<TABLE>
<CAPTION>

SELECTED FINANCIAL HIGHLIGHTS

------------------------------------------------------------------------------------------------------------------------------------
December 31,
(In thousands, except per share data)               2004          2003          2002          2001          2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>           <C>           <C>           <C>
RESULTS OF OPERATIONS
Interest income                               $   61,902    $   58,413    $   66,291    $   77,039    $   75,481
Interest expense                                  19,176        19,883        25,746        34,357        32,536
Net interest income                               42,726        38,530        40,545        42,682        42,945
Provision for loan losses                          2,129         2,592         4,748         2,448         2,472
Net income                                        13,392        12,963         2,561        14,671        14,380
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Net income
 Basic                                        $     1.99    $     1.93    $     1.83    $     2.10    $     1.97
 Diluted                                            1.98          1.92          1.82          2.09          1.97
Cash dividends declared                             1.32          1.29          1.25          1.21          1.17
Book value                                         19.38         18.83         18.52         17.89         17.49
------------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Percentage of net income to:
 Average shareholders' equity (ROE)                10.46%        10.39%        10.04%        11.93%        11.61%
 Average total assets (ROA)                          .99          1.04          1.04          1.28          1.40
Percentage of dividends declared to net income     66.43         66.91         68.38         57.70         59.33
Percentage of average shareholders'
 equity to average total assets                     9.50          9.98         10.37         10.75         12.06
------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                    $  131,450    $  126,471    $  125,773    $  123,560    $  125,461
Total assets                                   1,397,144     1,318,565     1,275,602     1,183,530     1,204,752
Long-term debt                                    53,158        56,413        57,152        10,913        10,501
WEIGHTED AVERAGE SHARES OUTSTANDING
 Basic                                             6,737         6,727         6,870         6,982         7,304
 Diluted                                           6,780         6,770         6,910         7,025         7,307
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

CONTENTS


2    Letter to Our Shareholders
3    Farmers Capital Bank Corporation Board of Directors and Officers
4    Growth
16   Affiliates' Directors and Officers
21   Glossary of Financial Terms
22   Management's  Discussion and Analysis of Financial Condition and Results of
     Operations
38   Report of Management
39   Report of Independent Registered Public Accounting Firm On Internal Control
     Over Financial Reporting
40   Report  of  Independent  Registered  Public  Accounting  Firm On  Financial
     Statements
41   Consolidated Balance Sheets
42   Consolidated Statements of Income
43   Consolidated Statements of Comprehensive Income
44   Consolidated Statements of Changes in Shareholders' Equity
45   Consolidated Statements of Cash Flows
46   Notes to Consolidated Financial Statements
65   Shareholder Information


<PAGE>
LETTER TO OUR SHAREHOLDERS


Dear Shareholder:

We were  pleased  with our  overall  performance  in 2004 as it related to asset
growth and revenue  enhancement.  During the year,  we expanded into new markets
both through  acquisition  and  branching,  increased  our total assets and loan
portfolio,  and increased  earnings.  Farmers Capital Bank Corporation ended the
year with net income of $13.4 million,  an increase of 3.3% over the same period
of 2003. In the fourth  quarter of 2004,  net income was $2.9  million,  a 20.5%
increase over the same three month period of 2003. This increase for our Company
was due to key  factors  including  strong  fourth  quarter  loan growth and the
purchase of Financial National Electronic Transfer, Inc. (FiNET).

The loan portfolio for the Corporation  grew by 16% in 2004.  While some of this
growth may be  attributed  to the purchase of Citizens  Bank  (Kentucky),  Inc.,
increased  demand in all of our local  markets  and  through  the  correspondent
banking  area of Farmers Bank of  Georgetown  also  contributed  to this healthy
increase.  Farmers Bank of Georgetown,  United Bank, and  Lawrenceburg  National
Bank all experienced  significant loan growth in the second half of the year. In
December  2004 alone,  these three banks  totaled $94 million in loans more than
the same month-to-date period of 2003.

To support this loan growth,  the need for deposits was great.  In January 2004,
we introduced the FlexSpender  Certificate of Deposit. This 48 month certificate
allows  customers  to  increase  the rate once  during the  initial  term and to
withdraw funds over the life of the term.  Appealing for its  flexibility,  this
deposit  offering  garnered  interest  among  our  markets  and  beyond  when we
advertised it in a regional newspaper. By year end, FlexSpender  Certificates of
Deposit  corporately  totaled  over $111  million  of our $516  million  in time
deposits and in our total deposits of $1.1 billion.

Even though fiscal year 2004 has ended, for us the year established  beginnings.
Foundations  were laid for new and  vigorous  growth,  diverse  areas which will
strengthen  Farmers  Capital Bank  Corporation.  The  following  narrative  will
provide  insight to the different  arenas of the expansion of our environment in
2004.  In 2005,  we promise  you, our  shareholders,  to continue to explore new
products and markets that will make us profitable  and  competitive in the world
of financial services.


/s/ G. Anthony Busseni                /s/ Frank W. Sower, Jr.
G. Anthony Busseni                    Frank W. Sower, Jr.


<PAGE>


FARMERS CAPITAL BANK CORPORATION BOARD OF DIRECTORS AND OFFICERS



DIRECTORS
Frank W. Sower, Jr., Chairman
retired Appeals Officer,
Internal Revenue Service

J. Barry Banker
Manager, Stewart Home School

G. Anthony Busseni
President and CEO of the Corporation

W. Benjamin Crain
President of Fourth Street Tobacco
Warehouse and Chairman of the Board of
Directors of United Bank & Trust Co.

Gerald R. Hignite
President of Curneal & Hignite Insurance, Inc.

Lloyd C. Hillard, Jr.
President and CEO of First Citizens Bank

Harold G. Mays
President of H.G. Mays Corporation, an asphalt paving firm

Dr. Donald Mullineaux
DuPont Endowed Chair in Banking and Financial
Services in the Gatton College of Business
and Economics, University of Kentucky

Robert Roach, Jr.
retired Teacher

Michael M. Sullivan
retired Senior Vice President of FCB Services, Inc.

Dr. John D. Sutterlin
retired dentist and Chairman of the Board of
Directors of Farmers Bank & Capital Trust Co.

Shelley S. Sweeney
President of Swell Properties, Inc.

E. Bruce Dungan, Advisory Director
retired President and CEO of Farmers Capital Bank Corporation

Charles T. Mitchell, CPA, Advisory Director
Consultant, Charles T. Mitchell Co., LLP, CPA

Dr. John P. Stewart, Chairman Emeritus
retired Physician, Director of Stewart
Home School


OFFICERS
G. Anthony Busseni
President and CEO

Allison B. Gordon
Senior Vice President

C. Douglas Carpenter
Vice President, Secretary, and Chief Financial Officer

Todd Chadwell, CPA
Vice President, Auditing

Linda L. Faulconer, SPHR
Vice President, Human Resources

Anna Kaye Hall
Vice President, Finance

Mark A. Hampton, CPA
Vice President, Finance

Jean T. Harrod
Vice President, Legal Counsel

Janelda R. Mitchell
Vice President, Marketing

Sue Coles
Assistant Vice President, Compliance

Teresa Tipton
Assistant Vice President, Human Resources

<PAGE>


GROWTH.

The  simplest  definition  is to increase  in size or amount,  or to become more
advanced or developed.

Perhaps the best  definition of the growth Farmers  Capital Bank  Corporation is
experiencing  can be borrowed from the world of biology:  an unfolding of events
involved  in an  organism  changing  gradually  from a simple to a more  complex
level.

Our course has been to provide the best in financial  services to our  customers
and a strong  investment for our  shareholders.  The growth we are  experiencing
enables our Company to provide even greater, more complex services.

The economic  events of the past few years have  compelled  new  thinking  among
financial organizations:  increased competition from nonfinancial companies, low
interest  rate  levels,  and  increased  speculation  and  interest in the stock
market.  New sources of income are needed.  The time has come for bold moves and
to break tradition of asking Why? and try out the possibilities of Why not?

<PAGE>

PRO  MORTGAGE  PARTNERS,  LLC
One to four family mortgages,  a backbone of bank services, are key relationship
builders for community  banks.  Customers with excellent  credit histories and a
20% down payment  were the  sought-after  market.  As  customers  have  changed,
however,  so has the  mortgage  market.  New types of mortgages  are  available,
fitting the vast market of customers who do not fit the traditional criteria.

In May 2004,  Pro Mortgage  Partners,  LLC was formed as a subsidiary of Farmers
Bank of  Georgetown  to  originate  and place  mortgage  loans in the  secondary
market.  Headed by Tom Probst and his experienced  staff, Pro Mortgage  Partners
allows us to offer competitive  mortgage products previously  unavailable to our
affiliates.

Our  affiliates  can now match  almost  any  customer's  need  with the  perfect
mortgage to suit.  Thanks to Pro  Mortgage,  we can help  families  purchase and
afford homes creating a better community for all.

<PAGE>

CITIZENS BANK ACQUISITION AND MERGER
Bank acquisitions are not uncommon to the industry, but Farmers Capital Bank
Corporation holds a conservative view. When opportunities arise, a good deal of
research is done; we want a good fit for our shareholders, customers and
employees.

Citizens Bank, headquartered in Georgetown, provided us with that fit.

We saw an  opportunity  to expand our franchise and use our existing  facilities
and employees to obtain greater market share in the highly competitive market of
Scott County.  Since Farmers Bank held the highest market share in Scott County,
it was  increasingly  difficult  and more  expensive  to recruit  and retain new
customers.

The merger of Citizens Bank into Farmers Bank provided an expanded customer base
with the opportunity to bring our products and services to those customers.

The  extensive  conversion  process was handled with  cooperation  and team work
between  the  Farmers  Bank and the  Citizens  Bank  employees,  along  with the
necessary  assistance  provided  by FCB  Services,  Inc.,  the  data  processing
subsidiary that provides the technical support for all of our affiliates.

Once through the process, we retained several Citizens employees to help us with
our new customer base. The  transition  process was a great learning  experience
for  everyone  involved and will provide us with the  necessary  blueprints  for
future acquisitions and mergers.

<PAGE>

BILL PAYMENT SERVICES EXPANSION
Our second acquisition of 2004 was Financial National Electronic Transfer, Inc.
(FiNET) by First Citizens Bank and their flagship bill payment service,
FirstService.

Begun in the early  1980s as a means for  military  personnel  to pay  creditors
regardless  of where the  military  service  member is  stationed,  FirstService
allotment  service provides  benefits to both the service member and the lender;
good credit record is  established  for the service member and it provides a way
for companies to extend credit to this transient  market.  FiNET formed in 1983,
provided  identical  services plus Federal Benefits  Payment  Processing such as
Social Security and Veterans Benefits.  The merger of FirstService and FiNET has
expanded opportunities for our Company.

Allotment  and recurring  bill payment  services  help bring  profitability  and
growth to the Company in many ways: increased fee income and deposit growth, the
windfall of  additional  experienced  personnel,  and new  services  such as the
FedSys ATM Card which will allow benefit recipients to receive their payments on
ATM cards, an enhancement to security and convenience.

<PAGE>

LEXINGTON BRANCHES
Farmers Capital Bank Corporation  constantly looks for ways to expand into other
markets through branching.

In 1997, Kentucky Banking Centers built an office in Glasgow,  located in Barren
County;  1998 saw the opening of a First Citizens Bank branch in  Shepherdsville
of Bullitt County,  which adjoins Jefferson County and Louisville;  and in 1999,
Lawrenceburg National Bank opened a branch in Harrodsburg.

These offices give us the opportunity to expand outside of our existing  markets
and gain new  customers.  In these cases the  strategy  was to open  branches in
towns and cities that were  showing  growth  potential  and were  geographically
convenient.

In 2004,  we decided to take this  philosophy a step further by opening a branch
in Lexington.  Lexington is the second largest metropolitan  statistical area in
Kentucky behind only  Louisville.  It was ranked 9th by Forbes.com as one of the
"best places to do business" in the United  States.  Branching into such a large
metropolitan area was a departure for our Corporation as our existing  locations
are  located in smaller  communities.  The  success  of our  commercial  lending
services of Farmers  Bank of  Georgetown,  garnered  the  attention of Lexington
businesses,  resulting  in a strong  base of  customers.  Opening  an  office in
downtown  Lexington  allows us to retain and service our existing loan customers
while providing them with convenient  deposit services.  A second office located
on the  southwest  side of  Lexington  opened  recently;  this will  allow us to
provide  financial  services for the growing  Harrodsburg  Road/Beaumont  Center
area.

