First Security Bancorp 10QSB 2004 Q3 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

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

Commission File No: 000-49781

First Security Bancorp, Inc.

(Name of small business issuer in its charter)

Kentucky		61-1364206

(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	318 East Main Street, Lexington, Kentucky 40507

	(Address of principal executive offices)

	(859) 367-3700
	(Issuer’s telephone number)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 1,558,690 shares of common stock as of November 10, 2004.

Transitional Small Business Disclosure format (check one): Yes [ ] No[X]

FIRST SECURITY BANCORP, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
Item 2.  Management’s Discussion and Analysis or Plan of Operation
Item 3.  Controls and Procedures

PART II - OTHER INFORMATION
Item 6. Exhibits

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

FIRST SECURITY BANCORP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except for per share data)


	(Unaudited) September 30, 2004		December 31, 2003		(Unaudited) September 30, 2003
ASSETS
Cash and due from banks	$	4,753	$	4,820	$	5,403
Federal funds sold		7,216		25,193		8,686

Total cash and cash equivalent		11,969		30,013		14,089
Securities available-for-sale		36,265		38,624		38,386
Loans held for sale		853		407		961
Loans, net of allowance of $1,796, $2,379 and $2,224		154,833		158,733		160,710
Federal Home Loan Bank stock		798		772		764
Foreclosed assets		110		119		--
Premises and equipment, net		7,245		7,585		7,635
Goodwill		--		106		--
Other intangible assets		--		43		54
Accrued interest receivable and other assets		1,937		1,856		2,402

	$	214,010	$	238,258	$	225,001



LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing	$	23,002	$	24,581	$	21,944
Interest bearing		147,644		166,059		165,827

Total deposits		170,646		190,640		187,771
Federal funds purchased and repurchase agreements		8,263		8,874		3,723
Federal Home Loan Bank advances		8,821		12,512		13,065
Note Payable		5,000		5,000		--
Accrued interest payable and other liabilities		942		1,120		1,040

Total liabilities		193,672		218,146		205,599


Commitments and contingent liabilities
Shareholders' equity
Common stock, no par value: 5,000,000 shares
authorized; September 30, 2004 and December 31, 2003
- 1,558,690 shares issued, September 30, 2003 -
1,482,246 shares issued		8,926		8,926		8,656
Additional paid-in capital		8,926		8,926		8,656
Retained earnings		2,455		2,052		2,006
Accumulated other comprehensive income (loss)		31		208		84

Total shareholders' equity		20,338		20,112		19,402

	$	214,010	$	238,258	$	225,001

See Notes to Consolidated Condensed Financial Statements
Page 1 of 27

FIRST SECURITY BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
For the Three and Nine Month Periods Ended September 30
(Amounts in thousands, except for per share data)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2004			2003		2004			2003
Interest Income
Loans, including fees	$	2,232		$	2,513	$	6,855		$	7,713
Taxable securities		382			152		1,077			520
Tax exempt securities		7			64		31			329
Federal funds sold and other		18			39		94			86

		2,639			2,768		8,057			8,648

Interest expense
Deposits		883			1,187		2,845			3,785
Federal funds purchased and repurchase agreements		19			9		45			31
Federal Home Loan Bank advances		98			137		339			425
Note payable and other debt		54			--		147			--

		1,054			1,333		3,376			4,241

Net interest income		1,585			1,435		4,681			4,407
Provision for loan losses		222			50		297			519

Net interest income after provision for loan losses		1,363			1,385		4,384			3,888
Noninterest income
Service charges on deposit accounts		171			162		484			531
Net gains on sales of loans		96			312		332			907
Net gains on sales of securities		50			260		293			603
Net loss on sale of intangible assets		(106	)		--		(106	)		--
Other		44			60		163			173

		255			794		1,166			2,214

Noninterest expense
Salaries and employee benefits		753			880		2,355			2,570
Occupancy and equipment		275			293		871			861
Data processing		126			111		370			295
Legal and professional fees		138			155		307			489
Advertising		56			55		166			144
Other		281			361		906			1,038

		1,629			1,855		4,975			5,397

Income (loss) before income taxes		(11	)		324		575			705
Income tax expense (benefit)		(10	)		75		172			131

Net income (loss)	$	(1	)	$	249	$	403		$	574

Weighted average common shares outstanding
(shares in thousands):
Basic		1,559			1,491		1,559			1,476
Diluted		1,563			1,523		1,560			1,499
Earnings per share
Basic	$	--		$	.17	$	.26		$	.39
Diluted	$	--		$	.16	$	.26		$	.38

See Notes to Consolidated Condensed Financial Statements
Page 2 of 27

FIRST SECURITY BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGE IN SHAREHOLDERS' EQUITY (Unaudited)
(Share and dollar amounts in thousands)


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

Balance, January 1, 2004		1,559	$	8,926	$	8,926	$	2,052	$	208		$	20,112

Comprehensive Income:
Net income		--		--		--		403		--			403

Change in unrealized gain (loss) on
securities available for sale,
net of reclassification
and tax effects		--		--		--		--		(177	)		(177	)

Total comprehensive income (loss)													226

Balance, September 30, 2004		1,559	$	8,926	$	8,926	$	2,455	$	31		$	20,338

See Notes to Consolidated Condensed Financial Statements
Page 3 of 27

FIRST SECURITY BANCORP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Month Periods Ended September 30,
(Dollar amounts in thousands, except for per share data)


