
was $806,300.

         The Office of the  Comptroller  of the  Currency  ("OCC") has adopted a
three-year  pilot  program  which  permits   well-capitalized  and  well-managed
national banks to apply for authority to make  residential real estate loans and
small  business  loans to one  borrower  in excess of the  general  loans to one
borrower  limitation of 15% of unimpaired  capital and surplus.  The permissible
excess  amount would be the lesser of: (i) 10% of capital and  surplus;  or (ii)
the  percentage  of capital  and surplus in excess of 15% of capital and surplus
permitted  for such  loans  under the laws of the  state in which  the  national
bank's main office is located.  Under Kentucky law, a bank may lend up to 20% of
capital stock actually paid in and actual  surplus  unless the borrower  pledges
collateral  or  mortgages  real or personal  property  which has a value (net of
encumbrances) in excess of the debt in which case, the Kentucky bank may lend up
to 30% of paid-in  capital and actual surplus.  Residential  real property loans
made under the pilot program could not exceed 80% of the property's value and in
no event may a national  bank lend more that $10 million to one  borrower  under
the  program.  The total  amount of loans  made by a  national  bank  under this
authority could not exceed 100% of the bank's capital and surplus.  The Bank has
not  participated  in the OCC's pilot program and has not determined  whether it
will do so.

Non-Performing Loans

         Loans are placed in a non-accrual income status when, in the opinion of
management, the prospects for recovering both principal and accrued interest are
considered  doubtful.  The Bank  seeks to  control  its level of  non-performing
assets by following strict collection  procedures.  The Bank generally sends out
reminder  notices  as soon as a loan  becomes  15 days  delinquent.  If the loan
becomes 30 days  delinquent,  the  borrower  will  receive  another  letter or a
telephone  call and  collection  efforts  will be  continued  until  the loan is
brought  current.  If a loan becomes 90 days  delinquent,  the loan is generally
placed on non-accrual  status and the Bank  generally will initiate  proceedings
for the repossession or foreclosure upon any collateral securing the loan.

                                       5

<PAGE>

         The  following  table sets forth the amount of the Bank's  restructured
loans,  non-accrual  loans  and  accruing  loans 90 days or more past due at the
dates indicated.

<TABLE>
<CAPTION>
                                                                  At December 31,
                                                                  2002      2001
                                                                 ------    ------
                                                               (Dollars in thousands)
<S>                                                            <C>       <C>
Restructured loans ............................................  $    0    $    0
                                                                 ------    ------
Non-accrual loans:
    Real estate - mortgage:
        Residential ...........................................     894       482
        Commercial ............................................       0         0
        Agricultural ..........................................      64         0
    Real estate - construction ................................      54        56
    Consumer ..................................................     332       106
    Commercial and industrial .................................      99         0
                                                                 ------    ------
             Total nonaccrual loans ...........................   1,443       644
                                                                 ------    ------
Accruing loans past due 90 days or more:
    Real estate - mortgage:
        Residential ...........................................       0         0
        Commercial ............................................       0         0
        Agricultural ..........................................       0         0
    Real estate - construction ................................       0         0
    Consumer ..................................................       7        13
    Commercial and industrial .................................       0         0
                                                                 ------    ------
             Total accruing loans past due 90 days or more ....       7        13
                                                                 ------    ------
             Total non-accrual and past due loans .............  $1,450    $  657
                                                                 ======    ======
             Non-accrual and past due loans to gross loans ....    1.90%     1.01%
                                                                 ======    ======
             Allowance for credit losses to non-accrual and
                past due loans ................................   47.66%   107.61%
                                                                 ======    ======
</TABLE>

         During the year ended  December 31, 2002,  the Bank would have recorded
interest income of $166,600 on non-accrual loans, if such loans had been current
in accordance  with their original  term. The Bank included  $45,800 in interest
income on such loans during the year.

         At December 31, 2002, there were no loans  outstanding not reflected in
the above table as to which known  information about possible credit problems of
borrowers  caused  management  to have serious  doubts as to the ability of such
borrowers to comply with present loan repayment terms.

Allowance for Loan Losses

         The  allowance for loan losses is  established  through a provision for
loan losses charged to expense.  The allowance is maintained at a level adequate
to absorb probable losses.  Management  determines the adequacy of the allowance
based upon reviews of the portfolio,  recent loss  experience,  current economic
conditions,  the risk  characteristics  of the various  categories  of loans and
other pertinent factors.  Allowances for impaired loans are generally determined
based on collateral  values or the present values of estimated  cash flows.  The
allowance  for loan losses is increased by the  provision  for credit losses and
reduced by chargeoffs net of recoveries.

                                       6
<PAGE>

         Transactions  in the  allowance  for loan losses during the years ended
December 31, 2002 and 2001 were as follows:

                                                      Year Ended December 31,
                                                     -------------------------
                                                       2002             2001
                                                     --------         --------
                                                        (Dollars in thousands)

Beginning Balance ............................       $    707         $    626
                                                     --------         --------
Charge-offs:
    Real estate - mortgage:
        Residential ..........................           (175)             (26)
        Commercial ...........................              0                0
        Agricultural .........................            (30)               0
    Real estate - construction ...............              0                0
    Consumer .................................           (173)             (96)
    Commercial and industrial ................            (52)             (10)
                                                     --------         --------
             Total ...........................           (430)            (132)
                                                     --------         --------
Recoveries:
    Real estate - mortgage:
        Residential ..........................              4                0
        Commercial ...........................              0                0
        Agricultural .........................              0                0
    Real estate - construction ...............              0                9
    Consumer .................................             30                7
    Commercial and industrial ................             18               14
                                                     --------         --------
             Total ...........................             52               30
                                                     --------         --------

Net charge-offs ..............................           (378)            (102)
Provisions charged to operations .............            362              183
                                                     --------         --------
Ending balance ...............................       $    691         $    707
                                                     ========         ========
Average loans ................................       $ 71,865         $ 62,750
                                                     ========         ========
Net charge-offs to average loans .............           0.53%            0.16%
                                                     ========         ========


         Charge-offs  during 2002  increased by $298,000  compared to 2001.  The
charge-offs  for 2002  include  $112,000  of  charge-offs  taken on loans to one
family of  borrowers  and an  additional  $40,000  charge-off  taken on loans to
another borrower. The remainder of the increase consists of charge-offs taken on
several  loans.  Management  determined  that  these  borrowers  would  not have
sufficient resources to repay the debt. Management believes that the increase in
charge-offs is a result of the maturing loan portfolio and the economic slowdown
in 2001 and 2002.

                                       7
<PAGE>

         The following  table shows the allowance for loan losses broken down by
loan category at the dates indicated.

                                                 At December 31,
                                -----------------------------------------------
                                        2002                   2001
                                ----------------------    ---------------------
                                           Percent of               Percent of
                                            Loans in                 Loans in
                                Reserve       Each        Reserve       Each
                                for Each   Category to    For Each  Category to
                                Category   Total Loans    Category  Total Loans
                                --------   -----------    --------  -----------
                                            (Dollars in thousands)
Portfolio
---------
Real estate - mortgage:
  Residential.................    $ 320         55.15%     $ 195         55.55%
  Commercial..................      118         10.31        154         11.56
  Agricultural................       22          3.94         15          2.86
Real estate - construction....       13          9.60          1          7.01
Consumer......................      170         11.36        100         13.21
Commercial and industrial.....       48          9.64         32          9.81
Unallocated...................       --            --        210            --
                                  -----        ------    -------        ------
          Total...............    $ 691        100.00%   $   707        100.00%
                                  =====        ======    =======        ======


Investment Securities

         In  addition  to making  loans,  the Bank is  authorized  to maintain a
portfolio of investment  securities to provide  liquidity as well as a source of
earnings.  The Bank's securities  investment  authority includes  investments in
U.S.  Treasury  securities  as  well as  securities  issued  by U.S.  government
agencies including  mortgage-backed  securities.  The Bank also is authorized to
invest in obligations of certain states and their political subdivisions.

         The Bank's investment  securities  portfolio currently consists of debt
securities issued by the FHLB System and Federal National  Mortgage  Association
and  mortgage-backed  securities  issued by  Freddie  Mac and  Fannie  Mae.  The
following  table shows the  composition  of the  investment  portfolio  by major
category at the dates indicated.

                                                           At December 31,
                                                       ----------------------
                                                         2002           2001
                                                       -------        -------
                                                          (In thousands)
U. S. government and federal agency securities...      $ 2,572        $ 3,541
Mortgage-backed securities.......................        1,772              -
                                                       -------        -------
    Total........................................      $ 4,344        $ 3,541
                                                       =======        =======

                                       8


<PAGE>

         The following table sets forth the scheduled maturities,  market values
and average  yields for the Bank's  investment  securities  and  mortgage-backed
securities portfolio at December 31, 2002.

<TABLE>
<CAPTION>
                                                                      At December 31, 2002
                                 ---------------------------------------------------------------------------------------------------
                                                                                              More than               Total
                                 One Year or Less   One to Five Years  Five to Ten Years      Ten Years       Investment Portfolio
                                 ----------------   ------------------ ------------------ ----------------- ------------------------
                                           Weighted           Weighted           Weighted          Weighted                 Weighted
                                Amortized  Average  Amortized Average  Amortized Average Amortized Average Amortized  Market Average
                                   Cost     Yield      Cost    Yield      Cost    Yield     Cost    Yield     Cost     Value  Yield
                                   ----     -----      ----    -----      ----    -----     ----    -----     ----     -----  -----
                                                                       (Dollars in thousands)
<S>                             <C>        <C>     <C>       <C>      <C>       <C>       <C>     <C>      <C>      <C>     <C>
U.S. government and federal
   agency securities...........   $  --       --%    $2,000    5.213%   $ 500     4.000%    $ --     -- %    $2,500   $2,572  4.970%
Mortgage-backed  securities....      --       --         --       --      878     5.275      834    4.391     1,712    1,772  4.847
                                  -----              ------            ------               ----             ------   ------
  Total........................   $  --              $2,000            $1,378               $834             $4,212   $4,344
                                  =====              ======            ======               ====             ======   ======
</TABLE>

                                       9
<PAGE>

         At  December  31,  2002,  the Bank's  other  investments  consisted  of
$186,000 in stock in the Federal  Reserve Bank of St. Louis in which the Bank is
required to invest as a national  bank and  $389,000  in Federal  Home Loan Bank
("FHLB") of Cincinnati  stock in which it is required to invest in order to be a
member of the FHLB of Cincinnati.

         At December 31, 2002,  the Bank had no  investments  in securities of a
single  issuer  (other than the U.S.  government  securities  and  securities of
federal  agencies and  government-sponsored  enterprises)  which aggregated more
than 10% of stockholders' equity.

Deposits and Other Sources of Funds

         The Bank funds its lending and  investment  activities  primarily  with
deposits.  The Bank is also  eligible to borrow from the FHLB of  Cincinnati  of
which it became a member in 1998.  FHLB of  Cincinnati  advances may be used for
residential and small business lending.

         Deposits.  The Bank's deposit products include regular savings accounts
(statements),  money market  deposit  accounts,  demand  deposit  accounts,  NOW
checking accounts, IRA accounts and certificates of deposit accounts. Variations
in  service  charges,  terms and  interest  rates  are used to  target  specific
markets.  Ancillary  products and services  for deposit  customers  include safe
deposit boxes, money orders and travelers checks, night depositories,  automated
clearinghouse transactions, wire transfers, automated teller machines, telephone
banking,  and a customer  call  center.  The Bank also  offers  on-line  banking
through its website. The Bank is a member of Cirrus(R) and MAC(R) ATM networks.

          The Bank  obtains  deposits  principally  through  its main and branch
offices.  The Bank also attracts deposits through its website.  During 2002, the
Bank  increasingly  obtained  deposits through  internet  certificate of deposit
markets  on which  the Bank  posts its rates  for a fee.  Such  certificates  of
deposit  totaled  $19.1 million at December 31, 2002 compared to $6.2 million at
December 31, 2001. Of these  deposits,  $11.0 million were placed in the Bank by
one  broker.  The Bank has found  that  deposits  can be  obtained  through  the
internet at lower rates than it would be required to pay to attract funds in the
Elizabethtown  market.  At December 31, 2002, the Bank had  approximately  $19.8
million in certificates of deposit and other time deposits of $100,000 or more.

         The following table provides information as to the maturity of all time
deposits of $100,000 or more at December 31, 2002.

                                                                   Amount
                                                                   ------
                                                              (In thousands)
             Three months or less.......................          $ 3,208
             Over three through six months..............            1,841
             Over six through 12 months.................            5,086
             Over 12 months.............................            9,621
                                                                  -------
               Total....................................          $19,756
                                                                  =======

         Borrowings.  In addition to deposits,  the Bank  obtains  funds for its
operations  through various forms of short-term  borrowings  including  advances
from the FHLB of Cincinnati  and purchases of federal  funds.  FHLB advances may
only be used for residential and small business  lending.  At December 31, 2002,
the Bank had $7.0 million in  outstanding  advances from the FHLB of Cincinnati.
Advances are secured by a blanket lien on all the Bank's  residential  mortgages
and its FHLB stock. The Bank purchases  federal funds from time to time from its
correspondent bank primarily for cash management purposes.

                                       10
<PAGE>

         The following table sets forth certain information regarding borrowings
by the Bank at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                         At or for the Year Ended
                                                                December 31,
                                                             ------------------
                                                                2002       2001
                                                             -------    -------
                                                          (Dollars in thousands)
<S>                                                        <C>        <C>
Amounts outstanding at end of period:
     FHLB advances.......................................    $ 7,000    $ 7,000
     Federal funds purchased.............................         --         --

Weighted average rate paid on:
     FHLB advances.......................................       4.06%      4.31%
     Federal funds purchased.............................         --         --

Maximum amount of borrowings outstanding at any month end:
     FHLB advances.......................................    $ 7,000    $ 7,000
     Federal funds purchased.............................      4,610         --

Approximate average amounts outstanding:
     FHLB advances.......................................    $ 7,000    $ 4,510
     Federal funds purchased.............................        227         14

Approximate weighted average rate paid on:
     FHLB advances.......................................       4.31%      4.99%
     Federal funds purchased.............................       2.25       4.09
</TABLE>


Competition

         The banking  business  is highly  competitive.  The Bank  competes as a
financial intermediary with other commercial banks, savings associations, credit
unions, mortgage banking firms, consumer finance companies, securities brokerage
firms,  insurance  companies,  money  market  mutual  funds and other  financial
institutions operating in the Elizabethtown market area and elsewhere.

         The Bank's market area is a highly competitive, highly branched banking
market. There are currently 11 FDIC-insured depository institutions with offices
in Elizabethtown  including several  institutions  affiliated with regional bank
holding   companies.   Based  on  data  compiled  by  the  FDIC,  the  Bank  had
approximately 11% of the FDIC-insured deposits in Elizabethtown at June 30, 2002
(the  latest  date for which  such data is  available)  ranking  it fifth  among
FDIC-insured  institutions in deposit market share. The FDIC data, however, does
not reflect deposits in credit unions and at least one credit union based in the
Bank's market is believed to have more deposits  than the Bank.  Competition  in
the market  area for loans to small  businesses  and  professionals,  the Bank's
target  market,  is  intense,  and  pricing  is  important.  Most of the  Bank's
competitors  have  substantially  greater  resources and lending limits than the
Bank and offer  certain  services,  such as  extensive  and  established  branch
networks and trust services, that the Bank does not currently provide. Moreover,
larger  institutions  operating in the  Elizabethtown  market may have access to
borrowed  funds at lower  cost  than  will be  available  to the  Bank.  Deposit
competition among institutions in the market area also is strong.

                                       11
<PAGE>

         The  Board of  Directors  believes  that  the  Bank is able to  compete
effectively in this market. The Board of Directors believes that the area reacts
favorably  to the Bank's  community  bank focus and emphasis on service to small
and medium size businesses, individuals and professional concerns.

         Historically,  Kentucky  banks had only  been  permitted  to  establish
branches in the county in which  their main  office is located.  During the 2000
legislative  season,  however,  the  Kentucky  statutes  were  amended to permit
Kentucky banks to establish branches  throughout the state without  geographical
restriction.  This  change  in the law may allow  new  competitors  to enter the
Bank's market area. See "Supervision and Regulation."

Employees

         At December 31, 2002, the Bank had 38 full-time equivalent employees.

                           SUPERVISION AND REGULATION

Regulation of the Company

         General.  The Company is a bank holding  company  within the meaning of
the Bank  Holding  Company  Act of 1956 (the  "BHCA").  As such,  the Company is
registered  with the Board of  Governors  of the  Federal  Reserve  System  (the
"Federal  Reserve  Board")  and  subject to Federal  Reserve  Board  regulation,
examination,  supervision and reporting requirements. As a bank holding company,
the  Company is  required to furnish to the  Federal  Reserve  Board  annual and
quarterly  reports of its  operations  at the end of each  period and to furnish
such additional information as the Federal Reserve Board may require pursuant to
the BHCA. The Company is also subject to regular  inspection by Federal  Reserve
Board examiners.

         Under the BHCA, a bank holding  company must obtain the prior  approval
of the Federal Reserve Board before:  (1) acquiring direct or indirect ownership
or control of any voting  shares of any bank or bank  holding  company if, after
such  acquisition,  the bank holding company would directly or indirectly own or
control more than 5% of such shares;  (2) acquiring all or substantially  all of
the  assets  of  another  bank  or  bank  holding  company;  or (3)  merging  or
consolidating with another bank holding company.

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the  "Riegle-Neal  Act")  authorizes  the Federal  Reserve  Board to approve an
application of an adequately  capitalized  and  adequately  managed bank holding
company to acquire control of, or acquire all or substantially all of the assets
of, a bank  located in a state  other than such  holding  company's  home state,
without  regard to whether  the  transaction  is  prohibited  by the laws of any
state.  The Federal Reserve Board may not approve the acquisition of a bank that
has not been in existence for the minimum time period (not exceeding five years)
specified  by the  statutory  law of the host state.  The  Riegle-Neal  Act also
prohibits the Federal  Reserve Board from  approving  such an application if the
applicant (and its depository institution  affiliates) controls or would control
more than 10% of the insured deposits in the United States or 30% or more of the
deposits  in the  target  bank's  home state or in any state in which the target
bank maintains a branch.  The  Riegle-Neal  Act does not affect the authority of
states to limit the percentage of total insured  deposits in the state which may
be held or  controlled  by a bank or bank  holding  company to the  extent  such
limitation  does not  discriminate  against  out-of-state  banks or bank holding
companies.  Individual  states may also waive the 30%  state-wide  concentration
limit  contained in the  Riegle-Neal  Act.  Under  Kentucky  law, a bank holding
company is prohibited from acquiring control of any bank or bank holding company
if the bank holding company would control more than 15% of the total deposits of
all depository institutions in the Commonwealth of Kentucky unless waived by the
Commissioner.