<PAGE>

KENTUCKY HOME LIFE INSURANCE COMPANY
In keeping with our  philosophy  of growth and  diversification,  we continue to
look for ways to expand our market share and products in the wide-ranging  field
of insurance.  In 2004, we decided that the  opportunity  to provide credit life
insurance through our own subsidiary would be a worthwhile endeavor.

The purchase of Kentucky Home Life Insurance  Company enables our company to own
a platform  which  makes the  offering  of  additional  insurance  products  and
services  possible.  The  acquisition  of an  existing  life  insurance  company
represents the next logical  progression in our efforts to enhance our insurance
activities in a prudent and  conservative  manner.  This fits with our desire to
diversify our goals and our income.

Just as plants possess a natural ability to direct themselves toward the sun, we
believe at Farmers  Capital Bank  Corporation an inner vision drives our growth.
With a vision fuelled and enriched by the diversity of our organization,  we are
ready to face challenges head on. Utilizing our core competencies, the strengths
of our employees,  and a belief in our mission, we will continue to be a company
that can and will enjoy sustainable growth.



<PAGE>
AFFILIATES' DIRECTORS AND OFFICERS

FARMERS BANK & CAPITAL TRUST CO.
Member FDIC

DIRECTORS
Dr. John D. Sutterlin, Chairman
C. Gary Adkinson
Clyde P. Baldwin
G. Anthony Busseni
Michael A. Fields
Don C. Giles
Allison B. Gordon
Rickey D. Harp
Robert W. Kellerman
David R. Lee
Marvin E. Strong, Jr.
William R. Sykes
John J. Hopkins, Advisory Director
Frank W. Sower, Advisory Director
Joseph C. Yagel, Jr., Advisory Director

OFFICERS
Rickey D. Harp
President and CEO

Bruce W. Brooks
Executive Vice President, Chief Lending Officer and Environmental Officer

Fontaine Banks, III
Senior Vice President, Investments

Gregory S. Burton
Senior Vice President, Commercial Loans

L. Hobbs Cheek, CPA
Senior Vice President, Chief Financial Officer

Jack Diamond
Senior Vice President, Senior Trust Officer

Bruce G. Dungan
Senior Vice President, Compliance and Operations, Bank Secrecy Officer, Security
Officer

Elizabeth D. Hardy
Senior Vice President, Retail

Barbara Conway
Vice President, Main Office Manager

Nancy Gatewood
Vice President, West Branch Manager

Richard Gobber
Vice President, Retail

Sarah Gowins
Vice President, Commercial Loans

Elizabeth Johns
Vice President, Trust Officer

Gail Mitchell
Vice President, Franklin Square Branch Manager

Lydwina Napier
Vice President, Commercial Loans

Jane Sweasy
Vice President, Sales and Service Quality

Brenda Y. Rogers
Executive Secretary

Felicia Banks
Assistant Vice President, Assistant Manager, Franklin Square

Patsy Briscoe
Assistant Vice President, Loan Administration

Margaret Colston
Assistant Vice President, Retail Services

Judy Isaacs
Assistant Vice President, Bank Cards

Joan Lee
Assistant Vice President, Franklin Square Branch

Jennifer Parrish
Assistant Vice President, Retail Services

Patricia Norris Peavler
Assistant Vice President, Marketing

Jo Ann Reynolds
Assistant Vice President, Investments

Julie Riggs
Assistant Vice President, Retail Banking

John Senter
Assistant Vice President, Business Development

Mary Lou Wallace
Assistant Vice President, Branch Manager, Cardinal Hills

Deborah West
Assistant Vice President, Assistant Manager, Main Office

Keith Ballard
Trust Officer

Sally L. Bell
Trust Officer

Michael Burns
Trust Officer

Karen DiRaimo
Trust Officer

Kay Henninger
Trust Officer

Leigh Ann Young
Trust Officer

Mary Jo Verhey
Assistant Cashier, Internet Banking

C. Ray Baldwin
Property Management Director

Dorothy H. Switzer
Director of Travel Programs

Lynn Vann
Director of Human Resources
<PAGE>

KENTUCKY BANKING CENTERS, INC.
Member FDIC

DIRECTORS
Stokes A. Baird, IV, Chairman
Sue Bunnell
G. Anthony Busseni
Anna Kaye Hall
Steve Hayes
Larry Jewell
William Ray
David L. Shadburne, CPA
Freddie Travis
R. Kevin Vance, DVM

OFFICERS
David L. Shadburne, CPA
President and CEO

Owen Lambert
Executive Vice President

Lewis Bauer
Senior Vice President

Vanessa Puckett
Senior Vice President

Jeffrey Edwards
Vice President

Dawn S. Forbes, CPA
Vice President and CFO

Greg Isenberg
Vice President

Jannell Pedigo
Vice President

Angie Bybee
Assistant Vice President, Marketing

Mellyn Church, CPA
Assistant Vice President

Karisa Clark
Assistant Vice President

Jane T. Howell
Assistant Vice President

Rebecca Smith
Assistant Vice President, Operations, Human Resources

Patty J. Wright
Assistant Vice President

Carla Wuertzer
Assistant Vice President

Daryl Lowe
Cashier and Head Teller

Carolyn Russell
Assistant Cashier

Sharon Williams
Loan Officer
<PAGE>
FARMERS BANK AND TRUST COMPANY
Member FDIC

DIRECTORS
Cecil D. Bell, Jr., Chairman
G. Anthony Busseni
Allison B. Gordon
Frank R. Hamilton, Jr.
Vivian M. House
Robert Sharon McMillin
Joseph C. Murphy
Gervis C. Showalter
Kenneth M. Sturgill
Glenn M. Williams
Rollie D. Graves, Director Emeritus
Dr. Horace T. Hambrick, Director Emeritus Bobby Vance, Director Emeritus

OFFICERS
Joseph C. Murphy
President and CEO

Thomas P. Porter
Executive Vice President

Lynn C. McKinney
Senior Vice President and Cashier

Michael E. Schornick, Jr.
Senior Vice President

James R. Burkholder
Senior Vice President, Manager of Correspondent Banking Division

Doug Beck
Vice President

Richard Browning
Vice President

J. Michael Easley
Vice President

Bonita M. Glass
Vice President

Tina M. Johnston
Vice President, Chief Financial Officer

Deborah L. Marshall
Vice President

Stephen Scott Pitts
Vice President

Kimberly T. Thompson
Vice President

Lorraine B. Baldwin
Assistant Vice President

Rachel Goble
Assistant Vice President

Karen K. Kelly
Assistant Vice President

Tophan Kulkriwes
Assistant Vice President

Linda Leachman
Assistant Vice President

Paula S. Moran
Assistant Vice President

Carole S. Wagoner
Assistant Vice President

Jennifer M. Baldwin
Assistant Cashier
<PAGE>

FIRST CITIZENS BANK
Member FDIC

DIRECTORS
James E. Bondurant, Chairman
R. Terry Bennett
G. Anthony Busseni
Dan Ray Clagett, DMD
Patricia V. Durbin
G. Jesse Flynn
William Godfrey, MD
Gerald R. Hignite
Lloyd C. Hillard, Jr.
Ray Mackey
Janelda R. Mitchell
Virgil T. Price, DMD
George Roederer

OFFICERS
Lloyd C. Hillard, Jr.
President and CEO

Scott T. Conway
Executive Vice President, Chief Lending Officer

Marilyn B. Ford
Executive Vice President, Chief Operating Officer

Patricia J. Paris
Senior Vice President, Controller

David P. Tackett
Senior Vice President and Trust Officer

Thomas B. Walker
Senior Vice President, Allotment, Bill Payment and EFT Services

Richard N.  Clements
Vice President, Bullitt County Office Manager

William S. Duffy
Vice President and Trust Officer

David J. Evangelista
Vice  President  -  Technology  Coordinator,  Allotment,  Bill  Payment  and EFT
Services

Brenda K. Gayler
Vice President, Allotment, Bill Payment and EFT Operations

David E. Hunt
Vice President, Commercial Loan Officer

Marquetta L. Lively
Vice President, Loan Officer

Mary Lou Mobley
Vice President, CRA Officer and Compliance Officer

Ronald G.  Penwell
Vice President, Radcliff Office Manager

Linda S. Pepper
Vice President, Director of Human Resources and Director of Marketing

Brenda Fullerton
Assistant Vice President, Members First Coordinator

Melissa Payne
Assistant Vice President, Loan Operations

Jeffrey S. Pendleton
Assistant Vice President, Allotment, Bill Payment and EFT Services

Mary C. Tigges
Assistant Vice President, Mulberry Office Manager

Mary P. Edlin
Assistant Cashier, Bookkeeping Supervisor

Denesa G. Embry
Assistant Cashier, North Dixie Office Manager

Debbie Roberts
Operations Officer and Assistant Manager, Bullitt County Office

Leda Kay Pack
Assistant Trust Officer
<PAGE>

LAWRENCEBURG NATIONAL BANK
Member FDIC

DIRECTORS
E. Glenn Birdwhistell, Chairman
G. Anthony Busseni
Charles L. Cammack
C. Douglas Carpenter
Ray Edelman
Keith Freeman
Tom D. Isaac
James McGlone
Donald F. Peach
Oneita M. Perry
Paul Vaughn, Jr.

OFFICERS
Charles L. Cammack
President and CEO

Paul Vaughn, Jr.
Executive Vice President, Senior Trust Officer

Gail Gottshall
Executive Vice President

Robert Baughman
Vice President, Harrodsburg Office Manager

Warren R. Leet
Vice President

Timothy A. Perry
Vice President, Compliance

Bonnie S. Childs
Assistant Vice President, Marketing Representative

Libby Goodlett
Assistant Vice President, Accounting Officer

Clark Gregory
Assistant Vice President

Barbara Markwell
Assistant Vice President, Cashier

Robin Miller
Assistant Vice President, Operations Officer

Judith Reynolds
Assistant Vice President

Chris Thompson
Assistant Vice President, West Park Office Manager

Ronnie D. Young
Assistant Vice President


Chandra Ennis
Assistant West Park Office Manager

Teresa Higginbotham
Assistant Harrodsburg Office Manager

<PAGE>

UNITED BANK & Trust Co.
Member FDIC

DIRECTORS
W. Benjamin Crain, Chairman
Bruce W. Brooks
G. Anthony Busseni
Bobby G. Dotson
Michael L. Lawson
J. C. Moraja
Denny Nunnelley
Leighton Riddle
Shannon Greely Totty
Hampton H. Henton, Advisory Director
J. Stephen Hogg, Advisory Director
Howard B. Montague, Advisory Director
Ben F. Roach, MD, Advisory Director

OFFICERS
J. C. Moraja
President and CEO

Paul A. Edwards
Executive Vice President

Linda C. Bosse
Vice President, Cashier

Joyce L. Eaves
Vice President

Bruce E. Marshall
Vice President

Rick Roberts
Vice President

John R. Thompson
Vice President

Spencer A. Wall
Vice President, Midway Office Manager

Cornelia T. Ethington
Assistant Vice President

Rita Green
Assistant Vice President

Evie P. Knight
Assistant Vice President, Security Officer

Leisa M. Newton
Assistant Vice President, Compliance Officer

Carolyn F. Patterson
Assistant Vice President

Betty K. Poynter
Assistant Vice President, Human Resources

Sherry T. Davis
Assistant Vice President

Mary Rita Bland
Assistant Cashier

Phyllis B. McMahan
Assistant Cashier, Locust Street Office Manager

Patricia R. Stokley
Executive Secretary
<PAGE>

FCB SERVICES, INC.

