<PAGE>
 
                                                                EXHIBIT 10.3(a)

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS AGREEMENT is entered into this _____ day of __________, 1996, is an
amendment and restatement of the agreement entered into the 11th day of January,
1996, by and between First Lancaster Bancshares, Inc. (the "Company") and
Virginia R. S. Stump (the "Employee"), effective on the closing date (the
"Effective Date") of the conversion of First Lancaster Federal Savings Bank from
mutual to stock form.

     WHEREAS, the Employee has heretofore been employed by the Bank as its
President and Chief Executive Officer and is experienced in all phases of the
business of the Bank; and

     WHEREAS, the parties desire by this writing to establish and to set forth
the employment relationship between the Company and the Employee.

     NOW, THEREFORE, it is AGREED as follows:

     1.    Employment.  The Employee is employed as the President and Chief
           ----------                                                      
Executive Officer of the Company.  The Employee shall render such administrative
and management services for the Company as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity.  The
Employee shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Company. The Employee's other duties shall
be such as the Board of Directors of the Company ("Board") may from time to time
reasonably direct, including normal duties as an officer of the Company.

     2.    Consideration from Company: Joint and Several Liability.  In lieu of
           -------------------------------------------------------             
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Bank for the payment of all amounts due under the
employment agreement of even date herewith between the Bank and the Employee.
Nevertheless, the Board may in its discretion at any time during the term of
this Agreement agree to pay the Employee a base salary for the remaining term of
this Agreement.  If the Board agrees to pay such salary, the Board shall
thereafter review, not less often than annually, the rate of the Employee's
salary, and in its sole discretion may decide to increase her salary.

     3.    Discretionary Bonuses.  The Employee shall participate in an
           ---------------------                                       
equitable manner with all other senior management employees of the Company in
discretionary bonuses that the Board may award from time to time to the
Company's senior management employees.  No other compensation provided for in
this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.

     4.    (a)  Participation in Retirement, Medical and Other Plans.  During
                ----------------------------------------------------         
the term of this Agreement, the Employee shall be eligible to participate in the
following benefit plans:  group hospitalization, disability, health, dental,
sick leave, life insurance, travel and/or accident insurance, auto
allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Company.

           (b)  Employee Benefits; Expenses.  The Employee shall participate in
                ---------------------------                                    
any fringe benefits which are or may become available to the Company's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement.  The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which she shall incur in connection with her services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Company.

     5.    Term.  The Company hereby employs the Employee, and the Employee
           ----                                                            
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending thirty-six months thereafter (or such earlier
date as is determined in accordance with Section 9).  Additionally, on each
annual anniversary date from the Effective Date, the Employee's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be
<PAGE>
 
extended.  Only those members of the Board of Directors who have no personal
interest in this Employment Agreement shall discuss and vote on the approval and
subsequent review of this Agreement.

     6.    Loyalty; Noncompetition.
           ----------------------- 

           (a)  During the period of her employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all her full business time, attention, skill, and efforts
to the faithful performance of her duties hereunder; provided, however, from
time to time, the Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Company or any of its subsidiaries or
affiliates, or unfavorably affect the performance of the Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation.  "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of her employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Company, or be gainfully employed in any other position or job other than
as provided above.

           (b)  Nothing contained in this Paragraph 6 shall be deemed to prevent
or limit the Employee's right to invest in the capital stock or other securities
of any business dissimilar from that of the Company, or solely as a passive or
minority investor in any business.

     7.    Standards.  The Employee shall perform her duties under this
           ---------                                                   
Agreement in accordance with such reasonable standards as the Board may
establish from time to time.  The Company will provide Employee with the working
facilities and staff customary for similar executives and necessary for her to
perform her duties.

     8.    Vacation and Sick Leave.  At such reasonable times as the Board shall
           -----------------------                                              
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent herself voluntarily from the performance of her employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:

           (a)  The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Company.

           (b)  The Employee shall not receive any additional compensation from
the Company on account of her failure to take a vacation or sick leave, and the
Employee shall not accumulate unused vacation from one fiscal year to the next,
except in either case to the extent authorized by the Board.

           (c)  In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent herself voluntarily from the
performance of her employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.

           (d)  In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.

     9.    Termination and Termination Pay.  Subject to Section 11 hereof, the
           -------------------------------                                    
Employee's employment hereunder may be terminated under the following
circumstances:

           (a)  Death.  The Employee's employment under this Agreement shall
                -----                                                       
terminate upon her death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which her death occurred.