	2004			2003
Cash flows from operating activities
Net income	$	403		$	574
Adjustments to reconcile net income to net
cash from operating activities:
Provision for loan losses		297			519
Depreciation and amortization		370			364
Net amortization of securities		260			601
Net realized gain on sale of securities		(293	)		(603	)
Federal Home Loan Bank stock dividends		(24	)		(22	)
Originations of loans held for sale		(18,666	)		(56,973	)
Proceeds from sale of loans		18,552			60,309
Net gains on sales of loans		(332	)		(907	)
Net change in:
Accrued interest receivable		126			256
Other assets		(207	)		11
Accrued interest payable		(139	)		(69	)
Other liabilities		51			250

Net cash from operating activities		398			4,310

Cash flows from investing activities
Activity in available-for-sale securities:
Maturities and principal repayments		9,773			13,544
Sales		10,094			7,634
Purchases		(17,742	)		(16,774	)
Net change in loans		3,603			3,770
Proceeds of sale of goodwill and intangible assets		33			--
Loss on sale of goodwill and intangible assets		106			--
Net change in foreclosed assets		9			(569	)
Purchases of Federal Home Loan Bank stock		(2	)		--
Purchases of premises and equipment, net		(20	)		(57	)

Net cash from investing activities		5,854			7,548

Cash flows from financing activities
Net change in deposits		(19,994	)		(1,184	)
Net change in repurchase agreements and short-term borrowings		(611	)		(4,488	)
Repayments of Federal Home Loan Bank advances		(3,691	)		(1,452	)
Proceeds from issuance of common stock		--			542

Net cash from financing activities		(24,296	)		(6,582	)

Net change in cash and cash equivalents	$	(18,044	)	$	5,276
Cash and cash equivalents at beginning of period		30,013			8,813

Cash and cash equivalents at end of period	$	11,969		$	14,089

Supplemental cash flow information:
Interest paid	$	3,315		$	4,310
Income tax paid		200			260

See Notes to Consolidated Condensed Financial Statements
Page 4 of 27

FIRST SECURITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying unaudited consolidated condensed financial statements of First Security Bancorp, Inc. (the “First Security”) and its wholly-owned subsidiary First Security Bank of Lexington, Inc. (“FS Bank”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in First Security’s Form 10-KSB annual report for 2003 filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated condensed balance sheet of First Security as of December 31, 2003 has been derived from the audited consolidated balance sheet of First Security. Where appropriate, some items in the prior period financial statements have been reclassified to conform to the current presentation. Unless otherwise indicated within the text, dollars are presented in thousands except for per share data and all data is presented as of or for the periods ended September 30, 2004 and 2003.

Accounting and Reporting Policies: The accounting and reporting policies of First Security and FS Bank conform to accounting principles generally accepted in the United States of America and to predominant practices within the banking industry. The following summary of significant policies used in the preparation of First Security’s financial statements should be read in light of a more detailed discussion of all significant policies appearing in First Security’s Form 10-KSB as of and for the period ended December 31, 2003.

Operating Segments: Internal financial information is primarily recorded and aggregated in three lines of business, retail banking, commercial banking and mortgage banking. While management monitors the revenue streams of the various products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all financial service operations are considered by management to be aggregated within one reportable operating segment.

Operating Results: Operating results for the nine month period ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.

Stock Compensation: Employee compensation expense under stock options is reported using the intrinsic value method. Stock-based compensation cost for options granted employees with an exercise price less than the market price of the underlying common stock at the date of the grant if material, is reflected in net income. No stock-based compensation cost for options granted employees and directors with an exercise price equal to or greater than the market price of the underlying common stock at the date of grant is reflected in net income.

The following table illustrates the effect on net income and earnings per share if expense was measured for options granted using the fair value recognition provisions of FASB Statement No. 123,Accounting for Stock-Based Compensation. Amounts are in thousands, except for per share data.


		Three Months Ended						Nine Months Ended
		September 30						September 30
	2004			2003			2004			2003
Net income (loss) as reported	$	(1	)	$	249		$	403		$	574
Add or deduct: Stock-based compensation
expense determined under fair value based method		6			71			(43	)		(61	)

Pro forma net income	$	5		$	320		$	360		$	513

Basic earnings per share as reported	$	--		$	.17		$	.26		$	.39
Pro forma basic earnings per share	$	--		$	.22		$	.26		$	.35
Diluted earnings per share as reported	$	--		$	.16		$	.23		$	.38
Pro forma diluted earnings per share	$	--		$	.21	.	$	.23		$	.34

Page 5 of 27

FIRST SECURITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

For the quarters ended September 30, 2004 and 2003, the stock based compensation expense was negative (reduction in expense) because of forfeitures of options occurring during those periods.

NOTE 2 - SECURITIES

The fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows as of the dates indicated:


			Gross		Gross
	Fair		Unrealized		Unrealized
	Value		Gains		Losses
September 30, 2004
U.S. Government and federal agency	$	14,551	$	23	$	32
State and municipal		888		11		--
Mortgage-backed		20,826		117		71

Total	$	36,265	$	151		103

December 31, 2003
U.S. Government and federal agency	$	9,437	$	75	$	6
State and municipal		2,873		41		4
Mortgage-backed		26,314		280		71

Total	$	38,624	$	396	$	81

September 30, 2003
U.S. Government and federal agency	$	7,860	$	30	$	17
State and municipal		6,803		121		19
Mortgage-backed		23,723		117		105

Total	$	38,386	$	268	$	141

Securities with unrealized losses at September 30, 2004, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:


	12 Months or Less				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Description of Securities
U.S. Government and
federal agency	$	8,495	$	32	$	--	$	--	$	8,495	$	32
State and municipal		--		--		--		--		--		--
Mortgage-backed		5,172		13		3,552		58		8,724		71

Total temporarily
impaired with stated
maturities	$	13,667	$	45	$	3,552	$	58	$	17,219	$	103

Page 6 of 27

FIRST SECURITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2004

NOTE 2 - SECURITIES (Continued)

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality, management has the intent and ability to hold for the foreseeable future and the decline in fair value is largely due to changes in market conditions. The fair value is expected to recover as the securities approach their maturity date and/or market conditions improve.