         Additionally,  beginning on June 1, 1997, the federal banking  agencies
are  authorized to approve  interstate  merger  transactions  without  regard to
whether such transaction is prohibited by the law of any state,  unless the home
state of one of the banks  opted out of the  Riegle-Neal  Act by  adopting a law
after the date of  enactment  of the  Riegle-Neal  Act and prior to June 1, 1997
which applies equally to all out-of-state  banks and expressly  prohibits merger
transactions  involving out-of-state banks. The Commonwealth of Kentucky did not
pass such a law during this period.  Interstate acquisitions of branches will be
permitted  only if the law of the state in which the branch is  located  permits
such  acquisitions.  Interstate  mergers  and branch  acquisitions  will also be
subject to the nationwide and statewide  insured deposit  concentration  amounts
described above.

                                       12

<PAGE>

         The BHCA  also  prohibits,  with  certain  exceptions,  a bank  holding
company from acquiring  direct or indirect  ownership or control of more than 5%
of the voting shares of a company that is not a bank or a bank holding  company,
or from  engaging  directly  or  indirectly  in  activities  other than those of
banking,   managing  or  controlling   banks,  or  providing  services  for  its
subsidiaries.  The principal  exceptions to these  prohibitions  involve certain
non-bank  activities which, by statute or by Federal Reserve Board regulation or
order,  have been  identified as activities  closely  related to the business of
banking or managing or  controlling  banks.  The  activities  of the Company are
subject to these legal and regulatory limitations under the BHCA and the Federal
Reserve  Board's  regulations  thereunder.  Notwithstanding  the Federal Reserve
Board's prior approval of specific  nonbanking  activities,  the Federal Reserve
Board has the power to order a holding company or its  subsidiaries to terminate
any activity,  or to terminate its ownership or control of any subsidiary,  when
it has  reasonable  cause to believe that the  continuation  of such activity or
such  ownership or control  constitutes a serious risk to the financial  safety,
soundness or stability of any bank subsidiary of that holding company.

         Effective with the enactment of the Gramm-Leach-Bliley ("G-L-B") Act on
November  12,  1999,  bank  holding   companies   whose  financial   institution
subsidiaries  are well  capitalized  and  well  managed  and  have  satisfactory
Community  Reinvestment  Act  records  can  elect to become  "financial  holding
companies"  which  are  permitted  to engage  in a  broader  range of  financial
activities  than are  permitted to bank  holding  companies.  Financial  holding
companies  are  authorized  to engage  in,  directly  or  indirectly,  financial
activities. A financial activity is an activity that is (i) financial in nature;
(ii)  incidental  to  an  activity  that  is  financial  in  nature;   or  (iii)
complementary  to a  financial  activity  and that  does  not pose a safety  and
soundness  risk. The G-L-B Act includes a list of activities  that are deemed to
be  financial  in nature.  Other  activities  also may be decided by the Federal
Reserve  Board to be  financial  in nature or  incidental  thereto  if they meet
specified criteria.  A financial holding company that intends to engage in a new
activity  or to acquire a company to engage in such an  activity  is required to
give prior notice to the Federal  Reserve  Board.  If the activity is not either
specified in the G-L-B Act as being a financial activity or one that the Federal
Reserve  Board has  determined  by rule or regulation to be financial in nature,
the prior approval of the Federal Reserve Board is required.

         Capital  Adequacy.  The Federal  Reserve  Board has adopted  guidelines
regarding  the capital  adequacy of bank holding  companies,  which require bank
holding  companies  to  maintain  specified  minimum  ratios of capital to total
assets and  capital to  risk-weighted  assets.  See  "Regulation  of the Bank --
Capital Adequacy."

         Dividends and Distributions. The Federal Reserve Board has the power to
prohibit  dividends by bank holding companies if their actions constitute unsafe
or unsound practices. The Federal Reserve Board has issued a policy statement on
the payment of cash  dividends by bank holding  companies,  which  expresses the
Federal  Reserve  Board's  view  that a bank  holding  company  should  pay cash
dividends  only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent  with the company's  capital  needs,  asset  quality,  and overall
financial condition.

         Bank holding  companies are required to give the Federal  Reserve Board
notice of any purchase or redemption of their  outstanding  equity securities if
the gross  consideration for the purchase or redemption,  when combined with the
net  consideration  paid  for all  such  purchases  or  redemptions  during  the
preceding  12  months,  is equal to 10% or more of the  bank  holding  company's
consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or  redemption  if it  determines  that  the  proposal  would  violate  any law,
regulation, Federal Reserve Board order, directive, or any condition imposed by,
or written  agreement  with, the Federal Reserve Board.  Bank holding  companies
whose capital  ratios exceed the thresholds  for "well  capitalized"  banks on a
consolidated basis are exempt from the foregoing  requirement if they were rated
composite 1 or 2 in their most recent  inspection and are not the subject of any
unresolved supervisory issues.

         Sarbanes-Oxley Act of 2002. On July 30, 2002, the President signed into
law the  Sarbanes-Oxley  Act of 2002 (the  "Act")  which  mandated  a variety of
reforms intended to address corporate and accounting fraud. The Act provides for
the establishment of a new Public Company  Accounting  Oversight Board ("PCAOB")
which will enforce  auditing,  quality  control and  independence  standards for
firms that audit SEC-reporting companies and will be funded by fees from all SEC
reporting  companies.  The Act imposes higher standards for auditor independence
and restricts  provision of consulting  services by auditing  firms to companies
they audit.  Any  non-audit  services  being  provided  to an audit  client will
require  preapproval  by the Company's  audit  committee  members.  In addition,
certain audit  partners  must be rotated  periodically.  The Act requires  chief
executive officers and chief financial officers, or their equivalent, to certify
to the  accuracy of periodic  reports  filed with the SEC,  subject to civil and
criminal  penalties if

                                       13

<PAGE>

they knowingly or willfully violate this certification requirement. In addition,
under the Act,  counsel  will be  required  to  report  evidence  of a  material
violation of the  securities  laws or a breach of fiduciary duty by a company to
its chief  executive  officer or its chief legal  officer,  and, if such officer
does not appropriately  respond,  to report such evidence to the audit committee
or other similar committee of the board of directors or the board itself.

         Longer  prison terms will also be applied to corporate  executives  who
violate federal  securities laws, the period during which certain types of suits
can be brought against a company or its officers has been extended,  and bonuses
issued to top executive prior to restatement of a company's financial statements
are now  subject  to  disgorgement  if  such  restatement  was due to  corporate
misconduct.  Executives are also prohibited from trading during  retirement plan
"blackout" periods, and loans to company executives are restricted. In addition,
a provision directs that penalties levied by the SEC as a result of any judicial
or administrative action under the Act be deposited in a fund for the benefit of
harmed investors. Directors and executive officers must also report most changes
in their  ownership of a company's  securities  within two business  days of the
change.

         The Act also increases the oversight and authority of audit  committees
of publicly traded  companies.  Audit committee  members must be independent and
are barred from accepting  consulting,  advisory or other compensatory fees from
the issuer.  In addition,  all SEC reporting  companies must disclose whether at
least one  member of the  committee  is a  "financial  expert"  (as such term is
defined by the SEC rules) and if not,  why not.  Audit  committees  of  publicly
traded  companies  will have  authority  to retain  their own  counsel and other
advisors funded by the company.  Audit committees must establish  procedures for
the receipt,  retention  and treatment of complaints  regarding  accounting  and
auditing  matters and  procedures  for  confidential,  anonymous  submission  of
employee concerns regarding questionable accounting or auditing matters.

         Beginning six months after the SEC determines that the PCAOB is able to
carry  out its  functions,  it will be  unlawful  for any  person  that is not a
registered  public  accounting firm ("RPAF") to audit an SEC-reporting  company.
Under the Act, a RPAF is prohibited from performing  statutorily  mandated audit
services  for a  company  if  such  company's  chief  executive  officer,  chief
financial officer,  comptroller,  chief accounting officer or any person serving
in equivalent  positions has been employed by such firm and  participated in the
audit of such company during the one-year period  preceding the audit initiation
date.  The Act also  prohibits any officer or director of a company or any other
person  acting  under their  direction  from  taking any action to  fraudulently
influence,  coerce,  manipulate or mislead any  independent  public or certified
accountant  engaged in the audit of the Company's  financial  statements for the
purpose of rendering the financial statement's  materially  misleading.  The Act
also  requires the SEC to  prescribe  rules  requiring  inclusion of an internal
control   report  and   assessment   by  management  in  the  annual  report  to
shareholders.  The Act  requires the RPAF that issues the audit report to attest
to and report on management's  assessment of the Company's internal controls. In
addition, the Act requires that each financial report required to be prepared in
accordance with (or reconciled to) generally accepted accounting  principles and
filed  with  the SEC  reflect  all  material  correcting  adjustments  that  are
identified by a RPAF in accordance with generally accepted accounting principles
and the rules and regulations of the SEC.

         Although the Company  anticipates it will incur additional  expenses in
complying with the provisions of the Act and the related rules,  management does
not expect that such  compliance  will have a material  impact on the  Company's
financial condition or results of operations.

Regulation of the Bank

         General.  As a  national  bank,  the  Bank is  subject  to the  primary
supervision  of the OCC under the National Bank Act. The OCC regularly  examines
the  operations  of the Bank,  including  but not  limited to capital  adequacy,
reserves,  loans,  investments and management practices.  These examinations are
for the  protection  of the  Bank's  depositors  and not  its  shareholders.  In
addition,  the Bank is required to furnish  quarterly and annual call reports to
the OCC  pursuant  to the  Federal  Deposit  Insurance  ("FDI")  Act.  The OCC's
enforcement  authority  includes the power to remove  officers and directors and
the authority to issue  cease-and-desist  orders to prevent a national bank from
engaging  in  unsafe or  unsound  practices  or  violating  laws or  regulations
governing its business.

                                       14

<PAGE>

         The Bank is a member of the Federal Reserve System and its deposits are
insured by the FDIC to the legal maximum of $100,000 for each insured depositor.
Some of the aspects of the  lending  and  deposit  business of the Bank that are
subject to regulation by the Federal  Reserve Board and the FDIC include reserve
requirements  and  disclosure  requirements  in  connection  with  personal  and
mortgage loans and savings deposit accounts. In addition, the Bank is subject to
numerous  federal  and state  laws and  regulations  which  set  forth  specific
restrictions and procedural  requirements  with respect to the  establishment of
branches, investments, interest rates on loans, credit practices, the disclosure
of credit terms and discrimination in credit transactions.

         Capital  Adequacy.  The OCC has established  guidelines with respect to
the  maintenance  of  appropriate  levels of  capital  by  national  banks.  The
regulations impose two sets of capital adequacy  requirements:  minimum leverage
rules,  which require  national  banks to maintain a specified  minimum ratio of
capital to total  assets,  and  risk-based  capital  rules,  which  require  the
maintenance of specified minimum ratios of capital to "risk-weighted" assets.

         OCC regulations  require  national banks to maintain a minimum leverage
ratio of "Tier 1 capital"  (as  defined  in the  risk-based  capital  guidelines
discussed in the following paragraphs) to total assets of 3.0%. Although setting
a minimum  3.0%  leverage  ratio,  the capital  regulations  state that only the
strongest banks, with composite examination ratings of 1 under the rating system
used by the federal  bank  regulators,  would be permitted to operate at or near
such minimum level of capital. All other national banks are expected to maintain
a leverage ratio of at least 1% to 2% above the minimum ratio,  depending on the
assessment  of an  individual  organization's  capital  adequacy  by its primary
regulator.  Any national bank  experiencing or anticipating  significant  growth
would be  expected  to  maintain  capital  well  above the  minimum  levels.  In
addition,  FDIC policies  required the Bank to maintain a minimum leverage ratio
of 8.0% during the first three years of operation.

         The  risk-based  capital  rules of the OCC  require  national  banks to
maintain  minimum  regulatory  capital  levels  based upon a weighting  of their
assets and  off-balance  sheet  obligations  according to risk.  The  risk-based
capital rules have two basic components: a core capital (Tier 1) requirement and
a supplementary capital (Tier 2) requirement. Core capital consists primarily of
common stockholders' equity,  certain  noncumulative  perpetual preferred stock,
and minority interests in the equity accounts of consolidated subsidiaries; less
all intangible  assets,  except for certain servicing  assets,  purchased credit
card  relationships,  deferred  tax  assets and  credit-enhancing  interest-only
strips.  Supplementary capital elements include, subject to certain limitations,
the allowance  for losses on loans and leases;  perpetual  preferred  stock that
does not  qualify  as Tier 1  capital  and  long-term  preferred  stock  with an
original   maturity  of  at  least  20  years  from  issuance;   hybrid  capital
instruments,  including perpetual debt and mandatory convertible securities; and
subordinated debt and intermediate-term preferred stock.

         The  risk-based  capital  regulations  assign  balance sheet assets and
credit equivalent  amounts of off-balance sheet obligations to one of four broad
risk categories  based  principally on the degree of credit risk associated with
the obligor.  The assets and off-balance sheet items in the four risk categories
are weighted at 0%, 20%, 50% and 100%.  These  computations  result in the total
risk-weighted  assets. The risk-based capital  regulations require all banks and
bank  holding  companies to maintain a minimum  ratio of total  capital to total
risk-weighted assets of 8%, with at least 4% as core capital. For the purpose of
calculating these ratios:  (i) supplementary  capital will be limited to no more
than 100% of core  capital;  and (ii) the  aggregate  amount of certain types of
supplementary  capital will be limited.  In  addition,  the  risk-based  capital
regulations  limit the allowance for loan losses  includable as capital to 1.25%
of total risk-weighted assets.

         OCC regulations and guidelines additionally specify that national banks
with significant exposure to declines in the economic value of their capital due
to changes in  interest  rates may be required  to  maintain  higher  risk-based
capital ratios. The federal banking agencies, including the OCC, have proposed a
system for  measuring  and  assessing  the  exposure  of a  national  bank's net
economic  value to changes in  interest  rates.  The federal  banking  agencies,
including the OCC, have stated their intention to propose a rule establishing an
explicit  capital  charge  for  interest  rate  risk  based  upon the level of a
national bank's  measured  interest rate risk exposure after more experience has
been gained with the proposed measurement process.

                                       15

<PAGE>

         In  accordance   with  the  Federal   Deposit   Insurance   Corporation
Improvement  Act of 1991,  the OCC has also adopted  regulations  which classify
national  banks by capital  levels  and which  require  the OCC to take  various
prompt  corrective  actions  in the event a national  bank fails to satisfy  the
capital standards.  Under these regulations, a well capitalized bank is one that
is not subject to any regulatory order or directive to meet any specific capital
level and that has or exceeds the following  capital levels:  a total risk-based
capital  ratio of 10%, a Tier 1 risk-based  capital  ratio of 6%, and a leverage
ratio of 5%. An adequately capitalized bank is one that does not qualify as well
capitalized  but meets or exceeds the following  capital  requirements:  a total
risk-based  capital ratio of 8%, a Tier 1 risk-based  capital ratio of 4%, and a
leverage ratio of either (i) 4% or (ii) 3% if the bank has the highest composite
examination   rating.   A  bank  not  meeting  these   criteria  is  treated  as
undercapitalized, significantly undercapitalized, or critically undercapitalized
depending  on the extent to which the  bank's  capital  levels  are below  these
standards.  A national bank that falls within any of the three  undercapitalized
categories  established  by the  prompt  corrective  action  regulation  will be
subject to severe regulatory sanctions.

         Branching.  Under the  McFadden  Act of 1927,  national  banks may only
establish  branches to the extent  specifically  authorized by statute for banks
chartered by the state in which the national  bank is located and subject to the
restrictions  as to location  imposed by state law on state banks.  Kentucky law
historically  provided  that  Kentucky  banks  could only  maintain  and operate
branches in the  counties in which their main office was  located.  On March 17,
2000, however, the Governor of Kentucky signed legislation that permits Kentucky
banks to establish branches without  geographical  restriction.  The Riegle-Neal
Act  authorizes  the OCC and FDIC to  approve  interstate  branching  de novo by
national and state banks, respectively,  only in states which specifically allow
for such branching.  The  Riegle-Neal Act also requires the appropriate  federal
banking agencies to prescribe  regulations  which prohibit any out-of-state bank
from using the  interstate  branching  authority  primarily  for the  purpose of
deposit  production.  These  regulations must include  guidelines to ensure that
interstate  branches  operated  by an  out-of-state  bank  in a host  state  are
reasonably helping to meet the credit needs of the communities which they serve.

         Dividend  Limitations.  Pursuant to the National  Bank Act, no national
bank may pay dividends from its paid-in capital.  All dividends must be paid out
of current or retained net profits,  after deducting reserves for losses and bad
debts. A national bank is prohibited  from paying a dividend if it has sustained
losses in excess of its undivided profits on hand. The National Bank Act further
restricts the payment of dividends out of net profits by  prohibiting a national
bank from  declaring a dividend on its shares of common  stock until its surplus
fund  equals the amount of its capital  stock or, if the  surplus  fund does not
equal the amount of capital stock,  until  one-tenth of a bank's net profits for
the preceding  half year in the case of quarterly or semi-annual  dividends,  or
the  preceding  two  half-year  periods  in the case of  annual  dividends,  are
transferred to the surplus fund.  Prior OCC approval is required for the payment
of a dividend if the total of all  dividends  declared by a national bank in any
calendar  year would exceed the total of its net profits for that year  combined
with its net profits for the two preceding years, less any required transfers to
surplus or a fund for the retirement of any preferred  stock.  In addition,  the
Bank is prohibited by federal statute from paying  dividends or making any other
capital  distribution  that would cause the Bank to fail to meet its  regulatory
capital  requirements.  Further,  the OCC also has  authority  to  prohibit  the
payment of dividends by a national bank when it determines such payment to be an
unsafe and unsound banking practice.

