================================================================================

                       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, 2001
                                       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. Employer
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: $7,080,102

     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 $3.6 million as of March 15, 2002. 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 15, 2002,  there were issued and outstanding  248,920 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 6.3% is slightly 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


                                       2
<PAGE>
construction  loans  for  its  portfolio.   In  October  2000,  the  Bank  began
originating residential mortgage loans for sale into the secondary market.

     LOAN PORTFOLIO COMPOSITION. The following table provides information on the
composition of the loan portfolio at the indicated dates.
<TABLE>
<CAPTION>
                                                                                AT DECEMBER 31,
                                                            -----------------------------------------------------
                                                                   2001                            2000
                                                            ---------------------           ---------------------
                                                            AMOUNT            %             AMOUNT            %
                                                            ------          -----           ------          -----
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                         <C>             <C>             <C>             <C>
Real estate -- mortgage:
  Residential.............................................  $   36,295      55.55%          $  33,308       56.58%
  Commercial..............................................       7,553      11.56               5,093        8.65
  Agricultural............................................       1,867       2.86               1,595        2.71
Real estate-- construction................................       4,582       7.01               4,387        7.45
Consumer..................................................       8,632      13.21               8,874       15.07
Commercial and industrial.................................       6,409       9.81               5,615        9.54
                                                            ----------      -----           ---------       -----
                                                                65,338     100.00%             58,872      100.00%
                                                                           ======                          ======
Allowance for credit losses...............................        (707)                          (626)
Unearned fees and discounts...............................         (42)                          (166)
                                                            ----------                      ---------
Loans receivable, net ....................................  $   64,589                      $  58,080
                                                            ==========                      =========
</TABLE>

     In  addition  to the above,  the Bank had  approximately  $1.4  million and
$258,500  in loans held for sale at December  31,  2001 and 2000,  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, 2001. Demand loans and
loans which have no stated  maturity are treated as due in one year or less.  At
December 31, 2001, the Company had loans totaling  $1,109,300 due after one year
with variable rates and $48,365,700 in such loans with fixed rates.
<TABLE>
<CAPTION>
                                    DUE WITHIN            ONE TO FIVE           DUE OVER
                                     ONE YEAR                YEARS              FIVE YEARS          TOTAL
                                    ----------            -----------           ----------          -----
                                                                     (IN THOUSANDS)
<S>                                 <C>                    <C>                  <C>               <C>
Real estate -- mortgage:
  Residential....................   $   4,296              $  27,956            $   4,043         $  36,295
  Commercial.....................       1,471                  4,891                1,191             7,553
  Agricultural...................         172                  1,657                   38             1,867
Real estate-- construction.......       3,871                    505                  206             4,582
Consumer.........................       1,213                  6,584                  835             8,632
Commercial and industrial........       4,840                  1,341                  228             6,409
                                    ---------             ----------            ---------         ---------
                                    $  15,863             $   42,934            $   6,541         $  65,338
                                    =========             ==========            =========         =========
</TABLE>

     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.  Substantially  all of the  Bank's  real  estate  loans  are  secured  by
properties in Elizabethtown,  Kentucky and surrounding  areas.  Under the Bank's
loan  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

                                       3
<PAGE>

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, 2001,  there were
approximately $2.9 million in loans originated as exceptions to loan policies.

     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 $1,099,000 and  $1,831,800,  respectively,  to
any one borrower at December 31, 2001. At December 31, 2001,  the largest amount
outstanding  to any one  borrower  and  their  related  interests  was  $708,800
unsecured and $95,000 fully secured.

     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 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,
                                                                       ---------------------------
                                                                         2001               2000
                                                                       --------           --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                    <C>                <C>
Restructured loans...................................................  $       0          $       0
                                                                       ---------          ---------
Non-accrual loans:
   Real estate -- mortgage:
     Residential.....................................................        482                190
     Commercial......................................................          0                  0
     Agricultural....................................................          0                  0
   Real estate -- construction.......................................         56                 15
   Consumer..........................................................        106                 20
   Commercial and industrial.........................................          0                  0
                                                                       ---------          ---------
        Total nonaccrual loans.......................................        644                225
                                                                       ---------          ---------

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..........................................................          0                  0
   Commercial and industrial.........................................          0                  0
                                                                       ---------          ---------
       Total accruing loans past due 90 days or more.................          0                  0
                                                                       ---------          ---------
       Total non-accrual and past due loans..........................  $     644          $     225
                                                                       =========          =========

       Non-accrual and past due loans to gross loans.................       0.99%              0.38%
                                                                       =========          =========
       Allowance for credit losses to non-accrual and
          past due loans.............................................     109.78%            278.20%
                                                                       =========          =========
</TABLE>

     During the year  ended  December  31,  2001,  the Bank would have  recorded
interest income of $63,600 on non-accrual  loans, if such loans had been current
in accordance  with their original  terms for the period they were  outstanding.
The Bank included $14,200 in interest income on such loans during the year.

     At December 31, 2001, 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, 2001 and 2000 were as follows:
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                       ---------------------------
                                                                         2001               2000
                                                                       --------           --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                    <C>                <C>
Beginning Balance....................................................  $     626          $    562
                                                                       ---------          --------

Charge-offs:
   Real estate -- mortgage:
      Residential....................................................        (26)                0
      Commercial.....................................................          0                 0
      Agricultural...................................................          0                 0
   Real estate -- construction.......................................          0                (9)
   Consumer..........................................................        (96)             (101)
   Commercial and industrial.........................................        (10)              (79)
                                                                       ----------         --------
          Total......................................................       (132)             (189)
                                                                       ---------          --------
Recoveries:
   Real estate -- mortgage:
     Residential.....................................................          0                18
     Commercial......................................................          0                 0
     Agricultural....................................................          0                 0
   Real estate -- construction.......................................          9                 0
   Consumer..........................................................          7                17
   Commercial and industrial.........................................         14                 0
                                                                       ---------          --------
         Total.......................................................         30                35
                                                                       ---------          --------

Net charge-offs......................................................       (102)             (154)
Provisions charged to operations.....................................        183               218
                                                                       ---------          --------
Ending balance.......................................................  $     707          $    626
                                                                       =========          ========
Average loans........................................................  $  62,750          $ 54,202
                                                                       =========          ========
Net charge-offs to average loans ....................................       0.16%             0.28%
                                                                       =========          ========
</TABLE>

     Charge-offs during 2001 decreased $57,000 with a decrease in commercial and
industrial  loan  charge-offs  of $69,000  partially  offset by an  increase  in
residential  real estate  mortgage  loan  charge-offs  of $26,000.  Current year
consumer   charge-offs  consist  of  several  small  loan  amounts.   Management
determined that these borrowers would not have sufficient resources to repay the
debt. The commercial and industrial loan charge-offs for the year ended December
31, 2000 include a $65,000 charge-off taken on loans to one borrower. Management
determined  that the borrower would not have  sufficient  resources to repay the
debt based on the borrower's individual business circumstances.

                                       7
<PAGE>
     The following table shows the allowance for loan losses broken down by loan
category at the dates indicated.
<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31,
                                            -------------------------------     -----------------------------
                                                       2001                                2000
                                            -------------------------------     -----------------------------
                                             RESERVE      PERCENT OF LOANS      RESERVE      PERCENT OF LOANS
                                             FOR EACH     IN EACH CATEGORY      FOR EACH     IN EACH CATEGORY
PORTFOLIO                                    CATEGORY      TO TOTAL LOANS       CATEGORY      TO TOTAL LOANS
---------                                   ----------    -----------------     ---------    ----------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                         <C>                 <C>             <C>                <C>
   Real estate -- mortgage:
     Residential..........................  $     195           55.55%          $    181           56.58%
     Commercial...........................        154           11.56                 82            8.65
     Agricultural.........................         15            2.86                 --            2.71
   Real estate -- construction............          1            7.01                  1            7.45
   Consumer...............................        100           13.21                 70           15.07
   Commercial and industrial.............          32            9.81                191            9.54
   Unallocated............................        210            0.00                101            0.00
                                            ---------           -----           --------           -----
       Total..............................  $     707          100.00%          $    626          100.00%
                                            =========          ======           ========          ======
</TABLE>
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 securities
issued  by the FHLB  System  and  Federal  National  Mortgage  Association.  The
following  table shows the  composition  of the  investment  portfolio  by major
category at the dates indicated.
<TABLE>
<CAPTION>
                                                                             AT DECEMBER 31,
                                                                       ---------------------------
                                                                         2001               2000
                                                                       --------           --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                    <C>                <C>
U.S. government and federal agency securities........................  $   3,541          $   3,020
                                                                       ---------          ---------
      Total..........................................................  $   3,541          $   3,020
                                                                       =========          =========
</TABLE>

     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, 2001.