Sales of available-for-sale securities were as follows for the nine-month period ended September 30, 2004, the year ended December 31, 2003 and the nine-month period ended September 30, 2003:


	September 30,		December 31,		September 30,
	2004		2003		2003
Proceeds	$	10,094	$	11,886	$	7,634
Gross gains		293		698		603
Gross losses		--		4		--

The fair value of debt securities and carrying amount, if different, at September 30, 2004 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


	Fair
	Value
Due in one year or less	$	2,201
Due from one to five years		11,660
Due from five to ten years		1,319
Due after ten years		258
Mortgage-backed		20,827

Total	$	36,265

Securities pledged at September 30, 2004, December 31, 2003 and September 30, 2003 had carrying amounts of $13.9 million, $8.8 million and $4.2 million, respectively, and were pledged to secure public deposits and repurchase agreements.

At September 30, 2004, December 31, 2003 and September 30, 2003, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Page 7 of 27

FIRST SECURITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2004

NOTE 3 - LOANS

Loans were as follows as of the dates indicated:


	September 30,			December 31,			September 30,
	2004			2003			2003

Commercial	$	59,736		$	49,165		$	44,898
Mortgage loans on real estate:
Commercial		48,559			61,669			63,180
Residential		9,767			14,882			13,878
Construction		20,451			16,990			22,034
Home equity		11,393			11,488			11,406
Consumer		5,948			6,035			6,697
Credit card		775			883			841

Subtotal		156,629			161,112			162,934
Less allowance for loan losses		(1,796	)		(2,379	)		(2,224	)

Loans, net	$	154,833		$	158,733		$	160,710

Substantially all 1-4 single-family first residential mortgage loans are pledged to the Federal Home Loan Bank as collateral for advances.

Changes in the allowance for loan losses were as follows for the nine-month period ended September 30, 2004, the year ended December 31, 2003 and the nine-month period ended September 30, 2003:


	September 30,			December 31,			September 30,
	2004			2003			2003

Beginning balance	$	2,379		$	2,459		$	2,459
Loans charged-off		(886	)		(858	)		(858	)
Recoveries		6			109			104
Provision for loan losses		297			669			519

Ending balance	$	1,796		$	2,379		$	2,224

NOTE 4 - STOCK OPTIONS

Stock Award Plan
Options to buy stock are granted to directors, officers and employees under First Security’s Stock Award Plan (“Stock Plan”), which provides for issue of up to 200,000 options. Pursuant to the Stock Plan, options may be issued which are defined as incentive stock options or as non-qualified stock options. Incentive stock options are intended to qualify under the provisions of Internal Revenue Code Section 422 (“IRC”), which include, among other things, that the option price be not less than the fair value of the shares as of the date of grant. Non-qualified stock options are those that do not meet the requirements of the provisions of the IRC, and, accordingly, may contain terms that are different than those in place for incentive stock options. The Stock Plan is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees”, and related interpretations.

During the first quarter of 2004, First Security awarded 26,350 options to employees and 19,000 to non-employee directors. These options were granted at an exercise price of $17.15, which equaled the market price for the stock as of the date of the grant.

Page 8 of 27

FIRST SECURITY BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2004

NOTE 4 - STOCK OPTIONS (Continued)

At September 30, 2004, a summary of the options outstanding pursuant to the Stock Plan is as follows:


	Outstanding				Exercisable
	Weighted				Weighted
Range of	Average				Average
Exercise	Exercise				Exercise
Prices		Number		Price		Number		Price

$13.75-$15.50		18,250	$	15.39		17,400	$	15.39
$16.00-$22.00		105,050		18.79		81,250		19.09

Outstanding at period-end		123,300	$	18.29		98,650	$	18.44

Other Stock Options
In addition to the above, on December 1, 2003 First Security issued 20,000 options to its chief executive officer with an exercise price of $14.00, which was below the market price of the shares at the date of the grant. These options are non-qualified. The difference between the exercise price and the market price will be recognized as compensation expense over the vesting period in accordance with Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees.”

NOTE 5 - EARNINGS PER SHARE

The factors used in the earnings per share computation for the three and nine month periods ended September 30, 2004 and 2003 were as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2004			2003		2004		2003
Basic
Net Income (loss)	$	(1	)	$	249	$	403	$	574
Weighted average common shares outstanding		1,559			1,491		1,559		1,476
Basic earnings per common share	$	--		$	.17	$	.26	$	.39

Diluted
Net Income (loss)	$	(1	)	$	249	$	403	$	574
Weighted average common shares outstanding		1,559			1,491		1,559		1,476
Add: Dilutive effects of assumed exercises of
stock warrants and options		4			32		1		23

Average shares and dilutive potential common
shares		1,563			1,523		1,560		1,499

Diluted earnings per common share	$	--		$	.16	$	.26	$	.38

Stock options outstanding for shares of common
stock that were not considered in computing diluted
earnings per common share because they were
anti-dilutive as follows (shares in thousands):		100			62		100		62

Page 9 of 27

PART I - FINANCAL INFORMATION

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our financial condition at September 30, 2004 and 2003, and our results of operations for the three month and nine month periods ended September 30, 2004 and 2003. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the unaudited Consolidated Condensed Financial Statements. You should read the following discussion and analysis along with our unaudited Consolidated Condensed Financial Statements and the related notes included elsewhere herein, and with the Form 10-KSB filed by First Security relating to financial information as of and for the period ended December 31, 2003.