         Deposit Insurance.  The Bank is required to pay semi-annual assessments
based on a percentage  of its insured  deposits to the FDIC for insurance of its
deposits by the Bank Insurance Fund.  Under the FDI Act, the FDIC is required to
set  semi-annual  assessments  for  BIF-insured  institutions  to  maintain  the
designated reserve ratio of the BIF at 1.25% of estimated insured deposits or at
a higher percentage of estimated insured deposits that the FDIC determines to be
justified  for  that  year  by  circumstances  raising  a  significant  risk  of
substantial  future  losses to the BIF. In the event that the BIF should fail to
meet its statutory  reserve ratio, the FDIC would be required to set semi-annual
assessment  rates for BIF members  that are  sufficient  to increase the reserve
ratio to 1.25% within one year or in  accordance  with such other  schedule that
the FDIC adopts by  regulation  to restore the reserve ratio in not more than 15
years.

         Under the risk-based deposit insurance assessment system adopted by the
FDIC, the assessment rate for an insured depository  institution  depends on the
assessment risk classification assigned to the institution by the FDIC, which is
determined by the institution's capital level and supervisory evaluations. Based
on the data reported to  regulators  for the date closest to the last day of the
fourth month  preceding the  semi-annual  assessment  period,  institutions  are
assigned  to one  of  three  capital  groups  --  well  capitalized,  adequately
capitalized or  undercapitalized."  Within each capital group,  institutions are
assigned to one of three  subgroups on the basis of  supervisory  evaluations

                                       16

<PAGE>

by the institution's primary supervisory authority and such other information as
the FDIC determines to be relevant to the institution's  financial condition and
the risk posed to the  deposit  insurance  fund.  Under the  current  assessment
schedule,  well  capitalized  banks with the best  supervisory  ratings  are not
required  to pay any  premium  for deposit  insurance.  All  BIF-insured  banks,
however,  are  required  to pay  assessments  to the FDIC to help fund  interest
payments on certain  bonds  issued by the  Financing  Corporation  ("FICO"),  an
agency  established by the federal  government to finance takeovers of insolvent
thrifts.  For the first quarter of 2003,  the FICO  assessment  will be equal to
1.68 basis points times assessable deposits.

         Enforcement.  Under  the  FDI  Act,  the OCC  has  primary  enforcement
responsibility  over  national  banks  and has the  authority  to bring  actions
against such banks and all institution-affiliated  parties, including directors,
officers,  stockholders,  and any  attorneys,  appraisers  and  accountants  who
knowingly or recklessly participate in wrongful action likely to have an adverse
effect on an insured  institution.  Formal enforcement action may range from the
issuance of a capital directive or cease and desist order to removal of officers
and/or  directors to  institution  of  receivership  or  conservatorship.  Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially  egregious  cases.  Under the FDI Act, the
FDIC has the authority to recommend to the OCC that it take  enforcement  action
with respect to a national bank. If action is not taken by the agency,  the FDIC
has authority to take such action under certain circumstances.  Federal law also
establishes criminal penalties for certain violations.

         Transactions  with Affiliates.  A national bank or its subsidiaries may
not engage in "covered transactions" with any one affiliate in an amount greater
than 10% of such bank's capital stock and surplus, and for all such transactions
with all  affiliates  a national  bank is  limited to an amount  equal to 20% of
capital  stock  and  surplus.  All  such  transactions  must  also  be on  terms
substantially  the same, or at least as favorable,  to the bank or subsidiary as
those provided to a non-affiliate.  The term "covered  transaction" includes the
making of loans,  purchase of assets,  issuance of a guarantee and similar other
types of transactions.  An affiliate of a national bank is any company or entity
which  controls or is under common  control with the national bank. In a holding
company context, the parent holding company of a national bank and any companies
which are  controlled  by such  parent  holding  company are  affiliates  of the
national  bank.  For  purposes  of the  aggregate  limit  on  transactions  with
affiliates,  the term affiliate would also include any financial subsidiary of a
national  bank.  The  BHCA  further  prohibits  a  depository  institution  from
extending  credit to or offering  any other  services,  or fixing or varying the
consideration for such extension of credit or service, on the condition that the
customer obtain some  additional  service from the institution or certain of its
affiliates or not obtain services of a competitor of the institution, subject to
certain limited exceptions.

         Loans to  Directors,  Executive  Officers and  Principal  Stockholders.
Loans to directors,  executive officers and principal stockholders of a national
bank  must be made on  substantially  the same  terms as  those  prevailing  for
comparable transactions with persons who are not executive officers,  directors,
principal  stockholder or employees of the Bank unless the loan is made pursuant
to a compensation or benefit plan that is widely available to employees and does
not favor  insiders.  Loans to any  executive  officer,  director and  principal
stockholder  together  with  all  other  outstanding  loans to such  person  and
affiliated  interests  generally  may not exceed  15% of the  bank's  unimpaired
capital  and  surplus  and  all  loans  to  such  persons  may  not  exceed  the
institution's  unimpaired  capital and unimpaired  surplus.  Loans to directors,
executive officers and principal stockholders,  and their respective affiliates,
in  excess of the  greater  of  $25,000  or 5% of  capital  and  surplus  (up to
$500,000) must be approved in advance by a majority of the board of directors of
the  bank  with any  "interested"  director  not  participating  in the  voting.
National  banks  are  prohibited  from  paying  the  overdrafts  of any of their
executive  officers or directors  unless  payment is made pursuant to a written,
pre-authorized interest-bearing extension of credit plan that specifies a method
of repayment or transfer of funds from another account at the bank. In addition,
loans to executive  officers may not be made on terms more  favorable than those
afforded  other  borrowers and are  restricted  as to type,  amount and terms of
credit.

Item 2. Properties
------------------

         The Bank leases both its main office at 1000 North Dixie Avenue and its
branch office at Dolphin Drive and U.S. Highway 62 in Elizabethtown, Kentucky.

         The main office has 13,500 square feet of space and was constructed for
the Bank by Kentucky National  Properties,  L.L.C.  ("KNP"), a limited liability
company in which each of the Bank's directors has a 10% ownership  interest.  In
September, 2001 the Bank began occupying a new addition to the main office which
was also built by KNP

                                       17
<PAGE>

and entered  into a new lease  agreement  for the entire  main  office  complex.
Rental  payments are $22,500 per month during the initial term of the lease with
provision for increase  based on the  percentage  increase in the Consumer Price
Index.  The Bank leases its main office  from the  partnership  under a ten-year
lease  with four  successive  renewal  options  of ten years  each See "Item 12.
Certain Relationships and Related Transactions."

         The Bank's  branch  office  which  opened in  December,  1998 has 2,771
square  feet of space.  The  office  is  leased  under a  five-year  lease  with
provision for five  renewals of five years each.  During the initial term of the
lease,  rental  payments  are  $2,540 per month for the  building  space plus an
additional  $1,724  per  month for the land  used for the  drive-through  teller
window.

         The Bank has  entered  into a three year  lease for space in  Radcliff,
Kentucky for a new loan production  office.  Rental payments under the lease are
approximately $730 per month.

Item 3. Legal Proceedings
-------------------------

         Although  the Bank  from  time to time is  involved  in  various  legal
proceedings  in the  normal  course of  business,  there are no  material  legal
proceedings to which the Bank is a party or to which its property is subject.

Item 4. Submission of Matters to a Vote of Security-holders
-----------------------------------------------------------

         There  were no  matters  submitted  to a vote of the  security  holders
during the fourth quarter of fiscal year 2002.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters
----------------------------------------------------------------

         There is currently no trading market for the Company's common stock and
the Company has not paid any dividends.  Under the Stock Transfer Agreement into
which each shareholder has entered,  shareholders must first offer shares to the
Bank's  Organizers  prior to any transfer for value. At December 31, 2002, there
were 251,400 shares outstanding and 320 shareholders of record.

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

         The  Company  recorded  its third  consecutive  year of  profits in the
Bank's  fifth  full year of  operations  in 2002.  Net  income  for the year was
$669,500  compared to income of $662,700  for the year ended  December 31, 2001.
Net income for the 2002 fiscal year benefited from higher net interest income as
falling  interest  rates  resulted in a wider  interest rate spread.  The Bank's
secondary  market division again  contributed  strongly to net income as the low
interest rate environment continued to create refinancing  opportunities.  These
positive developments were partially offset by an increase in other expenses due
to continued Bank growth in staff and facilities. The Bank continues to increase
its loan portfolio and has successfully  attracted  deposits from the community.
It is  management's  intention to continue to grow the Bank's loan  portfolio by
attracting local deposits with superior service and competitive rates.

Forward-Looking Statements

         When used in this  discussion and elsewhere in this Annual Report,  the
words or phrases "will likely  result," "are expected to," "will  continue," "is
anticipated,"   "estimate,"  "project,"  "intend"  or  similar  expressions  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private  Securities  Litigation Reform Act of 1995. The Company cautions readers
not to place undue reliance on any such forward-looking statements,  which speak
only as of the date made, and to advise readers that various factors,  including
regional and  national  economic  conditions,  unfavorable  judicial  decisions,
substantial  changes in levels of market interest rates,  credit and other risks
of lending and investment  activities  and  competitive  and regulatory  factors
could affect the Bank's financial  performance and could cause the Bank's actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

                                       18

<PAGE>

         The  Company  does  not  undertake  and   specifically   disclaims  any
obligation to update any  forward-looking  statements  to reflect  occurrence of
anticipated  or  unanticipated  events or  circumstances  after the date of such
statements.

Critical Accounting Policies

         Accounting policies involving  significant judgments and assumptions by
management,  which have, or could have, a material  impact on the carrying value
of  certain  assets  and  impact  income,  are  considered  critical  accounting
policies.  The Bank  considers  the  allowance  for loan losses to be a critical
accounting  policy.  There have been no  significant  changes in the  methods or
assumptions used in the accounting  policies that require material estimates and
assumptions.

         Determining  an   appropriate   level  of  allowance  for  loan  losses
necessarily  involves a high degree of judgment.  The ongoing evaluation process
includes a formal analysis of the allowance each quarter, which considers, among
other  factors,  the  character  and size of the loan  portfolio,  business  and
economic  conditions,  loan  growth,  delinquency  trends,  nonperforming  loans
trends,  charge-off  experience  and  other  asset  quality  factors.  The  Bank
evaluates specific loan status reports on certain commercial and commercial real
estate  loans  rated  "substandard"  or worse in  excess of a  specified  dollar
amount.  Estimated reserves for each of these credits is determined by reviewing
current collateral value, financial information,  cash flow, payment history and
trends and other relevant facts  surrounding the particular  credit.  Provisions
for losses on the  remaining  commercial  and  commercial  real estate loans are
based  on  pools  of  similar  loans  using a  combination  of  historical  loss
experience and  qualitative  adjustments.  For the  residential  real estate and
consumer  loan  portfolios,  the range of  reserves  is  calculated  by applying
historical charge-off and recovery experience to the current outstanding balance
in each  loan  category.  Although  management  uses  available  information  to
establish  the  appropriate  level  of the  allowance  for loan  losses,  future
adjustments  to the  allowance  may be  necessary  based on  estimates  that are
susceptible  to change as a result of changes in economic  conditions  and other
factors and such  adjustments  may occur in the near term. In addition,  various
regulatory  agencies,   as  an  integral  part  of  their  examination  process,
periodically  review the Bank's  allowance  for loan losses.  Such  agencies may
require  the  Bank to  recognize  adjustments  to the  allowance  based on their
judgments about information available to them at the time of their examination.

Comparison  of the Results of Operations  for the Years Ended  December 31, 2002
and 2001

         General.  Net income for the year ended  December 31, 2002 was $669,500
($2.64  diluted  earnings per share)  compared to net income of $662,700  ($2.64
diluted  earnings per share) for the year ended  December 31, 2001. The increase
in net income was due to an increase in net  interest  income of $731,900 as the
Bank's  cost  of  funds  declined  significantly  in  the  lower  interest  rate
environment.  While the average yield on interest-earning  assets also declined,
it did not fall as sharply as the average  cost of funds.  Interest  income also
benefited from continued  growth in the loan  portfolio.  The improvement in net
interest income was offset by a decrease in other income of $20,200, an increase
in the provision for loan loss of $179,000 and an increase in other  expenses of
$524,200  Returns  on  average  assets and equity for 2002 were 0.79% and 9.42%,
respectively, compared to 0.89% and 10.58% in 2001.

         Net Interest Income.  The primary component of the Bank's net income is
its net interest income which is the difference  between income earned on assets
and interest  expense paid on the deposits and borrowings used to fund them. Net
interest  income is  determined  by the spread  between the yields earned on the
Bank's   interest-earning   assets  and  the  rates  paid  on   interest-bearing
liabilities as well as the relative amounts of such assets and liabilities.  Net
interest  income  divided by average  interest-earning  assets,  represents  the
Bank's net interest margin.

         For the year ended  December 31, 2002,  net interest  income  increased
$731,900,  or 25.7%,  compared to the prior year.  The  increase in net interest
income  reflects a dramatic  decrease in the Bank's average cost of funds in the
declining rate environment. While interest income decreased $6,200, or 0.1%, for
the year ended December 31, 2002, interest expense decreased $738,100, or 21.2%.
The effects of declining market rates are reflected in average yields and costs.
The Bank's average yield on interest-earning assets declined 111 basis points to
8.01% for 2002 from 9.12% for 2001 while the Bank's  average cost of liabilities
declined  172 basis  points to 4.03% in 2002 from 5.75% in 2001.  As a result of
these  movements in average  yields and costs,  the Bank's  interest rate spread
widened to 3.98% for 2002 compared to 3.37% in 2001. Helping to bolster interest
income was an  increase in average  interest-earning  assets of  $9,356,000,  or
13.7%,  to  $78,927,000  for the  year  ended  December  31,  2002  compared  to
$69,391,000  for the year

                                       19
<PAGE>

ended December 31, 2001. By  comparison,  average  interest-bearing  liabilities
only increased $7,652,000, or 12.6%, to $68,218,00 for 2002 from $60,566,000 for
2001. The Bank's net interest  margin widened to 4.22% for fiscal year 2002 from
4.10% for fiscal year 2001.

         During the year ended December 31, 2002, the Bank reported net interest
income,  before  provision  for loan  losses,  of  $3,576,000.  Interest  income
(consisting of $6,057,000 in interest and fees on loans, $211,000 in interest on
securities  and  $54,800 in  interest  on federal  funds sold and other  income)
totaled  $6,322,800  while interest  expense,  which  consisted of $2,208,100 in
interest  on  deposits  (including  $680,600  on  certificates  of deposit  over
$100,000), $306,100 in interest on federal funds purchased and Federal Home Loan
Bank  ("FHLB")  advances  and  $232,600 in interest  on capital  leases  totaled
$2,746,800.

         During the year ended December 31, 2001, the Bank reported net interest
income,  before  provision  for loan  losses,  of  $2,844,100.  Interest  income
(consisting of $5,977,300 in interest and fees on loans, $193,400 in interest on
securities  and  $158,300 in interest  on federal  funds sold and other  income)
totaled  $6,329,000  while interest  expense,  which  consisted of $3,094,200 in
interest  on  deposits  (including  $988,400  on  certificates  of deposit  over
$100,000), $225,400 in interest on federal funds purchased and FHLB advances and
$165,300 in interest on capital leases totaled $3,484,900.

                                       20

<PAGE>

          The following table provides  information  for the designated  periods
with respect to the average  balances,  income and expense and annualized yields
and costs  associated  with various  categories of  interest-earning  assets and
interest-bearing liabilities.

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31.
                                                               --------------------------------------------------------------------
                                                                            2002                                 2001
                                                               --------------------------------     -------------------------------
                                                                                        Average                             Average
                                                                Average                 Yield/      Average                 Yield/
                                                                Balance    Interest      Cost       Balance     Interest     Cost
                                                                -------    --------      ----       -------     --------     ----
                                                                                    (Dollars in thousands)
<S>                                                          <C>          <C>           <C>      <C>          <C>           <C>
Assets:
Interest-earning assets:
     Federal funds sold and other.....................         $  1,626     $    55        3.86%   $  3,641     $   157       4.31%
     Securities.......................................            4,832         211        4.37       3,021         195       6.45
     Loans held for sale..............................            1,380         131        9.49         751          61       8.12
     Loans, net of allowances (1).....................           71,089       5,926        8.34      61,978       5,916       9.55
                                                               --------     -------                --------     -------
          Total interest-earning assets...............           78,927       6,323        8.01      69,391       6,329       9.12
                                                               --------     -------                --------     -------
Non-interest-earning assets...........................            5,822                               4,772
                                                               --------                            --------
          Total assets................................         $ 84,749                            $ 74,163
                                                               ========                            ========
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
     Savings and NOW..................................         $  9,484       $ 207        2.18%     $6,321       $ 165       2.61%
     Money market.....................................            4,122         111        2.68       1,948          67       3.43
     Other time deposits..............................           45,302       1,890        4.17      46,241       2,862       6.19
FHLB advances.........................................            7,000         301        4.30       4,510         225       4.99
Federal funds purchased...............................              226           5        2.25          14           1       4.09
Capital lease obligations.............................            2,084         233       11.16       1,532         165      10.77
                                                               --------     -------                --------     -------
          Total interest-bearing liabilities..........           68,218       2,747        4.03      60,566       3,485       5.75
                                                                            -------                             -------
Non-interest-bearing deposits.........................            8,729                               6,566
Other liabilities.....................................              707                                 763
Stockholders' equity..................................            7,095                               6,268
                                                               --------                            --------
Total liabilities and equity..........................         $ 84,749                            $ 74,163
                                                               ========                            ========
Net interest income...................................                      $ 3,576                             $ 2,844
                                                                            =======                             =======
Net interest spread...................................                                     3.98%                              3.37%
                                                                                           ====                               ====
Net interest margin...................................                                     4.22%                              4.10%
                                                                                           ====                               ====
</TABLE>

------------
(1)  Includes non-accrual loans.