DIRECTORS
E. Bruce Dungan, Chairman
G. Anthony Busseni
Charles L. Cammack
Allison B. Gordon
Rickey D. Harp
Lloyd C. Hillard, Jr.
Donald R. Hughes, Jr.
J. C. Moraja
Joseph C. Murphy
David L. Shadburne
Michael M. Sullivan
Karen R. Wade, Secretary

OFFICERS
Donald R. Hughes, Jr.
President and CEO

Karen R. Wade
Executive Vice President

James F. Palmer
Senior Vice President

Bill Ballinger
Vice President

William Bell
Vice President

Michael Hedges
Vice President

Rita Kennedy
Vice President

Martin Serafini
Vice President

Steve Bolin
Assistant Vice President

Jeffrey S. Brewer
Assistant Vice President

Jason M. Purcell
Assistant Vice President

<PAGE>

LEASING ONE CORPORATION

DIRECTORS
G. Anthony Busseni, Chairman
Bruce W. Brooks
C. Douglas Carpenter
L. Hobbs Cheek, CPA
Rickey D. Harp
David Lee
Charles J. Mann
Marvin E. Strong

OFFICERS
Charles J. Mann
President and CEO

Mark Lester
Vice President

Jim Morris
Vice President

Eddie Miller
Assistant Vice President



FARMERS CAPITAL INSURANCE CORPORATION

DIRECTORS
G. Anthony Busseni, Chairman
Rickey D. Harp
Jamey Bennett
Sue Coles

OFFICERS
G. Anthony Busseni
Chairman

Rickey D. Harp
President

Jamey Bennett
Vice President

Sue Coles
Secretary

doing business as:
   Capital Insurance Group
   Farmers Title Company
<PAGE>


KENTUCKY GENERAL HOLDINGS, LLC

DIRECTORS
G. Anthony Busseni, Chairman
Jamey Bennett
C. Douglas Carpenter
Rick Harp

OFFICERS
G. Anthony Busseni
Chairman

Jamey Bennett
President

Sue Coles
Secretary


PRO MORTGAGE PARTNERS, LLC

DIRECTORS
Joseph C. Murphy, Chairman
Bruce W. Brooks
G. Anthony Busseni
Charles L. Cammack
Jean T. Harrod
J. C. Moraja
Thomas A. Probst

OFFICERS
Thomas A. Probst
President

Susan K. Tackett
Vice President


<PAGE>


GLOSSARY OF FINANCIAL TERMS

ALLOWANCE FOR LOAN LOSSES
A valuation  allowance to offset  credit losses  specifically  identified in the
loan portfolio,  as well as management's best estimate of probable losses in the
remainder of the portfolio at the balance sheet date.  Management  estimates the
allowance balance required using past loan loss experience, an assessment of the
financial  condition of individual  borrowers,  a determination of the value and
adequacy of  underlying  collateral,  the  condition  of the local  economy,  an
analysis  of the  levels  and  trends  of the loan  portfolio,  and a review  of
delinquent and classified loans.  Actual losses could differ  significantly from
the amounts estimated by management.

DIVIDEND PAYOUT
Cash dividends paid on common shares, divided by net income.

BASIS POINTS
Each basis point is equal to one  hundredth  of one  percent.  Basis  points are
calculated  by  multiplying  percentage  points  times  100.  For  example:  3.7
percentage points equals 370 basis points.

INTEREST RATE SENSITIVITY
The relationship  between interest sensitive earning assets and interest bearing
liabilities.

NET CHARGE-OFFS
The amount of total loans  charged off net of recoveries of loans that have been
previously charged off.

NET INTEREST INCOME
Total interest income less total interest expense.

NET INTEREST MARGIN
Taxable  equivalent  net interest  income  expressed as a percentage  of average
earning assets.

NET INTEREST SPREAD
The difference  between the taxable  equivalent  yield on earning assets and the
rate paid on interest bearing funds.

OTHER REAL ESTATE OWNED
Real estate not used for banking  purposes.  For example,  real estate  acquired
through foreclosure.

PROVISION FOR LOAN LOSSES
The charge against  current income needed to maintain an adequate  allowance for
loan losses.

RETURN ON AVERAGE ASSETS (ROA)
Net income divided by average total assets.  Measures the relative profitability
of the resources utilized by the Company.

RETURN ON AVERAGE EQUITY (ROE)
Net income  divided by  average  shareholders'  equity.  Measures  the  relative
profitability of the shareholders' investment in the Company.

TAX EQUIVALENT BASIS (TE)
Income from tax-exempt loans and investment securities have been increased by an
amount  equivalent  to the taxes that would have been paid if this  income  were
taxable  at  statutory  rates.  In order to  provide  comparisons  of yields and
margins for all earning assets,  the interest income earned on tax-exempt assets
is increased to make them fully  equivalent  to other  taxable  interest  income
investments.

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
The number of shares  determined  by  relating  (a) the portion of time within a
reporting  period that common shares have been outstanding to (b) the total time
in that period.

<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

The  following  pages  present  management's  discussion  and  analysis  of  the
consolidated  financial  condition and results of operations of Farmers  Capital
Bank Corporation (the "Company").  Banking  subsidiaries  include Farmers Bank &
Capital  Trust  Co.  ("Farmers  Bank")  in  Frankfort,  KY and its  wholly-owned
subsidiaries  Leasing  One  Corporation  ("Leasing  One")  and  Farmers  Capital
Insurance Corporation ("Farmers Insurance"). Leasing One is a commercial leasing
company  in  Frankfort,  KY and  Farmers  Insurance  is an  insurance  agency in
Frankfort,  KY;  Farmers  Bank and Trust  Company in  Georgetown,  KY  ("Farmers
Georgetown")  and its  wholly-owned  subsidiary  Pro Mortgage  Partners,  LLC, a
mortgage brokerage company  established in May, 2004 offering a variety of fixed
rate loan  products;  First  Citizens Bank in  Elizabethtown,  KY; United Bank &
Trust Co. in Versailles, KY; Lawrenceburg National Bank in Harrodsburg,  KY; and
Kentucky  Banking  Centers,  Inc.  in  Glasgow,  KY. The  Company has two active
nonbank subsidiaries,  FCB Services,  Inc. ("FCB Services") and Kentucky General
Holdings, LLC ("Kentucky General"). FCB Services is a data processing subsidiary
located in Frankfort, KY, which provides services to the Company's banks as well
as  unaffiliated  banks.  Kentucky  General  holds a 50% voting  interest in KHL
Holdings,  LLC,  which is the parent  company of  Kentucky  Home Life  Insurance
Company. The following discussion should be read in conjunction with the audited
consolidated financial statements and related Notes that follow.

FORWARD-LOOKING STATEMENTS

This report contains  forward-looking  statements  under the Private  Securities
Litigation Reform Act of 1995 that involve risks and uncertainties.  In general,
forward-looking statements relate to a discussion of future financial results or
projections,   future  economic   performance,   future  operational  plans  and
objectives,   and  statements  regarding  the  underlying  assumptions  of  such
statements.  Although the Company  believes that the assumptions  underlying the
forward-looking   statements  contained  herein  are  reasonable,   any  of  the
assumptions could be inaccurate,  and therefore,  there can be no assurance that
the  forward-looking  statements  included  herein  will  prove to be  accurate.
Factors that could cause actual results to differ from the results  discussed in
the  forward-looking  statements  include,  but are  not  limited  to:  economic
conditions  (both  generally and more  specifically  in the markets in which the
Company and its subsidiaries  operate) and lower interest  margins;  competition
for the Company's customers from other providers of financial services;  deposit
outflows or reduced demand for financial services and loan products;  government
legislation,  regulation,  and changes in monetary  and fiscal  policies  (which
changes from time to time and over which the Company has no control); changes in
interest  rates;  material  unforeseen  changes  in the  liquidity,  results  of
operations, or financial condition of the Company's customers; the capability of
the Company to  successfully  enter into a  definitive  agreement  for and close
anticipated transactions; the possibility that acquired entities may not perform
as well as  expected;  unexpected  claims or  litigation  against  the  Company;
technological  or  operational  difficulties;  and other risks or  uncertainties
detailed in the Company's  filings with the Securities and Exchange  Commission,
all of which are  difficult  to predict and many of which are beyond the control
of the Company.  The Company  expressly  disclaims  any intent or  obligation to
update any  forward-looking  statements  after the date  hereof to conform  such
statements to actual results or to changes in our opinions or expectations.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The  Company's  audited  consolidated   financial  statements  are  prepared  in
accordance with accounting principles generally accepted in the United States of
America  and  follow  general  practices  applicable  to the  banking  industry.
Application  of  these  principles   requires   management  to  make  estimates,
assumptions,  and  judgments  that  affect  the  reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reported  period.  These  estimates,  assumptions,  and judgments are
based  on  information  available  as of the date of the  financial  statements;
accordingly, as this information changes, the financial statements could reflect
different  estimates,  assumptions,  and judgments.  Certain policies inherently
have a greater reliance on the use of estimates,  assumptions, and judgments and
as such have a greater possibility of producing results that could be materially
different than originally reported.  Estimates,  assumptions,  and judgments are
necessary when assets and liabilities are required to be recorded at fair value,
when a decline in the value of an asset  warrants an  impairment  write-down  or
valuation  reserve to be established,  or when an asset or liability needs to be
recorded contingent upon a future event. Carrying assets and liabilities at fair
value inherently results in more financial statement volatility. The fair values
and the information used to record valuation  adjustments for certain assets and
liabilities  are based either on quoted  market  prices or are provided by other
third-party  sources,  when  available.  When  third-party  information  is  not
available,  valuation  adjustments  are  estimated  in good faith by  management
primarily through the use of internal cash flow modeling techniques.

The most significant  accounting  policies followed by the Company are presented
in Note 1 of the Company's 2004 audited consolidated financial statements. These
policies,  along with the disclosures presented in the other financial statement
notes and in this  management's  discussion and analysis of financial  condition
and results of operations,  provide  information on how  significant  assets and
liabilities  are valued in the  financial  statements  and how those  values are
determined.  Based  on the  valuation  techniques  used and the  sensitivity  of
financial  statement  amounts  to  the  methods,   assumptions,   and  estimates
underlying  those amounts,  management has identified the  determination  of the
allowance  for loan  losses to be the  accounting  area that  requires  the most
subjective or complex  judgments,  and as such could be most subject to revision
as new information becomes available.

The allowance for loan losses represents credit losses  specifically  identified
in the loan  portfolio,  as well as  management's  estimate of  probable  credit
losses in the loan portfolio at the balance sheet date.  Determining  the amount
of the  allowance  for loan losses and the related  provision for loan losses is
considered  a  critical  accounting  estimate  because it  requires  significant
judgment and the use of  estimates  related to the amount and timing of expected
future cash flows on impaired  loans,  estimated  losses on pools of homogeneous
loans based on historical loss experience, and consideration of current economic
trends and  conditions,  all of which may be susceptible to significant  change.
The loan portfolio also  represents the largest asset group on the  consolidated
balance sheets.  Additional information related to the allowance for loan losses
that describes the  methodology and risk factors can be found under the captions
"Asset Quality" and "Nonperforming  Assets" in this management's  discussion and
analysis of financial condition and results of operation, as well as Notes 1 and
4 of the Company's 2004 audited consolidated financial statements.

EXECUTIVE LEVEL OVERVIEW

The  Company  offers a variety of  financial  products  and  services  at its 27
banking  locations  in 16  communities  throughout  Central  Kentucky.  The most
significant  products and services include  consumer and commercial  lending and
leasing,  receiving  deposits,  providing  trust  services,  and offering  other
traditional banking products and services.  The primary goals of the Company are
to continually  improve  profitability and shareholder value,  maintain a strong
capital  position,  provide  excellent  service  to our  customers  through  our
community  banking  structure,  and to provide a challenging  and rewarding work
environment for our employees.

The Company generates a significant  amount of its revenue,  cash flows, and net
income from  interest  income and net interest  income,  respectively.  Interest
income is generated by earnings on the Company's earning assets, primarily loans
and  investment  securities.  Net interest  income is the excess of the interest
income  earned on  earning  assets  over the  interest  expense  paid on amounts
borrowed to support those earning assets.  Interest expense is paid primarily on
deposits  accounts and other short and  long-term  borrowing  arrangements.  The
ability  to  properly   manage  net  interest   income  under  changing   market
environments is crucial to the success of the Company.