Forward-Looking Statements

First Security Bancorp, Inc. (the “First Security”) may from time to time make written or oral statements, including statements contained in this report, which may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The words “expect”, “anticipate”, “intend”, “consider”, “plan”, “believe”, “seek”, “should”, “estimate”, and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements. These statements are subject to various risks and uncertainties. Such forward-looking statements are made based upon management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. First Security’s actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors. Such factors are described below and include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) increased competition with other financial institutions, (iii) lack of sustained growth in the economy in the Lexington, Kentucky area, (iv) rapid fluctuations or unanticipated changes in interest rates, (v) the inability of our bank subsidiary, First Security Bank of Lexington, Inc. (“FS Bank”) to satisfy regulatory requirements for its expansion plans, and (vi) changes in the legislative and regulatory environment. Many of such factors are beyond First Security’s ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. First Security does not intend to update or reissue any forward-looking statements contained in this report as a result of new information or other circumstances that may become known to First Security.

General

First Security is a one-bank holding company that conducts business through its wholly-owned subsidiary, FS Bank. First Security was incorporated on February 11, 2000 and became the holding company of FS Bank through an exchange of shares with FS Bank shareholders. FS Bank is a state chartered commercial bank organized under the laws of the Commonwealth of Kentucky. FS Bank commenced operations on November 17, 1997. FS Bank operates as a community bank emphasizing personalized banking relationships with individuals and businesses located within the Lexington, Kentucky metropolitan statistical area (“MSA”). The Lexington Kentucky MSA is highly competitive with approximately 37 banks and thrift institutions with offices located within this MSA. The majority of deposits in the MSA are held by larger regional banking organizations with headquarters outside of the Lexington market area and the state of Kentucky.

FS Bank offers a variety of products and services through four full-service offices located in Lexington. The products and services offered to its customers include checking, savings and time deposits, loans to individuals and businesses and safe deposit box rentals. Operating revenues are derived principally from interest and fees on loans and interest from investment securities that are all held as available for sale.

Prior to September 10, 2004, FS Bank conducted mortgage banking operations under the name First Security Mortgage Company, at two leased residential mortgage origination offices, one located at 190 W. Lowry Lane, in Lexington, and a second located in Danville, Kentucky, approximately 45 miles southwest of Lexington. On September 10, 2004, we sold certain assets used in these mortgage banking operations (and transferred the two residential mortgage origination offices) to First Mortgage Company, LLC, a limited liability company formed by

Page 10 of 27

Brady Ratliff and Allen Haggard, both of whom were employed by FS Bank in its mortgage loan division. We had acquired the mortgage banking operations that were sold in the transaction in June 2002 from First Mortgage Company, Inc., of which Mr. Ratliff was a principal. Following the sale of this division, First Security continues to offer residential mortgages to its customers through its offices and through referrals to various mortgage companies, including First Mortgage Company, LLC.

Results of Operations

For the third quarter of 2004, First Security reported a net loss of $1,000 as compared to a net profit of $249,000 for the third quarter of 2003. The primary reasons for the decline in net income for the third quarter of 2004 versus 2003 was an increase in the provision for loan losses from $50,000 to $222,000 and a loss of $106,000 on the sale of certain assets used in the mortgage loan division of FS Bank.

For the nine-month period ended September 30, 2004, net income totaled $403,000 as compared to $573,000 for the same period ended September 30, 2003. The primary reasons for the decline in net income were declines in gains on the sales of residential mortgage loans and securities and a loss on the sale of certain assets used in the mortgage loan division. These declines in gains and the loss on the sale offset reductions in interest expenses, the provision for loan losses and noninterest expenses.

The following is a more detailed discussion of results of our operations for the three month and nine month periods ended September 30, 2004 and 2003.

Net Interest Income. Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of our earnings. A summary of the relevant information concerning net interest income, spreads and margins is as follows (amounts in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2004		2003		2004		2003
Net Interest Income	$	1,585	$	1,435	$	4,681	$	4,407

Average Balances
Earning assets		205,236		215,848		213,110		216,681
Funding sources (1)		199,454		210,412		205,819		208,123

Average yields or costs
Loans		5.52%		6.08%		5.68%		6.24%
Earning assets		5.10%		5.09%		5.05%		5.35%
Deposits		2.00%		2.44%		2.09%		2.63%
Funding sources		2.10%		2.51%		2.19%		2.72%

Spread (2)		2.73%		2.26%		2.58%		2.31%
Margin (3, 4)		3.06%		2.64%		2.94%		2.73%

Funding sources, as used in this context, includes externally obtained funding in the form of deposits, repurchase agreements, advances from the Federal Home Loan Bank and notes payable.

Net interest spread is the difference between the average yield on earning assets and the average cost of interest bearing funding sources

The above calculations are before tax-equivalent adjustments.

Net interest margin is a calculation of the ratio of net interest income to average earning assets.

In the second quarter of 2004, we recorded a recovery of $95,754 of interest income from prior periods. This recovery is included in the above calculations.

For the quarter ended September 30, 2004, we recorded net interest income of $1,585,000 as compared to $1,435,000 for the comparable 2003 period. This improvement of $150,000 is attributable primarily to lower interest expense on deposits. The cost of all funding sources declined by 41 basis points, which is attributable to both older and higher cost certificates of deposit maturing and being repriced and to a shifting in our deposit base from certificates of deposit to interest bearing transaction accounts, principally, money market accounts, which have a significantly lower cost than certificates of deposits. The yield on earning assets increased by 1 basis point, which is attributable to our carrying significantly lower balances of federal funds sold as a proportion of the total earning asset base.