                                       21
<PAGE>

          The following  table  allocates  the changes in the  components of the
Bank's net interest  income  between the years ended December 31, 2002 and 2001.
For each category of interest income and interest expense, changes are allocated
to changes due to rate (prior year's average volume  multiplied by the change in
rate between periods) and changes due to volume (prior year's average rate times
change in volume between periods). Changes due to changes in rate/volume (change
in rate  times  change in volume)  are  allocated  between  change in volume and
change in rate in proportion to the absolute dollar amounts of each.

                                                    Year Ended December 31,
                                               ---------------------------------
                                                      2002 vs. 2001
                                               ---------------------------------
                                                                Change Due to:
                                                Increase/      ----------------
                                                Decrease       Rate      Volume
                                                --------       ----      ------
                                                       (In thousands)
Federal funds sold and other ...............    $  (103)    $   (35)    $   (68)
Investment securities ......................         17         (62)         79
Loans held for sale ........................         70          10          60
Loans, net of allowances ...................         10        (749)        759
                                                -------     -------     -------
     Total interest-earning assets .........         (6)       (836)        830
                                                -------     -------     -------

Deposits ...................................       (886)     (1,051)        165
FHLB advances ..............................         76         (31)        107
Federal funds purchased ....................          4           0           4
Capital lease obligations ..................         68           6          62
                                                -------     -------     -------
     Total interest-bearing liabilities ....       (738)     (1,076)        338
                                                -------     -------     -------
     Total .................................    $   732     $   240     $   492
                                                =======     =======     =======


         Provision  for Loan Losses.  The provision for loan losses for the year
ended  December 31, 2002 was  $361,800,  compared to $182,800 for the year ended
December  31,  2001.  Net  charge-offs  for the year  ended  December  31,  2002
increased  $276,100 to $377,700  (0.53% of average  loans)  compared to $101,600
(0.16%  of  average  loans)  during  the  year  ended  December  31,  2001.  The
charge-offs  for 2002  include  $175,000 for  charge-offs  taken on loans to one
family of borrowers and $40,000 of  charge-offs  taken on loans to one borrower.
The remainder of the increase  consists of  charge-offs  taken on several loans.
Management  determined that these borrowers would not have sufficient  resources
to repay the debt.  Management  believes that the increase in  charge-offs  is a
result of the maturing  loan  portfolio  and the  economic  slowdown in 2001 and
2002. The Company makes  provisions for loan losses in amounts deemed  necessary
to maintain the adequacy of the allowance for loan losses. At December 31, 2002,
the Company's allowance for loan losses was $690,800, or 0.90% of the gross loan
portfolio.

         Other  Income.  Other  income for the year ended  December 31, 2002 was
$730,900  compared to $751,100 for the year ended  December 31, 2001, a decrease
of $20,200,  or 2.7%.  Other income decreased due in large part to lower service
charges  and fees  during  2002  which  offset  higher  gains on sales of loans.
Service  charges and fees  decreased  to $434,700  from  $501,700 in 2001.  This
decrease was due to several  factors  including  matching  lower fees charged by
local  competition,  fewer  overdraft  charges,  and a large number of portfolio
loans  refinancing  in the prior year  resulting  in larger  service  charge fee
income in 2001.  Contributing  to the  decrease was a decline in credit life and
accident  insurance  income  during the current  year to $1,000 from  $21,000 in
2001. This decrease was partially  offset by an increase in net gains on sale of
loans from  $165,300  in 2001 to  $229,800  in 2002 and other  income  including
secondary  market service  charges and fees  decreased  slightly from $57,100 in
2001 to $56,000 in 2002,  reflecting the activity of the Bank's secondary market
loan division.  The Bank's secondary market activities have continued to benefit
from low  mortgage  rates  which have  contributed  to a high level of  mortgage
refinancing.  The Bank also  recognized  $9,400  in gain on sale of  investments
during fiscal year 2002.

                                       22
<PAGE>

         Other  Expenses.  Other  expenses for the year ended  December 31, 2002
were  $2,928,200  compared to $2,404,000  for the year ended  December 31, 2001.
Other expenses include salaries and employee benefits, advertising, professional
services, postage, telephone and supplies,  occupancy costs, directors' fees and
various other operational expenses.  The increases in other expenses reflect the
growth of the Bank.  Salaries and employee  benefits  increased  relative to the
increase in employees at the main office and branch  office from Bank growth and
the growth in the secondary  market  mortgage  loan division  which was added in
October,  2000.  Occupancy  expense  includes  land  rent  expense  in  2002  of
approximately  $81,200  related  to the main  office  and  branch  land  leases.
Equipment  expenses  increased  as the Bank  occupied  expansion  facilities  in
September,  2001  requiring  additional  capital  expenditures  and resulting in
increased  depreciation expense.  Other operating expenses increased due in part
to the Bank's  expansion and to an increase in expenses on repossessed  property
of $31,000.

         Income Tax Expense.  For the year ended  December 31, 2002,  income tax
expense was  $347,500  compared to $345,700  during  2001.  The  increase in tax
expense  during the 2002  period  was due to an  increase  in net income  before
taxes. The Company's  effective tax rates for 2002 and 2001 were essentially the
same at 34.2% and 34.3%, respectively. The Company provides for both the current
and  deferred  tax  effects  of  the  transactions  reported  in  its  financial
statements and established deferred tax assets and liabilities for the temporary
differences and established  financial reporting and tax bases of its assets and
liabilities.

Comparison of Financial Condition at December 31, 2002 and December 31, 2001

         The Company  continued to experience  steady asset growth during fiscal
year 2002. Total assets  increased by $15.6 million,  or 20.2%, to $92.5 million
at December  31, 2002 from $76.9  million at December 31,  2001.  The  Company's
asset growth is primarily  attributable  to growth in the Bank's loan  portfolio
which increased by $11.1 million,  or 17.2%,  from $64.6 million at December 31,
2001 to $75.7  million  at  December  31,  2002.  The Bank  also  increased  its
investment  portfolio  and federal  funds sold from $4.3 million at December 31,
2001 to $8.2 million at December 31, 2002 as part of the Bank's formal liquidity
plan.  Loans held for sale  increased by $300,000  from $1.4 million at December
31, 2001 to $1.7  million at December  31,  2002.  Funding for the Bank's  asset
growth came  primarily from the Bank's net income of $669,500 and an increase in
deposits of $15.3 million,  or 25.4%, from $60.2 million at December 31, 2001 to
$75.4  million at December  31,  2002.  Of this  increase,  $7.8  million was in
deposits other than  certificates of deposits.  The decrease in accrued interest
receivable and other assets of approximately $71,100 was partially  attributable
to a decrease in deferred tax assets of approximately $92,200. Also contributing
to the  decline,  was a decrease  in  accrued  interest  receivable  on loans of
$44,200  resulting  from a decrease in interest  rates from December 31, 2001 to
December 31, 2002. This decrease was partially  offset by an increase in federal
estimated  income  taxes  paid of $43,200  and an  increase  in other  assets of
$21,800.  The  decrease in accrued  interest  payable and other  liabilities  of
approximately $447,600 is primarily attributable to a decrease in federal income
taxes  payable  from  $336,000 at December  31, 2001 to no federal  income taxes
payable at December 31, 2002. The remainder of the decrease is due to a decrease
in accrued  interest  payable  resulting from a decline in interest rates on the
Bank's interest-bearing liabilities from December 31, 2001 to December 31, 2002.

         Management  projects  that the Bank will continue to meet its liquidity
needs  primarily  through  deposit growth and advances from the FHLB.  Short and
long-term advances,  secured by the Bank's qualifying residential loan portfolio
are available  from the FHLB,  should the need arise.  The Bank plans to explore
other sources of liquidity.

         Stockholders'  equity increased $797,700,  or 11.9%, to $7.5 million at
December 31, 2002 from $6.7 million at December  31, 2001  primarily  due to the
net income during the year, a $10,400 credit to surplus for compensation accrued
as the result of the  vesting of stock  options  and by the  issuance  of common
stock  totaling  $62,000 for the  settlement of directors'  fees in lieu of cash
payments.  Stockholders'  equity was increased by $55,800 in unrealized gains on
available-for-sale  securities,  net of tax benefits.  Average equity to average
assets was 8.37% for 2002 compared to 8.45% for 2001.

Asset/Liability Management

         Net interest income, the primary component of the Company's net income,
arises from the difference between the yield on interest-earning  assets and the
cost of interest-bearing liabilities and the relative amounts of such assets and
liabilities.  The Company manages its assets and liabilities by coordinating the
levels of and gap between  interest-rate  sensitive  assets and  liabilities  to
minimize  changes in net interest income and in the economic value of its

                                       23

<PAGE>

equity despite changes in market interest rates. The Bank's  Asset/Liability and
Risk Management Committee meets on a weekly basis to monitor compliance with the
Board's  objectives.  Among  other  tools used by the  Asset/Liability  and Risk
Management  Committee  to monitor  interest  rate risk is a "gap"  report  which
measures the dollar difference between the amount of interest-earning assets and
interest-bearing  liabilities  subject to repricing  within a given time period.
Generally,  during a period of rising  interest  rates,  a negative gap position
would adversely affect net interest income, while a positive gap would result in
an  increase  in net  interest  income,  while,  conversely,  during a period of
falling  interest  rates,  a negative  gap would  result in an  increase  in net
interest income and a positive gap would adversely affect net interest income.

         The following  table analyzes the Bank's  interest-rate  sensitivity at
December 31, 2002. The table  categorizes  the Bank's assets and  liabilities by
their maturity or earliest repricing opportunity.  For purposes of the table, it
is assumed that 53% of demand and 51% of savings  deposits  mature  within three
months with the remainder maturing within the one-to-five year period.

<TABLE>
<CAPTION>
                                                                                          Over 1
                                                                        Over 3 to         through        Over
                                                        0-3 Months      12 Months         5 Years      5 Years (1)      Total
                                                        ----------      ---------         -------      -----------      -----
                                                                                  (Dollars in thousands)
<S>                                                     <C>              <C>             <C>           <C>          <C>
Rate-Sensitive Assets:
     Federal funds sold and other...............           $ 3,883        $    --         $    --       $    --       $ 3,883
     Securities.................................                --             --           2,063         2,281         4,344
     Federal Home Loan Bank stock...............                --             --              --           389           389
     Federal Reserve stock......................                --             --              --            --           186
     Loans held for sale........................             1,733             --              --            --         1,733
     Loans......................................             5,693         12,949          42,758        14,267        75,667
                                                           -------        -------         -------       -------       -------
               Total rate-sensitive assets......            11,309         12,949          44,821        17,123        86,202
                                                           -------        -------         -------       -------       -------
     Cash and due from banks....................                --             --              --         2,462         2,462
     Fixed assets...............................                --             --              --         2,907         2,907
Other assets....................................                --             --              --           914           914
                                                           -------        -------         -------       -------       -------
               Total assets.....................           $11,309        $12,949         $44,821       $23,406       $92,485
                                                           =======        =======         =======       =======       =======

Rate-Sensitive Liabilities:
     Deposits:
          Demand................................           $ 5,195        $    --         $ 4,607       $    --       $ 9,802
          Savings...............................             3,865             --           3,713            --         7,578
          Time..................................             7,035         16,822          26,172            --        50,029
     Other borrowings...........................                 2          2,006              39         7,012         9,059
                                                           -------        -------         -------       -------       -------
               Total rate-sensitive liabilities.            16,097         18,828          34,531         7,012        76,468
                                                           -------        -------         -------       -------       -------
     Demand deposits............................                --             --              --         8,041         8,041
     Accrued and other liabilities..............                --             --              --           470           470
     Stockholders' equity.......................                --             --              --         7,506         7,506
                                                           -------        -------         -------       -------       -------
               Total liabilities and equity.....           $16,097        $18,828         $34,531       $23,029       $92,485
                                                           =======        =======         =======       =======       =======

GAP.............................................           $(4,788)       $(5,879)        $10,290       $10,111       $ 9,734
Cumulative GAP..................................            (4,788)       (10,667)           (377)        9,734
Cumulative GAP as of % of total assets..........             (5.18)%       (11.53)%         (0.41)%       10.52%
</TABLE>

-----------
(1)  Includes non-rate-sensitive assets.

         As seen in the preceding table, for the first 365 days 45.7% of funding
sources  are  estimated  to reprice  compared  to 28.1% of all  interest-earning
assets.  Changes  in the mix of earning  assets or  supporting  liabilities  can
either increase or decrease the net interest margin without  affecting  interest
rate sensitivity. In addition, the interest rate spread between an asset and its
supporting  liability can vary  significantly  while the timing of repricing for
both the asset and the liability  remains the same,  thus impacting net interest
income.  This  characteristic is referred to as

                                       24

<PAGE>

basis  risk  and  generally  relates  to  the  possibility  that  the  repricing
characteristics  of  short-term  assets tied to the Bank prime  lending rate are
different  from those of  short-term  funding  sources such as  certificates  of
deposit.

         Varying  interest rate  environments can create  unexpected  changes in
prepayment  levels of assets  and  liabilities  which are not  reflected  in the
interest  rate  sensitivity   analysis  report.   These   prepayments  may  have
significant effects on the Bank's exposure to changes in interest rates.

         The  preceding  table  indicates  that  the Bank is in a  liability  or
negative gap position at 0 to 12 months. This liability sensitive position would
generally  indicate that the Bank's net interest  income would  decrease  should
interest rates rise and would increase should interest rates fall. When the Bank
is in a positive  position  this would  generally  indicate  that the Bank's net
interest  income would  increase  should  interest rates rise and would decrease
should interest rates fall. Management  anticipates further narrowing the Bank's
cumulative  gap  position  due to loan  growth  increasing  relative  to deposit
growth. In controlling growth,  management  anticipates evaluating the condition
of the economy,  the pattern of market interest rates and other economic data to
determine  the  appropriate  mix and  repricing  characteristics  of assets  and
liabilities required to produce an optimal net interest margin.  Management also
anticipates  further  narrowing  of its  cumulative  gap position as a result of
managing its available  federal funds liquidity and FHLB advances.  Accordingly,
management  expects  only  minimal  sensitivity  to parallel  shifts in interest
rates.

Liquidity and Capital Resources

         The Company  currently has no business  other than that of the Bank and
does  not  currently  have  any  material  funding  commitments.  The  Company's
principal source of liquidity will be dividends received from the Bank. The Bank
is subject to various regulatory  restrictions on the payment of dividends.  The
Bank may not pay  dividends  in excess of its earnings for the current year plus
its retained earnings for the prior two fiscal years without the approval of the
Office of the Comptroller of the Currency.  In addition,  the Bank is prohibited
from paying dividends while it has a deficit in its retained earnings account.

         The Bank's  principal  sources of funds for  investments and operations
are net income, deposits from its primary market area, advances from the FHLB of
Cincinnati,  principal  and  interest  payments on loans,  interest  received on
investment  securities  and  federal  funds  purchased.  Its  principal  funding
commitments  are for the  origination  or  purchase  of loans,  the  payment  of
maturing  deposits,  principal and interest  payments on advances from FHLB, and
obligations  under  capital  leases for buildings  and  equipment.  Deposits are
considered  the  primary  source of funds  supporting  the  Bank's  lending  and
investment activities.

         The Bank's most liquid assets are cash and cash equivalents,  which are
cash on hand,  amounts due from financial  institutions,  federal funds sold and
money market mutual funds. The levels of such assets are dependent on the Bank's
operating financing and investment  activities at any given time. The variations
in levels of cash and cash  equivalents  are  influenced  by  deposit  flows and
anticipated future deposit flows.

         Cash and  cash  equivalents  (cash  due  from  banks,  interest-bearing
deposits  in other  financial  institutions,  and  federal  funds  sold),  as of
December 31, 2002, totaled $6.3 million compared to $3.0 million at December 31,
2001.  The Bank's  cash  flows  were  provided  mainly by  financing  activities
consisting  primarily  of  $15.3  million  from  deposit  increases.   Operating
activities  provided  $574,300  in cash.  The Bank used these cash flows for its
investing activities primarily to fund increases in gross loans of $11.6 million
and investment securities of $719,800, and for capital expenditures of $130,000.

         At December  31, 2002,  the Bank had  outstanding  commitments  to fund
loans in the amount of approximately $6.2 million, including outstanding standby
letters of credit of $204,800.  It is anticipated  that such commitments will be
funded from cash on hand, federal funds purchased,  FHLB borrowings,  and future
deposits increases.

                                       25

<PAGE>

Impact of Inflation and Changing Prices

         The  consolidated  financial  statements  and notes  thereto  presented
herein have been prepared in accordance with U.S. generally accepted  accounting
principles,  which generally  require the measurement of financial  position and
operating results in terms of historical dollars without considering the changes
in the relative  purchasing  power of money over time due to  inflation.  Unlike
most industrial  companies,  nearly all of the Company's  assets and liabilities
are monetary in nature. As a result, interest rates have a greater impact on the
Company's  performance  than do the  effects  of  general  levels of  inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the prices of goods and services.

Item 7. Financial Statements
----------------------------

         The Company's financial  statements are contained in this Annual Report
on Form 10-KSB immediately following Item 14.

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

         Not applicable.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
--------------------------------------------------------------------------------
        with Section 16(a) of the Exchange Act
        --------------------------------------

         Set forth  below is  information  about  the  directors  and  executive
officers and  significant  employees  of the Company.  The Board of Directors is
divided into three classes.  Directors serve for three-year terms with one class
of directors  standing for election each year. Each current  director has served
as a director of this Bank since its  organization in 1997 and became a director
of the Company upon its incorporation in 1999. Unless indicated  otherwise,  the
positions  stated for each  individual  are  positions  held in the Bank and the
positions stated are positions which are currently held and which have been held
for at least the past five years.