<TABLE>
<CAPTION>
                               ONE YEAR OR LESS     ONE TO FIVE YEARS     FIVE TO TEN YEARS     MORE THAN TEN YEARS
                             -------------------  ---------------------  --------------------   -------------------
                                        WEIGHTED              WEIGHTED               WEIGHTED              WEIGHTED
                             AMORTIZED  AVERAGE   AMORTIZED    AVERAGE   AMORTIZED    AVERAGE   AMORTIZED  AVERAGE
                               COST      YIELD      COST        YIELD       COST       YIELD      COST      YIELD
                             ---------  --------  ---------   --------   ---------   ---------  ---------  --------
                                                             (DOLLARS IN THOUSANDS)
<S>                          <C>            <C>    <C>          <C>     <C>           <C>        <C>          <C>

U.S. government and federal
   agency securities.......  $       0      0%     $  2,993     5.91%   $    500      5.62%      $     0      0%
                             ---------             --------             --------                 -------

Total......................  $       0             $  2,993             $    500                 $     0
                             =========             ========             ========                 =======
<CAPTION>
                                      TOTAL INVESTMENT PORTFOLIO
                                    ------------------------------
                                                        WEIGHTED
                                    AMORTIZED   MARKET   AVERAGE
                                      COST       VALUE    YIELD
                                    ---------   ------  --------
<S>                                 <C>          <C>       <C>
U.S. government and federal
   agency securities.......         $  3,493     $ 3,541   5.87%
                                    --------     ------

Total......................         $  3,493     $ 3,541
                                    ========     ======
</TABLE>

     At December 31, 2001, the Bank's other investments consisted of $176,700 in
stock in the Federal  Reserve Bank of St. Louis in which the Bank is required to
invest as a national  bank and  $355,800 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.

                                       8
<PAGE>

     At December 31, 2001, 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. The Bank does not
solicit brokered deposits. At December 31, 2001, the Bank had approximately $15
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, 2001.

                                                               AMOUNT
                                                          --------------
                                                          (IN THOUSANDS)

    Three months or less..................................  $    5,099
    Over three through six months.........................       2,241
    Over six through 12 months............................       6,452
    Over 12 months........................................         749
                                                            ----------
    Total.................................................  $   14,541
                                                            ==========

     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, 2001,
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.

                                       9
<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,
                                                                       ---------------------------
                                                                         2001               2000
                                                                       --------           --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                    <C>                <C>
Amounts outstanding at end of period:
  FHLB advances......................................................  $   7,000          $      --
  Federal funds purchased............................................         --                 --

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

Maximum amount of borrowings outstanding at any month end:
  FHLB advances......................................................  $   7,000          $      --
  Federal funds purchased............................................         --                 23

Approximate average amounts outstanding:
  FHLB advances......................................................  $   4,510          $      --
  Federal funds purchased............................................         14                 22

Approximate weighted average rate paid on:
  FHLB advances......................................................       4.99%                --%
  Federal funds purchased............................................       4.09               6.41
</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  8.46% of the  FDIC-insured  deposits in Elizabethtown at June 30,
2001 (the latest date for which such data is  available)  ranking it sixth among
FDIC-insured  institutions  in deposit  market share.  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.

     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

                                       10
<PAGE>

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, 2001, the Bank had 30 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.

     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

                                       11
<PAGE>
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.

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.

                                       12
<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.

     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

                                       13
<PAGE>
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 by
the institution's  primary  supervisory  authority and such other information as
the FDIC

                                       14
<PAGE>

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 an  assessment  to the FDIC in an amount  equal to 2.12 basis  points  times
their assessable deposits to help fund interest payments on certain bonds issued
by the Financing Corporation, an agency established by the federal government to
finance takeovers of insolvent thrifts.

     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.

                                       15
<PAGE>

     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 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.

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 2001.

                                     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, 2001, there
were 248,920 shares outstanding and 323 shareholders of record.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

     The Company  recorded its second  consecutive year of profits in the Bank's
fourth full year of  operations  in 2001.  Net income for the year was  $663,000
compared  to income of  $602,000  for the year ended  December  31,  2000.  On a
pre-tax  basis,  the Company's  earnings more than doubled to $1,008,000 in 2001
from  $415,000  in 2000.  Net income for the 2001  fiscal  year  benefited  from
continued growth in interest-earning assets resulting in an increase in interest
income and related service charges and fee income.  The Bank's  secondary market
division  also  contributed  to the  increase  in net  income for the year ended
December  31,  2001.  Net  income for the 2000  fiscal  year was helped in great
measure  by the  tax  benefit  associated  with  the  lifting  of the  valuation
allowance   relating  to  net  deferred  tax  assets.   The  Bank  continues  to
significantly  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

                                       16
<PAGE>

financial  performance  and could  cause the Bank's  actual  results  for future
periods to differ materially from those anticipated or projected.

     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.

COMPARISON  OF THE RESULTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2001
AND 2000

     GENERAL.  Net income  for the year ended  December  31,  2001 was  $662,700
($2.64  diluted  earnings per share)  compared to net income of $601,700  ($2.43
diluted earnings per share) for the year ended December 31, 2000.  Income before
income taxes increased  $593,600,  or 143.1%, to $1,008,400 compared to $414,800
for the 2000 fiscal year.  The increase in pre-tax income was due to an increase
in net interest income of $396,700,  an increase in other income of $319,800 and
a decrease  in  provision  for loan loss of  $34,800.  These  improvements  were
partially  offset  by an  increase  in other  expenses  of  $157,600.  The small
increase in net income for fiscal year 2001 was due to the  recording  of income
tax expense of  $345,700  as  compared to an income tax benefit of $186,900  for
fiscal year 2000. In accordance with Statement of Financial Accounting Standards
No.  109,  the  Company  determined  that it was more  likely  than not that net
deferred  tax assets will be  realized,  and thus  concluded  that no  valuation
allowance  was  needed  for  deductible  temporary  differences.  The  valuation
allowance  relating  to net  deferred  tax assets was lifted in fiscal year 2000
resulting  in an income tax benefit of $323,200  offset by current and  deferred
income tax expense of $136,300.

     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,  2001,  net  interest  income  increased
$396,700,  or 16.2%,  compared  to the prior  year.  Interest  income  increased
$873,500,  or 16.0%, for the year ended December 31, 2001 while interest expense
increased  $476,800,  or 15.9%. The increase in net interest income reflects the
continued  growth in  interest-earning  assets.  Total average  interest-earning
assets increased by  approximately  $11,166,000,  or 19.2%,  with an decrease in
average  yield of 25 basis points  while  average  interest-bearing  liabilities
increased by approximately  $10,211,000,  or 20.3%,  with an decrease in average
cost of 22 basis points.  The Bank's net interest  margin  narrowed to 4.10% for
fiscal year 2001 from 4.20% for fiscal year 2000.

     During the year ended  December  31, 2001,  the Bank  reported net interest
income,  before  provision for credit  losses,  of $2,844,100.  Interest  income
(consisting  of $5,977,300  interest and fees on loans,  $195,100 in interest on
securities  and  $156,600 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 Federal Home Loan
Bank  ("FHLB")  advances  and  $165,300 in interest  on capital  leases  totaled
$3,484,900.  Interest on capitalized  leases is expected to increase by $100,000
during 2002 as a result of the Bank's  occupancy of the new addition to the main
office.

     During the year ended  December  31, 2000,  the Bank  reported net interest
income,  before  provision for credit  losses,  of $2,447,400.  Interest  income
(consisting  of $5,142,400  interest and fees on loans,  $200,100 in interest on
securities  and  $112,900 in interest  on federal  funds sold and other  income)
totaled  $5,455,500  while interest  expense,  which  consisted of $2,873,100 in
interest  on  deposits  (including  $892,400  on  certificates  of deposit  over
$100,000),  $1,400 in  interest  on federal  funds  purchased  and  $133,600  in
interest on capital leases totaled $3,008,100.