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For the nine-month period ended September 30, 2004, we recorded net interest income of $4,681,000 as compared to $4,407,000 for the comparable 2003 period. The primary reason for this improvement is the 53 basis point decline in funding costs that exceeded the 30 basis point decline in the yield on earning assets.

The improvement in net interest income for both the quarter and year to date periods in 2004 was achieved through improvement in spreads and margins, as opposed to growth in the amounts of earning assets and funding sources, both of which declined.

Our yield on loans during the quarter ended September 30, 2004 was 5.52%, as compared to 5.78% for the quarter ended June 30, 2004 and 6.08% for the quarter ended September 30, 2003. For the nine-month period ended September 30, 2004, our yield on loans was 5.68%, as compared to 6.24% for the same period in 2003. These declines in yields on loans are attributable to the following factors:

Older fixed rate loans, originated at a point in time when interest rates were substantially higher, are being repaid or maturing and being renewed at today’s lower interest rates.
Competitive pressures in the market have increased, with other banks offering interest rates on loans that are much lower than rates on some of our existing loans, thus causing us to renegotiate the interest rates to lower levels to maintain the loan relationships.

These factors subsided late in the second quarter as loan yields began to increase as a result of increases in the general interest rate environment.

The bank’s prime rate was increased three times during the quarter, on July 2, August 11 and September 22, and we expect short term rates to continue to increase over the coming three quarters. These increases contributed to a stabilizing of the yield on loans during the third quarter and are expected to have a beneficial impact on the yield of the loan portfolio, as approximately 65% of the bank’s loans are based on prime and are adjustable within a thirty day period.

During the quarter ended September 30, 2004, our cost of deposits has also declined, from 2.05% to 2.00%, and the cost of all funding declined from 2.16% to 2.10%. These declines reflect the implementation of a strategic funding decision during the third quarter of 2004 to redesign and more aggressively price our money market accounts so as to shift deposits from longer term fixed rate certificates of deposit to our money market accounts. That strategy results in both a lower cost of funds and a better matching of interest rate movements with our loan portfolio, which is composed primarily of loans that are immediately repricable based on changes in the prime rate.

Provision for Loan Losses. The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses (“ALL”) that, in our management’s evaluation, should be adequate to provide coverage for probable and incurred loss on outstanding loans. The provision for loan losses amounted to $222,000 and $50,000 for the quarters ended September 30, 2004 and 2003, respectively. The provision for loan losses the nine month periods ended September 30, 2004 and 2003 amounted to $297,000 and $519,000, respectively.

The increase in the provision expense during the third quarter relates primarily to a charge off of approximately $695,000 to a single borrower that had filed for Chapter 11 Bankruptcy. See also the discussion of nonperforming assets included elsewhere herein.

Based upon our management’s evaluation of the loan portfolio, our management believes the allowance for loan losses to be adequate to absorb our estimate of probable and incurred losses existing in the loan portfolio at the balance sheet date. While the timing of the actual charge-off of loans for which reserves have been established is uncertain, management believes that all inherent loan losses have been adequately provided for in the Allowance. These are forward-looking statements, and actual results could differ because of several factors, including those identified in this discussion and in the discussion of Cautionary Statements Regarding Forward-Looking Information.

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Noninterest Income. FS Bank’s noninterest income is composed of several components, some of which vary significantly between quarterly periods. The primary components of noninterest income are as follows:

Service charges on deposit accounts are composed of various fees assessed on customers’ account activity including overdraft fees and generally reflect FS Bank’s growth in its deposits and customers.
Net gains on the sale of loans includes income from origination fees and points on residential loans made with the expectation that they will be later sold into the secondary market, and from service release fees received on these loans from the purchasers. All loans are sold whereby servicing rights transfer to the buyer. Generally, mortgage origination fees increase in lower interest rate environments and decrease in rising interest rate environments. As a result, mortgage origination fees may fluctuate greatly in response to a changing rate environment.

Noninterest income for the three month periods ended September 30, 2004 and 2003 is summarized as follows (dollars in thousands):


	Three months
	ended September 30,					Net Change
	2004			2003		Amount
Noninterest income:
Service charges on deposit accounts	$	171		$	162	$	9
Net gains on the sale of loans		96			312		(216	)
Net gains on the sale of securities		50			260		(210	)
Net loss on sale of assets		(106	)		--		(106	)
Other noninterest income		44			60		(16	)

Total	$	255		$	794		(539	)

Noninterest income for the nine month periods ended September 30, 2004 and 2003 is summarized as follows (dollars in thousands):


	Nine months
	ended September 30,					Net Change
	2004			2003		Amount
Noninterest income:
Service charges on deposit accounts	$	484		$	531	$	(47	)
Net gains on the sale of loans		332			907		(575	)
Net gains on the sale of securities		293			603		(310	)
Net loss on sale of assets		(106	)		--		(106	)
Other noninterest income		163			173		(10	)

Total	$	1,166		$	2,214		(1,048	)

During 2003, a refinancing “boom” existed in the United States, evidenced by record numbers of borrowers refinancing their home loans in order to take advantage of the historically low long term interest rates. That boom slowed during the fourth quarter of 2003, and remained so during the first three quarters of 2004. This slowdown affected FS Bank in its mortgage lending and sales of loans into the secondary market for both comparable periods, as shown in the above tables. On September 10, 2004, FS Bank sold certain assets it used in its mortgage loan origination efforts to First Mortgage Company, LLC, an entity formed by Brady Ratliff and Allen Haggard, who were employed by FS Bank in its mortgage loan division. That sale resulted in the $106,000 loss shown in the above table.