In assessing the Company's  financial  performance in this report, the following
items of note should be considered:

     o    The  general  trend  of the  interest  rate  environment  for 2003 was
          downward primarily as a result of short-term  interest rate reductions
          taken by the Federal  Reserve  Board (the  "Fed").  The effects of the
          downward trend in general  interest rates for 2003  positively  affect
          the Company's net interest income during 2004. A significant amount of
          time deposits,  the largest component of interest bearing liabilities,
          have  repriced  to lower rates and  contributed  to an increase in net
          interest income for the current period. The repricing of time deposits
          for the Company  have  generally  taken longer to occur than for other
          interest paying  liabilities and interest  earning assets due to their
          fixed  nature  and  maturity  characteristics.  Although  the trend in
          short-term  interest  rates is  moving  upward,  the  increase  in the
          short-term  federal  funds rate of 125 basis  points by the Fed during
          2004 did not  significantly  impact the Company's net interest  income
          during the current year as 75 basis  points of the  increase  occurred
          since September 2004.

     o    The current year lacked the prepayments of mortgage-backed  investment
          securities  experienced  during  2003 which were  unusually  high as a
          result of increased  refinancing  of home  mortgages.  Many  borrowers
          opted to refinance  their home  mortgages at historic low rates during
          2003.  This caused  higher  premium  amortization  on  mortgage-backed
          investment  securities which resulted in the lower yields reflected in
          the investment portfolio in 2003.

     o    On July 1, 2004 the Company acquired Citizens Bank (Kentucky), Inc. in
          Georgetown,  Kentucky  ("Citizens  Georgetown") for $14.6 million in a
          cash  transaction.  The impact of this  acquisition  was an  immediate
          boost in loans  and  deposits  of $50.1  million  and  $62.4  million,
          respectively,  to the Company's  balance  sheet.  The  application  of
          purchase  accounting to this  acquisition  resulted in $4.8 million in
          goodwill and $2.2 million in core deposit intangible. The core deposit
          intangible created $255 thousand in amortization expense in 2004 where
          there is no  comparable  amount in the prior  year.  During the fourth
          quarter of 2004, the Company merged  Citizens  Georgetown into Farmers
          Georgetown.

     o    On October  1, 2004 we  announced  our  entrance  into the  Lexington,
          Kentucky market area when Farmers Georgetown opened a branch office in
          downtown  Lexington.  Subsequent to year-end 2004, a second branch was
          opened in south Lexington.

     o    On October 8, 2004 First  Citizens  Bank acquired  Financial  National
          Electronic  Transfer,  Inc  ("FiNET")  for  $6.6  million  in  a  cash
          transaction.  FiNET is a data processing  company that  specializes in
          the processing of federal benefit payments and military allotments and
          is  headquartered in Radcliff,  Kentucky.  The primary assets acquired
          were  goodwill of $3.9 million and customer  list  intangible  of $2.4
          million.  The customer  list  intangible  resulted in $130 thousand in
          amortization  expense for 2004 where there is no comparable  amount in
          the  prior  year.  The  acquisition  of  FiNET   increased   allotment
          processing  fees and  service  charges  and fees on  deposits  by $280
          thousand and $257  thousand,  respectively,  in the fourth  quarter of
          2004.  Effective January 1, 2005, FiNET was merged into First Citizens
          Bank.

          Prior to the acquisition of FiNET, First Citizens Bank was emerging as
          a leader in military bill payment processing.  Allotment processing is
          a bill  payment  and federal  benefits  processing  service.  The bill
          payment  service  provides bill payment for military  personnel  using
          payroll  deduction as the source for bill payments to local merchants.
          The Company  receives a  transaction  fee for each payment made to the
          participating merchants. Federal benefits processing provides a direct
          deposit  service  for  recipients  of  federal  assistance  who do not
          maintain a bank account.  Personal  finance  companies offer a service
          allowing federal benefit recipients to pick up their benefit checks at
          the retail offices of participating finance companies.  First Citizens
          Bank acts as a pass-through.  It receives federal benefit payments and
          then remits them to the intended  party usually on the same day. First
          Citizens  Bank  receives  a  transaction  fee for  this  service  from
          participating  vendors.

     o    During  2004,  the  Company   introduced  the   FlexSpender  48  month
          certificate of deposit. This deposit product,  which was offered at an
          attractive  market rate,  allows the depositor one opportunity  during
          the term to adjust the rate earned to the current  rate offered at the
          time of the  election.  In  addition,  the  depositor  is  allowed  to
          withdraw a certain amount from the account at four different intervals
          over the 48 month term  without  penalty.  Marketing  of this  product
          intensified   during  the  middle  of  the  year  in  anticipation  of
          short-term  interest  rate  increases  by the  Fed.  Net new  deposits
          attracted  from this  promotion  were  approximately  $40  million  at
          year-end 2004.

     o    During 2004, the Company intensified its efforts related to compliance
          with the  Sarbanes-Oxley  Act of 2002.  The  result of this Act on the
          financial performance of the Company is higher noninterest expenses in
          the current  year.  This  increase  includes a  significant  amount of
          additional   internal  labor  allocated  to  this  effort  along  with
          increased  consulting  expenses  and higher  audit  fees.  The Company
          expects to benefit from certain  operational  efficiencies  discovered
          during this process.

RESULTS OF OPERATIONS

Consolidated net income for 2004 was $13.4 million, an increase of $429 thousand
or 3.3%  compared to $13.0  million  for 2003.  Basic and diluted net income per
share for 2004 was $1.99 and $1.98, respectively. This represents an increase of
$.06 or 3.1% on both a basic and  diluted  basis.  The  Company  reported a $4.2
million  increase in net interest  income  attributed to a combination of higher
interest income on loans and securities and lower interest expense, primarily on
deposits.  Noninterest  income declined $142 thousand or 0.8% while  noninterest
expenses  grew  $4.4  million  or  11.8%  mainly  as a  result  of the  Citizens
Georgetown and FiNET  acquisitions and the expansion of banking  operations into
the Lexington,  Kentucky market.  The provision for loan losses and income taxes
decreased $463 thousand or 17.9% and $343 thousand or 10.2%, respectively.

The return on assets  ("ROA") was .99% in 2004, a decline of 5 basis points from
the prior  year-end.  The return on equity  ("ROE")  increased 7 basis points to
10.46%  compared to 10.39% in the prior year. The increase in ROE is a primarily
the result of a 51 basis point  increase  in  financial  leverage  from 10.0% to
10.5% as of December 31, 2004. Financial leverage represents the degree in which
borrowed funds, as opposed to equity, are used in the funding of assets.

INTEREST INCOME

Interest income results from interest earned on earning assets,  which primarily
include loans and investment  securities.  Interest income is affected by volume
(average  balance),  composition of earning assets, and the related rates earned
on those assets.  Total interest income for 2004 was $61.9 million,  an increase
of $3.5  million  or 6.0%  from the  previous  year.  Interest  income  on loans
increased  mainly as a result of higher loan  balances  resulting  from both the
Citizens Georgetown  acquisition and internally generated loan growth.  Interest
income on  securities  grew as a result of a higher  average  rate earned on the
investments.  The  Company's  tax  equivalent  yield on  earning  assets for the
current year was 5.3%, a decline of one basis point  compared to the same period
a year ago.

Interest  and fees on loans was $49.4  million,  an increase of $1.5  million or
3.2% compared to a year earlier.  Average loans increased $76.6 million or 10.3%
to $818.9  million in the comparison due to higher loan demand in what remains a
low rate environment and, to a lesser extent, the loans acquired in the Citizens
Georgetown  acquisition.  On July 1, 2004, the Company  purchased  approximately
$50.1 million in loans  related to the Citizens  Georgetown  acquisition,  which
approximates  to $25.0  million of the increase in average  loans for 2004.  The
positive  effect on  interest  income due to the growth in loans was offset by a
decrease in the  average  rate  earned,  which was  negatively  impacted by both
competitive  market  conditions  on new and  renewed  loans as well as the loans
acquired in the  Citizens  Georgetown  acquisition.  The loans  purchased in the
Citizens Georgetown acquisition had a lower average yield than existing loans of
the Company. The tax equivalent yield on loans decreased 45 basis points to 6.1%
from 6.5% in the annual  comparison.  Interest  on taxable  securities  was $7.9
million,  an increase of $1.4 million or 21.1% due to an increase in the average
rate earned,  which in the prior year was  negatively  impacted by the effect of
higher  premium  amortization  on  mortgage-backed  securities.  Prepayments  on
mortgage-backed  securities  increased  greatly during 2003 due to corresponding
refinancing  of home  mortgages  that serve as collateral  for these  investment
securities.  The increase in activity was directly related to the lower interest
rate  environment.  The average rate earned on taxable  securities  increased 61
basis points to 3.2% from 2.6% while the average  balance  declined $4.5 million
or 1.8% to $245.5  million.  Interest on nontaxable  securities  increased  $643
thousand  or 19.6%  due to a $20.1  million  or 26.5%  increase  in the  average
balance to $95.7 million from $75.7 million. Interest on short-term investments,
including  time  deposits in other banks,  federal  funds sold,  and  securities
purchased under  agreements to resell,  decreased $82 thousand due to a decrease
in the average  balance on these  investments  of $18.9 million or 31.8%,  which
offset a 34 basis point increase in the average rate earned to 1.5%.

INTEREST EXPENSE

Interest   expense   results  from  incurring   interest  on  interest   bearing
liabilities,  which primarily include interest bearing  deposits,  federal funds
purchased and securities sold under agreements to repurchase, and other borrowed
funds.  Interest expense is affected by volume,  composition of interest bearing
liabilities,  and the related rates paid on those  liabilities.  Total  interest
expense was $19.2 million for 2004, a decrease of $707 thousand or 3.6% from the
prior year.  Interest  expense  declined as a result of lower rates paid on time
deposits.  The Company's cost of funds was 1.9% for 2004, a decrease of 22 basis
points  from 2.1% for the prior  year.  The  decline was led by a 53 basis point
drop in the average  rate paid on time  deposits.  This decline is the result of
time  deposits  repricing to lower rates and the  promotion of  certificates  of
deposits, both of which occurred in advance of the effect of recent increases in
short term interest rates by the Fed.

Interest  expense on time  deposits,  the largest  component  of total  interest
expense,  decreased  $1.2  million  or 8.7% to $12.7  million.  A decline in the
average  rate paid on time  deposits  offset an increase in the average  balance
outstanding and was the primary reason for the decrease in interest expense. The
average rate paid  decreased  53 basis points to 2.8% while the average  balance
increased $36.6 million or 8.7%. The increase in the average balance outstanding
was boosted by the promotion of the  FlexSpender  certificate of deposit product
and, to a lesser  extent,  the effect of the  Citizens  Georgetown  acquisition.
Interest  expense on savings  deposits  and  interest  bearing  demand  deposits
increased  $123 thousand or 7.5% and $93 thousand or 7.3%,  respectively.  These
increases  were due primarily to an increase in the average  balances on savings
and interest bearing demand deposits of $19.2 million or 11.1% and $14.9 million
or 6.5%,  respectively.  The average  rate paid on savings  deposits  declined 3
basis  points to .9% while the  average  rate paid on  interest  bearing  demand
deposits was unchanged at .6%.

Interest expense on federal funds purchased and securities sold under agreements
to repurchase increased $328 thousand or 38.0% due to an increase in both volume
and rate of $11.3 million or 16.1% and 23 basis points or 18.7%. The increase is
mainly due to increased  correspondent  banking  activity.  Interest  expense on
other  borrowed  funds  consists  primarily of Federal  Home Loan Bank  ("FHLB")
borrowings,  a funding  source the  Company  utilized  to a greater  extent when
interest rates declined  significantly  during 2002.  Interest  expense on other
borrowed funds was relatively unchanged at $2.1 million in 2004 compared to $2.2
million  for 2003.  A $6.6  million or 10.5%  decrease  in the  average  balance
outstanding offset a 34 basis point or 9.9% increase in the average rate paid.

NET INTEREST INCOME

Net interest income is the most significant component of the Company's earnings.
Net  interest  income is the  excess of the  interest  income  earned on earning
assets over the interest paid for funds to support  those  assets.  The two most
common metrics used to analyze net interest  income are net interest  spread and
net interest margin.  Net interest spread represents the difference  between the
yields on earning assets and the rates paid on interest bearing liabilities. Net
interest  margin  represents  the  percentage of net interest  income to average
earning  assets.  Net interest margin will exceed net interest spread because of
the  existence  of  noninterest  bearing  sources of funds,  principally  demand
deposits  and  shareholders'  equity,  which are also  available to fund earning
assets.  Changes in net interest  income and margin result from the  interaction
between the volume and the composition of earning assets,  their related yields,
and the associated  cost and  composition of the interest  bearing  liabilities.
Accordingly,  portfolio size, composition, and the related yields earned and the
average  rates paid can have a  significant  impact on net  interest  spread and
margin.  The table on the  following  page  represents  the major  components of
interest  earning  assets and interest  bearing  liabilities on a tax equivalent
basis.  To compare the tax-exempt  asset yields to taxable  yields,  amounts are
adjusted to pretax  equivalents based on the marginal corporate Federal tax rate
of 35%.