                                       17
<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,
                                               --------------------------------------------------------------------------
                                                             2001                                      2000
                                               ---------------------------------       ----------------------------------
                                                                         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.............   $   3,641    $     157     4.31%        $    1,751    $     113      6.45%
   Securities...............................       3,021          195     6.45              2,871          200      6.97
   Loans held for sale......................         751           61     8.12                 31            4     12.90
   Loans, net of allowances (1).............      61,978        5,916     9.55             53,572        5,138      9.59
                                               ---------    ---------                  ----------    ---------
        Total interest-earning assets.......      69,391        6,329     9.12             58,225        5,455      9.37
                                                            ---------                                ---------
Non-interest-earning assets.................       4,772                                    4,056
                                               ---------                               ----------
        Total assets........................   $  74,163                               $   62,281
                                               =========                               ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing deposits:
  Savings and NOW...........................   $   6,321    $     165     2.61%        $    5,821    $     202      3.41%
  Money market..............................       1,948           67     3.43              1,571           66      4.23
  Other time deposits.......................      46,241        2,862     6.19             41,658        2,605      6.25
FHLB advances...............................       4,510          225     4.99                 --           --        --
Federal funds purchased.....................          14            1     4.09                 22            1      6.41
Capital lease obligations...................       1,532          165    10.77              1,283          134     10.43
                                               ---------    ---------                  ----------    ---------
        Total interest-bearing
             liabilities....................      60,566        3,485     5.75             50,355        3,008      5.97
                                                            ---------                                ---------
Non-interest-bearing deposits...............       6,566                                    5,912
Other liabilities...........................         763                                      541
Stockholders' equity........................       6,268                                    5,473
                                               ---------                               ----------
Total liabilities and equity................   $  74,163                               $   62,281
                                               =========                               ==========

Net interest income.........................                $   2,844                                $   2,447
                                                            =========                                =========

Net interest spread.........................                              3.37%                                     3.40%
                                                                         =====                                     =====

Net interest margin.........................                              4.10%                                     4.20%
                                                                         =====                                     =====
<FN>
---------
(1)  Includes non-accrual loans.

</FN>
</TABLE>


                                       18
<PAGE>

     The following  table  allocates the changes in the components of the Bank's
net interest income between the years ended December 31, 2001 and 2000. 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.
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                          -------------------------------------
                                                                 2001     VS.     2000
                                                          -------------------------------------
                                                                             CHANGE DUE TO:
                                                          INCREASE/       ---------------------
                                                          DECREASE        RATE          VOLUME
                                                          --------        ----          ------
                                                                       (IN THOUSANDS)
<S>                                                       <C>            <C>          <C>
Federal funds sold and other...........................   $     44       $    (37)    $      81
Investment securities..................................         (5)           (15)           10
Loans held for sale....................................         57             (1)           58
Loans, net of allowances...............................        778            (24)          802
                                                          --------       ---------    ---------
     Total interest-earning assets.....................        874            (77)          951
                                                          --------       ---------    ---------

Deposits...............................................        221            (89)          310
FHLB advances..........................................        225             --           225
Federal funds purchased................................         --             --            --
Capital lease obligations..............................         31              4            27
                                                          --------       --------     ---------
     Total interest-bearing liabilities................        477            (85)          562
                                                          --------       ---------    ---------
      Total............................................   $    397       $     10     $     387
                                                          ========       ========     =========
</TABLE>
     PROVISION FOR LOAN LOSSES. The provision for loan losses for the year ended
December 31, 2001 was $182,800, compared to $217,600 for the year ended December
31, 2000.  Net  charge-offs  for the year ended  December  31, 2001  declined to
$101,600  (0.16% of average loans) compared to $154,000 (0.28% of average loans)
during the year ended December 31, 2000.  There were no significant  charge-offs
requiring an additional  provision  during 2001,  resulting in a decrease in the
provision  for loan losses for the year ended  December  31,  2001.  The Company
makes  provisions  for loan losses in amounts  deemed  necessary to maintain the
adequacy of the allowance for loan losses.  At December 31, 2001,  the Company's
allowance for loan losses was $706,700, or 1.08% of the gross loan portfolio.
01
     OTHER  INCOME.  Other  income  for the year  ended  December  31,  2001 was
$751,100  compared to $431,400 for the year ended December 31, 2000, an increase
of $319,700, or 74.1%. Other income increased due to higher net gains on sale of
loans and  service  charges  and fees  during  2001.  Net gains on sale of loans
increased  from $10,700 in 2000 to $165,300 in 2001 and other  income  including
secondary  market  service  charges and fees  increased  from $17,100 in 2000 to
$57,100 in 2001,  reflecting  the activity of the Bank's  secondary  market loan
division  which began  operating in October 2000.  The Bank's  secondary  market
activities  benefited  from a decline in mortgage rates during 2001 which led to
an  unusually  high level of  mortgage  refinancing.  Service  charges  and fees
increased to $501,700 from $353,900 in 2000  reflecting the continued  growth in
the Bank's loans and deposits.  The Bank also recognized  $6,000 in gain on sale
of other real  estate  owned  during  fiscal  year 2001.  These  increases  were
partially offset by a decline in credit life and accident insurance income which
declined to $21,000 from $49,700 in 2000.

     OTHER  EXPENSES.  Other  expenses for the year ended December 31, 2001 were
$2,404,000  compared to $2,246,400 for the year ended  December 31, 2000.  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 addition of a secondary  market  mortgage  loan  division in October,  2000.
Occupancy  expense includes land rent expense in 2001 of approximately  $159,300
related to the main office and branch land leases. Rent and depreciation expense
is expected to increase by  approximately  $42,000  during fiscal year 2002 as a
result of

                                       19
<PAGE>

occupying  the new addition to the main office.  The Bank will also incur higher
utility and other expense as a result of the new  addition.  The addition of the
secondary  market  mortgage loan division also  increased  salaries and employee
benefits  expense,  postage,  telephone  and  supplies  and a  variety  of other
categories of other operating expense.  Equipment expenses increased as the Bank
occupied expansion  facilities in September,  2001 requiring  additional capital
expenditures  and  resulting in increased  depreciation  expense.  The growth in
salaries was partially  offset by a decline in professional  services expense as
the Bank has sought to reduce its reliance on outside professionals.

     INCOME TAX EXPENSE (BENEFIT).  For the year ended December 31, 2001, income
tax expense was $345,700  compared to a $186,900 income tax benefit during 2000.
The tax benefit  during the 2000  period  related to the  reversal of  valuation
allowances  primarily related to the Bank's net deferred tax assets. 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.  The Company, however,  establishes
valuation  allowances  for its net deferred tax assets  unless it is more likely
than not that these net  deferred  tax  assets  will be  realized.  Based on its
current  earnings and other factors,  the Company  determined in 2000 that it is
more likely than not that it will realize certain of its net deferred tax assets
and reversed the corresponding valuation allowance.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2001 AND DECEMBER 31, 2000

     The Company  continued to experience steady asset growth during fiscal year
2001.  Total assets  increased by $10.4 million,  or 15.7%,  to $76.9 million at
December 31, 2001 from $66.5 million at December 31, 2000.  The Company's  asset
growth is primarily  attributable  to growth in the Bank's loan portfolio  which
increased by $6.5 million,  or 11.2%, from $58.1 million at December 31, 2000 to
$64.6  million at December  31, 2001.  The Bank also  increased  its  investment
portfolio  and federal funds sold from $3.8 million at December 31, 2000 to $4.9
million at December 31, 2001 as part of the Bank's formal  liquidity plan. Loans
held for sale  increased by $1.1  million from  $259,000 at December 31, 2000 to
$1.4  million at December  31,  2001.  Funding for the Bank's  asset growth came
primarily from advances from the FHLB of Cincinnati and increased deposits. FHLB
advances  totaled  $7.0  million at December  31,  2001  compared to no advances
outstanding at December 31, 2000.  Deposits increased by $1.5 million,  or 2.6%,
from $58.7  million at December 31, 2000 to $60.2  million at December 31, 2001.
The decrease in accrued  interest  receivable and other assets of  approximately
$43,200 was  partially  attributable  to a decrease  in  deferred  tax assets of
approximately  $19,100.  The  remainder  of the  decrease  in  accrued  interest
receivable and other assets was primarily  attributable to a decrease in accrued
interest  receivable on loans  resulting from the decline in interest rates from
December 31, 2000 to December 31, 2001. The increase in accrued interest payable
and other liabilities of approximately  $286,100 is primarily attributable to an
increase in federal  income  taxes  payable to  $336,000  compared to no federal
income taxes payable at December 31, 2000. This increase was partially offset by
a decrease in accrued  interest  payable due to a decline in interest rates from
December 31, 2000 to December 31, 2001. Premises and equipment increased by $1.1
million and  obligations  under capital  lease  increased by $850,000 due to the
expansion of the Bank's main office facilities.  The Bank occupied the expansion
in  September,  2001.  The Bank  signed a new  capital  lease  arrangement  with
Kentucky National Properties,  L.L.C., a limited liability company controlled by
the  Company's  directors,  which  combined the  expansion  lease with  existing
related party arrangements for the main office facility.  The remaining increase
in premises and  equipment was a result of capital  expenditures  to furnish the
expansion facilities.

     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 funding to meet liquidity needs.

     Stockholders'  equity  increased  $774,200,  or 13.0%,  to $6.7  million at
December 31, 2001 from $5.9 million at December  31, 2000  primarily  due to the
net income during the year, a $31,200 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 $18,300 in unrealized gains on
available-for-sale  securities,  net of tax benefits. As a result of the holding
company  reorganization,  stockholders' equity account was restated to equal the
Bank's stockholders' equity net of retained deficit prior to the reorganization.