<TABLE>
<CAPTION>
                                                                                                       Current Term
Name                                      Age     Positions with the Company                             to Expire
----                                      ---     --------------------------                             ---------
<S>                                      <C>   <C>                                                      <C>
Robert E. Robbins, M.D.                    69     Chairman of the Board, Director of the Company           2005
                                                  and the Bank

Lawrence P. Calvert                        55     Chief Executive Officer, Director of the                 2004
                                                  Company and the Bank

Ronald J. Pence                            48     President, Director of the Company and the Bank          2003

Kevin D. Addington                         41     Director of the Company and the Bank                     2003

Henry Lee Chitwood                         58     Director of the Company and the Bank                     2003

Lois Watkins Gray                          66     Director of the Company and the Bank                     2004

William R. Hawkins                         47     Director of the Company and the Bank                     2004

Christopher G. Knight, M.D.                58     Director of the Company and the Bank                     2005

Allen McNutt                               60     Director of the Company and the Bank                     2005

Larry F. Witten                            48     Chief Lending Officer                                     --

Paula H. Gearon                            35     Controller and Chief Accounting Officer                   --
                                                  of the Company and the Bank

</TABLE>

                                       26

<PAGE>

         Robert  E.  Robbins,  M.D.  practices  general  surgery  with  Surgical
Specialists, PSC, in Elizabethtown, Kentucky. He is active in numerous local and
national medical  organizations.  In addition, Dr. Robbins is active in property
development in the Elizabethtown area. He has also served as a past president of
the  Elizabethtown  Lions  Club  and as a former  First  Vice  President  of the
Elizabethtown Chamber of Commerce.

         Lawrence P.  Calvert has served as the Chief  Executive  Officer of the
Bank  since its  opening  in  October  1997.  Mr.  Calvert  has over 28 years of
experience in banking in Hardin County. Most recently, Mr. Calvert served as the
Chief  Executive  Officer of The Cecilian  Bank, a $100 million  asset bank with
five  locations in Hardin  County.  Mr. Calvert joined The Cecilian Bank in 1973
and left that bank in January of 1997 in order to help  organize  the Bank.  Mr.
Calvert has various other business  interests in Hardin County and is serving as
Chairman and director of the Elizabethtown Chamber of Commerce.

         Ronald J. Pence has served as the President of the Bank since it opened
for  business in October  1997.  He has over 23 years of banking  experience  in
Hardin  County,  serving  most  recently as the Chief  Financial  Officer of The
Cecilian  Bank  which  he  joined  in 1978  and  left in 1997 to  assist  in the
formation  of the Bank.  Mr.  Pence has  numerous  business  interests in Hardin
County and is active in civic  affairs.  He  currently  serves as a director and
past President of the Elizabethtown Rotary Club.

         Kevin D. Addington is the President of Addington  Transportation,  Inc.
which owns and operates  warehouse and storage  facilities in the  Elizabethtown
area. Mr.  Addington is also the owner of Addington  Properties which is engaged
in property  leasing  and  management.  He is active in local civic  affairs and
serves as Administrative Board Chairman for the Cecilia United Methodist Church.

         Henry Lee Chitwood is a sales  executive  for Bean  Publishing  Co., an
office  equipment  and  furnishings  supplier.  Mr.  Chitwood  also has  various
property interests.

         Lois Watkins Gray recently retired as the Superintendent of Schools for
Hardin County,  a position which she had held since 1992. Ms. Gray had served as
an  educator  for ten years in Hardin  County.  She is also  active in state and
national educational and professional groups.

         William R. Hawkins is the founder and owner of Three Oaks Marketing and
Development which markets satellite television systems. Operating under the name
Starpath of Hardin County,  Mr. Hawkins'  company holds the rights for providing
DirecTV  programming for Hardin County. Mr. Hawkins is active in industry groups
and trade associations having held numerous posts in the Satellite  Broadcasting
and Communication  Association of America.  Mr. Hawkins is also a founder of the
T. Howard  Foundation,  an educational  foundation,  promoting  opportunity  for
minorities and people of color, on whose board of directors he currently serves.

         Christopher  G.  Knight,  M.D. is an  ophthalmologist  practicing  with
Knight & Smith, PSC in  Elizabethtown,  Kentucky.  He also has other diversified
business interests in local medical, media and real estate. Dr. Knight is active
in local medical and civic organizations. He serves on the Board of Directors of
Wesley Hilltop House.

         Allen McNutt is the owner and operator of McNutt Construction  Company,
a general construction firm engaged in commercial and industrial  renovation and
new  construction.  Mr. McNutt has been engaged in construction and construction
contracting  in Hardin County for nearly 30 years.  Mr.  McNutt's other business
interests include part ownership of the Hardin County Independent  newspaper and
local real estate investments.  Mr. McNutt is also active in various local civic
organizations and professional groups.

         Larry F. Witten serves as the Bank's Chief Lending Officer.  Mr. Witten
has extensive  local banking  experience in Hardin County.  Prior to joining the
Bank, Mr. Witten served as the Chief  Financial  Officer of The Cecilian Bank, a
position he had held since May 1996.  Before  joining  The  Cecilian  Bank,  Mr.
Witten had served as Vice President - Commercial  and Mortgage  Lending for Bank
One in Hardin  County.  Mr.  Witten  had been  affiliated  with Bank One and its
predecessors in various capacities for over ten years.

                                       27

<PAGE>

         Paula H. Gearon  joined the Bank in 2001 and was  appointed  Controller
and Chief Accounting Officer in 2002. She also serves as  Secretary/Treasurer of
the Company and Cashier of the Bank.  Prior to joining the Bank,  Ms. Gearon was
the staff  accountant at Communicare,  Inc., a non-profit  community  healthcare
center,  and prior to that, she was with the accounting firm of Whelan,  Doerr &
Co. Ms. Gearon is a certified public accountant.

Item 10.  Executive Compensation
--------------------------------

         Summary Compensation Table. The following table sets forth the cash and
noncash  compensation awarded to or earned by the Chief Executive Officer of the
Company and the Bank and by each executive officer whose salary and bonus earned
in fiscal year 2002 exceeded $100,000 for services rendered in all capacities to
the Company and its subsidiaries (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                                                                 Long-Term
                                                Annual Compensation         Compensation Awards
                                                -------------------         -------------------
                                                                            Restricted    Securities
                                                              Other Annual    Stock       Underlying      All Other
Name and Principal Position      Year       Salary    Bonus   Compensation   Award(s)      Options      Compensation
---------------------------      ----       ------    -----   ------------   --------      -------      ------------
<S>                            <C>     <C>        <C>        <C>            <C>           <C>          <C>
Lawrence P. Calvert              2002    $ 127,500  $  --      $    --        $    --          --        $ 7,895 (1)
Chief Executive Officer          2001      122,500     --           --             --          --          8,095
                                 2000      115,000     --           --             --       4,500          7,003

Ronald J. Pence                  2002    $ 127,500  $  --      $    --        $    --          --        $ 6,735 (2)
President                        2001      122,500     --           --             --          --          6,935
                                 2000      115,000     --           --             --       4,500          6,616

</TABLE>

-----------------
(1)  Mr.  Calvert's "Other  Compensation"  consisted of $1,895 in paid term life
     insurance premiums and $6,000 in deferred director fees for 2002.
(2)  Mr.  Pence's  "Other  Compensation"  consisted  of $735 in paid  term  life
     insurance premiums and $6,000 in deferred director fees for 2002.

         Option Year-End Value Table. The following table sets forth information
concerning the value of options held by the Named Executive  Officers at the end
of fiscal year 2002. No options were exercised during fiscal year 2002.  Options
are  considered  in-the-money  if  the  fair  market  value  of  the  underlying
securities  exceeds the exercise  price.  Neither Mr.  Calvert's nor Mr. Pence's
options were in-the-money at December 31, 2002.

<TABLE>
<CAPTION>
                               Number of Securities        Value of Unexercised
                              Underlying Unexercised       In-The-Money Options
                               Options at Year-End             At Year-End(1)
                               -------------------             --------------
Name                       Exercisable    Unexercisable   Exercisable   Unexercisable
----                       -----------    -------------   -----------   -------------
<S>                         <C>             <C>             <C>            <C>
Lawrence P. Calvert           10,500            --            $ --           $ --
Ronald J. Pence               10,500            --            $ --           $ --
</TABLE>

-------------
(1)  Value based on difference  between  exercise  price and market value of the
     Common Stock underlying options at year end.

Director Compensation

         Directors do not receive  separate  compensation  for their services on
the Company's  Board of Directors.  Directors of the Bank are paid a retainer of
$500 a month for each month in which  there is only one board  meeting  and $700
per month for any month in which there is more than one  meeting.  Directors  do
not receive any additional fees for committee meetings.

         Under the Kentucky  National  Bancorp,  Inc. Director Fee Deferral Plan
(the "Director Plan"),  directors may elect to receive shares of Common Stock in
lieu of cash fees for their  service.  In order to  participate  in the Director
Plan,  directors  must agree to defer receipt of all or a portion of their Board
fees and will be entitled to receive  shares of Common  Stock with a fair market
value equal to the fees  deferred.  Shares are  distributed  annually as soon as
practicable  after

                                       28

<PAGE>

the calendar year for which shares have been earned.  Upon shareholder  approval
of the Director  Plan,  each director  received 644 shares for all director fees
that had been deferred  through  December 31, 1999. Each director has elected to
participate in the Director Plan and is eligible to receive 240 shares of Common
Stock for fees deferred during 2002.

         Pursuant to the Kentucky National  Bancorp,  Inc. 2000 Stock Option and
Incentive Plan (the "Option Plan"), each non-employee  director received options
to acquire 1,000 shares of Common Stock at an exercise price of $25.00 per share
during fiscal year 2000.

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

         (a) Security  Ownership of Certain  Beneficial  Owners.  The  following
table sets forth information  regarding all persons known to the Company to have
beneficially owned more than 5% of the Company's Common Stock as of December 31,
2002.

<TABLE>
<CAPTION>
                                                                                           Percent of
                                                                                           Shares of
         Name and Address                                Amount and Nature of             Common Stock
         of Beneficial Owner                            Beneficial Ownership(1)          Outstanding(2)
         -------------------                            -----------------------          --------------
<S>                                                        <C>                            <C>
         Robert E. Robbins                                     16,332(3)                      6.47%
         P.O. Box 2089
         Elizabethtown, Kentucky 42701

         Lawrence P. Calvert                                   18,141(4)                      6.93
         1000 North Dixie Avenue
         Elizabethtown, Kentucky 42701

         Ronald J. Pence                                       24,140(5)                      9.22
         1000 North Dixie Avenue
         Elizabethtown, Kentucky 42701

         Kevin D. Addington                                    14,641                         5.80
         701 W. Park Road
         Elizabethtown, Kentucky 42701

         Christopher G. Knight                                 14,640                         5.80
         1109 Woodland Drive
         Elizabethtown, Kentucky 42701

         Larry F. Witten                                       17,690(6)                      6.81
         1000 North Dixie Avenue
         Elizabethtown, Kentucky 42701

         Allen McNutt                                          14,640(7)                      5.80
         109 Gaither Station Road
         Elizabethtown, Kentucky 42701
</TABLE>

---------------
(1)  For purposes of this table, a person is deemed to be the  beneficial  owner
     of any  shares  of  Common  Stock  if he or she  has or  shares  voting  or
     investment  power  with  respect  to such  Common  Stock  or has a right to
     acquire  beneficial  ownership  at any time  within 60 days from the Record
     Date.  As used  herein,  "voting  power" is the power to vote or direct the
     voting of shares and  "investment  power" is the power to dispose or direct
     the  disposition  of shares.  Includes  1,000  shares which each of Messrs.
     Robbins,  Addington,  Knight  and  McNutt  each have the right to  acquire,
     10,500  shares  which each of Messrs.  Calvert  and Pence have the right to
     acquire and 8,500 shares which Mr. Witten has the right to acquire pursuant
     to the exercise of options. Except as otherwise noted, ownership is direct,
     and the named persons  exercise sole voting and  investment  power over the
     shares of the Common Stock.

                                       29
<PAGE>

(2)  In  calculating  the  percentage  ownership of an individual or group,  the
     number of shares  outstanding  is deemed to include  any  shares  which the
     individual or group may acquire  through the exercise of options  within 60
     days of the Record Date.
(3)  Includes  12,000 shares held in his Individual  Retirement  Account ("IRA")
     and 2,440 shares held in a partnership of which he is the general partner.
(4)  Includes 6,000 shares held in his IRA.
(5)  Includes 6,566 shares held in his IRA.
(6)  Includes 9,190 shares held jointly.
(7)  Includes 12,748 shares held jointly.

         (b) Security  Ownership of  Management.  The following  table  provides
information as of December 31, 2002 concerning ownership of the Company's Common
Stock  (which  constitutes  its only  class of  equity  securities)  each of its
directors, the Named Executive Officers and all executive officers and directors
as a group. Each person listed has sole voting and investment power with respect
to the shares listed across from his name except as noted otherwise.

<TABLE>
<CAPTION>
                                                                  Beneficial Ownership(1)
                                                          ----------------------------------------
                                                                                    Percentage of
                                                                                       Shares
               Name                                        Number of Shares        Outstanding(2)
               ----                                        ----------------        --------------
<S>                                                     <C>          <C>         <C>
               Robert E. Robbins, M.D.                      16,332     (3)           6.47%

               Lawrence P. Calvert                          18,141     (4)           6.93

               Ronald J. Pence                              24,140     (5)           9.22

               Kevin D. Addington                           14,461                   5.80

               Henry Lee Chitwood                            8,640     (6)           3.42

               Lois Watkins Gray                             5,640     (7)           2.23

               William R. Hawkins                            8,332                   3.30

               Christopher G. Knight, M.D.                  14,640     (8)           5.80

               Allen McNutt                                 14,640     (8)           5.80

               All directors and                           142,854     (9)          49.62
               executive officers as a
               group (11 persons)
</TABLE>

---------------
(1)  For definition of beneficial ownership, see footnote 1 to the table in Item
     11(a) of this Annual  Report on Form  10-KSB.  Except as  otherwise  noted,
     ownership  is direct and the named  person has sole  voting and  investment
     power. Includes 10,500 shares which each of Messrs.  Calvert and Pence have
     the right to acquire  pursuant to the  exercise of options and 1,000 shares
     which each director  other than Messrs.  Calvert and Pence has the right to
     acquire pursuant to the exercise of options.
(2)  In  calculating  percentage  ownership  for a given  individual or group of
     individuals,  the number of shares of the Common Stock outstanding includes
     unissued shares subject to options  exercisable  within 60 days of December
     31, 2002 held by that individual or group.
(3)  Includes  12,000  shares  held  in his  IRA  and  2,440  shares  held  by a
     partnership of which he is the general partner.
(4)  Includes 6,000 shares held in his IRA.
(5)  Includes 6,566 shares held in his IRA.
(6)  Includes 6,748 shares held jointly.
(7)  Includes 3,748 shares held jointly.
(8)  Includes 12,748 shares held jointly.
(9)  Includes  36,500 shares which  directors  and  executive  officers have the
     right to acquire pursuant to the exercise of options.


         (c)      Changes in Control. Not applicable.

                                       30

<PAGE>

         (d) Securities Authorized for Issuance Under Equity Compensation Plans.
The following table sets forth certain information with respect to the Company's
equity compensation plans.

<TABLE>
<CAPTION>
                                                                                                     Number of securities
                                                                                                      remaining available
                                         Number of securities            Weighted-average             for future issuance
                                           to be issued upon              exercise price           under equity compensation
                                        exercise of outstanding           of outstanding          plans (excluding securities
                                      options, warrants & rights    options, warrants & rights    reflected in first (column)
                                      --------------------------    --------------------------    ---------------------------
<S>                                         <C>                           <C>                            <C>
Equity compensation plans
   approved by securities holders               40,000                        $25.00                         6,000

Equity compensation plans not
   approved by securities holders                  n/a                           n/a                           n/a
                                                ------                        ------                         -----

   Total...........................             40,000                        $25.00                         6,000
                                                ======                        ======                         =====
</TABLE>

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

         From time to time,  it is expected that the Bank will engage in banking
transactions  with its directors,  officers and their associates in the ordinary
course of business.  At December 31, 2002, $1,119,900 of loans were outstanding.
Loans to  directors  and  executive  officers  will only be made in the ordinary
course of business of the Bank and on  substantially  the same terms,  including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions  with other  persons and will not involve more than the normal risk
of collectibility or present other unfavorable features.

         The Bank  leases its main  office from  Kentucky  National  Properties,
L.L.C. ("KNP"), a limited liability company in which each of the directors has a
10%  ownership  interest.  During 2002,  the Bank paid KNP $270,000 in rent.  In
September 2001, the Bank began occupying a new addition to the main office which
was also built by KNP and entered into a new lease agreement for the entire main
office complex. The monthly rental under the new lease is $22,500 per month with
provision for annual  increase based on the percentage  increase in the Consumer
Price Index.  The lease also provides that the Bank shall be responsible for all
real  estate  property  taxes  during the term of the lease.  The lease is for a
ten-year term with four successive renewal options of ten years each. During the
term of the lease and any renewals thereof,  the premises may only be used for a
bank or banking  institution  unless the prior written consent of the lessor has
been received.

Item 13. Exhibits List and Reports on Form 8-K
----------------------------------------------

         (a) Exhibits List.  The following  exhibits are either filed as part of
             -------------
this Annual Report on Form 10-KSB or incorporated herein by reference:

         No.      Description
         ---      -----------
<TABLE>
<CAPTION>
     <S>       <C>
         3.1      Articles of Incorporation *
         3.2      Bylaws *
         4        Form of Common Stock Certificate *
         10.1     Restrictive Stock Transfer Agreement *
         10.2     Organizational Stock Option and Incentive Plan +**
         10.3     Lease Agreement,  dated September 1, 2001,  between Kentucky  National  Properties,  L.L.C. and Kentucky National
                  Bank***
         10.4     Kentucky National Bancorp, Inc. 2000 Stock Option and Incentive Plan +****
         10.5     Kentucky National Bancorp, Inc. Director Fee Deferral Plan +****
         21       Subsidiaries of the Registrant
         23       Consent of EKW & Associates, llp
         99.1     Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002

</TABLE>

                                       31

<PAGE>

----------------------
*    Incorporated by reference from the Registrant's  Registration  Statement on
     Form S-4 (File No. 333-72371).
**   Incorporated by reference from Registrant's  Post-Effective Amendment No. 1
     to Registration Statement on Form S-8 (File No. 333-72371).
***  Incorporated  by  reference  from the  Registrant's  Annual  Report on Form
     10-KSB for the Year Ended December 31, 2001.
**** Incorporated by reference from Registrant's  Registration Statement on Form
     S-8 (File No. 333-41676).

+    Management or compensatory plan required to be filed as an exhibit.


         (b)  Reports  on Form 8-K.  No  current  reports on Form 8-K were filed
              --------------------
during the last quarter of the fiscal year covered by this report.