                                      -2-
<PAGE>
 
           (b)  Disability.  (1) The Company may terminate the Employee's
                ----------                                               
employment after having established the Employee's Disability.  For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform her duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Company's long-term disability plan (or, if the Company has
no such plan in effect, which impairs the Employee's ability to substantially
perform her duties under this Agreement for a period of one hundred eighty (180)
consecutive days).  The Employee shall be entitled to the compensation and
benefits provided for under this Agreement for (i) any period during the term of
this Agreement and prior to the establishment of the Employee's Disability
during which the Employee is unable to work due to the physical or mental
infirmity, or (ii) any period of Disability which is prior to the Employee's
termination of employment pursuant to this Section 9(b); provided that any
benefits paid pursuant to the Company's long term disability plan will continue
as provided in such plan.

           (2)  During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, she shall furnish such information, assistance and documents so
as to assist in the continued ongoing business of the Company and, if able,
shall make herself available to the Company to undertake reasonable assignments
consistent with her prior position and her physical and mental health. The
Company shall, upon substantiation by the Employee in accordance with the
policies of the Company, pay all reasonable expenses incident to the performance
of any assignment given to the Employee during the disability period.

           (c)  Just Cause.  The Board may, by written notice to the Employee,
                ----------                                                    
immediately terminate her employment at any time, for Just Cause.  The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.  Termination for "Just Cause" shall mean
termination because of, in the good faith determination of the Board, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement.  Notwithstanding the foregoing, in
the event of termination for Just Cause there shall be delivered to the Employee
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's counsel, to be heard
before the Board), such meeting and the opportunity to be heard to be held prior
to, or as soon as reasonably practicable following termination, but in no event
later than 60 days following such termination, finding that in the good faith
opinion of the Board the Employee was guilty of conduct set forth above in the
second sentence of this Subsection (c) and specifying the particulars thereof in
detail.  If following such meeting the Employee is reinstated, the Board may, in
its discretion, direct payment to the Employee in an amount up to the amount of
pay that the Employee would have received if she had been employed by the Bank
during the period between her termination and reinstatement.

           (d)  Without Just Cause; Constructive Discharge.  (1) The Board may,
                ------------------------------------------ 
by written notice to the Employee, immediately terminate her employment at any
time for a reason other than Just Cause, in which event the Employee shall be
entitled to receive the following compensation and benefits (unless such
termination occurs within the time period set forth in Section 11(b) hereof in
which event the benefits and compensation provided for in Section 11 shall
apply): (i) any salary provided pursuant to Section 2 hereof, up to the date of
expiration of the term as provided in Section 5 hereof (including any renewal
term) of this Agreement (the "Expiration Date"), plus said salary for an
additional 12-month period, and (ii) at the Employee's election either (A) cash
in an amount equal to the cost to the Employee of obtaining all health, life,
disability and other benefits which the Employee would have been eligible to
participate in through the Expiration Date based upon the benefit levels
substantially equal to those that the Company provided for the Employee at the
date of termination of employment or (B) continued participation under such
Company benefit plans through the Expiration Date, but only to the extent the
Employee continues to qualify for participation therein. All amounts payable to
the Employee shall be paid, at the option of the Employee, either (I) in
periodic payments through the Expiration Date, or (II) in one lump sum within
ten (10) days of such termination.

                                      -3-
<PAGE>
 
           (2)  The Employee may voluntarily terminate her employment under this
Agreement, and the Employee shall thereupon be entitled to receive the
compensation and benefits payable under Section 9(d)(1) hereof, within ninety
(90) days following the occurrence of any of the following events, which has not
been consented to in advance by the Employee in writing (unless such voluntary
termination occurs within the time period set forth in Section 11(b) hereof in
which event the benefits and compensation provided for in Section 11 shall
apply):  (i) the requirement that the Employee move her personal residence, or
perform her principal executive functions, more than thirty (30) miles from her
primary office; (ii) a material reduction in the Employee's base compensation,
as the same may be changed by mutual agreement from time to time other than in
connection with an institution-wide reduction; (iii) the failure by the Company
to continue to provide the Employee with compensation and benefits provided for
under this Agreement, as the same may be increased from time to time, or with
benefits substantially similar to those provided to her under any of the
employee benefit plans in which the Employee now or hereafter becomes a
participant, or the taking of any action by the Company which, directly or
indirectly, would materially reduce any of such benefits or deprive the Employee
of any material fringe benefit enjoyed by her; (iv) the assignment to the
Employee of duties and responsibilities materially different from those normally
associated with her position as referenced at Section 1; (v) a failure to elect
or reelect the Employee to the Board of Directors of the Company if the Employee
was serving on the Board on the Effective Date or was otherwise elected to the
Board during the term of this Agreement; (vi) a material diminution or reduction
in the Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Company; or (vii) a
material reduction in the secretarial or other administrative support of the
Employee other than in connection with an institution-wide reduction in force.