                                       20
<PAGE>
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 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, 2001. 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 45% of demand and 56% 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
                                       ----------         ---------          -------        ----------        -----
<S>                                     <C>            <C>                <C>             <C>             <C>
Rate-Sensitive Assets:
   Federal funds sold and other.......  $      788     $        --        $        --     $       --      $       788
   Securities.........................          --              --              3,029            512            3,541
   Federal Home Loan Bank stock.......          --              --                 --            356              356
   Federal Reserve stock..............          --              --                 --            177              177
   Loans held for sale................       1,371              --                 --             --            1,371
   Loans..............................       6,149           9,539             42,436          6,465           64,589
                                        ----------      ----------         ----------     ----------      -----------
        Total rate-sensitive assets...       8,308           9,539             45,465          7,510           70,822
                                        ----------     -----------         ----------     ----------      -----------
   Cash and due from banks............          --              --                 --          2,212            2,212
   Fixed assets.......................          --              --                 --          3,031            3,031
Other assets..........................          --              --                 --            858              858
                                        ----------     -----------        -----------     ----------      -----------
        Total assets..................  $    8,308     $     9,539        $    45,465     $   13,611      $    76,923
                                        ==========     ===========        ===========     ==========      ===========

Rate-Sensitive Liabilities:
  Deposits:
     Demand...........................  $    2,574     $        --        $     3,143     $       --      $     5,717
     Savings..........................       2,217              --              1,736             --            3,953
     Time.............................      12,464          28,068              2,018             --           42,550
  Other borrowings....................          13           2,038                 29          7,031            9,111
                                        ----------     -----------        -----------     ----------      -----------
        Total rate-sensitive
          liabilities.................      17,268          30,106              6,926          7,031           61,331
                                        ----------     -----------        -----------     ----------      -----------
  Demand deposits.....................          --              --                 --          7,966            7,966
  Accrued and other liabilities.......          --              --                 --            918              918
  Stockholders' equity................          --              --                 --          6,708            6,708
                                        ----------     -----------        -----------     ----------      -----------
        Total liabilities and equity..  $   17,268     $    30,106        $     6,926     $   22,623      $    76,923
                                        ==========     ===========        ===========     ==========      ===========

GAP...................................  $   (8,960)    $   (20,567)       $    38,539     $       479     $     9,491
Cumulative GAP........................      (8,960)        (29,527)             9,012           9,491
Cumulative GAP as a % of
     total assets.....................      (11.65)%        (38.39)%           11.72%          12.34%
<FN>
-------------------------
(1) Includes non-rate-sensitive assets.
</FN>
</TABLE>

     As seen in the  preceding  table,  for the first 365 days  77.2% of funding
sources  are  estimated  to reprice  compared  to 25.2% 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

                                       21
<PAGE>

the asset and the  liability  remains  the same,  thus  impacting  net  interest
income.  This  characteristic is referred to as 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,
2001,  totaled $3.0 million  compared to $1.9 million at December 31, 2000.  The
Bank's cash flows were provided  mainly by financing  activities  including $7.0
million in  advances  from the FHLB and $1.5  million  from  deposit  increases.
Operating  activities  provided $271,600 in cash. The Bank used these cash flows
for its  investing  activities  primarily  to fund an increase in gross loans of
$6.7 million, in investment  purchases of $570,000,  and in capital expenditures
of $360,000.

     At December 31, 2001, the Bank had outstanding commitments to fund loans in
the amount of approximately $8.2 million,  including outstanding standby letters
of credit of $179,000 and  commitments  to related  parties of  $627,600.  It is
anticipated  that such  commitments  will be funded  from cash on hand,  federal
funds purchased, FHLB borrowings, and future deposits increases.


                                       22
<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 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 13.

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.          67         Chairman of the Board, Director of the Company            2002
                                            and the Bank
Lawrence P. Calvert              54         Chief Executive Officer, Director of the Company          2004
                                             and the Bank
Ronald J. Pence                  47         President, Director of the Company and the Bank           2003
Kevin D. Addington               39         Director of the Company and the Bank                      2003
Henry Lee Chitwood               56         Director of the Company and the Bank                      2003
Lois Watkins Gray                64         Director of the Company and the Bank                      2004
William R. Hawkins               44         Director of the Company and the Bank                      2004
Christopher G. Knight, M.D.      57         Director of the Company and the Bank                      2002
Allen McNutt                     58         Director of the Company and the Bank                      2002
Larry F. Witten                  47         Chief Lending Officer                                      --
</TABLE>

     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

                                       23
<PAGE>

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 21 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  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 is the  Superintendent  of Schools for Hardin  County,  a
position  which she has held since 1992.  Ms. Gray has 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 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.

                                       24
<PAGE>
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 2001 exceeded $100,000 for services rendered in all capacities to
the Company and its subsidiaries (the "Named Executive Officers").
<TABLE>
<CAPTION>
                                                                                   LONG-TERM
                                                                               COMPENSATION AWARDS
                                         ANNUAL COMPENSATION                --------------------------
                                  ------------------------------------      RESTRICTED      SECURITIES
    NAME AND                                              OTHER ANNUAL        STOCK         UNDERLYING         ALL OTHER
PRINCIPAL POSITION       YEAR     SALARY    BONUS         COMPENSATION       AWARD(S)         OPTIONS        COMPENSATION
------------------       ----     ------    -----         ------------      ---------       ----------        ------------
<S>                      <C>     <C>        <C>           <C>                <C>            <C>               <C>
Lawrence P. Calvert      2001    $ 122,500  $   --         $   --              --               --            $   8,095 (1)
Chief Executive Officer  2000      115,000      --             --              --            4,500                7,003
                         1999      115,000      --             --              --               --               10,695

Ronald J. Pence          2001    $ 122,500  $   --         $   --              --               --            $   6,935 (2)
President                2000      115,000      --             --              --            4,500                6,616
                         1999      115,000      --             --              --               --                9,593
<FN>
------------
(1)  Mr.  Calvert's "Other  Compensation"  consisted of $1,895 in paid term life
     insurance premiums and $6,200 in deferred director fees for 2001.
(2)  Mr.  Pence's  "Other  Compensation"  consisted  of $735 in paid  term  life
     insurance premiums and $6,200 in deferred director fees for 2001.
</FN>
</TABLE>

     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 2001. No options were exercised during fiscal year 2001.  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, 2001.
<TABLE>
<CAPTION>
                                        NUMBER OF SECURITIES                 VALUE OF UNEXERCISED
                                       UNDERLYING UNEXERCISED                IN-THE-MONEY OPTIONS
                                         OPTIONS AT YEAR-END                      AT YEAR-END
                                    ----------------------------           ----------------------------
NAME                                EXERCISABLE    UNEXERCISABLE           EXERCISABLE    UNEXERCISABLE
----                                -----------    -------------           -----------    -------------
<S>                                   <C>            <C>                     <C>             <C>
Lawrence P. Calvert                   9,000          1,500                   $   --          $   --
Ronald J. Pence                       9,000          1,500                   $   --          $   --
</TABLE>

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 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 248 shares of Common Stock for fees deferred during 2001.

                                       25
<PAGE>

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

     (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,
2001.
<TABLE>
<CAPTION>
                                                                                 PERCENT OF SHARES
NAME AND ADDRESS                                 AMOUNT AND NATURE OF             OF COMMON STOCK
OF BENEFICIAL OWNER                              BENEFICIAL OWNERSHIP(1)          OUTSTANDING(2)
-------------------                              -----------------------         -----------------
<S>                                                 <C>                             <C>
Robert E. Robbins                                   14,839 (3)                      5.95%
P.O. Box 2089
Elizabethtown, Kentucky  42701

Lawrence P. Calvert                                 16,373 (4)                      6.35%
1000 North Dixie Avenue
Elizabethtown, Kentucky  42701

Ronald J. Pence                                     22,372 (5)                      8.67%
1000 North Dixie Avenue
Elizabethtown, Kentucky  42701

Kevin D. Addington                                  14,040                          5.63%
701 W. Park Road
Elizabethtown, Kentucky  42701

Christopher G. Knight                               14,039                          5.62%
1109 Woodland Drive
Elizabethtown, Kentucky  42701

Larry F. Witten                                     16,190 (6)                      6.33%
1000 North Dixie Avenue
Elizabethtown, Kentucky  42701

Allen McNutt                                        14,039 (7)                      5.62%
109 Gaither Station Road
Elizabethtown, Kentucky  42701
<FN>
-----------
(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  667  shares  which each of Messrs.
     Robbins,  Addington,  Knight and McNutt  have the right to  acquire,  9,000
     shares  which each of Messrs.  Calvert  and Pence have the right to acquire
     and 7,000 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.
(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 1,924 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)  Held jointly.
(7)  Includes 12,480 shares held jointly.
</FN>
</TABLE>