Item 14. Controls and Procedures
--------------------------------

         The Company's Chief Executive  Officer and Chief Financial Officer have
evaluated  the Company's  disclosure  controls and  procedures  (as such term is
defined in Rule 13a-14(d) under the Exchange Act) as of a date within 90 days of
the date of  filing  of this  Form  10-KSB.  Based  upon  such  evaluation,  the
Company's  Chief Executive  Officer and Chief  Financial  Officer have concluded
that such controls and procedures  are effective to ensure that the  information
required  to be  disclosed  by the  Company in the  reports  it files  under the
Exchange Act is gathered, analyzed and disclosed with adequate timeliness.

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of the evaluation described above.


                         KENTUCKY NATIONAL BANCORP, INC.

                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

                                                                            Page
                                                                            ----

Independent Auditor's Report..............................................   F-1

Consolidated Statements of Condition......................................   F-2

Consolidated Statements of Income.........................................   F-3

Consolidated Statements of Changes in Stockholder's Equity................   F-5

Consolidated Statements of Cash Flows.....................................   F-6

Notes to Consolidated Financial Statements................................   F-8

                                       32
<PAGE>
                       [EKW & ASSOCIATES, LLP LETTERHEAD]

                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
Kentucky National Bancorp, Inc. and Subsidiary
Elizabethtown, Kentucky


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

We conducted  our audits in accordance  with U.S.  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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 Kentucky National
Bancorp,  Inc. and  Subsidiary as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for the years then ended, in conformity
with U.S. generally accepted accounting principles.



/s/ EKW & Associates, llp
-------------------------------------
Owensboro, Kentucky
February 6, 2003


                                      F-1

<PAGE>



                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CONDITION

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                                   December 31
                                                           -------------------------
                                                               2002          2001
                                                           ------------  -----------
<S>                                                        <C>           <C>

                              ASSETS

Cash and due from banks                                    $ 2,461,512   $ 2,211,755
Federal funds sold                                           3,882,452       788,000
Investment securities available-for-sale                     4,344,247     3,540,810
Loans held for sale                                          1,733,025     1,370,740
Loans, net                                                  75,667,068    64,589,393
Federal Home Loan Bank Stock, at cost                          388,900       355,800
Federal Reserve Stock, at cost                                 186,000       176,650
Premises and equipment, net                                  2,907,171     3,031,510
Foreclosed assets                                              127,060             -
Accrued interest receivable and other assets                   787,104       858,240
                                                           -----------   -----------

     Total assets                                          $92,484,539   $76,922,898
                                                           ===========   ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Deposits                                                 $75,449,900   $60,186,450
  Federal Home Loan Bank advances                            7,000,000     7,000,000
  Obligations under capital leases                           2,058,829     2,110,760
  Accrued interest payable and other
    liabilities                                                470,219       917,778
                                                           -----------   -----------

     Total liabilities                                      84,978,948    70,214,988
                                                           -----------   -----------

Commitments and contingent liabilities                               -             -
                                                           -----------   -----------

Stockholders' equity:
  Preferred stock, $.01 par value;
    authorized 1,000,000 shares                                      -             -
  Common stock, $.01 par value:
    authorized, 5,000,000 shares; issued and
    outstanding, 251,400 and 248,920 shares
    at December 31, 2002 and 2001,
    respectively                                                 2,514         2,489
  Surplus                                                    5,607,078     5,534,703
  Retained earnings                                          1,808,476     1,138,946
  Accumulated other comprehensive
    income                                                      87,523        31,772
                                                           -----------   -----------

     Total stockholders' equity                              7,505,591     6,707,910
                                                           -----------   -----------

     Total liabilities and stockholders'
       equity                                              $92,484,539   $76,922,898
                                                           ===========   ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       F-2
<PAGE>


                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

                     Years ended December 31, 2002 and 2001


<TABLE>
<CAPTION>
                                                             December 31
                                                     --------------------------
                                                         2002           2001
                                                     -----------    -----------
<S>                                                <C>            <C>
Interest and dividend income:
  Loans, including fees                              $ 6,057,029    $ 5,977,291
  Securities                                             210,970        193,351
  Federal funds sold and other                            54,751        158,319
                                                     -----------    -----------

     Total interest and dividend income                6,322,750      6,328,961
                                                     -----------    -----------

Interest expense:
  Deposit accounts                                     1,527,531      2,105,817
  Certificates of deposit over $100,000                  680,565        988,399
  Federal funds purchased                                  5,110            564
  Federal Home Loan Bank advances                        300,987        224,796
  Capital leases                                         232,564        165,293
                                                     -----------    -----------

     Total interest expense                            2,746,757      3,484,869
                                                     -----------    -----------

     Net interest income                               3,575,993      2,844,092

Provision for loan losses                                361,750        182,800
                                                     -----------    -----------

     Net interest income after provision
       for loan losses                                 3,214,243      2,661,292
                                                     -----------    -----------

Other income:
  Service charges and fees                               434,684        501,717
  Credit life and accident insurance                       1,033         20,972
  Net gain on sale of loans                              229,820        165,263
  Gain on sale of other real estate owned                      -          6,063
  Gain on sale of investments                              9,420              -
  Other income                                            56,024         57,126
                                                     -----------    -----------

                                                         730,981        751,141
                                                     -----------    -----------
Other expenses:
  Salaries and employee benefits                       1,457,786      1,211,655
  Data processing                                        220,934        199,346
  Net occupancy expense                                  224,353        180,110
  Advertising                                            128,739         99,124
  Postage, telephone and supplies                        133,201        132,651
  Directors fees                                          54,000         55,800
  Bank franchise tax                                      92,637         77,992
  Equipment expense                                      187,706        123,310
  Insurance expense                                        7,734          8,395
  Professional services                                  144,204        131,890
  Other operating expenses                               276,900        183,733
                                                     -----------    -----------

                                                       2,928,194      2,404,006
                                                     -----------    -----------
</TABLE>


                                    Continued

                                       F-3

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF INCOME, Continued

                     Years ended December 31, 2002 and 2001


<TABLE>
<CAPTION>
                                                December 31
                                         -------------------------
                                              2002          2001
                                         -----------   -----------

<S>                                    <C>           <C>
     Income before income taxes          $ 1,017,030   $ 1,008,427

Income tax expense                           347,500       345,722
                                         -----------   -----------

     Net income                          $   669,530   $   662,705
                                         ===========   ===========

Earnings per share:
  Basic                                  $      2.67   $      2.67
                                         ===========   ===========

  Diluted                                $      2.64   $      2.64
                                         ===========   ===========
</TABLE>





          See accompanying notes to consolidated financial statements.

                                       F-4


<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                     Years ended December 31, 2002 and 2001


<TABLE>
<CAPTION>

                                                                          Accumu-
                                                                           lated
                                                                           Other
                              Common Stock                                Compre-     Compre-
                       ---------------------                   Retained   hensive     hensive
                        Shares       Amount      Surplus       Earnings    Income      Income        Total
                       ---------   ---------   -----------    ----------  --------   ----------   -----------
<S>                   <C>        <C>        <C>            <C>         <C>         <C>        <C>

Balances,
 December 31, 2000      246,440    $   2,464   $ 5,441,528    $  476,241  $ 13,460                $ 5,933,693

Incentive stock
 option plan                  -            -        31,200             -         -                     31,200

Issuance of stock         2,480           25        61,975             -         -                     62,000

Net income                    -            -             -       662,705         -    $ 662,705       662,705

Other comprehen-
 sive income, net
 of tax:

  Unrealized gains
  on securities
  available-for-
  sale net of re-
  classification
  adjustment                  -            -             -             -    18,312       18,312        18,312
                       --------    ---------   -----------    ----------  --------   ----------   -----------

Comprehensive
 income                                                                               $ 681,017
                                                                                     ==========

Balances,
 December 31, 2001      248,920        2,489     5,534,703     1,138,946    31,772                  6,707,910

Incentive stock
  option plan                 -            -        10,400             -         -                     10,400

Issuance of stock         2,480           25        61,975             -         -                     62,000

Net income                    -            -             -       669,530         -    $ 669,530       669,530

Other comprehen-
 sive income, net
 of tax:

  Unrealized gains
  on securities
  available-for-
  sale net of re-
  classification
  adjustment                  -            -             -             -    55,751       55,751        55,751
                       --------    ---------   -----------    ----------  --------   ----------   -----------

Comprehensive
 Income                                                                              $  725,281
                                                                                     ==========

Balances,
 December 31, 2002       251,400    $  2,514   $ 5,607,078    $1,808,476  $ 87,523               $  7,505,591
                       =========   =========   ===========    ==========  ========               ============


</TABLE>



          See accompanying notes to consolidated financial statements.

                                       F-5


<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                           December 31,
                                                   ----------------------------
                                                       2002            2001
                                                   ------------    ------------
<S>                                              <C>             <C>
Cash flows from operating activities:
  Net income                                       $   669,530     $   662,705
  Adjustments to reconcile net income
      to net cash provided by operating
      activities:
    Provision for loan losses                          361,750         182,800
    Depreciation, amortization and
      accretion, net                                   240,424         153,040
    Federal Home Loan Bank stock dividend              (17,100)        (21,700)
    Incentive stock option compensation                 10,400          31,200
    Deferred income taxes                               63,513           9,667
    Gain on sale of other real estate owned                  -          (6,063)
    Gain on sale of available-for-sale
      investments                                       (9,420)              -
    Loss on disposal of fixed assets                    24,115               -
  Net change in:
      Loans held for sale                             (362,285)     (1,112,205)
      Accrued interest receivable and other
        assets                                         (21,097)         24,095
      Accrued interest payable and other
        liabilities                                   (385,559)        348,065
                                                   -----------     -----------

          Net cash provided by operating
            activities                                 574,271         271,604
                                                   -----------     -----------

Cash flows from investing activities:
  Purchase of available-for-sale securities         (3,580,885)     (2,492,500)
  Proceeds from sale of available-for-sale
    securities                                       1,003,125               -
  Proceeds from maturities of available-for-
    sale securities                                  1,857,934       2,000,000
  Purchases of Federal Home Loan Bank stock            (16,000)        (48,200)
  Purchase of Federal Reserve Bank stock                (9,350)        (24,350)
  Proceeds from sale of other real estate
    owned                                               31,233           4,000
  Net increase in loans                            (11,597,718)     (6,690,244)
  Purchases of premises and equipment                 (129,920)       (361,107)
                                                   -----------     -----------

          Net cash used in investing
            activities                             (12,441,581)     (7,612,401)
                                                   -----------     -----------

Cash flows from financing activities:
  Net increase in deposits                          15,263,450       1,511,045
  Payments on capital lease obligations                (51,931)        (49,252)
  Federal Home Loan Bank advances                            -       7,000,000
                                                   -----------     -----------

Net cash provided by financing activities           15,211,519       8,461,793
                                                   -----------     -----------
</TABLE>




                                    Continued


                                       F-6

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                          December 31,
                                                   --------------------------
                                                       2002           2001
                                                   -----------    -----------
<S>                                              <C>            <C>
Net increase in cash and cash
  equivalents                                      $ 3,344,209    $ 1,120,996

Cash and cash equivalents, beginning of year         2,999,755      1,878,759
                                                   -----------    -----------

Cash and cash equivalents, end of year             $ 6,343,964    $ 2,999,755
                                                   ===========    ===========

Supplemental disclosures:

  Cash paid for interest                           $ 2,870,743    $ 3,545,405
                                                   ===========    ===========

  Cash paid for income taxes                       $   665,598    $         -
                                                   ===========    ===========

Noncash investing and financing
  transactions:

  Total increase in unrealized gain on
    securities available-for-sale                  $    84,471    $    27,744
                                                   ===========    ===========

  Loans transferred to other real
    estate owned                                   $   220,304    $    22,813
                                                   ===========    ===========

  Loans to facilitate the sale of other real
    estate owned                                   $    62,011    $    24,876
                                                   ===========    ===========
</TABLE>


During the years ended  December  31, 2002 and 2001,  the Company  issued  2,480
shares of common  stock,  in lieu of cash  payments for accrued  directors'  and
counsel's  fees  in the  amount  of  $62,000,  in  accordance  with  a  deferred
compensation plan approved by the stockholders on April 25, 2000.

During 2001, the Bank recorded an asset and  obligation for a building  addition
under lease financing arrangements in the aggregate amount of $899,530.




          See accompanying notes to consolidated financial statements.

                                       F-7

<PAGE>


                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES

     The following is a description of the more significant  accounting policies
     which Kentucky  National  Bancorp,  Inc. and Subsidiary follow in preparing
     and presenting their financial statements.

     A.   Business

          Kentucky  National  Bank (the Bank) is a wholly  owned  subsidiary  of
          Kentucky  National  Bancorp,  Inc. (the Company),  a one-bank  holding
          company,  and provides a full range of banking  services to individual
          and corporate customers  primarily in Hardin County,  Kentucky and the
          surrounding  area.  The Bank is  subject  to  competition  from  other
          financial  institutions.  The Bank is also subject to bank regulations
          and undergoes periodic examination by bank regulators.

     B.   Basis of Presentation

          The  consolidated  financial  statements  include the  accounts of the
          Company  and  the  Bank.  All  material   intercompany   balances  and
          transactions have been eliminated in consolidation.

     C.   Use of Estimates

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

          Material  estimates that are  particularly  susceptible to significant
          change  relate to the  determination  of the  allowance  for losses on
          loans and the  valuation of real estate  acquired in  connection  with
          foreclosures  or in  satisfaction  of loans.  In  connection  with the
          determination  of the  allowances  for losses on loans and  foreclosed
          real estate, management obtains independent appraisals for significant
          properties.

     D.   Investment Securities

          Debt  securities that management has the ability and intent to hold to
          maturity  are  classified  as  held-to-maturity  and  carried at cost,
          adjusted for amortization of premiums and accretion of discounts using
          the interest  method.  Other  marketable  securities are classified as
          available-for-sale and are carried at fair value. Unrealized gains and
          losses  on  securities  available-for-sale  are  recognized  as direct
          increases or decreases in  stockholders'  equity.  Cost of  securities
          sold is recognized using the specific identification method.



                                    Continued

                                        F-8

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     E.   Mortgage-backed Securities

          Mortgage-backed  securities represent participating interests in pools
          of long-term  first mortgage loans  originated and serviced by issuers
          of the  securities.  Mortgage-backed  securities are carried at unpaid
          principal  balances,  adjusted for  unamortized  premiums and unearned
          discounts.   Premiums  and  discounts  are  amortized   using  methods
          approximating  the  interest  method  over  the  remaining  period  to
          contractual maturity, adjusted for anticipated prepayments. Management
          has classified such securities as available-for-sale. Unrealized gains
          and losses are, therefore, recognized as direct increases or decreases
          in stockholders' equity.

     F.   Loans Held-for-Sale

          Mortgage  loans  originated  and  intended  for sale in the  secondary
          market are carried at the lower of cost or  estimated  market value in
          the aggregate. Net unrealized losses, if any, are recognized through a
          valuation allowance by charges to income.

     G.   Loans

          The Bank grants mortgage,  commercial and consumer loans to customers.
          A substantial portion of the loan portfolio is represented by mortgage
          loans primarily in Hardin County,  Kentucky and the surrounding  area.
          The  ability  of the  Bank's  debtors  to  honor  their  contracts  is
          dependent upon the real estate and general economic conditions in this
          area.

          Loans  that  management  has the  intent  and  ability to hold for the
          foreseeable future or until maturity or pay-off generally are reported
          at  their   outstanding   unpaid  principal   balances   adjusted  for
          charge-offs,  the allowance for loan losses,  and any deferred fees or
          costs on originated  loans.  Interest  income is accrued on the unpaid
          principal balance.

          The  accrual  of  interest  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.  Personal 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.

          All interest  accrued but not  collected  for loans that are placed on
          nonaccrual or charged off is reversed  against  interest  income.  The
          interest  on  these  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.


                                    Continued

                                        F-9

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     H.   Allowance for Credit Losses

          The allowance for loan losses is  established  as losses are estimated
          to have  occurred  through a  provision  for loan  losses  charged  to
          earnings.   Loan  losses  are  charged   against  the  allowance  when
          management  believes  the   uncollectibility  of  a  loan  balance  is
          confirmed.   Subsequent  recoveries,  if  any,  are  credited  to  the
          allowance.

          The  allowance  for loan  losses is  evaluated  on a regular  basis by
          management  and is based  upon  management's  periodic  review  of the
          collectibility  of the loans in light of  historical  experience,  the
          nature and volume of the loan portfolio,  adverse  situations that may
          affect  the  borrower's  ability  to  repay,  estimated  value  of any
          underlying   collateral  and  prevailing  economic  conditions.   This
          evaluation is inherently  subjective as it requires estimates that are
          susceptible  to  significant  revision  as  more  information  becomes
          available.

          A loan is considered  impaired when, based on current  information and
          events,  it is  probable  that the Bank will be unable to collect  the
          scheduled  payments of principal or interest when due according to the
          contractual  terms  of  the  loan  agreement.  Factors  considered  by
          management  in  determining   impairment   include   payment   status,
          collateral   value,  and  the  probability  of  collecting   scheduled
          principal  and  interest  payments  when due.  Loans  that  experience
          insignificant  payment delays and payment shortfalls generally are not
          classified as impaired.  Management  determines  the  significance  of
          payment delays and payment shortfalls on a case-by-case  basis, taking
          into  consideration all of the circumstances  surrounding the loan and
          the borrower,  including the length of the delay,  the reasons for the
          delay,  the  borrower's  prior payment  record,  and the amount of the
          shortfall in relation to the principal and interest  owed.  Impairment
          is measured on a loan by loan basis for  commercial  and  construction
          loans by either  the  present  value of  expected  future  cash  flows
          discounted  at  the  loan's   effective   interest  rate,  the  loan's
          obtainable  market price,  or the fair value of the  collateral if the
          loan is collateral dependent.

          Large groups of smaller  balance  homogeneous  loans are  collectively
          evaluated for  impairment.  Accordingly,  the Bank does not separately
          identify  individual  consumer and  residential  loans for  impairment
          disclosures.