           (3)  In the event that Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") becomes applicable to payments made under this
Section 9(d), and the payments exceed the "Maximum Amount" as defined in Section
11(a)(1) hereof, the payments shall be reduced as provided by Section 11(a)(2)
of this Agreement.

           (e)  Voluntary Termination by Employee.  Subject to Section 11
                ---------------------------------
hereof, the Employee may voluntarily terminate employment with the Company
during the term of this Agreement, upon at least 60 days prior written notice to
the Board of Directors, in which case the Employee shall receive only her
compensation, vested rights and employee benefits up to the date of her
termination.

     10.   No Mitigation.  The Employee shall not be required to mitigate the
           -------------                                                     
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

     11.   Change in Control.
           ----------------- 

           (a)  Change in Control; Involuntary Termination.  (1) Notwithstanding
                ------------------------------------------                      
any provision herein to the contrary, if the Employee's employment under this
Agreement is terminated by the Company, without the Employee's prior written
consent and for a reason other than Just Cause, in connection with or within
twelve (12) months after any change in control of the Bank or the Company, the
Employee shall, subject to Paragraph (2) of this Section 11(a), be paid an
amount equal to the difference between (i) the product of 2.99 times her "base
amount" as defined in Section 280G(b)(3) of the Code and regulations promulgated
thereunder (the "Maximum Amount"), and (ii) the sum of any other parachute
payments (as defined under Section 280G(b)(2) of the Code) that the Employee
receives on account of the change in control.  Said sum shall be paid in one
lump sum within ten (10) days of such termination.  This paragraph would not
apply to a termination of employment due to death, Disability or voluntary
termination by the Employee.

           (2)  In the event that the Employee and the Company jointly determine
and agree that the total parachute payments receivable under clauses (i) and
(ii) of Section 11(a)(1) hereof exceed the Maximum Amount, notwithstanding the
payment procedure set forth in Section 11(a)(1) hereof, the Employee shall
determine which and how much, if any, of the parachute payments to which she is
entitled shall be eliminated or reduced so that the total

                                      -4-
<PAGE>
 
parachute payments to be received by the Employee do not exceed the Maximum
Amount.  If the Employee does not make her determination within ten business
days after receiving a written request from the Company, the Company may make
such determination, and shall notify the Employee promptly thereof.  Within five
business days of the earlier of the Company's receipt of the Employee's
determination pursuant to this paragraph or the Company's determination in lieu
of a determination by the Employee, the Company shall pay to or distribute to or
for the benefit of the Employee such amounts as are then due the Employee under
this Agreement.

           (3)  As a result of uncertainty in application of Section 280G of the
Code at the time of payment hereunder, it is possible that such payments will
have been made by the Company which should not have been made ("Overpayment") or
that additional payments will not have been made by the Company which should
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made under Section 11(a)(1) hereof. In the event that the
Employee, based upon the assertion by the Internal Revenue Service against the
Employee of a deficiency which the Employee believes has a high probability of
success, determines that an Overpayment has been made, any such Overpayment paid
or distributed by the Company to or for the benefit of Employee shall be treated
for all purposes as a loan ab initio which the Employee shall repay to the
                           -- ------                                      
Company together with interest at the applicable federal rate provided for in
Section 7872(f)(2)(B) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the Employee to the
Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Employee is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes.  In the event that
the Employee and the Company determine, based upon controlling precedent or
other substantial authority, that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee together with interest at the applicable federal rate provided for in
Section 7872(f)(2)(B) of the Code.

           (4)  The term "change in control" shall mean any one of the following
events: (1) the acquisition of ownership, holding or power to vote more than 25%
of the Bank's or the Company's voting stock, (2) the acquisition of the ability
to control the election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the management or policies
of the Bank or the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934),
(4) the acquisition of control of the Bank or the Company within the meaning of
12 C.F.R. Part 574 or its applicable equivalent (except in the case of (1), (2),
(3) and (4) hereof, ownership or control of the Bank by the Company itself shall
not constitute a "change in control"), or (5) during any period of two
consecutive years, individuals who at the beginning of such period (the
"Continuing Directors") constitute the Board of Directors of the Company or the
Bank (the "Existing Board") cease for any reason to constitute at least a
majority thereof, provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a vote of at least a
majority of the Continuing Directors then in office shall be considered a
Continuing Director.  For purposes of this subparagraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.