                                       26
<PAGE>

     (b)  SECURITY  OWNERSHIP  OF  MANAGEMENT.   The  following  table  provides
information as of December 31, 2001 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)
                                                    -------------------------------------------------
                                                     NUMBER                        PERCENTAGE OF
NAME                                                OF SHARES                  SHARES OUTSTANDING (2)
----                                                ----------                 ----------------------
<S>                                                   <C>                                 <C>
Robert E. Robbins, M.D.                               14,839  (3)                         5.95%
Lawrence P. Calvert                                   16,373  (4)                         6.35%
Ronald J. Pence                                       22,372  (5)                         8.67%
Kevin D. Addington                                    14,040                              5.63%
Henry Lee Chitwood                                     8,039                              3.22%
Lois Watkins Gray                                      5,039                              2.02%
William R. Hawkins                                     8,039  (6)                         3.22%
Christopher G. Knight, M.D.                           14,039                              5.62%
Allen McNutt                                          14,039  (7)                         5.62%

All directors and executive
  officers as a group (10 persons)                   133,009  (8)                        47.74%
<FN>
-----------
(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 9,000 shares which each of Messrs.  Calvert and Pence have
     the right to acquire  pursuant  to the  exercise  of options and 667 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, 2001 held by that individual or group.
(3)  Includes  12,000  shares  held  in his  IRA  and  1,924  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 6,480 shares held jointly.
(7)  Includes 12,480 shares held jointly.
(8)  Includes  29,669 shares which  directors  and  executive  officers have the
     right to acquire pursuant to the exercise of options.
</FN>
</TABLE>
     (c) CHANGES IN CONTROL. Not applicable.

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, 2001,  $310,200 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.

                                       27
<PAGE>
     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  2001,  the Bank  paid  KNP  $186,000  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.


                                     PART IV

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

         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

-------------
*    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 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.


                                       28
<PAGE>

                         KENTUCKY NATIONAL BANCORP, INC.

                                    INDEX TO
                        CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                           PAGE



Independent Auditor's Report                                                F-1

Consolidated Statements of Condition                                        F-2

Consolidated Statements of Operations                                       F-3

Consolidated Statements of Changes in
     Stockholders' Equity                                                   F-5

Consolidated Statements of Cash Flows                                       F-6

Notes to Consolidated Financial Statements                                  F-8


                                       29
<PAGE>


                     [LETTERHEAD OF EKW & ASSOCIATES, llp]





                          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, 2001 and 2000,
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 audits 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, 2001 and 2000, 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 20, 2002


                                      F-1
<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CONDITION

                           DECEMBER 31, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                          -----------------------------------
                                                                              2001                    2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
                               ASSETS

Cash and due from banks                                                   $ 2,211,755             $ 1,574,759
Federal funds sold                                                            788,000                 304,000
Investment securities available-for-sale                                    3,540,810               3,019,970
Federal Home Loan Bank Stock, at cost                                         355,800                 285,900
Federal Reserve Stock, at cost                                                176,650                 152,300
Loans held for sale                                                         1,370,740                 258,535
Loans, net                                                                 64,589,393              58,079,886
Premises and equipment, net                                                 3,031,510               1,924,511
Accrued interest receivable and other assets                                  858,240                 901,432
                                                                          -----------             -----------

     Total assets                                                         $76,922,898             $66,501,293
                                                                          ===========             ===========
                LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Deposits                                                                $60,186,450             $58,675,405
  Federal Home Loan Bank advances                                           7,000,000                    -
  Obligations under capital leases                                          2,110,760               1,260,482
  Accrued interest payable and other
    liabilities                                                               917,778                 631,713
                                                                          -----------             -----------

     Total liabilities                                                     70,214,988              60,567,600
                                                                          -----------             -----------

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, 248,920 and 246,440 shares
    at December 31, 2001 and 2000,
    respectively                                                                2,489                   2,464
  Surplus                                                                   5,534,703               5,441,528
  Retained earnings                                                         1,138,946                 476,241
  Accumulated other comprehensive
    income                                                                     31,772                  13,460
                                                                          -----------             -----------
     Total stockholders' equity                                             6,707,910               5,933,693
                                                                          -----------             -----------
     Total liabilities and stockholders'
       Equity                                                             $76,922,898             $66,501,293
                                                                          ===========             ===========
</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, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                          -----------------------------------
                                                                             2001                    2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
Interest and dividend income:
  Loans, including fees                                                   $ 5,977,291             $ 5,142,388
  Securities                                                                  195,053                 200,149
  Federal funds sold and other income                                         156,617                 112,942
                                                                          -----------             -----------

     Total interest and dividend income                                     6,328,961               5,455,479
                                                                          -----------             -----------

Interest expense:
  Deposit accounts                                                          2,105,817               1,980,629
  Certificates of deposit over $100,000                                       988,399                 892,417
  Federal funds purchased                                                         564                   1,425
  Federal Home Loan Bank advances                                             224,796                      --
  Capital leases                                                              165,293                 133,639
                                                                          -----------             -----------

     Total interest expense                                                 3,484,869               3,008,110
                                                                          -----------             -----------

     Net interest income                                                    2,844,092               2,447,369

Provision for loan losses                                                     182,800                 217,572
                                                                          -----------             -----------

     Net interest income after provision
       for loan losses                                                      2,661,292               2,229,797
                                                                          -----------             -----------

Other income:
  Service charges and fees                                                    501,717                 353,874
  Credit life and accident insurance                                           20,972                  49,678
  Net gain on sale of loans                                                   165,263                  10,659
  Gain on sale of other real estate owned                                       6,063                      --
  Other income                                                                 57,126                  17,161
                                                                          -----------             -----------

                                                                              751,141                 431,372
                                                                          -----------             -----------
Other expenses:
  Salaries and employee benefits                                            1,211,655               1,043,663
  Data processing                                                             199,346                 213,385
  Net occupancy expense                                                       159,307                 151,245
  Advertising                                                                  99,124                 117,224
  Postage, telephone and supplies                                             132,651                 112,666
  Directors fees                                                               55,800                  45,918
  Bank franchise tax                                                           77,992                  68,476
  Equipment expense                                                           123,310                  89,907
  Insurance expense                                                             8,395                   7,776
  Professional services                                                       131,890                 210,916
  Other operating expenses                                                    204,536                 185,211
                                                                          -----------             -----------

                                                                            2,404,006               2,246,387
                                                                          -----------             -----------
</TABLE>
                                    Continued


                                      F-3
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF INCOME, CONTINUED

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                          -----------------------------------
                                                                             2001                    2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
     Income before income taxes                                           $ 1,008,427             $   414,782

Income tax expense (benefit)                                                  345,722                (186,926)
                                                                          -----------             -----------
     Net income                                                           $   662,705             $   601,708
                                                                          ===========             ===========

Earnings per share:
  Basic                                                                   $      2.67             $      2.46
                                                                          ===========             ===========
  Diluted                                                                 $      2.64             $      2.43
                                                                          ===========             ===========
</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, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                  ACCUMU-
                                                                                  LATED
                                                                                  OTHER
                                                                                  COMPRE-
                                   COMMON STOCK                       RETAINED    HENSIVE       COMPRE-
                            -------------------------                 EARNINGS    INCOME         HENSIVE
                              SHARES         AMOUNT       SURPLUS     (DEFICIT)   (LOSS)         INCOME             TOTAL
                            -----------    ----------   -----------  ----------  ---------      ----------       -----------
<S>                          <C>           <C>          <C>          <C>         <C>            <C>              <C>
Balances,
 December 31, 1999           240,000       $   2,400    $ 5,212,125  $(125,467)  $ (8,920)                       $ 5,080,138

Incentive stock
 option plan                    -               -            68,467       -          -                                68,467

Issuance of stock              6,440              64        160,936       -          -                               161,000

Net income                      -               -              -       601,708       -          $ 601,708            601,708

Other comprehen-
 sive income, net
 of tax:

  Unrealized gains
  on securities
  available-for-
  sale net of re-
  classification
  adjustment                    -               -              -         -         22,380          22,380             22,380
                            --------       ----------   -----------  ---------   --------       ---------        -----------

Comprehensive
 income                                                                                         $ 624,088
                                                                                                =========

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       -          -                                62,200