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For both the quarter and nine-month period ended September 30, 2004, gains on the sale of securities were lower than in the comparable periods in 2003. Interest rate increases beginning in early 2004 has caused the values of our securities to decline, which has resulted in lower gains on sales as shown in the above table.

Noninterest Expense. Noninterest expense consists of salaries and employee benefits, equipment and occupancy expenses, and other operating expenses.

The following is the makeup of our noninterest expense for the three month periods ended September 30, 2004 and 2003 (dollars in thousands):


	Three months
	ended September 30,				Net Change
	2004		2003		Amount
Noninterest expense:
Salaries and employee benefits	$	753	$	880	$	(127	)
Occupancy and equipment		275		293		(18	)
Data processing		126		111		15
Legal and professional fees		138		155		(17	)
Advertising		56		55		1
Other noninterest expense		281		361		(80	)

Total	$	1,629	$	1,855	$	(226	)

The following is the makeup of our noninterest expense for the nine month periods ended September 30, 2004 and 2003 (dollars in thousands):


	Nine months
	ended September 30,				Net Change
	2004		2003		Amount
Noninterest expense:
Salaries and employee benefits	$	2,355	$	2,570	$	(215	)
Occupancy and equipment		871		861		10
Data processing		370		295		75
Legal and professional fees		307		489		(182	)
Advertising		166		144		22
Other noninterest expense		906		1,038		(132	)

Total	$	4,975	$	5,397	$	(422	)

Expenses have decreased or increased during the above periods due primarily to the following factors:

The lower salaries and benefits expense for the quarter reflects a severance expense of approximately $91,000 incurred in September, 2003. The lower salaries and benefits expense for the none-month period reflects the lowered severance expense noted above, staffing vacancies that existed during the first two quarters of 2004, efforts to control the level of staffing through a more extensive use of part time employees and the elimination of eleven positions brought about by the sale of assets to and assumption of employees by First Mortgage Company, LLC, as discussed above.
The decline in other noninterest expense for the quarter is the result of lowered expense across a number of expense categories, including supplies ($19), customer accounts charge-offs ($13), miscellaneous and other expenses ($30) and other accounts with smaller changes. The decline in other noninterest expense for the nine-month period is primarily attributable to a loss on the sale of foreclosed assets that incurred in the second quarter of 2003 ($100) and lowered supplies expense ($50).
The decline in legal and professional fees for the nine month period is attributable to lower legal fees related to both strategic planning efforts and to problem loan administration.

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Income Taxes. The effective income tax expense rate for the quarter ended September 30, 2004 was 0.0%, as compared to 23.1% for the quarter ended September 30, 2003. For the nine month periods ended September 30, 2004 and 2003, the effective income tax expense rates were 30.0% and 18.5%, respectively. This difference in rates is attributable to the repositioning of our securities portfolio that took place during 2003. The focus of that repositioning was to reduce the average maturities of our portfolio in anticipation of increases in the general interest rates for 2004, and this strategy resulted in the sale of a substantial portion of our tax-exempt investment securities. As a result, tax exempt income was substantially lower in 2004, as compared to 2003, resulting in the higher effective income tax rate.

Financial Condition

During 2004, the total assets of the Company declined. The primary reason for this decline is a strategic decision to use excess federal funds sold to reduce the balances of certificates of deposit, which bear interest at rates that are higher than the interest rates earned on federal funds sold. Since December 31, 2003, federal funds sold has declined from $25.2 million to $7.2 million at September 30, 2004. The use of these excess funds has resulted in an improvement in spreads and margins, discussed in the previous sections.

A comparative summary of the components of average earnings assets before the deduction for the allowance for loan losses is presented as follows (amounts in thousands):


	Quarter Ended		Year Ended		Quarter Ended
	September 30, 2004		December 31, 2003		September 30, 2003
Interest earning assets
Loans (gross)	$	160,522	$	164,520	$	166,012
Investment securities (1)		41,797		40,178		37,978
Federal funds sold		2,917		10,974		11,858

Total	$	205,236	$	215,672	$	215,848

Total Average Assets	$	218,603	$	230,224	$	230,765

Percentage of earning assets to total
assets		93.8%		93.6%		93.5%

1. Includes available-for-sale securities and other securities.

Investment Securities. FS Bank’s investment portfolio is classified as available-for-sale, meaning that any or all of the securities may be sold to meet the business objectives of FS Bank. The portfolio consists primarily of mortgage backed bonds, which constitute 57.4% of the portfolio, as compared to 68.1% at December 31, 2003 and 61.9% at September 30, 2003. In managing the portfolio, FS Bank seeks to maintain investment grade securities, at a reasonable yield, and with an overall duration (average length of an investment) of no more than four years. At September 30, 2004, the duration of the entire portfolio was approximately 3.2 years. By maintaining a relatively short duration, FS Bank is better able to minimize loss of value in a rising interest rate environment.

Loans: Loans, net of the allowance for loan losses, declined by $1.7 million and $3.9 million during the three month and nine month periods, respectively, ended September 30, 2004, and $5.9 million as compared to September 30, 2003. The primary reasons for these declines have been increasing competitive pressures in the local market, coupled with vacant lending officer positions that have now been filled. The composition of the portfolio remains weighted in commercial and commercial real estate loans, which accounted for approximately 69.1% of the total gross balances at September 30, 2004, as compared to 68.8% at December 31, 2003 and 66.3% at September 30, 2003.