Tax  equivalent  net interest  income was $44.9 million for 2004, an increase of
$4.5 million or 11.0% compared to $40.5 million in 2003. The net interest margin
was 3.74%,  an  improvement  of 15 basis points from 3.59% in the prior year. An
increase  in net  interest  spread  accounts  for 21 basis  points of the higher
margin while the impact of  noninterest  bearing  sources of funds declined by 6
basis points. The effect of noninterest bearing sources of funds on net interest
margin is reflective of the overall lower rate environment.

During 2004, the tax equivalent  yield on total earning assets decreased 1 basis
point to 5.3%  while  the cost of funds  decreased  by 22 basis  points to 1.9%,
resulting in the 21 basis point  improvement  in spread noted above.  The larger
decline in the average rates paid on interest  bearing  liabilities  compared to
the relatively unchanged average rates earned on average earning assets resulted
in the increase in net interest income.  The tax equivalent spread between rates
earned on earning assets and rates paid on interest bearing  liabilities totaled
3.5% for 2004 compared to 3.3% a year earlier.

The Company remains proactive in management of the rate sensitive  components of
both its assets and  liabilities.  This task continues to be challenging  due to
the lasting effects of the falling  interest rate  environment  that has carried
over from previous  periods  whereby we are still  experiencing  relatively  low
interest rates. During 2004, the Fed increased the short-term federal funds rate
five times,  the first of which  occurred on June 30,  2004,  totaling 125 basis
points.  Predicting the movement of future  interest rates is uncertain.  During
the past year, the average rates on the two most  significant  components of net
interest  income  for the  Company,  loans  and time  deposits,  both  declined.
However,  the average rate paid on time deposits have generally  declined faster
than the rates earned on the loan  portfolio.  Should interest rates continue to
decline,  the  Company's  cost of funds  should  also  decline  to some  extent.
However, since many of the Company's funding sources have neared their repricing
floors,  the yield on  earning  assets  could  potentially  decline to a greater
degree than has occurred in the current  period.  Should  interest  rates on the
Company's earning assets and interest paying liabilities begin to move upward as
reflected in recent  short-term  market interest rate  increases,  the Company's
cost of funds  could  potentially  increase  faster  than the  yields on earning
assets.

<PAGE>
<TABLE>
<CAPTION>

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY: INTEREST RATES AND INTEREST DIFFERENTIAL
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                        2004                           2003                               2002
------------------------------------------------------------------------------------------------------------------------------------
                                    Average             Average     Average            Average       Average               Average
(In thousands)                      Balance   Interest    Rate      Balance  Interest    Rate        Balance    Interest     Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>         <C>    <C>         <C>         <C>      <C>           <C>         <C>
EARNING ASSETS
Investment securities
  Taxable                        $  245,515   $  7,934    3.23%  $  250,030  $  6,549    2.62%    $  238,496    $ 10,062    4.22%
  Nontaxable1                        95,748      5,997    6.26       75,661     4,838    6.39         77,908       5,168    6.63
Time deposits with banks,
  federal funds sold and
  securities purchased under
  agreements to resell               40,524        602    1.49       59,391       684    1.15         68,948       1,236    1.79
Loans 1,2,3                         818,933     49,570    6.05      742,319    48,272    6.50        705,090      51,970    7.37
------------------------------------------------------------------------------------------------------------------------------------
     Total earning assets         1,200,720   $ 64,103    5.34%   1,127,401  $ 60,343    5.35%     1,090,442    $ 68,436    6.28%
------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses           (12,325)                        (11,224)                         (10,951)
------------------------------------------------------------------------------------------------------------------------------------
     Total earning assets,
     net of allowance for
     loan losses                  1,188,395                       1,116,177                        1,079,491
------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks              87,616                          78,889                           91,219
Premises and equipment, net          25,850                          24,205                           24,053
Other assets                         45,740                          31,478                           11,599
------------------------------------------------------------------------------------------------------------------------------------
     Total assets                $1,347,601                      $1,250,749                       $1,206,362
------------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
   Interest bearing demand       $  242,086   $  1,364     .56%  $  227,217  $  1,271     .56%    $  215,766    $  1,887     .87%
   Savings                          191,100      1,768     .93      171,942     1,645     .96        167,044       2,290    1.37
   Time                             459,320     12,723    2.77      422,749    13,934    3.30        404,658      18,337    4.53
Federal funds purchased and
   securities sold under
   agreements to repurchase          81,520      1,191    1.46       70,242       863    1.23         92,912       1,647    1.77
Other borrowed funds                 56,355      2,130    3.78       62,995     2,170    3.44         43,092       1,585    3.68
------------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing
     liabilities                  1,030,381   $ 19,176    1.86%     955,145  $ 19,883    2.08        923,472    $ 25,746    2.79%
------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of
  Kentucky deposits                  35,875                          33,831                          33,318
Other demand deposits               144,105                         128,136                         117,505
Other liabilities                     9,247                           8,815                           6,931
------------------------------------------------------------------------------------------------------------------------------------
     Total liabilities            1,219,608                       1,125,927                       1,081,226
------------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity           127,993                         124,822                         125,136
------------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity        $1,347,601                      $1,250,749                      $1,206,362
------------------------------------------------------------------------------------------------------------------------------------
Net interest income                             44,927                         40,460                            42,690
TE basis adjustment                             (2,201)                        (1,930)                           (2,145)
------------------------------------------------------------------------------------------------------------------------------------
     Net interest income                      $ 42,726                       $ 38,530                          $ 40,545
------------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                       3.48%                          3.27%                              3.49%
Effect of noninterest bearing
   sources of funds                                        .26                            .32                                .43
------------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                       3.74%                          3.59%                              3.92%
------------------------------------------------------------------------------------------------------------------------------------

1    Income and yield stated at a fully tax equivalent  basis using the marginal corporate Federal tax rate of 35%.
2    Loan balances include principal balances on nonaccrual loans.
3    Loan fees  included  in interest  income  amounted  to $2.2  million,  $2.1 million, and $2.0 million for 2004, 2003, and 2002,
     respectively.
</TABLE>
<PAGE>


The following table is an analysis of the change in net interest income.
<TABLE>
<CAPTION>

ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
--------------------------------------------------------------------------------------------------------------------
                                    Variance       Variance Attributed to  Variance        Variance Attributed to
(In thousands)                     2004/2003 1      Volume        Rate    2003/2002 1      Volume        Rate
--------------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
INTEREST INCOME
Taxable investment securities       $  1,385     $   (120)    $  1,505     $ (3,513)    $    466     $ (3,979)
Nontaxable investment securities2      1,159        1,259         (100)        (330)        (146)        (184)
Time deposits with banks, federal
 funds sold and securities
 purchased under agreements
 to resell                               (82)        (252)         170         (552)        (154)        (398)
Loans2                                 1,298        4,775       (3,477)      (3,698)       2,649       (6,347)
--------------------------------------------------------------------------------------------------------------------
Total interest income                  3,760        5,662       (1,902)      (8,093)       2,815      (10,908)
--------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest bearing demand deposits          93           93         (616)          94                      (710)
Savings deposits                         123          177          (54)        (645)          65         (710)
Time deposits                         (1,211)       1,145       (2,356)      (4,403)         785       (5,188)
Federal funds purchased and
 securities sold under agreements
 to repurchase                           328          151          177         (784)        (348)        (436)
Other borrowed funds                     (40)        (241)         201          585          693         (108)
--------------------------------------------------------------------------------------------------------------------
Total interest expense                  (707)       1,325       (2,032)      (5,863)       1,289       (7,152)
--------------------------------------------------------------------------------------------------------------------
Net interest income                 $  4,467     $  4,337     $    130     $ (2,230)    $  1,526     $ (3,756)
--------------------------------------------------------------------------------------------------------------------
Percentage change                      100.0%        97.1%         2.9%       100.0%       (68.4)%      168.4%
--------------------------------------------------------------------------------------------------------------------
1 The changes which are not solely due to rate or volume are allocated on a percentage basis using the absolute
  values of rate and volume variances as a basis for allocation.
2 Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
</TABLE>


NONINTEREST INCOME

Noninterest  income  totaled $17.8 million for 2004, a decrease of $142 thousand
or  .8%  compared  to  $17.9  million  in the  prior  year.  Noninterest  income
represented  22.3% of total  revenue at  year-end  2004,  a decline of 110 basis
points from 23.4% for 2003. The decrease in noninterest  income is due primarily
to lower net gains on the sale of  investment  securities  of $574  thousand  or
59.5%  and lower net gains on the sale of  mortgage  loans of $510  thousand  or
58.0%. The Company periodically sells investment  securities primarily for asset
and  liability  management  purposes,  which  can  result  in  variability  when
comparing to previous periods. The lower net gains on the sale of mortgage loans
is  attributed  to a decline  in  mortgage  loans  originated  for sale of $39.8
million  or 66.3%  in the  comparison  and is  reflective  of lower  refinancing
activity in the current period.  Consumer refinancing activity in the prior year
was driven by historically low interest rates. Nearly offsetting the declines in
net  gains on the sale of  investment  securities  and net  gains on the sale of
mortgage  loans were an  increase in service  charges  and fees on deposits  and
allotment  processing  fees.  Service  charges  and fees on  deposits  grew $739
thousand or 9.6% due to an increase in overdraft  fees of $320  thousand or 6.4%
and other  account  fees  related to our  allotment  business of $312  thousand.
Allotment  processing  fees increased $295 thousand or 35.6% to $1.1 million due
primarily to the  acquisition  of FiNET during the fourth  quarter of 2004.  The
increase in other account fees earned  related to the allotment  business in the
current period are also attributed to the acquisition of FiNET.  Since this is a
recent acquisition, the increases presented above are expected to level off once
there are comparable periods in the future.  Other noninterest income items were
relatively flat in the current year compared to a year earlier.

NONINTEREST EXPENSE

Total  noninterest  expense  was $41.9  million  for 2004,  an  increase of $4.4
million or 11.8% compared to 2003. The increase in noninterest expense is mainly
a result of the Citizens  Georgetown and FiNET acquisitions and the expansion of
banking operations into the Lexington,  Kentucky market. The largest increase in
noninterest  expense was salaries and employee  benefits,  which  increased $2.2
million or 10.4% as the average  number of full time  equivalent  employees rose
5.6%  in the  twelve  month  comparison.  Salaries  and  related  payroll  taxes
increased $1.7 million or 10.1% to $18.0 million due to increased  personnel and
normal salary increases.  Noncash  compensation expense related to the Company's
nonqualified  stock  option  plan  declined  $149  thousand  or 35.3% due to the
structure of the vesting  schedule.  Employee  benefit  expenses  increased $643
thousand or 16.5% primarily due to increased  health care costs,  higher pension
expense,  and costs  associated  with the new  postretirement  health  insurance
coverage  initiated  late in the first quarter of 2003.  The number of full time
equivalent  employees  increased to 514 from 460 reported at the prior year-end,
with a significant portion of the increase attributed to the Citizens Georgetown
acquisition and additional employees at Pro Mortgage Partners.

Occupancy  expense,  net of rental income,  increased $264 thousand or 10.4% and
totaled  $2.8  million.  The  increase  was  driven  by the  Company's  business
acquisitions  and  expansion  along with normal  increases in  utilities  costs.
Equipment expenses were $2.5 million, an increase of $304 thousand or 14.0% that
was driven by business  expansion.  Data processing and  communications  expense
rose $463  thousand or 12.7% to $4.1  million.  The  increase is  attributed  to
increased data transfer capacity and larger processing  volumes.  Bank franchise
taxes  increased  $132 thousand or 9.9% as a result of higher  taxable values of
our bank subsidiaries. Correspondent bank fees were $824 thousand, a decrease of
$101 thousand or 10.9%. The decrease is primarily  attributed to lower fees paid
related  to  Commonwealth  of  Kentucky  custodial  transaction  volumes.  Other
noninterest  expenses increased $1.2 million or 19.7% to $7.4 million.  Included
in  this  increase  is  amortization   expense  of  core  deposit  and  customer
relationship  intangibles  related to acquisition  activity of $255 thousand and
$130 thousand, respectively, in which there is no corresponding amount for 2003.
Increases  in other  noninterest  expenses  can be  attributed  to higher  costs
related to Sarbanes-Oxley compliance,  costs relating to the Citizens Georgetown
and FiNET  acquisitions,  expansion  of  banking  into the  Lexington,  Kentucky
market, and additional expenses relating to Pro Mortgage Partners.