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
                            =======        =========    =========== ==========   ========                       ===========
</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, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                          -----------------------------------
                                                                             2001                    2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
Cash flows from operating activities:
  Net income                                                              $   662,705             $   601,708
  Adjustments to reconcile net income
       to net cash provided by operating
       activities:
    Provision for loan losses                                                 182,800                 217,572
    Depreciation, amortization and
      accretion, net                                                          153,040                 110,225
    Federal Home Loan Bank stock dividend                                     (21,700)                (17,600)
    Incentive stock option compensation                                        31,200                  68,467
    Deferred income taxes                                                       9,667                (192,835)
    Gain on sale of other real estate owned                                    (6,063)                   -
    Net change in:
      Loans held for sale                                                  (1,112,205)               (258,535)
      Accrued interest receivable and other
        assets                                                                 24,095                (219,020)
      Accrued interest payable and other
        liabilities                                                           348,065                 314,946
                                                                          -----------             -----------

          Net cash provided by operating
            activities                                                        271,604                 624,928
                                                                          -----------             -----------

Cash flows from investing activities:
  Purchase of available-for-sale securities                                (2,492,500)               (999,219)
  Proceeds from maturities of available-for-
    sale securities                                                         2,000,000                    -
  Purchases of Federal Home Loan Bank stock                                   (48,200)               (101,800)
  Redemption of Federal Reserve Bank stock                                       -                     27,700
  Purchase Federal Reserve Bank stock                                         (24,350)                   -
  Proceeds from sale of other real estate
    owned                                                                       4,000                    -
  Net increase in loans                                                    (6,690,244)             (9,966,791)
  Purchases of premises and equipment                                        (361,107)                (54,792)
                                                                          -----------             -----------

          Net cash used in investing
            activities                                                     (7,612,401)            (11,094,902)
                                                                          -----------             -----------

Cash flows from financing activities:
  Net increase in deposits                                                  1,511,045               9,468,992
  Payments on capital lease obligations                                       (49,252)                (45,447)
  Federal Home Loan Bank advances                                           7,000,000                    -
                                                                          -----------             -----------
Net cash provided by financing activities                                   8,461,793               9,423,545
                                                                          -----------             -----------
Net increase (decrease) in cash and cash
  equivalents                                                               1,120,996              (1,046,429)

Cash and cash equivalents, beginning of year                                1,878,759               2,925,188
                                                                          -----------             -----------
Cash and cash equivalents, end of year                                    $ 2,999,755             $ 1,878,759
                                                                          ===========             ===========
</TABLE>

                                    Continued


                                      F-6
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                          -----------------------------------
                                                                             2001                    2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
SUPPLEMENTAL DISCLOSURES:

  Cash paid for interest                                                  $ 3,545,405             $ 3,604,213
                                                                          ===========             ===========

  Cash paid for income taxes                                              $      -                $    14,000
                                                                          ===========             ===========
NONCASH TRANSACTIONS:

  Federal Home Loan Bank Stock dividend
    received                                                              $    21,700             $    17,600
                                                                          ===========             ===========
  Total increase in unrealized gain on
    securities available-for-sale                                         $    27,744             $    33,909
                                                                          ===========             ===========
  Loans transferred to other real
    estate owned                                                          $    22,813             $      -
                                                                          ===========             ===========
  Loans to facilitate the sale of other real
    estate owned                                                          $    24,876             $      -
                                                                          ===========             ===========
</TABLE>

During the years ended  December 31, 2001 and 2000, the Company issued 2,480 and
6,440 shares of common stock, respectively, in lieu of cash payments for accrued
directors'   and  counsel's   fees  in  the  amount  of  $62,000  and  $161,000,
respectively,  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 for the years ended  December  31, 2001 and 2000.
          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.   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.

     F.   LOANS

          Loans are stated at the unpaid principal  balance,  less the allowance
          for loan  losses  and  unearned  income.  Interest  income on loans is
          recorded  on the  accrual  basis  except  for  those  loans  placed on
          nonaccrual of income  status.  Loans are placed on nonaccrual  when 90
          days past due unless well  secured  and in the process of  collection.
          Unearned income,  arising principally from consumer installment loans,
          is reflected as a reduction of loans and is  recognized as income by a
          method that approximates the interest method.

          The accrual of interest on impaired  loans is  discontinued  when,  in
          management's  opinion,  the borrower may be unable to meet payments as
          they come due.  When  interest  accrual  is  discontinued,  all unpaid
          accrued   interest  is  reversed.   Interest  income  is  subsequently
          recognized only to the extent cash payments are received.

     G.   ALLOWANCE FOR CREDIT LOSSES

          The  allowance is maintained  at a level  adequate to absorb  probable
          losses.  Management  determines the adequacy of the allowance based on
          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 value
          of estimated cash flows. The allowance for loan losses is increased by
          the  provision  for loan  losses  and  reduced by  charegoffs,  net of
          recoveries.

     H.   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.

     I.   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.

                                    Continued
                                      F-9
<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     J.   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,  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.

     K.   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.

          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-


                                    Continued


                                      F-10
<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     K.   FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED

          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.

          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.

     L.   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.

     M.   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.

     N.   ADVERTISING

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


                                    Continued

                                      F-11
<PAGE>
                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SIGNIFICANT ACCOUNTING POLICIES, Continued

     O.   RECLASSIFICATIONS

          Certain 2000 amounts have been  reclassified  to conform with the 2001
          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, 2001 and 2000 is
     as follows:
<TABLE>
<CAPTION>
                                                                                 2001
                                                   ------------------------------------------------------------------
                                                                              UNREALIZED
                                                     AMORTIZED       ------------------------------        FAIR
                                                       COSTS            GAINS            LOSSES            VALUE
                                                   --------------    -------------    -------------    --------------
<S>                                                <C>               <C>              <C>              <C>
       Available-for-sale:
        U.S. Treasury and Federal
         Agencies                                  $3,492,672        $ 48,513         $    375         $3,540,810
                                                   ==========        ========         ========    =    ==========

<CAPTION>
                                                                                 2000
                                                   ------------------------------------------------------------------
                                                                              UNREALIZED
                                                     AMORTIZED       ------------------------------        FAIR
                                                       COSTS            GAINS            LOSSES            VALUE
                                                   --------------    -------------    -------------    --------------
<S>                                                <C>               <C>              <C>              <C>
       Available-for-sale:
        U.S. Treasury and Federal
         Agencies                                  $2,999,576        $ 20,549         $    155         $3,019,970
                                                   ==========        ========         ========         ==========
</TABLE>
     A  summary  of  investment   securities  at  December  31,  2001  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.
<TABLE>
<CAPTION>
                                                                             AMORTIZED               FAIR
                                                                               COST                  VALUE
                                                                           -----------            -----------
<S>                                                                        <C>                    <C>
       Available-for sale:
         Due after one year through five years                             $ 2,992,672            $ 3,028,780
         Due after five years through ten years                                500,000                512,030
                                                                           -----------            -----------

                                                                           $ 3,492,672            $ 3,540,810
                                                                           ===========            ===========
</TABLE>

     There were no  securities  pledged to secure  public  deposits or for other
     purposes at December 31, 2001 or 2000.

3.   LOANS

     The composition of loans at December 31, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                                                               2001                   2000
                                                                           -----------             -----------
<S>                                                                        <C>                     <C>
              Commercial and industrial                                    $ 6,408,797             $ 5,614,756
              Real estate - mortgage                                        43,848,257              38,401,240
              Real estate - construction                                     4,582,561               4,386,658
              Agricultural                                                   1,866,586               1,595,434
</TABLE>

                                    Continued


                                      F-12
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.     LOANS, Continued
<TABLE>
<CAPTION>
                                                                               2001                   2000
                                                                           -----------             -----------
<S>                                                                        <C>                     <C>
              Consumer                                                     $ 8,497,391             $ 8,748,586
              Other                                                            134,352                 125,584
                                                                           -----------             -----------

                                                                            65,337,944              58,872,258
              Less:
                Allowance for loan losses                                      706,739                 625,556
                Unearned income                                                 41,812                 166,816
                                                                           -----------             -----------

                                                                           $64,589,393             $58,079,886
                                                                           ===========             ===========
</TABLE>

     At December 31, 2001 and 2000, the Bank had no loans that were specifically
     classified as impaired.

     An analysis of the changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
                                                                              2001                    2000
                                                                           -----------             -----------
<S>                                                                        <C>                     <C>
              Balance, beginning of period                                 $   625,556             $   561,944
              Loans charged off                                               (131,806)               (188,841)
              Loan recoveries                                                   30,189                  34,881
              Provision for loan losses                                        182,800                 217,572
                                                                           -----------             -----------

              Balance, end of period                                       $   706,739             $   625,556
                                                                           ===========             ===========
</TABLE>

4.   PREMISES AND EQUIPMENT

A    summary of  premises  and  equipment  at  December  31, 2001 and 2000 is as
     follows:
<TABLE>
<CAPTION>
                                                                              2001                    2000
                                                                           -----------             -----------
<S>                                                                        <C>                     <C>
              Bank premises                                                $   384,593             $   384,593
              Furniture and equipment                                          779,711                 418,605
              Leaseholds                                                     2,289,433               1,389,902
                                                                           -----------             -----------

                                                                             3,453,737               2,193,100
              Less accumulated depreciation                                    422,227                 268,589
                                                                           -----------             -----------

                                                                           $ 3,031,510             $ 1,924,511
                                                                           ===========             ===========
</TABLE>

     Depreciation  of premises and  equipment  was $153,638 and $110,582 for the
     years ended December 31, 2001 and 2000, respectively.