           (b)  Change in Control; Voluntary Termination.  Notwithstanding any
                ----------------------------------------                      
other provision of this Agreement to the contrary, but subject to Sections
11(a)(2), 11(a)(3), and 11(c) hereof, the Employee may voluntarily terminate her
employment under this Agreement within thirty (30) days following a change in
control of the Bank or the Company, as defined in Section 11(a)(4) hereof, and
be entitled to receive the payment described in Section 11(a)(1) of this
Agreement.  Alternatively, the Employee may voluntarily terminate her employment
under this Agreement within twelve (12) months following such change in control
of the Bank or the Company and the Employee shall thereupon be entitled to
receive the payment described in Section 11(a)(1) of this Agreement upon the
occurrence of any of the following events, or within 90 days thereafter, which
has not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee perform her principal executive functions more
than thirty (30) miles from her primary office as of the date of the change in
control; (ii) a material reduction in the Employee's base compensation as in
effect on the date of the change in control or as the same may be changed by
mutual agreement from time to time other than in connection with an institution-
wide reduction; (iii) the failure by the

                                      -5-
<PAGE>
 
Company to continue to provide the Employee with compensation and benefits
provided for under this Agreement, as the same may be increased from time to
time, or with benefits substantially similar to those provided to her under any
employee benefit in which the Employee is a participant, or the taking of any
action by the Company which, directly or indirectly, would materially reduce any
of such benefits or deprive the Employee of any material fringe benefit enjoyed
by her at the time of the change in control; (iv) the assignment to the Employee
of duties and responsibilities materially different from those normally
associated with her position as referenced at Section 1; (v) a failure to elect
or reelect the Employee to the Board of Directors of the Company, if the
Employee is serving on the Board on the date of the change in control;  (vi) a
material diminution or reduction in the Employee's responsibilities or authority
(including reporting responsibilities) in connection with her employment with
the Company if the Employee was serving on the Board on the Effective Date or
was otherwise elected to the Board during the term of this Agreement; or (vii) a
material reduction in the secretarial or other administrative support of the
Employee other than in connection with an institution-wide reduction in force.

           (c)  Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

           (d)  In the event that any dispute arises between the Employee and
the Company as to the terms or interpretation of this Agreement, including this
Section 11, whether instituted by formal legal proceedings or otherwise,
including any action that the Employee takes to enforce the terms of this
Section 11 or to defend against any action taken by the Company, the Employee
shall be reimbursed for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions, provided that the
Employee shall obtain a final judgement by a court of competent jurisdiction in
favor of the Employee. Such reimbursement shall be paid within ten (10) days of
Employee's furnishing to the Company written evidence, which may be in the form,
among other things, of a cancelled check or receipt, of any costs or expenses
incurred by the Employee.

     12.   Federal Income Tax Withholding.  The Company may withhold all Federal
           ------------------------------                                       
and State income or other taxes from any benefit payable under this Agreement as
shall be required pursuant to any law or government regulation or ruling.

     13.   Successors and Assigns.
           ---------------------- 

           (a)  Company.  This Agreement shall inure to the benefit of and be
                --------                                                     
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.

           (b)  Employee.  Since the Company is contracting for the unique and
                ---------                                                     
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating her rights or duties hereunder without first obtaining the written
consent of the Company; provided, however, that nothing in this paragraph shall
preclude (i) the Employee from designating a beneficiary to receive any benefit
payable hereunder upon her death, or (ii) the executors, administrators, or
other legal representatives of the Employee or her estate from assigning any
rights hereunder to the person or persons entitled thereunto.

           (c)  Attachment.  Except as required by law, no right to receive
                ----------                                                 
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.

     14.   Amendments.  No amendments or additions to this Agreement shall be
           ----------                                                        
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

                                      -6-
<PAGE>
 
     15.   Applicable Law.  Except to the extent preempted by Federal law, the
           --------------                                                     
laws of the Commonwealth of Kentucky shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.

     16.   Severability.  The provisions of this Agreement shall be deemed
           ------------                                                   
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

     17.   Entire Agreement.  This Agreement, together with any understanding or
           ----------------                                                     
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.


     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.


ATTEST:                            FIRST LANCASTER BANCSHARES, INC.


________________________           By: __________________________________
Secretary                                    Its Executive Vice President


WITNESS:


________________________           ______________________________________
                                   Virginia R. S. Stump

                                      -7-