INCOME TAX

Income tax expense  for 2004 was $3.0  million,  a decrease of $343  thousand or
10.2% from the previous  year. The effective tax rate decreased 219 basis points
to 18.4%  from  20.6% in  2003.  The  change  in the  effective  tax rate is due
primarily  to  an  increase  of  nontaxable  income  resulting  from  additional
municipal investment securities.

FINANCIAL CONDITION

Total  assets  were $1.4  billion on  December  31,  2004,  an increase of $78.6
million  or 6.0% from the prior  year-end.  The growth in assets was driven by a
$119.2 million or 16.0%  increase in net loans.  This increase was helped by the
acquisition  of $50.1  million in net loans of  Citizens  Georgetown  on July 1,
2004.  Offsetting  the  increase  in  loans  were  decreases  in both  cash  and
equivalents of $48.0 million or 37.7% and investment securities of $13.8 million
or 3.6%.  Other assets,  including  $8.7 million in goodwill and $4.3 million in
intangibles related to the Citizens Georgetown and FiNET acquisitions, increased
$21.1  million or 33.1%  since  year-end  2003.  The  increase  in total  assets
correlates to additional  funding  sources,  primarily  $70.7 million or 6.6% in
additional  deposits and $5.0 million or 3.9% in additional equity. The increase
in deposits is mainly due to the  Citizens  Georgetown  acquisition,  which were
$62.4 million at  acquisition  on July 1, 2004 and the marketing  effort to sell
the Company's new  FlexSpender  certificate  of deposit midway through the year.
Total  shareholders'  equity  increased  $5.0  million  or 3.9% due mainly to an
increase in retained  earnings of $4.5  million or 3.1%.  An increase in capital
surplus  of $2.1  million  or 11.1% due  mainly to the  issuance  of new  shares
related to the exercise of stock options more than offset a $1.4 million decline
in  comprehensive  income  related  to  unrealized  losses  (net  of tax) of the
Company's available for sale investment securities portfolio.

Management of the Company considers it noteworthy to understand the relationship
between the Company's  principal  subsidiary,  Farmers Bank & Capital Trust Co.,
and the  Commonwealth  of Kentucky.  Farmers Bank provides  various  services to
state agencies of the  Commonwealth.  As the  depository  for the  Commonwealth,
checks are drawn on Farmers Bank by these agencies,  which include paychecks and
state  income tax  refunds.  Farmers  Bank also  processes  vouchers  of the WIC
(Women,  Infants and Children) program for the Cabinet for Human Resources.  The
Bank's investment  department also provides services to the Teacher's Retirement
systems. As the depository for the Commonwealth,  large fluctuations in deposits
are likely to occur on a daily basis.  Therefore,  reviewing average balances is
important to understanding the financial condition of the Company.

On an average  basis,  total assets were $1.3  billion for 2004,  an increase of
$96.9 million or 7.7% from year-end  2003.  Average  earning  assets,  primarily
loans and  securities,  were $1.2 billion for 2004, an increase of $73.3 million
or 6.5%  compared to 2003.  Average  earning  assets  represent  89.10% of total
average  assets on December 31,  2004,  a decrease 104 basis points  compared to
90.14% at year-end 2003.

LOANS

Loans, net of unearned  income,  totaled $876.7 million on December 31, 2004, an
increase of $120.8 million or 16.0% from $755.9 million at year-end 2003. Higher
balances were recorded throughout each category of the loan portfolio,  with the
Citizens  Georgetown  acquisition  contributing  to the  increases.  Real estate
lending increased $89.8 million or 16.7% in the comparison. Real estate mortgage
loans make up 64.4% of the total net loans  outstanding at December 31, 2004 and
increased  $72.1  million  or 14.6%  compared  to a year  earlier.  Real  estate
construction  loans grew $17.8 million or 39.1% from year-end 2003.  Commercial,
financial,  and  agricultural  loans  increased $23.4 million or 21.1% to $134.0
million.  Installment  loans and lease  financing  were $75.3  million and $39.5
million,  respectively,  at year-end 2004.  This  represents an increase of $3.7
million  or 5.2%  and  $3.9  million  or  10.8%,  respectfully  in the  year-end
comparisons.  On average,  loans represented 68.2% of earning assets during 2004
compared to 65.8% for 2003. When loan demand  declines,  the available funds are
redirected  to lower earning  temporary  investments  or investment  securities,
which typically involve a decrease in credit risk and lower yields.

The composition of the loan portfolio,  net of unearned income, is summarized in
the table below.
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
(In thousands)
December 31,                           2004    %        2003    %       2002    %        2001    %       2000     %
---------------------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>    <C>       <C>   <C>       <C>    <C>       <C>   <C>       <C>
Commercial, financial,
 and agricultural                  $134,016  15.3%  $110,657  14.6  $110,056  14.9%  $108,516  15.4  $105,248  15.4%
Real estate --
 construction                        63,156   7.2     45,390   6.0    55,896   7.6     41,930   6.0    40,993    6.0
Real estate mortgage --
 residential                        313,711  35.8    270,638  35.8   251,185  34.0    247,498  35.3   248,420   36.4
Real estate mortgage --
 farmland and other
 commercial enterprises             251,094  28.6    222,100  29.4   208,435  28.2    184,670  26.3   177,135   25.9
Installment                          75,271   8.6     71,565   9.5    76,162  10.3     78,399  11.2    77,284   11.3
Lease financing                      39,457   4.5     35,595   4.7    36,905   5.0     40,856   5.8    34,269    5.0
---------------------------------------------------------------------------------------------------------------------
Total                              $876,705 100.0%  $755,945 100.0% $738,639 100.0%  $701,869 100.0% $683,349  100.0%
---------------------------------------------------------------------------------------------------------------------
</TABLE>


The following table presents commercial,  financial,  and agricultural loans and
real estate  construction loans outstanding at December 31, 2004 which, based on
remaining scheduled repayments of principal, are due in the periods indicated.
<TABLE>
<CAPTION>

LOAN MATURITIES
------------------------------------------------------------------------------------------------------
                                           Within       After One But          After
(In thousands)                            One Year    Within Five Years     Five Years      Total
------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>                 <C>         <C>
Commercial, financial, and agricultural   $ 89,685       $ 29,197            $ 15,134    $134,016
Real estate -- construction                 51,193          9,127               2,836      63,156
------------------------------------------------------------------------------------------------------
Total                                     $140,878       $ 38,324            $ 17,970    $197,172
------------------------------------------------------------------------------------------------------

</TABLE>

The table below presents commercial,  financial, and agricultural loans and real
estate  construction  loans  outstanding at December 31, 2004 that are due after
one year, classified according to sensitivity to changes in interest rates.

INTEREST SENSITIVITY
------------------------------------------------------------------------------
                                              Fixed                Variable
(In thousands)                                 Rate                   Rate
------------------------------------------------------------------------------
Due after one but within five years        $ 22,557               $ 15,767
Due after five years                          8,808                  9,162
------------------------------------------------------------------------------
   Total                                   $ 31,365               $ 24,929
------------------------------------------------------------------------------


ASSET QUALITY

The  Company's  loan  portfolio  is subject to varying  degrees of credit  risk.
Credit risk is  mitigated  by  diversification  within the  portfolio,  limiting
exposure to any single  customer or  industry,  standard  lending  policies  and
underwriting  criteria,  and  collateral  requirements.  The  Company  maintains
policies and procedures to ensure that the granting of credit is done in a sound
and  consistent  manner.  This includes  policies on a  company-wide  basis that
require certain minimum standards to be maintained.  However,  the policies also
permit the individual subsidiary companies authority to adopt standards that are
no less  stringent  than those  included in the  company-wide  policies.  Credit
decisions are made at the subsidiary bank level under guidelines  established by
policy.  The Company's  internal audit department  performs loan reviews at each
subsidiary bank during the year. This loan review evaluates loan administration,
credit quality,  documentation,  compliance with Company loan standards, and the
adequacy of the  allowance  for loan  losses on a  consolidated  and  subsidiary
basis.

The provision for loan losses represents charges made to earnings to maintain an
allowance  for  loan  losses  at  an  adequate  level  based  on  credit  losses
specifically  identified in the loan  portfolio,  as well as  management's  best
estimate  of probable  loan  losses in the  remainder  of the  portfolio  at the
balance  sheet date.  The  allowance  for loan  losses is a valuation  allowance
increased by the  provision  for loan losses and  decreased by net  charge-offs.
Loan losses are charged  against the  allowance  when  management  believes  the
uncollectibility  of a loan is  confirmed.  Subsequent  recoveries,  if any, are
credited to the allowance.

Management   estimates  the  allowance   balance  required  using  a  risk-rated
methodology.  Many factors are considered when  estimating the allowance.  These
include, but are not limited to, past loan loss experience, an assessment of the
financial  condition of individual  borrowers,  a determination of the value and
adequacy of  underlying  collateral,  the  condition  of the local  economy,  an
analysis  of the  levels  and  trends  of the loan  portfolio,  and a review  of
delinquent  and  classified  loans.  The allowance  for loan losses  consists of
specific and general  components.  The specific  component relates to loans that
are  individually  classified  as  impaired  or loans  otherwise  classified  as
substandard or doubtful.  The general component covers  non-classified loans and
is based on  historical  loss  experience  adjusted  for current  risk  factors.
Allocations  of the  allowance  may be made for specific  loans,  but the entire
allowance is available for any loan that, in  management's  judgment,  should be
charged  off.  Actual loan losses could  differ  significantly  from the amounts
estimated by management.

The risk-rated  methodology  includes  segregating watch list and past due loans
from the  general  portfolio  and  allocating  specific  reserves to these loans
depending  on  their  status.  For  example,  watch  list  loans,  which  may be
identified  by the  internal  loan review  risk-rating  system or by  regulatory
examiner classification, are assigned a certain loss percentage while loans past
due 30 days or more are  assigned a  different  loss  percentage.  Each of these
percentages  consider past experience as well as current factors.  The remainder
of the general loan portfolio is segregated into three components having similar
risk  characteristics  as follows:  commercial  loans,  consumer loans, and real
estate loans.  Each of these  components is assigned a loss percentage  based on
their respective three year historical loss percentage.  Additional  allocations
to the  allowance  may  then be  made  for  subjective  factors,  such as  those
mentioned  above, as determined by senior managers who are  knowledgeable  about
these matters.

While management considers the allowance for loan losses to be adequate based on
the information currently available, additional adjustments to the allowance may
be necessary due to changes in the factors noted above. Borrowers may experience
difficulty in periods of economic deterioration,  and the level of nonperforming
loans,  charge-offs,   and  delinquencies  could  rise  and  require  additional
increases in the provision.  Also,  regulatory agencies,  as an integral part of
their  examinations,  periodically  review the allowance for loan losses.  These
reviews could result in additional adjustments to the provision based upon their
judgments about relevant information available during their examination.

The provision  for loan losses  totaled $2.1 million in 2004, a decrease of $463
thousand or 17.9%  compared to $2.6  million  reported in 2003.  The Company had
$2.6 million in net charge-offs,  an increase of $261 thousand or 11.1% compared
to $2.4 million in the prior year. Net charge-offs were  significantly  impacted
by loans  related  to the  Citizens  Georgetown  acquisition  during  2004.  Net
charge-offs  on loans acquired from Citizens  Georgetown  were $916 thousand and
represent  mainly  residential  real  estate  and  commercial  lending.  This is
significant because there was no related provision for loan losses attributed to
the loans acquired from Citizens  Georgetown.  Excluding the Citizens Georgetown
loans,  net  charge-offs  for the Company were $1.7 million,  a decrease of $655
thousand or 27.7%.