                                    Continued



                                      F-13
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.     DEPOSITS

     The  composition of deposits at December 31, 2001 and 2000 is summarized as
     follows:
<TABLE>
<CAPTION>
                                                                              2001                    2000
                                                                           ------------            -----------
<S>                                                                        <C>                     <C>
              Non-interest bearing demand                                  $ 7,967,035             $ 5,812,335
              Interest bearing demand                                        5,716,641               4,635,133
              Savings                                                        3,953,217               2,554,480
              Certificates of deposit over
                $100,000                                                    14,540,745              15,446,356
              Other interest bearing deposits                               28,008,812              30,227,101
                                                                           -----------             -----------

                                                                           $60,186,450             $58,675,405
                                                                           ===========             ===========
</TABLE>

     At December 31,  2001,  scheduled  maturities  of  certificates  of deposit
     including IRA's are as follows:

                  2002                      $40,532,100
                  2003                        1,617,457
                  2004                          400,000
                  2005                             -
                                            -----------

                                            $42,549,557
                                            ===========

     The Bank held  deposits of  approximately  $3,526,200  and  $2,402,700  for
     related parties at December 31, 2001 and 2000, respectively.

6.   CAPITAL LEASES

     The  Bank  has  entered  into  a  long-term  capital  lease  agreement  for
     substantially all bank equipment and furniture.  The lease, which commenced
     on February 1, 1998,  extends 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, 2001 the future minimum lease payments
     under the capital leases were as follows:

                  For the year ending:
                  2002                               $   284,550
                  2003                                   238,516
                  2004                                   238,516

                                    Continued



                                      F-14
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.   CAPITAL LEASES, CONTINUED

                  2005                                $   238,516
                  2006                                    238,516
                  Thereafter                            9,952,651
                                                      -----------

                  Total minimum lease payments         11,191,265
                  Less amounts representing interest    9,080,505
                                                      -----------

                  Present value of net minimum
                    lease payments                    $ 2,110,760
                                                      ===========

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

          For the year ending:
                   2002                               $    82,653
                   2003                                    82,653
                   2004                                    82,653
                   2005                                    82,653
                   2006                                    82,653
                   Thereafter                           3,217,734
                                                      -----------

          Total minimum annual rental
            commitments                               $ 3,630,999
                                                      ===========

     Rental  expense  under  long-term   noncancellable   operating  leases  was
     approximately $69,700 and $62,500 for the years ended December 31, 2001 and
     2000, 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:
<TABLE>
<CAPTION>
                                           INTEREST         DECEMBER 31,
                         MATURITY            RATE               2001
                         --------          --------         ------------
<S>                      <C>                 <C>              <C>
                         12/14/02            2.63%            $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
                                                              ==========
</TABLE>

     Mortgage loans with a balance of approximately  $26,267,500 at December 31,
     2001, and all FHLB stock are pledged to the FHLB as collateral in the event
     that the Bank requires future advances.

                                    Continued



                                      F-15
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.     COMPREHENSIVE INCOME

     At  December  31, 2001 and 2000,  the Bank held  securities  classified  as
     available-for-sale, which have net unrealized gains of $48,138 and $20,394,
     respectively.  The  before  and after tax  amount  and tax  expense of this
     component of comprehensive income for the years ended December 31, 2001 and
     2000 is summarized below:
<TABLE>
<CAPTION>
                                                               BEFORE              TAX                AFTER
                                                                TAX               EXPENSE              TAX
                                                              ---------           --------           --------
<S>                                                           <C>                 <C>                <C>
       2001
         Unrealized holding gains                             $ 27,744            $  9,432           $ 18,312

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

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

       2000
         Unrealized holding gains                             $ 33,909            $ 11,529           $ 22,380

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

                                                              $ 33,909            $ 11,529           $ 22,380
                                                              ========            ========           ========
</TABLE>

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 (benefit)  applicable to
     continuing  operations  for the years ended December 31, 2001 and 2000 were
     as follows:
<TABLE>
<CAPTION>
                                                                            2001                    2000
                                                                         -----------             -----------
<S>                                                                      <C>                     <C>
             Current                                                     $   336,055             $     5,909
             Deferred                                                          9,667                (192,835)
                                                                         -----------              -----------

                                                                         $   345,722             $  (186,926)
                                                                         ===========             ===========
</TABLE>

     Deferred   income  tax  assets  net  of  deferred  tax   liabilities   were
     approximately  $166,800  and  $185,900  at  December  31,  2001  and  2000,
     respectively.  Such amounts are included in accrued interest receivable and
     other assets in the  accompanying  balance sheet.  At December 31, 2001 and
     2000, deferred tax assets and liabilities are composed of the following:

                                    Continued


                                      F-16
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.   INCOME TAXES, CONTINUED
<TABLE>
<CAPTION>
                                                                             2001                    2000
                                                                         -----------             -----------
<S>                                                                      <C>                     <C>
             Deferred tax assets:
               Allowance for loan losses                                 $   186,800             $   156,900
               Startup costs                                                  16,900                  35,500
               Organization costs                                             10,900                  25,100
               Stock options                                                  49,500                  38,900
               Capital lease asset                                             2,600                    -
                                                                         -----------             -----------

                                                                             266,700                 256,400
                                                                         -----------             -----------

             Deferred tax liabilities:
               Federal Home Loan Bank stock                                  (17,200)                 (9,800)
               Accumulated depreciation                                      (65,900)                (53,800)
               Capital lease obligation                                         (400)                   -
               Available-for-sale securities                                 (16,400)                 (6,900)
                                                                         -----------             -----------

                                                                             (99,900)                (70,500)
                                                                         -----------             -----------

             Net deferred tax asset                                      $   166,800             $   185,900
                                                                         ===========             ===========
</TABLE>

     During 2000, the valuation allowance in place for deferred income taxes was
     eliminated  based  on  the  expectation  of  future  taxable  income  being
     sufficient  to  realize  deferred  tax  assets.  Eliminating  the  deferred
     valuation  allowance resulted in a decrease in the valuation  allowance and
     corresponding deferred tax benefit of $244,300.

     During the year ended  December  31, 2000,  the Company used  approximately
     $320,000 in tax loss carryforwards to offset taxable income.

     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:
<TABLE>
<CAPTION>
                                                                             2001                    2000
                                                                         -----------             -----------
<S>                                                                      <C>                     <C>
             U.S. federal income tax                                     $   342,865             $   141,000
             Changes from statutory tax:
               Deferred tax valuation adjustment                                -                   (323,200)
               Other, net                                                      2,857                  (4,726)
                                                                         -----------             -----------

             Income tax expense (benefit)                                $   345,722             $  (186,926)
                                                                         ===========             ===========

</TABLE>
                                    Continued


                                      F-17
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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, 2001 and 2000.
<TABLE>
<CAPTION>
                                                                             2001                    2000
                                                                         -----------             -----------
<S>                                                                      <C>                     <C>
             Income available to common stock-
               holders use in basic and diluted
               EPS                                                       $   662,705             $   601,708
                                                                         ===========             ===========

             Weighted average number of common
               shares used in basic EPS                                      248,507                 244,293
                                                                         ===========             ===========

             Effect of dilutive securities:
               Stock-based compensation plan                                   2,480                   2,919
                                                                         -----------             -----------

             Weighted number of common shares
               and dilutive potential common
               stock used in diluted EPS                                     250,987                 247,212
                                                                         ===========             ===========
</TABLE>

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, 2001,  approximately
     $420,800 in  retained  earnings  was  available  for  payment of  dividends
     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.


                                    Continued



                                      F-18
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.  REGULATORY MATTERS, Continued

     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, 2001
     and 2000, that the Bank met all capital  adequacy  requirements to which it
     is subject.

     As of December 31, 2001,  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.