     I.   Transfer of Financial Assets

          Transfers of financial assets are accounted for as sales, when control
          over the assets has been surrendered.  Control over transferred assets
          is deemed to be  surrendered  when the assets have been  isolated from
          the Bank,  the transferee  obtains the right (free of conditions  that
          constrain  it from  taking  advantage  of that  right)  to  pledge  or
          exchange  the  transferred  assets,  and the Bank  does  not  maintain
          effective control over the transferred  assets through an agreement to
          repurchase them before their maturity.


                                    Continued

                                       F-10

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     J.   Premises and Equipment

          Premises  and  equipment  are  stated  at  cost,  net  of  accumulated
          depreciation. Depreciation expense is computed using the straight-line
          method over the estimated useful lives of the assets.

     K.   Foreclosed Real Estate

          Real  estate  properties   acquired  through,  or  in  lieu  of,  loan
          foreclosure are to be sold and are initially recorded at fair value at
          the  date  of  foreclosure   establishing  a  new  cost  basis.  After
          foreclosure,  valuations are periodically  performed by management and
          the real  estate is  carried at the lower of  carrying  amount or fair
          value less cost to sell.  Revenue and  expenses  from  operations  and
          changes  in  the  valuation  allowance  are  charged  to  income.  The
          historical average holding period for such properties is less than one
          year.

     L.   Federal Funds Purchased

          Federal funds purchased  generally mature within one to four days from
          the  transaction  date.  Federal fund lines available for borrowing by
          the Bank at December 31, 2002 were approximately $6,222,800.

     M.   Income Taxes

          Income  taxes are  provided  for the tax  effects of the  transactions
          reported in the financial  statements  and consist of taxes  currently
          due plus deferred taxes related  primarily to differences  between the
          basis of  available-for-sale  securities,  allowance  for loan losses,
          accumulated  depreciation,  stock  options,  startup and  organization
          costs,  and Federal Home Loan Bank stock for  financial and income tax
          reporting.  The  deferred  tax assets and  liabilities  represent  the
          future tax return consequences of those differences, which will either
          be taxable or deductible when the assets and liabilities are recovered
          or settled.

     N.   Fair Value of Financial Instruments

          The fair value of a financial  instrument  is the current  amount that
          would be exchanged  between  willing  parties,  other than in a forced
          liquidation.  Fair value is best  determined  based upon quoted market
          prices. However, in many instances,  there are no quoted market prices
          for the Company's various financial instruments. In cases where quoted
          market  prices are not  available,  fair values are based on estimates
          using present value or other valuation  techniques.  Those  techniques
          are  significantly  affected by the  assumptions  used,  including the
          discount  rate and  estimates of future cash flows.  Accordingly,  the
          fair value estimates may not be realized in an immediate settlement of
          the instrument.  SFAS 107 excludes certain  financial  instruments and
          all  nonfinancial   instruments  from  its  disclosure   requirements.
          Accordingly,  the  aggregate  fair  value  amounts  presented  may not
          necessarily represent the underlying fair value of the Company.

                                    Continued

                                       F-11

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     N.   Fair Values of Financial Instruments, continued

          The  following  methods  and  assumptions  were used by the Company in
          estimating fair value disclosures for financial instruments:

          Cash and cash  equivalents  - The  carrying  amounts  of cash and cash
          equivalents approximate fair values.

          Securities - Fair values for securities,  excluding  Federal Home Loan
          Bank stock and Federal Reserve Bank stock,  are based on quoted market
          prices.  The  carrying  values of  Federal  Home  Loan Bank  stock and
          Federal  Reserve  Bank  stock  approximate  fair  value  based  on the
          redemption  provisions  of the  Federal  Home  Loan  Bank and  Federal
          Reserve Bank.

          Mortgage  loans held for sale - Fair values of mortgage loans held for
          sale are based on  commitments  on hand from  investors or  prevailing
          market prices.

          Loans - For  variable-rate  loans that reprice  frequently and with no
          significant  change in credit risk,  fair values are based on carrying
          amounts.  Fair values for other loans (e.g.,  fixed rate  mortgage and
          commercial) are estimated using  discounted cash flow analyses,  using
          interest rates currently being offered for loans with similar terms to
          borrowers of similar credit quality.  Fair values for non-perform- ing
          loans are estimated using  discounted cash flow analyses or underlying
          collateral values, where applicable.

          Deposits  - The fair  values  disclosed  for  demand  deposits  (e.g.,
          interest  and  non-interest   bearing   checking   accounts)  are,  by
          definition,  equal to the amount  payable  on demand at the  reporting
          date  (i.e.,  their  carrying   amounts).   The  carrying  amounts  of
          variable-rate,  fixed-term  money market accounts and savings accounts
          approximate  their fair values at the reporting  date. Fair values for
          fixed-rate  certificates  of deposit are estimated  using a discounted
          cash flow  calculation  that applies  interest rates  currently  being
          offered on certificates to a schedule of aggregated  expected  monthly
          maturities on time deposits.

          Federal  Home Loan Bank  Advances - The fair  values of the  Company's
          borrowings are estimated using  discounted cash flow analyses based on
          the Company's current incremental borrowing rates for similar types of
          borrowing arrangements.

          Obligations  Under  Capital  Leases - The fair  values  of the  Bank's
          capital lease  obligations  are estimated  using  discounted cash flow
          analyses based on the Bank's current  incremental  borrowing rates for
          similar types of borrowing arrangements.

          Accrued   interest  -  The  carrying   amounts  of  accrued   interest
          approximate fair value.


                                    Continued

                                       F-12

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     N.   Fair Values of Financial Instruments, continued

          Off-balance  sheet  instruments  - Fair values for  off-balance-sheet,
          credit-related  financial  instruments,  are  based on fees  currently
          charged to enter into  similar  agreements,  taking  into  account the
          remaining  terms  of the  agreements  and the  counterparties'  credit
          standing.

     O.   Off Balance Sheet Financial Instruments

          In the  ordinary  course of  business  the Bank has  entered  into off
          balance  sheet  financial  instruments  consisting of  commitments  to
          extend  credit,  commercial  letters of credit and standby  letters of
          credit.  Such  financial  instruments  are  recorded in the  financial
          statements when they become payable.

     P.   Statement of Cash Flows

          For purposes of the statement of cash flows, cash and cash equivalents
          include  cash on hand,  demand  balances  due from banks,  and federal
          funds sold.

     Q.   Advertising

          The  Company  expenses  the cost of  advertising  and  other  business
          development expenditures as incurred.

     R.   Reclassifications

          Certain 2001 amounts have been  reclassified  to conform with the 2002
          presentation.

2.   INVESTMENT SECURITIES

     A comparison of the amortized cost and fair values of investment securities
     and the gross  unrealized gains and losses at December 31, 2002 and 2001 is
     as follows:

                                                      2002
                                   --------------------------------------------
                                                    Unrealized
                                    Amortized  -------------------       Fair
                                      Costs      Gains      Losses      Value
                                   ----------  --------   --------   ----------

   Available-for-sale:
    U.S. Treasury and Federal
     Agencies                      $2,500,000  $ 72,185          -   $2,572,185
    Mortgage-backed Securities      1,711,638    60,424          -    1,772,062
                                   ----------  --------   --------   ----------

                                   $4,211,638  $132,609   $      -   $4,344,247
                                   ==========  ========   ========   ==========


                                                      2002
                                   --------------------------------------------
                                                    Unrealized
                                    Amortized  -------------------       Fair
                                      Costs      Gains      Losses      Value
                                   ----------  --------   --------   ----------
   Available-for-sale:
    U.S. Treasury and Federal
     Agencies                      $3,492,672  $ 48,513   $    375   $3,540,810
                                   ==========  ========   ========   ==========


                                Continued

                                      F-13

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   INVESTMENT SECURITIES, Continued

     A  summary  of  investment   securities  at  December  31,  2002  based  on
     contractual maturities is presented in the table below. Expected maturities
     will differ from  contractual  maturities  because the issuers may have the
     right to call or prepay  obligations  with or  without  call or  prepayment
     penalties.


                                                    Amortized        Fair
                                                      Cost           Value
                                                   -----------    -----------
       Available-for sale:
         Due after one year through five years     $ 2,000,000    $ 2,062,810
         Due after five years through ten years      1,377,906      1,426,035
         Due after ten years                           833,732        855,402
                                                   -----------    -----------

                                                   $ 4,211,638    $ 4,344,247
                                                   ===========    ===========

     Available-for-sale   securities  were  sold  for  proceeds  of  $1,003,125,
     resulting in realized  gains of $9,420  during the year ended  December 31,
     2002.  There were no  securities  sales during the year ended  December 31,
     2001.

     There were no  securities  pledged to secure  public  deposits or for other
     purposes at December 31, 2002 or 2001.

3.   LOANS

     The composition of loans at December 31, 2002 and 2001 are as follows:

                                                2002          2001
                                            -----------   -----------

         Commercial and industrial          $ 7,359,867   $ 6,408,797
         Real estate - mortgage              49,985,784    43,848,257
         Real estate - construction           7,333,861     4,582,561
         Agricultural                         3,006,697     1,866,586
         Consumer                             8,385,753     8,497,391
         Other                                  293,954       134,352
                                            -----------   -----------

                                             76,365,916    65,337,944
         Less:
           Allowance for loan losses            690,811       706,739
           Unearned income                        8,037        41,812
                                            -----------   -----------

                                            $75,667,068   $64,589,393
                                            ===========   ===========

     At  December  31,  2002  and  2001,   the  Bank  has  loans   amounting  to
     approximately  $106,500  and $-0-,  respectively,  that  were  specifically
     classified  as  impaired.  The average  balance of these loans  amounted to
     approximately $121,600 and $-0- for the years ended December 2002 and 2001,
     respectively.  No specific  allowance  has been  established  for  impaired
     loans.  The  following is a summary of cash receipts on these loans and how
     they were applied in 2002:



                                    Continued

                                      F-14
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   LOANS, Continued

              Cash receipts applied to
                reduce principal balance              $    10,000
              Cash receipts recognized as
                interest income                             8,000
                                                      -----------

                   Total cash receipts                $    18,000
                                                      ===========

     The  Bank had  non-accrual  loans  totaling  approximately  $1,443,400  and
     $644,100,  at  December  31,  2002 and 2001,  respectively.  Loans past due
     ninety  days or more and  still  accruing  interest  totaled  approximately
     $7,000 and $13,100 at December 31, 2002 and 2001, respectively.

     An analysis of the changes in the allowance for loan losses is as follows:


                                                2002           2001
                                            ------------   ------------

        Balance, beginning of period        $   706,739    $   625,556
        Loans charged off                      (429,837)      (131,806)
        Loan recoveries                          52,159         30,189
        Provision for loan losses               361,750        182,800
                                            -----------    -----------

        Balance, end of period              $   690,811    $   706,739
                                            ===========    ===========

4.   PREMISES AND EQUIPMENT

     A summary of premises  and  equipment  at December  31, 2002 and 2001 is as
     follows:


                                                2002           2001
                                            -----------    -----------

       Bank premises                        $   384,593    $   384,593
       Furniture and equipment                  896,646        779,711
       Leaseholds                             2,258,177      2,289,433
                                            -----------    -----------

                                              3,539,416      3,453,737
       Less accumulated depreciation            632,245        422,227
                                            -----------    -----------

                                            $ 2,907,171    $ 3,031,510
                                            ===========    ===========

     Depreciation  of premises and  equipment  was $230,144 and $153,638 for the
     years ended December 31, 2002 and 2001, respectively.





                                    Continued

                                      F-15

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.   DEPOSITS

     The  composition of deposits at December 31, 2002 and 2001 is summarized as
     follows:


                                              2002           2001
                                           -----------   -----------

      Non-interest bearing demand          $ 8,040,375   $ 7,967,035
      Interest bearing demand                9,802,358     5,716,641
      Savings                                7,578,245     3,953,217
      Certificates of deposit over
        $100,000                            19,756,404    14,540,745
      Other interest bearing deposits       30,272,518    28,008,812
                                           -----------   -----------

                                           $75,449,900   $60,186,450
                                           ===========   ===========

     At December 31,  2002,  scheduled  maturities  of  certificates  of deposit
     including IRA's are as follows:

                  2003                          $23,857,193
                  2004                           23,053,377
                  2005                              856,761
                  2006                              200,042
                  2007                            2,061,549
                                                -----------

                                                $50,028,922
                                                ===========

     The Bank held  deposits of  approximately  $4,105,100  and  $3,526,200  for
     related parties at December 31, 2002 and 2001, respectively.

     At December 31, 2002 and 2001,  the Bank had deposits  outside of the local
     market  area in the amount of  approximately  $19,094,600  and  $6,249,400,
     respectively.  At December 31, 2002, the Bank held  $10,982,000 in deposits
     from one depositor.

6.   CAPITAL LEASES

     The Bank entered into a long-term capital lease agreement for substantially
     all bank equipment and furniture,  which  commenced on February 1, 1998 and
     extended for a five year period expiring in 2002. The Bank has also entered
     into an agreement to lease a branch building and land commencing on May 11,
     1998,  and extending  for an initial five year period with five  successive
     five year renewal terms expiring in 2028. In addition, the Bank has entered
     into an agreement  with a related party for lease of the main bank building
     and land.  This lease,  which includes a previous lease for the main office
     building  and land,  commenced  on  September  1, 2001 and  extends  for an
     initial  period of ten years with four  successive  ten year renewal  terms
     expiring in 2051. The building components of these leases are classified as
     capital leases.  The land components are classified as operating leases. At
     December  31,  2002 the future  minimum  lease  payments  under the capital
     leases were as follows:




                                    Continued

                                      F-16

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.   CAPITAL LEASES, Continued

                  For the year ending:
                  2003                                      $   238,516
                  2004                                          238,516
                  2005                                          238,516
                  2006                                          238,516
                  2007                                          238,515
                  Thereafter                                  9,714,136
                                                            -----------

                  Total minimum lease payments               10,906,715
                  Less amounts representing interest          8,847,886
                                                            -----------

                  Present value of net minimum
                    lease payments                          $ 2,058,829
                                                            ===========


     Future minimum annual rental commitments under the noncancelable  operating
     leases for land are as follows:

                  For the year ending:
                           2003                             $    81,309
                           2004                                  81,309
                           2005                                  81,309
                           2006                                  81,309
                           2007                                  81,309
                           Thereafter                         3,107,193
                                                            -----------
                  Total minimum annual rental
                    commitments                             $ 3,513,738
                                                            ===========

     Rental  expense  under  long-term   noncancellable   operating  leases  was
     approximately $81,200 and $69,700 for the years ended December 31, 2002 and
     2001, respectively.

7.   FEDERAL HOME LOAN BANK ADVANCES

     Advances from Federal Home Loan Bank of Cincinnati are payable at maturity,
     with interest payable monthly, and are summarized as follows:

                          Interest     December 31,
             Maturity       Rate            2002
             ---------    --------     ------------

             12/12/03        1.75%       $2,000,000
             01/19/11        5.44%        2,000,000
             01/24/11        4.60%        1,000,000
             03/09/11        5.22%        1,000,000
             03/14/11        4.22%        1,000,000
                                         ----------

                                         $7,000,000
                                         ==========

     Mortgage loans with a balance of approximately  $31,515,700 at December 31,
     2002,  and all  FHLB  stock  are  pledged  to the  FHLB as  collateral  for
     outstanding advances.





                                    Continued

                                      F-17

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   COMPREHENSIVE INCOME

     At  December  31, 2002 and 2001,  the Bank held  securities  classified  as
     available-for-sale,  which  have  net  unrealized  gains  of  $132,609  and
     $48,138,  respectively.  The before and after tax amount and tax expense of
     this  component of  comprehensive  income for the years ended  December 31,
     2002 and 2001 is summarized below:

                                            Before        Tax         After
                                             Tax        Expense        Tax
                                          ---------    ---------     ---------
       2002
         Unrealized holding gains         $ 93,891      $ 31,923      $ 61,968

         Reclassification adjustment
          for gains included in net
          income                            (9,420)       (3,203)       (6,217)
                                          --------      --------      --------

                                          $ 84,471      $ 28,720      $ 55,751
                                          ========      ========      ========

       2001
         Unrealized holding gains         $ 27,744      $  9,432      $ 18,312

         Reclassification adjustment
          for gains included in net
          income                                 -             -             -
                                          --------      --------      --------

                                          $ 27,744      $  9,432      $ 18,312
                                          ========      ========      ========

9.   INCOME TAXES

     The Company and the Bank file a consolidated income tax return. The Bank is
     charged or credited the amount equal to the income tax that would have been
     applicable on a separate return basis.

     The components of consolidated  income tax expense applicable to continuing
     operations for the years ended December 31, 2002 and 2001 were as follows:


                                 2002            2001
                              ------------   -----------

             Current          $    283,987   $   336,055
             Deferred               63,513         9,667
                              ------------   -----------

                              $    347,500   $   345,722
                              ============   ===========

     Deferred   income  tax  assets  net  of  deferred  tax   liabilities   were
     approximately   $74,600  and  $166,800  at  December  31,  2002  and  2001,
     respectively.  Such amounts are included in accrued interest receivable and
     other assets in the  accompanying  balance sheet.  At December 31, 2002 and
     2001, deferred tax assets and liabilities are composed of the following:





                                    Continued

                                      F-18

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.   INCOME TAXES, Continued

                                                   2002             2001
                                               ------------    ------------
       Deferred tax assets:
         Allowance for loan losses             $   157,300     $   186,800
         Startup costs                               1,900          16,900
         Organization costs                           -             10,900
         Stock options                              53,000          49,500
         Capital lease asset                        16,900           2,600
                                               -----------     -----------

                                                   229,100         266,700
                                               -----------     -----------

       Deferred tax liabilities:
         Federal Home Loan Bank stock              (28,400)        (17,200)
         Accumulated depreciation                  (80,000)        (65,900)
         Capital lease obligation                   (1,000)           (400)
         Available-for-sale securities             (45,100)        (16,400)
                                               -----------     -----------

                                                  (154,500)        (99,900)
                                               -----------     -----------

       Net deferred tax asset                  $    74,600     $   166,800
                                               ===========     ===========

     The provision for federal tax expense  differs from the amount  computed by
     applying the U.S.  federal  income tax rate of 34 percent to income  before
     income taxes as a result of the following:

                                                    2002           2001
                                                ------------   -----------

             U.S. federal income tax            $   345,790    $   342,865
             Changes from statutory tax:
               Nondeductible expenses                 1,710          2,857
                                                -----------    -----------

             Income tax expense                 $   347,500    $   345,722
                                                ===========    ===========

10.  EARNINGS PER SHARE

     Earnings per share has been  determined  in  accordance  with  Statement of
     Financial Accounting Standards No. 128, "Earnings Per Share".  Earnings per
     common and common  equivalent share were computed by dividing net income by
     the weighted average number of shares of common stock outstanding.  Diluted
     earnings  per share was  determined  by dividing net income by the weighted
     average  number of shares of common  stock  outstanding  plus the  weighted
     average number of shares that would be issued upon exercise of the dilutive
     stock-based compensation plan assuming proceeds are used to purchase shares
     pursuant to the treasury stock method.