Net charge-offs for the Company were as follows during 2004: real estate lending
$564 thousand, installment loans $1.2 million, lease financing $88 thousand, and
commercial, financial, and agricultural loans $806 thousand. The increase in net
charge-offs  relates primarily to a $525 thousand increase in net charge-offs in
the  commercial  lending  portfolio.  A  significant  amount of this increase is
attributed to a relatively small number of individual  credits.  Net charge-offs
on real estate  lending  declined $309 thousand or 35.4%.  The prior year amount
was significantly  impacted by the deterioration in the credit quality of a pool
of  construction  loans  secured by  residential  real  estate to a  financially
troubled  builder.  Additional  information  related  to this  pool of  loans is
included  under the caption  "Nonperforming  Assets" below.  Net  charge-offs on
installment  lending  increased  $323 thousand or $38.4% and net  charge-offs on
lease  financing  declined  $278  thousand  or  76.0%  in  the  comparison.  Net
charge-offs  equaled .32% of average  loans for 2004,  unchanged  from the prior
year-end.  The  allowance  for loan losses,  which  included an increase of $2.0
million on July 1, 2004 as a result of the Citizens Georgetown acquisition,  was
$12.8  million at year-end 2004 and  represented  1.46% of loans net of unearned
income at year-end  2004 compared to 1.49% at year-end  2003.  The allowance for
loan losses as a percentage of nonperforming  loans totaled 127.8% and 123.9% at
year-end  2004  and  2003,  respectively.   Management  continues  to  emphasize
collection efforts and evaluation of risks within the portfolio. The composition
of the  Company's  loan  portfolio  continues to be diverse with no  significant
concentration to any individual or industry.

The table below summarizes the loan loss experience for the past five years.

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands)              2004        2003        2002        2001        2000
-------------------------------------------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>         <C>         <C>
Balance of allowance for loan losses at
 beginning of year                               $ 11,292    $ 11,061    $ 10,549    $ 10,249    $  9,659
Acquisition of Citizens Bank (Kentucky), Inc.       2,005
Loans charged off:
 Commercial, financial, and agricultural            1,020         376         481         600       1,336
 Real estate                                          663         936       2,833       1,476         369
 Installment loans to individuals                   1,421       1,090       1,146         762         857
 Lease financing                                      113         385         147          87          97
-------------------------------------------------------------------------------------------------------------
  Total loans charged off                           3,217       2,787       4,607       2,925       2,659
-------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
 Commercial, financial, and agricultural              214          95          63         157         313
 Real estate                                           99          63          71         371         132
 Installment loans to individuals                     257         249         232         247         310
 Lease financing                                       25          19           5           2          22
-------------------------------------------------------------------------------------------------------------
  Total recoveries                                    595         426         371         777         777
-------------------------------------------------------------------------------------------------------------
  Net loans charged off                             2,622       2,361       4,236       2,148       1,882
-------------------------------------------------------------------------------------------------------------
Additions to allowance charged to expense           2,129       2,592       4,748       2,448       2,472
-------------------------------------------------------------------------------------------------------------
Balance at end of year                           $ 12,804    $ 11,292    $ 11,061    $ 10,549    $ 10,249
-------------------------------------------------------------------------------------------------------------
Average loans net of unearned income             $818,933    $742,319    $705,090    $698,758    $667,241
Ratio of net charge-offs
 during year to average loans, net
 of unearned income                                   .32%        .32%        .60%        .31%        .28%
-------------------------------------------------------------------------------------------------------------
</TABLE>


The following  table presents an estimate of the allocation of the allowance for
loan losses by type for the date indicated. Although specific allocations exist,
the entire allowance is available to absorb losses in any particular category.

<TABLE>
<CAPTION>

ALLOWANCE FOR LOAN LOSSES
-------------------------------------------------------------------------------------------
December 31, (In thousands)                  2004      2003      2002      2001      2000
-------------------------------------------------------------------------------------------
<S>                                       <C>       <C>       <C>       <C>       <C>
Commercial, financial, and agricultural   $ 2,637   $ 2,349   $ 3,913   $ 3,492   $ 4,050
Real estate                                 7,166     6,164     4,838     4,135     3,835
Installment loans to individuals            1,906     1,797     1,879     2,208     1,861
Lease financing                             1,095       982       431       714       503
------------------------------------------------------------------------------------------
Total                                     $12,804   $11,292   $11,061   $10,549   $10,249
------------------------------------------------------------------------------------------
</TABLE>


NONPERFORMING ASSETS

Nonperforming  assets for the Company include  nonperforming  loans,  other real
estate  owned,  and other  foreclosed  assets.  Nonperforming  loans  consist of
nonaccrual  loans,  loans past due 90 days on which interest is still  accruing,
and  restructured  loans.  Generally,  the  accrual  of  interest  on  loans  is
discontinued  when it is determined that the collection of interest or principal
is doubtful,  or when a default of interest or principal  has existed 90 days or
more, unless such loan is well secured and in the process of collection.

Nonperforming assets totaled $13.8 million at year-end 2004, an increase of $2.6
million or 23.3%  compared  to 2003.  The  increase is  primarily  due to a $1.9
million or 107.4%  increase in other real estate owned and $1.1 million or 20.8%
increase in nonaccrual  loans.  The increase in other real estate owned includes
$2.8 million of the  underlying  real estate  collateral on a pool of loans to a
financially troubled builder transferred to the Company through foreclosure. The
increase in nonaccrual  loans is related  primarily to an increase in nonaccrual
commercial  lease  receivables of $834 thousand.  A significant  portion of this
increase relates to a single credit in the manufacturing business. Additionally,
nonaccrual loans include a pool of construction loans to a financially  troubled
builder  that  totaled  $1.3  million at December  31,  2004, a decrease of $2.9
million compared to $4.2 million at year-end 2003. The $2.9 million reduction in
2004  is  comprised  mainly  of the  $2.8  million  in  real  estate  collateral
transferred  to the Company  through  foreclosure as mentioned  above.  The $2.9
million decrease in nonaccrual  construction loans attributed to the financially
troubled builder was nearly offset by an increase in nonaccrual  commercial real
estate  lending of $1.4  million  that was mainly  attributed  to a single  loan
customer  and an increase in  nonaccrual  residential  real estate loans of $834
thousand  that was  driven  by the  loans  acquired  from  Citizens  Georgetown.
Interest  income  lost on the  pool of  construction  loans  to the  financially
troubled  builder  mentioned above due to their  nonaccrual  status totaled $233
thousand  and $621  thousand for the twelve  months ended  December 31, 2004 and
2003.  Nonperforming  loans  represent  1.1% of loans net of unearned  income at
year-end 2004, a decrease of 7 basis points from 1.2% compared to year-end 2003.
Information  pertaining  to  nonperforming  loans and assets is presented in the
table below.

<TABLE>

-------------------------------------------------------------------------------------------
December 31, (In thousands)                  2004      2003      2002      2001      2000
-------------------------------------------------------------------------------------------
<S>                                       <C>       <C>       <C>       <C>       <C>
Loans accounted for on nonaccrual basis   $ 6,350   $ 5,258   $15,681   $ 3,621   $ 2,852
Loans past due 90 days or more and
 still accruing                             3,670     3,856     3,624     1,593     1,739
-------------------------------------------------------------------------------------------
Total nonperforming loans                  10,020     9,114    19,305     5,214     4,591
Other real estate owned                     3,739     1,803       385       715       598
Other foreclosed assets                        60       292       126       363       136
-------------------------------------------------------------------------------------------
Total nonperforming assets                $13,819   $11,209   $19,816   $ 6,292   $ 5,325
-------------------------------------------------------------------------------------------
</TABLE>

TEMPORARY INVESTMENTS

Temporary  investments  consist of interest  bearing deposits in other banks and
federal funds sold and  securities  purchased  under  agreements to resell.  The
Company  uses these funds in the  management  of  liquidity  and  interest  rate
sensitivity.  In 2004, temporary  investments averaged $40.5 million, a decrease
of $18.9  million or 31.8%.  The decrease is primarily a result of the Company's
net funding position and the relationship  between its principal  subsidiary and
the Commonwealth of Kentucky as described in preceding  sections of this report.
Temporary  investments  are  reallocated  as loan  demand  and other  investment
alternatives present the opportunity.

INVESTMENT SECURITIES

The investment  securities  portfolio is comprised  primarily of U.S. Government
agency  securities,  mortgage-backed  securities,  and tax-exempt  securities of
states and  political  subdivisions.  Total  investment  securities  were $369.1
million on December 31, 2004, a decrease of $13.8  million or 3.6% from year-end
2003.

The funds made available  from maturing or called bonds have been  redirected as
necessary to fund higher yielding loan growth, reinvested to purchase additional
investment  securities,  or otherwise employed to improve the composition of the
balance  sheet.  The purchase of nontaxable  obligations of states and political
subdivisions is one of the primary means of managing the Company's tax position.
The impact of the  alternative  minimum tax related to the Company's  ability to
acquire tax-free obligations at an attractive yield is routinely monitored.

Investment  securities averaged $341.3 million in total for the current year, an
increase of $15.6 million or 4.8%. The increase in average investment securities
was driven by a $20.1 million or 26.5% increase in nontaxable  securities.  This
increase  is  attributable  to the  Company's  continued  efforts  to manage the
composition  of its  balance  sheet in an  effort  to  enhance  the  risk-return
characteristics of its securities  portfolio in a dynamic economic  environment.
The  Company  had a  net  unrealized  gain  on  available  for  sale  investment
securities  of $1.1  million at December 31, 2004  compared to a net  unrealized
gain of $3.3 million at year-end 2003. The $2.2 million  decrease in the current
period is due primarily to the impact of changing economic conditions, including
an increase in short-term  market interest rates that have generally lowered the
value of the investment  portfolio at the end of the current period.  As overall
market  rates have  drifted  higher  toward the end of the current  period,  the
portfolio  has declined in value.  Market values of fixed rate  investments  are
inversely related to changes in market interest rates.

On December 31, 2004,  available for sale  securities made up 94.6% of the total
investment securities, an increase of 111 basis points from a year earlier. U.S.
Government  agencies were $146.1 million and $131.0 million at year-end 2004 and
2003,  respectively.  This  represents  41.8% of the  total  available  for sale
securities and 39.6% of the total  portfolio at year-end 2004. At year-end 2003,
U.S.  Government  agencies  made  up  36.6%  of the  total  available  for  sale
securities and 34.2% of the total portfolio.  Mortgage-backed  securities in the
available for sale portfolio were $112.6 million at year-end 2004, a decrease of
$34.5 million or 23.5% from year-end 2003.  Mortgage-backed securities accounted
for 32.2% and 41.1% of the available for sale  securities  portfolio at December
31, 2004 and 2003, respectively.

During 2003, prepayments of mortgage-backed investments increased greatly due to
the  corresponding  refinancing  of home  mortgages that serve as collateral for
these  investments.  Generally,  as market  interest rates fell,  many borrowers
whose mortgage debt was included in these  investments  refinanced their debt at
lower interest rates. This resulted in the related  mortgage-backed  investments
being repaid faster than  anticipated,  causing any premium paid on the original
investment to amortize against interest income and produce lower yields.

The Company  realized  $391  thousand in net gains on the sale of available  for
sale  investment  securities  during 2004, a decrease of $574  thousand or 59.5%
compared to 2003.  The decrease in net gains on the sale of  available  for sale
investment securities was due to normal asset/liability  management and occurred
with favorable market conditions related to the securities sold. On December 31,
2004, shareholders' equity included a $700 thousand unrealized gain, net of tax,
related to the fair market value adjustment of the available for sale investment
securities portfolio. This amount was $2.1 million at year-end 2003 and is lower
in part due to the sale of investments during the current year and the effect of
higher market interest rates at the end of the current period.

