Good question.
Kentucky was one of the Border States - slave-states that had narrowly voted against joining the Confederacy, but clearly still at risk of doing so. Lincoln was so sensitive about this that he allowed Kentucky to stay neutral for the first year of the war.
In 1862, the Confederates invaded the state, and their commander, Braxton Bragg, was able to set up a Southern government there. At this point, the Confederates sewed a twelfth star into their flag, representing Kentucky.
However, this government collapsed as soon as Bragg retreated, and Kentucky finally, if reluctantly, declared for the Union.
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