The specific economic and credit risks associated with our loan portfolio, include, but are not limited to, a general downturn in the economy which could affect employment rates in our market area, general real estate market deterioration, interest rate fluctuations, deteriorated or non-existent collateral, title defects, inaccurate appraisals, financial deterioration of borrowers and fraud.

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We attempt to reduce these economic and credit risks by adherence to loan-to-value guidelines for collateralized loans, by investigating the creditworthiness of the borrower and by monitoring the borrower’s financial position. Also, we establish and periodically review our lending policies and procedures. Banking regulations limit our exposure by prohibiting loan relationships that exceed 20% of FS Bank’s statutory capital in the case of loans that are not fully secured by readily marketable or other permissible types of collateral, and further limit the amount of loans that can be made to related parties.

We periodically analyze our loan position with respect to our borrowers’ industries to determine if a concentration of credit risk exists to any one or more industries. We have a significant credit exposure of loans outstanding plus unfunded lines of credit to borrowers in the residential construction industry and to owners of nonresidential buildings at September 30, 2004. This exposure level is taken into consideration by management in its determination of the adequacy of the allowance for loan losses. Based upon that determination, we believe that we did not have any excessive exposure to any single industry which would warrant additional allowance allocations.

FS Bank discontinues the accrual of interest income when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or (2) the principal or interest is more than 90 days past due, unless the loan is both well-secured and in the process of collection.

Non-Performing Assets. Non-performing assets are made up of loans that have been placed in a non-accrual status, loans that are past due 90 days or greater, loans that have been classified as restructured and repossessed assets. The following table sets forth the non-performing assets at the dates indicated (amounts in thousands):


	September 30, 2004		December 31, 2003		September 30, 2003

Non-accrual loans (1)	$	3,217	$	3,605	$	440
Restructured loans (2)		--		--		3,268
Loans past due 90 days or greater		11		214		50
Repossessed assets		110		119		575

Total	$	3,338	$	3,938	$	4,333

Included in non-accrual loans at September 30, 2004 are loans to a troubled franchise operator in the aggregate amount of $1.9 million that were previously reported as restructured.

The restructured loans appearing in the September 30, 2003 totals were later placed into the non-accrual status and appear as non-accrual loans at December 31, 2003 and September 30, 2004.

Allowance for Loan Losses (ALL). We maintain the ALL at a level that our management deems appropriate to adequately cover the probable and incurred loss in the loan portfolio. The following table sets forth the balances in our allowance for loan losses and the percentage for total loans and non-performing loans at the dates indicated (amounts in thousands):


	September 30, 2004		December 31, 2003		September 30, 2003

Allowance for loan losses	$	1,796	$	2,379	$	2,224

Total loans	$	156,629	$	161,112	$	162,934
Percentage of allowance for loan losses
to total loans		1.15%		1.48%		1.36%

Non-performing assets	$	3,338	$	3,938	$	4,333
Percentage of allowance for loan losses
to non-performing assets		53.8%		60.4%		51.3%

As of the above dates, our management deemed the balances in the allowance for loan losses to be adequate. The judgments and estimates associated with our ALL determination are described under “Critical Accounting Estimates” below.

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Deposits and Other Borrowings. We had approximately $170.7 million of deposits at September 30, 2004, as compared to $190.6 million at December 31, 2004 and $187.8 million at September 30, 2003. Our deposits consist of noninterest and interest-bearing demand accounts, savings, money market and time deposits.

The following table sets for the components of our deposits as of the dates indicated (amounts in thousands):


	September 30, 2004		December 31, 2003		September 30, 2003

Interest-bearing demand	$	17,639	$	18,190	$	18,570
Savings, money market and NOW		36,852		23,201		23,233
Time deposits less than $100,000		53,652		69,385		69,821
Time deposits $100,000 and over		39,501		55,283		54,203

Total interest-bearing deposits		147,644		166,059		165,827
Noninterest-bearing		23,002		24,581		21,944

Total deposits	$	170,646	$	190,640	$	187,771

Total deposits declined by $2.8 million and $20.0 million, respectively, during the three month and nine month periods ended September 30, 2004 and $17.1million as compared to September 30, 2003. The decline is primarily in certificates of deposit, which declined by $15.6 million and $31.6 million, respectively, during the three month and nine month periods ended September 30, 2004 and $30.9 million as compared to September 30, 2003. These declines in certificates of deposit reflect the funding strategies adopted by FS Bank in late 2003. As discussed previously, our liquidity and funding plans include a decision to use federal funds purchased to reduce our balances in certificates of deposit. The reason for this decision is that the certificates of deposit have a higher interest cost than the earnings yield on our federal funds sold. Therefore, the use of excess federal funds sold to reduce certificates of deposit resulted in an improvement in our net interest income. The balances of noninterest-bearing deposits remained essentially unchanged during the quarter.

In addition to our deposits, we have repurchase agreements which are essentially deposit equivalents collateralized by securities. These agreements amounted to $8.3 million at September 30, 2004, $8.9 million at December 31, 2003 and $3.7 million at September 30, 2003. Additionally, at September 30, 2004, we had balances of $8.8 million in advances from the Federal Home Loan Bank of Cincinnati compared to $12.5 million at December 31, 2003 and $13.1 million at September 30, 2003.

Note Payable. On December 30, 2003, First Security entered into a credit agreement with another financial institution that provides for a reducing revolving line of credit in the maximum amount of $6 million, of which $5 million was drawn at inception and contributed to FS Bank to increase its capital base. The related note is secured by 100% of the common shares of FS Bank and has a maturity of December 31, 2006. The maximum amount available under the credit agreement reduces to $5 million on December 31, 2004 and $4 million on December 31, 2005.