     The following  data shows the amounts used in computing  earnings per share
     (EPS) and the effect on income and the weighted average number of shares of
     dilutive potential common stock at December 31, 2002 and 2001.






                                    Continued

                                      F-19

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.    EARNINGS PER SHARE, Continued

                                                    2002         2001
                                                -----------   -----------

       Income available to common stock-
         holders use in basic and diluted
         EPS                                    $   669,530   $   662,705
                                                ===========   ===========

       Weighted average number of common
         shares used in basic EPS                   250,987       248,507
                                                ===========   ===========

       Effect of dilutive securities:
         Stock-based compensation plan                2,400         2,480
                                                -----------   -----------

       Weighted number of common shares
         and dilutive potential common
         stock used in diluted EPS                  253,387       250,987
                                                ===========   ===========

11.  REGULATORY MATTERS

     Under applicable banking laws, bank regulatory authorities must approve the
     declaration  of dividends in any year, in an amount in excess of the sum of
     net income of that year and retained earnings net of dividends and required
     transfers of the preceding two years.  At December 31, 2002,  approximately
     $1,097,200  in retained  earnings was available for payment of dividends by
     the Bank to the Company without approval by bank regulatory authorities.

     The Bank is subject to various regulatory capital requirements administered
     by  the  federal  banking   agencies.   Failure  to  meet  minimum  capital
     requirements  can  initiate  certain  mandatory  and  possibly   additional
     discretionary  actions by  regulators  that,  if  undertaken,  could have a
     direct material effect on the Bank's  financial  statements.  Under capital
     adequacy  guidelines  and the  regulatory  framework for prompt  corrective
     actions,  the Bank must  meet  specific  capital  guidelines  that  involve
     quantitative  measures  of the  Bank's  assets,  liabilities,  and  certain
     off-balance   sheet  items  as  calculated  under   regulatory   accounting
     practices.  The Bank's capital amounts and  classification are also subject
     to  qualitative   judgments  by  the  regulators  about  components,   risk
     weightings, and other factors.

     Quantitative measures established by regulations to ensure capital adequacy
     require the Bank to maintain  minimum  amounts and ratios (set forth in the
     table  below) of total and Tier I capital  (as defined by  regulations)  to
     risk-weighted  assets (as  defined),  and of Tier I capital (as defined) to
     average assets (as defined).  Management believes,  as of December 31, 2002
     and 2001, that the Bank met all capital  adequacy  requirements to which it
     is subject.

     As of December 31, 2002,  the most recent  notification  from the Office of
     the Comptroller of Currency (OCC)  categorized the Bank as well capitalized
     under  the  regulatory  framework  for  prompt  corrective  action.  To  be
     categorized  as well  capitalized,  the Bank must  maintain  minimum  total
     risk-based,  Tier I risk-based,  and Tier I leverage ratios as set forth in
     the  following  table.   There  are  no  conditions  or  events  since  the
     notification that Management believes have changed the Bank's category.


                                    Continued

                                      F-20

<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.  REGULATORY MATTERS, Continued

     The Bank's  actual  capital  amounts and ratios are also  presented  in the
     table as of December 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                               FOR CAPITAL          FOR WELL
                                                                ADEQUACY           CAPTIALIZED
                                          ACTUAL                PURPOSES            PURPOSES
                                   -------------------   -------------------    ------------------
                                    AMOUNT       RATIO    AMOUNT      RATIO      AMOUNT     RATIO
                                   ---------    ------   ---------   -------    ---------   ------
<S>                               <C>        <C>        <C>         <C>       <C>        <C>
       December 31, 2002:
       Total capital to
        risk weighted assets         $8,049     12.40%     $5,195      8.00%     $6,493     10.00%

       Tier I capital to risk
        weighted assets               7,358     11.33       2,597      4.00       3,896      6.00

       Tier I capital to
        average assets                7,358      7.94       3,708      4.00       4,635      5.00

       December 31, 2001:
       Total capital to
        risk weighted assets         $7,315     13.15%     $4,450      8.00%     $5,563     10.00%

       Tier I capital to risk
        weighted assets               6,620     11.90       2,225      4.00       3,338      6.00

       Tier I capital to
        average assets                6,620      8.85       2,993      4.00       3,740      5.00
</TABLE>

12.  STOCK OPTION PLANS

     Under a plan effective at inception,  the Company granted performance based
     options  to  purchase  16,000  shares  of  stock to key  employees  with no
     additional  options  available under the plan. Under a new plan approved by
     stockholders  on April 25,  2000,  the Company  granted  performance  based
     options  to  purchase  24,000  shares  of stock to key  employees,  service
     providers and consultants,  with 6,000 additional  options  available to be
     granted under the plan. The options to purchase shares expire 10 years from
     the date of the grant.  Options vested over a period from 1997 to 2002 upon
     achievement of performance or production  incentives.  Compensation accrued
     under the plans at December 31, 2002 and 2001 was approximately $10,400 and
     $31,200, respectively.

     A summary of the options outstanding during 2002 and 2001 are as follows:

                                           2002                  2001
                                    -------------------   ------------------
                                              WEIGHTED              WEIGHTED
                                     NUMBER     AVERAGE    NUMBER    AVERAGE
                                      OF       EXERCISE     OF      EXERCISE
                                    OPTIONS     PRICE     OPTIONS     PRICE
                                    -------   ---------   -------   ---------

       Issued at inception           40,000    $ 25.00     40,000     $ 25.00
       Granted during year                -                     -
       Exercised during year              -                     -
                                     ------                ------

       Outstanding at year end       40,000    $ 25.00     40,000     $ 25.00
                                     ======                ======

       Eligible for exercise at
         year end                    40,000                24,000
                                     ------                ------

       Weighted average fair
         value of options
         granted during year              -                     -
                                     ======                ======

                                    Continued

                                      F-21

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.  DEFERRED COMPENSATION PLAN

     On April 25,  2000,  the  stockholders  approved a plan for the  payment of
     deferred  directors'  and  counsel's  fees  whereby up to 18,000  shares of
     common stock may be issued for the  settlement of such fees in lieu of cash
     payment.  Under the plan,  6,440 shares were  immediately  distributed  for
     payment of fees accrued  from  inception  through  December 31, 1999 in the
     amount of $161,000.  During 2001,  2,480 shares were issued for fees in the
     amount of $62,000,  accrued as of December  31, 2000.  During  2002,  2,480
     shares  were  issued  for fees in the  amount  of  $62,000,  accrued  as of
     December 31, 2001. At December 31, 2002, fees in the amount of $60,000 were
     accrued for an additional 2,400 shares to be issued in 2003 in lieu of cash
     fees. Shares are to be distributed  annually as soon as practical after the
     calendar year for which the shares have been earned.  The plan is effective
     until its termination by the Board of Directors.

14.  FAIR VALUES OF FINANCIAL INSTRUMENTS

     The  estimated  fair  values of the  Bank's  financial  instruments  are as
     follows:

                                            2002                   2001
                                     -------------------    ------------------
                                     CARRYING     FAIR      CARRYING     FAIR
                                      AMOUNT      VALUE      AMOUNT     VALUE
                                     --------   --------    --------  --------
                                       (in thousands)         (in thousands)
       Financial assets:
        Cash and cash equivalents     $ 6,344    $ 6,344     $ 3,000   $ 3,000
        Securities available-for-
         sale                           4,344      4,344       3,541     3,541
        Federal Home Loan Bank
         stock                            389        389         356       356
        Federal Reserve stock             186        186         177       177
        Loans and loans held-for-
         sale, net of allowance        77,400     78,271      65,960    66,624
        Accrued interest receivable       632        632         676       676
       Financial liabilities:
        Deposits                       75,450     75,680      60,186    60,663
        Federal Home Loan
         Bank advances                  7,000      7,363       7,000     7,083
        Obligations under capital
         leases                         2,059      2,059       2,111     2,111
        Accrued interest payable          188        188         312       312
       Off-balance-sheet
          liabilities:
        Commitments to extend
         credit                             -          -           -         -
        Standby letters of credit           -          -           -         -

     The carrying  amounts in the preceding  table are included in the statement
     of financial condition under the applicable captions.

15.  RELATED PARTY TRANSACTIONS

     In the ordinary course of business, the Bank has and expects to continue to
     have transactions,  including borrowings, with its officers,  directors and
     their affiliates.  In the opinion of management,  such transactions were on
     substantially the same terms,  including interest rates and collateral,  as
     those prevailing at the time of comparable transactions


                                    Continued

                                      F-22
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.  RELATED PARTY TRANSACTIONS, Continued

     with  other  persons  and  did  not  involve  more  than a  normal  risk of
     collectibility or present any other unfavorable features to the Bank. Loans
     to such  borrowers  and  loans to  affiliated  companies,  of  which  these
     individuals  are  principal  owners,  were  approximately   $1,119,900  and
     $310,200 at December 31, 2002 and 2001, respectively.

     The Bank, in the normal  course of business,  leases its main office from a
     related  party.  Payments made under both capital and operating  leases for
     the  year  ended  December  31,  2002 and 2001  amounted  to  approximately
     $270,000 and $186,000, respectively.

     Directors' fees payable were approximately  $54,000 and $55,800 at December
     31, 2002 and 2001, respectively.

16.  COMMITMENTS AND CONTINGENT LIABILITIES

     In the normal course of business, the Bank has outstanding  commitments and
     contingent  liabilities.  At  December  31,  2002  and  2001,  the Bank has
     commitments  to extend  credit  which are not  reflected  in the  financial
     statements  of  approximately  $6,164,600  and  $6,015,600,   respectively,
     including  stand-by  letters of $204,797 and $179,023  and  commitments  to
     related parties of $-0- and $627,618,  respectively. The Bank's exposure to
     credit  loss in the event of  nonperformance  by the  other  party to these
     commitments is represented by the contractual amount of those instruments.

     The Bank engages in originating  loans for sale on the secondary market. At
     December 31, 2002, the Bank had  commitments to originate loans for sale of
     approximately  $4,604,300 and  commitments  to sell loans of  approximately
     $6,337,300 including loans held for sale in the amount of $1,733,025. Loans
     are sold under terms which include requirements to repurchase under certain
     events of  delinquency  and default.  The Bank had recourse  commitments on
     loans sold of approximately $11,766,500 and $7,172,000 at December 31, 2002
     and 2001, respectively.  Recourse provisions generally expire within one to
     four months from the date of transfer.

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there is no  violation of any  condition  established  in the  contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require payment of a fee. Since many of the commitments are
     expected to expire without being drawn upon, the total  commitment  amounts
     do not necessarily  represent future cash requirements and do not generally
     present any significant liquidity risk to the Bank. The Bank evaluates each
     customer's   creditworthiness  on  a  case-by-case  basis.  The  amount  of
     collateral  obtained,  if deemed  necessary  by the Bank upon  extension of
     credit,  is  based  on  management's  credit  evaluation  of the  customer.
     Collateral  held varies but may  include  accounts  receivable,  inventory,
     property, plant and equipment, and income-producing commercial properties.




                                    Continued

                                      F-23

<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.  COMMITMENTS AND CONTINGENT LIABILITIES, Continued

     Standby letters of credit are conditional commitments issued by the Bank to
     guarantee the  performance of a customer to a third party.  Standby letters
     of  credit  generally  have  fixed  expiration  dates or other  termination
     clauses  and may  require  payment of a fee.  The credit  risk  involved in
     issuing  letters  of credit is  essentially  the same as that  involved  in
     extending  loan  facilities to  customers.  The Bank's policy for obtaining
     collateral,  and the nature of such collateral,  is essentially the same as
     that involved in making commitments to extend credit.

     The  Bancorp and the Bank are  subject to claims and  lawsuits  which arise
     primarily  in  the  ordinary  course  of  business.  It is the  opinion  of
     management that the  disposition or ultimate  resolution of such claims and
     lawsuits  will not  have a  material  adverse  effect  on the  consolidated
     financial position of the Bancorp.

17.  CONCENTRATIONS OF CREDIT

     Most of the Bank's loans,  commitments  and standby  letters of credit have
     been granted to customers in the Bank's market area. Most credit  customers
     are  depositors of the Bank. The  concentrations  of credit by type of loan
     are set forth in Note 3. The  distribution  of commitments to extend credit
     approximates the distribution of loans outstanding.

     At December 31, 2002, the Bank held deposits of approximately $3,975,300 at
     financial institutions in excess of federally insured amounts

18.  SUBSEQUENT EVENT

     Subsequent  to the year ended  December 31, 2002,  the Bank entered into an
     agreement to lease a loan  production  office  building on January 1, 2003,
     for an initial term of three years.  The Bank will incur monthly  operating
     lease expense of approximately $730.

19.  CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

     Information  as to the financial  position,  results of operations and cash
     flows of Kentucky National  Bancorp,  Inc. as of December 31, 2002 and 2001
     are summarized as follows:


                        STATEMENTS OF FINANCIAL CONDITION
                           December 31, 2002 and 2001
                                     ASSETS


                                          2002            2001
                                     -------------   ------------

       Investment in subsidiary      $   7,445,587   $  6,651,442
       Other assets                         60,004         56,468
                                     -------------   ------------

            Total assets             $   7,505,591   $  6,707,910
                                     =============   ============





                                    Continued

                                      F-24

<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19.  CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY), Continued


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                              2002             2001
                                          -------------    ------------

       Stockholders' equity               $   7,505,591    $  6,707,910
                                          -------------    ------------

            Total liabilities and
              stockholders' equity        $   7,505,591    $  6,707,910
                                          =============    ============


                              STATEMENTS OF INCOME
                     Years ended December 31, 2002 and 2001

                                                     2002            2001
                                                -------------   -------------

       Net income of subsidiary                 $    676,394    $    683,297
       General and administrative expenses           (10,400)        (31,200)
                                                ------------    ------------

            Income before tax                        665,994         652,097
       Income tax benefit                              3,536          10,608
                                                ------------    ------------

            Net income                          $    669,530    $    662,705
                                                ============    ============


                            STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2002 and 2001


                                                      2002           2001
                                                   ----------    ----------
       Cash flows from operating activities:
         Net income                                $  669,530    $  662,705
         Adjustments to reconcile net income
             to cash provided by operating
             activities:
           Net income of subsidiary                  (676,394)     (683,297)
           Incentive stock option compensation         10,400        31,200
           Increase in other assets                    (3,536)      (10,608)
                                                   ----------    ----------

            Net cash flows from
              operating activities                          -             -
                                                   ----------    ----------

       Cash flows from investing activities                 -             -
                                                   ----------    ----------

       Cash flows from financing activities                 -             -
                                                   ----------    ----------

       Net increase in cash                                 -             -
       Cash, beginning of period                            -             -
                                                   ----------    ----------

       Cash, end of period                         $        -    $        -
                                                   ==========    ==========






                                      F-25




<PAGE>

                                   SIGNATURES

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

                                           KENTUCKY NATIONAL BANCORP, INC.

Date:   March 28, 2003                     By:   /s/Ronald J. Pence
                                                 -------------------------------
                                                 Ronald J. Pence
                                                 President
                                                 (Duly Authorized 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 dated indicated.




By:   /s/Lawrence P. Calver                             Date:     March 28, 2003
      ---------------------------------------
      Lawrence P. Calvert
      Chief Executive Officer and Director
      (Principal Executive Officer)


By:   /s/Ronald J. Pence                                Date:     March 28, 2003
      ---------------------------------------
      Ronald J. Pence
      President and Director
      (Principal Financial Officer)


By:   /s/Robert E. Robbins                              Date:     March 27, 2003
      ---------------------------------------
      Robert E. Robbins
      Chairman of the Board and Director


By:   /s/Kevin D. Addington                             Date:     March 28, 2003
      ---------------------------------------
      Kevin D. Addington
      Director


By:   /s/Henry Lee Chitwood                             Date:     March 28, 2003
      ---------------------------------------
      Henry Lee Chitwood
      Director


By:                                                     Date:     March   , 2003
      ---------------------------------------                           --
      Lois Watkins Gray
      Director


By:   /s/William R. Hawkins                             Date:     March 28, 2003
      ---------------------------------------
      William R. Hawkins
      Director


<PAGE>


By:                                                     Date:     March __, 2003
      ---------------------------------------
      Christopher G. Knight
      Director


By:                                                     Date:     March __, 2003
      ---------------------------------------
      Leonard Allen McNutt
      Director


By:   /s/Paula H. Gearon                                Date:     March 28, 2003
      ---------------------------------------
      Paula H. Gearon
      Controller and Chief Accounting Officer
      (Principal Accounting Officer)


<PAGE>

                                  CERTIFICATION

         I, Lawrence P. Calvert,  Chief Executive  Officer of Kentucky  National
Bancorp, Inc., certify that:

         1. I have  reviewed  this  annual  report on Form  10-KSB  of  Kentucky
National 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
quarterly 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. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and 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 us 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 our  conclusions about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

                  (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

         6. The registrant's  other certifying  officers and I have indicated in
this annual report whether 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 28, 2003                 /s/Lawrence P. Calvert
                                     -------------------------------------------
                                     Lawrence P. Calvert
                                     Chief Executive Officer


<PAGE>

                                  CERTIFICATION

         I, Ronald J. Pence,  President and Chief Financial  Officer of Kentucky
National Bancorp, Inc., certify that:

         1. I have  reviewed  this  annual  report on Form  10-KSB  of  Kentucky
National 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
quarterly 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. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and 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 us 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 our conclusions  about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

                  (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

         6. The registrant's  other certifying  officers and I have indicated in
this annual report whether 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 28, 2003                       /s/Ronald J. Pence
                                           -------------------------------------
                                           Ronald J. Pence
                                           President and Chief Financial Officer