     The Bank's  actual  capital  amounts and ratios are also  presented  in the
     table as of December 31, 2001 and 2000.
<TABLE>
<CAPTION>
                                                                         FOR CAPITAL                 FOR WELL
                                                                          ADEQUACY                  CAPITALIZED
                                                  ACTUAL                  PURPOSES                   PURPOSES
                                          ----------------------    ----------------------     ----------------------
                                           AMOUNT       RATIO        AMOUNT        RATIO        AMOUNT       RATIO
                                          ---------    ---------    ---------     --------     ---------    ---------
<S>                                         <C>          <C>          <C>           <C>          <C>          <C>
       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%

       DECEMBER 31, 2000:
       Total capital to
        risk weighted assets                $6,463       13.76%       $3,758        8.00%        $4,697       10.00%

       Tier I capital to risk
        weighted assets                      5,875       12.51%        1,879        4.00%         2,818        6.00%

       Tier I capital to
        average assets                       5,875        8.89%        2,644        4.00%         3,304        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  expires 10 years
     from the date of the grant.  Options  vest over a period range from 1997 to
     2002 upon achievement of performance or production incentives. Compensation
     accrued  under the plans at December  31,  2001 and 2000 was  approximately
     $31,200 and $68,500, respectively.

                                    Continued


                                      F-19
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.  STOCK OPTION PLANS, CONTINUED

     A summary of the options outstanding during 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                                                  2001                               2000
                                                     -------------------------------    ---------------------------
                                                                        WEIGHTED                           WEIGHTED
                                                       NUMBER           AVERAGE            NUMBER           AVERAGE
                                                         OF             EXERCISE             OF            EXERCISE
                                                       OPTIONS           PRICE            OPTIONS            PRICE
                                                     ------------    ---------------    -------------    ----------
<S>                                                   <C>            <C>                 <C>             <C>
       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                                     24,000                             24,000
                                                     -------                            -------

       Weighted average fair
         value of options
         granted during year                            -                                  -
                                                     =======                            =======
</TABLE>

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.  At December 31, 2001,
     fees in the amount of $62,000 were accrued for an  additional  2,480 shares
     to be issued in 2002 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:
<TABLE>
<CAPTION>
                                                                  2001                                2000
                                                     --------------------------------    --------------------------------
                                                        CARRYING            FAIR            CARRYING            FAIR
                                                         AMOUNT             VALUE            AMOUNT            VALUE
                                                     ---------------     ------------    ---------------    -------------
                                                             (IN THOUSANDS)                      (IN THOUSANDS)
<S>                                                         <C>               <C>                <C>              <C>
       FINANCIAL ASSETS:
        Cash and cash equivalents                           $3,000            $3,000             $1,879           $1,879
        Securities available-for-
         sale                                                3,541             3,541              3,020            3,020
        Federal Home Loan Bank
         stock                                                 356               356                286              286
        Federal Reserve stock                                  177               177                152              152
</TABLE>

                                    Continued


                                      F-20
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.  FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED
<TABLE>
<CAPTION>
                                                                  2001                                2000
                                                     --------------------------------    --------------------------------
                                                       CARRYING             FAIR            CARRYING            FAIR
                                                        AMOUNT             VALUE             AMOUNT            VALUE
                                                     --------------     -------------    ---------------    -------------
                                                             (IN THOUSANDS)                      (IN THOUSANDS)
<S>                                                        <C>               <C>                <C>              <C>
        Loans and loans held-for-
         sale, net of allowance                            $65,960           $66,624            $58,339          $58,818
        Accrued interest receivable                            676               676                697              697
       FINANCIAL LIABILITIES:
        Deposits                                            60,186            60,663             58,675           58,436
        Federal Home Loan
         Bank advances                                       7,000             7,083                -                -
        Obligations under capital
         leases                                              2,111             2,111              1,260            1,260
        Accrued interest payable                               277               277                372              372
       OFF-BALANCE-SHEET
          LIABILITIES:
        Commitments to extend
         credit                                                -                 -                  -                -
        Standby letters of credit                              -                 -                  -                -
</TABLE>

     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 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  $310,200 and $569,800 at December 31, 2001 and
     2000, 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,  2001 and 2000  amounted  to  approximately
     $186,000 and $144,000, respectively.

     Directors' fees payable were approximately $55,800 at December 31, 2001 and
     2000.

16.  COMMITMENTS AND CONTINGENT LIABILITIES

     In the normal course of business, the Bank has outstanding  commitments and
     contingent  liabilities.  At  December  31,  2001  and  2000,  the Bank has
     commitments  to extend  credit  which are not  reflected  in the  financial
     statements  of  approximately  $6,015,600  and  $4,161,400,   respectively,
     including  stand-by  letters of $179,023 and $361,227  and  commitments  to
     related  parties  of  $627,618  and  $1,241,615,  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.

                                    Continued


                                      F-21
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.  COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED

     The Bank engages in originating  loans for sale on the secondary market. At
     December 31, 2001, the Bank had  commitments to originate loans for sale of
     approximately  $2,183,000 and  commitments  to sell loans of  approximately
     $3,553,700 including loans held for sale in the amount of $1,370,740. Loans
     are sold under terms which include requirements to repurchase under certain
     events of  delinquency  and default.  The Bank has recourse  commitments on
     loans sold of  approximately  $7,172,000  at December  31,  2001.  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.

     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.

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, 2001, the Bank held deposits of  approximately  $966,000 at
     financial institutions in excess of federally insured amounts

18.  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, 2001 and 2000
     are summarized as follows:

                                    Continued


                                      F-22
<PAGE>

                 KENTUCKY NATIONAL BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.  CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY), CONTINUED

                        STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2001 AND 2000

                                     ASSETS
<TABLE>
<CAPTION>
                                                                               2001                      2000
                                                                           ------------              ------------
<S>                                                                        <C>                       <C>
       Investment in subsidiary                                            $  6,651,442              $  5,887,833
       Other assets                                                              56,468                    45,860
                                                                           ------------              ------------

            Total assets                                                   $  6,707,910              $  5,933,693
                                                                           ============              ============
<CAPTION>

                                              LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                               2001                      2000
                                                                           ------------              ------------
<S>                                                                        <C>                       <C>
       Stockholders' equity                                                $  6,707,910              $  5,933,693
                                                                           -------------             ------------

            Total liabilities and
              stockholders' equity                                         $  6,707,910              $  5,933,693
                                                                           ============              ============
</TABLE>
<TABLE>
<CAPTION>
                                                      STATEMENTS OF INCOME
                                             YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                               2001                      2000
                                                                           ------------              ------------
<S>                                                                        <C>                       <C>
       Net income of subsidiary                                            $    683,297              $    624,315
       General and administrative expenses                                      (31,200)                  (68,467)
                                                                           ------------              ------------

            Income before tax                                                   652,097                   555,848
       Income tax benefit                                                        10,608                    45,860
                                                                           ------------              ------------

            Net income                                                     $    662,705              $    601,708
                                                                           ============              ============
</TABLE>
<TABLE>
<CAPTION>
                                                    STATEMENTS OF CASH FLOWS
                                             YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                               2001                      2000
                                                                           ------------              ------------
<S>                                                                        <C>                       <C>
       Cash flows from operating activities:
         Net income                                                        $    662,705              $    601,708
         Adjustments to reconcile net income
             to cash provided by operating
             activities:
           Net income of subsidiary                                            (683,297)                 (624,315)
           Incentive stock option compensation                                   31,200                    68,467
           Increase in other assets                                             (10,608)                  (45,860)
                                                                           ------------              ------------

            Net cash used by operating activities                                  -                         -
                                                                           ------------              ------------

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

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

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

       Cash, end of period                                                 $       -                 $       -
                                                                           ============              ============
</TABLE>

                                      F-23

<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 29, 2002                    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 dates indicated.


By:/s/ Lawrence P. Calvert                                  Date: March 29, 2002
   --------------------------------------------------
      Lawrence P. Calvert
      Chief Executive Officer and Director
      (Principal Executive Officer)


By:/s/ Ronald J. Pence                                      Date: March 29, 2002
   --------------------------------------------------
      Ronald J. Pence
      President and Director
      (Principal Financial and Accounting Officer)


By:/s/ Robert E. Robbins                                    Date: March 29, 2002
   --------------------------------------------------
      Robert E. Robbins
      Chairman of the Board and Director


By:/s/ Kevin D. Addington                                   Date: March 29, 2002
   --------------------------------------------------
      Kevin D. Addington
      Director

By:/s/ Henry Lee Chitwood                                   Date: March 29, 2002
   --------------------------------------------------
      Henry Lee Chitwood
      Director

By:/s/ Lois Watkins Gray                                    Date: March 29, 2002
   --------------------------------------------------
      Lois Watkins Gray
      Director

By:/s/ William R. Hawkins                                   Date: March 29, 2002
   --------------------------------------------------
      William R. Hawkins
       Director

By:/s/ Christopher G. Knight                                Date: March 29, 2002
   --------------------------------------------------
      Christopher G. Knight
      Director

By:/s/ Leonard Allen McNutt                                 Date: March 29, 2002
   --------------------------------------------------
      Leonard Allen McNutt
      Director