The credit agreement contains a number of covenants relating to the operation of the Bank including the maintenance of a minimum equity capital ratio, a maximum ratio of nonperforming assets to total loans, a minimum return on average assets and the maintenance of a minimum dividend payment capacity by the Bank. Covenants applicable to First Security include a prohibition of the payment of dividends on its common stock. At September 30, 2004, First Security met all requirements of the credit agreement.

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

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FS Bank has established a limited number of alternative or secondary sources to provide additional liquidity and funding sources when needed to support lending activity or other liquidity needs. These alternative funding sources currently include unsecured federal funds lines of credit from five correspondent banks aggregating approximately $23 million and a secured line of credit with the Federal Home Loan Bank of Cincinnati, which allows FS Bank to borrow based on the level of qualifying residential loans which serve as collateral for this type of borrowing. Using these two sources, at September 30, 2004, FS Bank could borrow approximately $25 million based on available lines.

The need for future borrowing arrangements above current levels will be evaluated by management with consideration given to the growth prospects of the loan portfolio, liquidity needs, costs of deposits, market conditions and other factors. Short-term liquidity needs for periods of up to one year may be met through federal funds lines of credit, borrowings and short-term Federal Home Loan Bank advances. The Federal Home Loan Bank additionally offers advance programs of varying maturities for terms beyond one year.

Capital Resources. At September 30, 2004, our stockholders’ equity amounted to $20.3 million, as compared to $20.1 million at December 31, 2003. The change in stockholders’ equity was attributable to our net income for the nine month period ended September 30, 2004 of $403 thousand less the net decrease in comprehensive income of $177 thousand attributable to the decrease in fair value of our available-for-sale securities portfolio.

Critical Accounting Estimates

The accounting principles we follow and our methods of applying these principles conform with accounting principles generally accepted in the United States and with general practices within the banking industry. In connection with the application of those principles, we have made judgments and estimates which, in the case of the determination of our allowance for loan losses (ALL), have been critical to the determination of our financial position and results of operations.

Allowance for Loan Losses (ALL). To evaluate the loan portfolio, management has established loan grading procedures. These procedures establish a grade for each loan upon origination which is periodically reassessed throughout the term of the loan. Grading categories include highest quality, above average, average, low average, watch, substandard, doubtful, and loss. Loans graded watch or worse also include loans severely past-due and those not accruing interest. Specific reserve allocations are calculated for specific individual loans having been graded watch, substandard, doubtful, and loss based on the specific estimated collectability (and by reference, estimated inherent risk of loss) of each loan. The aggregate of the estimated probable and incurred loss then becomes a portion of the allowance for loan losses to be specifically allocated to that loan. These calculations are referred to as specific allocations.

For loans not individually graded watch, substandard, doubtful or loss, an estimated loss factor is calculated and applied to each category, after reducing the category amounts for cash equivalent collateral held by FS Bank (such as certificates of deposit issued by FS Bank and held as collateral) and guaranties from the federal government (such as SBA guaranties). A general allowance allocation is computed using totals of each loan grading category (as adjusted) multiplied by an estimated loss factor applied to each grading category. The sum of the calculation for each grading category represents the general allowance. These loss factors are typically developed over time using actual loss experience adjusted for the various factors discussed above.

The sum of the specific allocations and the general allocation represents management’s best estimate of the probable incurred losses contained in the loan portfolio at the measurement date. Even though the ALL is composed of two components, the entire ALL is available to absorb any credit losses.

In assessing the adequacy of the ALL, we also rely on an ongoing independent loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, the input from our independent loan reviewer, who is not an employee of FS Bank, and reviews that may have been conducted by bank regulatory agencies as part of their usual examination process.

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Management believes the allowance for loan losses at September 30, 2004 was adequate. Although we believe we use the best information available to make allowance provisions, future adjustments which could be material may be necessary if the assumptions used to determine the allowance differ from future loan portfolio performance.

Impact of Inflation

The Consolidated Financial Statements and related consolidated financial data presented herein have been prepared in accordance with generally accepted accounting principles and practices within the banking industry which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation.

Recent Accounting Pronouncements

Since December 31, 2003, there have been no new accounting pronouncements that would have a material effect on the financial statements or practices of FS Bank.

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PART I. - FINANCIAL INFORMATION

Item 3. - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

First Security maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to First Security’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. First Security’s management evaluated with the participation of its Chief Executive Officer and Chief Financial Officer, the effectiveness of First Security’s disclosure controls and procedures as of the end of the fiscal quarter covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that First Security Bancorp’s disclosure controls and procedures were effective as of September 30, 2004.

Changes in Internal Controls

There was no change in First Security’s internal control over financial reporting identified during that evaluation that occurred during First Security’s fiscal quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, First Security’s internal control over financial reporting.

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PART II - Other Information

Item 6. Exhibits
The exhibits listed on the Exhibit Index of this form 10-QSB are filed or furnished as a part of this report.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	First Security Bancorp, Inc.

Date: November 10, 2004	/s/ R. Douglas Hutcherson R. Douglas Hutcherson President and Chief Executive Officer


Date: November 10, 2004	/s/ John G. Sullivan John G. Sullivan Executive Vice-President and Chief Financial Officer

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EXHIBITS

Exhibit 11. Statement regarding computation of Per Share Earnings in the Notes to Consolidated Financial Statements in Part 1 of this Report for such computation (see Note 5 “Earnings Per Share”).

Exhibit 31. Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1. Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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First Security Bancorp (FSLK) Inactive 10QSB2004 Q3 Quarterly report (small business)