The following table  summarizes the carrying values of investment  securities on
December 31, 2004,  2003, and 2002.  The investment  securities are divided into
available  for  sale  and  held  to  maturity  securities.  Available  for  sale
securities  are  carried  at the  estimated  fair  value  and  held to  maturity
securities are carried at amortized cost.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
December 31,                         2004                   2003               2002
------------------------------------------------------------------------------------------------------
                             Available      Held to    Available     Held to    Available     Held to
(In thousands)               for Sale      Maturity     for Sale    Maturity     for Sale    Maturity
------------------------------------------------------------------------------------------------------
<S>                           <C>          <C>          <C>         <C>         <C>         <C>
Obligations of U.S.
 Government agencies          $146,144                  $131,020                $ 161,867   $     100
Obligations of states and
 political subdivisions         84,245     $ 19,803       73,651    $ 24,718       51,556      28,242
Mortgage-backed securities     112,571                   147,110          71      148,407         177
Money market mutual funds                                                          35,021
Corporate debt                                                                     10,259
Equity securities                6,357                     6,388                    5,928
------------------------------------------------------------------------------------------------------
Total                         $349,317     $ 19,803     $358,169    $ 24,789     $413,038    $ 28,519
------------------------------------------------------------------------------------------------------
</TABLE>

The following  table  presents an analysis of the  contractual  maturity and tax
equivalent weighted average interest rates of investment  securities at December
31, 2004.  For purposes of this  analysis,  available  for sale  securities  are
stated at fair value and held to  maturity  securities  are stated at  amortized
cost.  Equity  securities  in  the  available  for  sale  portfolio  consist  of
restricted FHLB and Federal Reserve Board stocks,  which have no stated maturity
and are not included in the maturity schedule that follows.

<TABLE>
<CAPTION>

AVAILABLE FOR SALE
----------------------------------------------------------------------------------------------------------
                                                     After One But      After Five But
                                  Within One Year   Within Five Years  Within Ten Years  After Ten Years
(In thousands)                     Amount   Rate      Amount    Rate     Amount   Rate    Amount   Rate
----------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>     <C>         <C>     <C>        <C>   <C>       <C>
Obligations of U.S.
 Government agencies              $84,540   2.1%    $ 61,604    2.6%
Obligations of states and
 political subdivisions               266   6.6       11,581    5.9     $54,301    4.9%  $18,097    7.0%
Mortgage-backed securities          3,174   5.0       47,904    4.5      41,150    4.6    20,343    5.1
----------------------------------------------------------------------------------------------------------
  Total                           $87,980   2.2%    $121,089    3.7%    $95,451    4.7%  $38,440   6.0%
----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>


HELD TO MATURITY
----------------------------------------------------------------------------------------------------------
                                                     After One But      After Five But
                                  Within One Year   Within Five Years  Within Ten Years  After Ten Years
(In thousands)                     Amount   Rate      Amount    Rate     Amount   Rate    Amount   Rate
----------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>     <C>         <C>     <C>        <C>   <C>       <C>
Obligations of states and
 political subdivisions           $ 4,151    7.0%     $13,918    7.0%    $  474    7.0%  $ 1,260    6.4%
----------------------------------------------------------------------------------------------------------
  Total                           $ 4,151    7.0%     $13,918    7.0%    $  474    7.0%  $ 1,260    6.4%
----------------------------------------------------------------------------------------------------------
</TABLE>

The  calculation  of the weighted  average  interest  rates for each category is
based on the weighted average costs of the securities.  The weighted average tax
rates on exempt  states and  political  subdivisions  are computed  based on the
marginal corporate Federal tax rate of 35%.

DEPOSITS

The  Company's  primary  source  of  funding  for  its  lending  and  investment
activities results from its customer deposits,  which consist of noninterest and
interest  bearing  demand,  savings,  and time  deposits.  On December 31, 2004,
deposits  totaled  $1.1  billion,  an  increase  of $70.7  million  or 6.6% from
year-end  2003.  The increase in deposits  was due to a $123.8  million or 14.7%
increase in interest  bearing  deposits  partially  offset by a $53.1 million or
23.4% decline in noninterest bearing deposits.  The increase in interest bearing
deposits include higher time deposits of $93.8 million or 22.2%,  higher savings
deposits of $15.5 million or 8.3%, and higher  interest  bearing demand deposits
of $14.6  million  or 6.3%.  Time  deposits  grew  primarily  as a result of the
Citizens  Georgetown  acquisition and the marketing effort to sell the Company's
new  FlexSpender  certificate  of deposit midway through the year. End of period
noninterest  bearing  deposits  declined as a result of activity  related to the
Commonwealth  of  Kentucky,  which  declined  $61.1  million in the  comparison.
Excluding the Commonwealth of Kentucky  deposits,  noninterest  bearing deposits
increased  $8.0 million or 5.5%.  Average  total  deposits were $1.1 billion for
2004,  an  increase of $88.6  million or 9.0%  compared  to 2003.  Increases  in
average  deposits were  consistent  throughout the entire  deposit  portfolio as
follows:  noninterest bearing demand of $18.0 million or 11.1%; interest bearing
demand of $14.9 million or 6.5%; savings accounts of $19.2 million or 11.1%; and
time  deposits of $36.6  million or 8.7%.  The Citizens  Georgetown  acquisition
boosted total deposits by $62.4 million on July 1, 2004.

During 2004, total average  interest  bearing  deposits were $892.5 million,  an
increase  of $70.6  million  or 8.6%  from  $821.9  million  for  2003.  Average
noninterest  bearing deposits were $180.0 million,  an increase of $18.0 million
or 11.1% from $162.0 million in the prior year.

A summary of average balances and rates paid on deposits follows.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
Years Ended December 31,                 2004                   2003                   2002
---------------------------------------------------------------------------------------------------
                                  Average    Average     Average    Average     Average    Average
(In thousands)                    Balance     Rate       Balance     Rate       Balance     Rate
---------------------------------------------------------------------------------------------------
<S>                            <C>          <C>        <C>          <C>       <C>          <C>
Noninterest bearing demand     $  179,980              $ 161,967              $ 150,823
Interest bearing demand           242,086     .56        227,217     .56%       215,766      .87%
Savings                           191,100     .93        171,942     .96        167,044     1.37
Time                              459,320    2.77        422,749    3.30        404,658     4.53
---------------------------------------------------------------------------------------------------
Total                          $1,072,486   1.20%      $ 983,875    1.72%     $ 938,291    2.40%
---------------------------------------------------------------------------------------------------
</TABLE>


Maturities of time deposits of $100,000 or more outstanding at December 31, 2004
are summarized as follows.

---------------------------------------------
(In thousands)                      Amount
---------------------------------------------
3 months or less                 $  30,946
Over 3 through 6 months             24,143
Over 6 through 12 months            29,316
Over 12 months                      55,675
---------------------------------------------
  Total                          $ 140,080
---------------------------------------------

SHORT-TERM BORROWINGS

Short-term   borrowings   primarily  consist  of  federal  funds  purchased  and
securities sold under  agreements to repurchase with year-end  balances of $59.8
million,   $56.7  million,   and  $116.0  million  in  2004,   2003,  and  2002,
respectively.  Such  borrowings  are  generally  on an  overnight  basis.  Other
short-term  borrowings consist of FHLB borrowings totaling $1.0 million, $0, and
$8.4 million at year-end 2004,  2003, and 2002,  respectively,  and demand notes
issued to the U.S.  Treasury under the treasury tax and loan note option account
totaling $791 thousand, $418 thousand, and $807 thousand in 2004, 2003, and 2002
respectively. A summary of short-term borrowings is as follows.

--------------------------------------------------------------------------------
(In thousands)                              2004         2003         2002
--------------------------------------------------------------------------------
Amount outstanding at year-end          $ 61,549     $ 57,116     $125,186
Maximum outstanding at any month-end     122,871      141,971      164,950
Average outstanding                       82,481       75,790      108,763
Weighted average rate during the year       1.47%        1.25%        1.88%
--------------------------------------------------------------------------------

LONG-TERM BORROWINGS

Substantially all of the Company's long-term borrowings consist of FHLB advances
to the  Company's  subsidiary  banks.  These  advances are secured by restricted
holdings  of FHLB  stock that the banks are  required  to own as well as certain
mortgage  loans as  required by the FHLB.  Such  advances  are made  pursuant to
several different credit programs, which have their own interest rates and range
of  maturities.  Interest  rates on FHLB advances are generally  fixed and range
between 2.89% and 7.10%,  with a weighted  average rate of 4.03%, and maturities
of up to 19 years.  Approximately  $29.0 million of the total long-term advances
from FHLB are  convertible  to a floating  interest  rate.  These  advances  may
convert to a floating  interest  rate  indexed to LIBOR only if LIBOR  equals or
exceeds 7%. FHLB advances are generally  used to increase the Company's  lending
activities and to aid the efforts of asset and liability management by utilizing
various repayment options offered by the FHLB.  Long-term advances from the FHLB
totaled  $52.5  million at December 31, 2004, a decrease of $3.0 million or 5.4%
from year-end 2003.

CONTRACTUAL OBLIGATIONS

The Company is contractually obligated to make payments as follows.
<TABLE>

-----------------------------------------------------------------------------------------------------
                                                           Payments Due by Period
                                          -----------------------------------------------------------
                                                 Less Than     One to       Three to     More Than
Contractual Obligations (In thousands)     Total  One Year   Three Years   Five Years   Five Years
-----------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>           <C>          <C>          <C>
Long-term debt                           $52,527   $ 7,254       $24,389      $ 6,199      $14,685
Operating leases                           2,114       318           586          436          774
Capital lease obligations                    631       277           354
-----------------------------------------------------------------------------------------------------
Total                                    $55,272   $ 7,849       $25,329      $ 6,635      $15,459
-----------------------------------------------------------------------------------------------------
</TABLE>


Long-term  FHLB debt  represents  FHLB  advances  pursuant to several  different
credit  programs  and is more  fully  described  under  the  caption  "Long-Term
Borrowings"  above  and in Note 7 of the  Company's  2004  audited  consolidated
financial  statements.  Capital lease obligations  represent amounts relating to
the  acquisition  of various data  processing  hardware and software.  Operating
leases include  standard  business  equipment  used in the Company's  day-to-day
business as well as the lease of certain  branch  sites.  Operating  lease terms
generally  range from one to five  years,  with the  ability  to extend  certain
branch site leases at the Company's option.

EFFECTS OF INFLATION

The majority of the  Company's  assets and  liabilities  are monetary in nature.
Therefore,  the Company  differs  greatly from most  commercial  and  industrial
companies that have significant investments in nonmonetary assets, such as fixed
assets and inventories.  However, inflation does have an important impact on the
growth of assets in the banking  industry and on the resulting  need to increase
equity  capital at higher than normal rates in order to maintain an  appropriate
equity to assets ratio.  Inflation also affects other noninterest expense, which
tends to rise during periods of general inflation.

Management  believes  the most  significant  impact on financial  and  operating
results  is the  Company's  ability  to  react to  changes  in  interest  rates.
Management seeks to maintain an essentially  balanced  position between interest
sensitive assets and liabilities in order to protect against the effects of wide
interest rate fluctuations.

MARKET RISK MANAGEMENT

Market risk is the risk of loss arising from  adverse  changes in market  prices
and rates.  The  Company's  market risk is comprised  primarily of interest rate
risk created by its core banking  activities  of extending  loans and  receiving
deposits.  The Company's success is largely dependent upon its ability to manage
this risk.  Interest  rate risk is defined as the exposure of the  Company's net
interest  income to adverse  movements in interest  rates.  Although the Company
manages other risks,  such as credit and liquidity  risk,  management  considers
interest rate risk to be its most significant risk, which could potentially have
the largest  and a material  effect on the  Company's  financial  condition  and
results of  operations.  A sudden and  substantial  change in interest rates may
adversely  impact the Company's  earnings to the extent that the interest  rates
earned on assets and paid on liabilities do not change at the same speed, to the
same  extent,  or on the same  basis.  Other  events  that could have an adverse
impact on the  Company's  performance  include  changes in general  economic and
financial conditions, general movements in market interest rates, and changes in
consumer  preferences.  The Company's  primary purpose in managing interest rate
risk is to effectively  invest the Company's  capital and to manage and preserve
the value created by its core banking business.

The Company has a Corporate Asset and Liability  Management  Committee ("ALCO").
ALCO  monitors  the  composition  of the balance  sheet to ensure  comprehensive
management of interest rate risk and liquidity.  ALCO also provides guidance and
support to each ALCO of the Company's  subsidiary  banks and is responsible  for
monitoring risks on a company-wide basis. ALCO has established minimum standards
in its asset and  liability  management  policy that each  subsidiary  bank must
adopt.  However,  the  subsidiary  banks are  permitted  to  deviate  from these
standards  so  long  as the  deviation  is no less  stringent  than  that of the
Corporate policy.

The Company uses a simulation  model as a tool to monitor and evaluate  interest
rate risk  exposure.  The model is designed to measure  the  sensitivity  of net
interest income and net income to changing interest rates during the next twelve
months.  Forecasting  net  interest  income  and its  sensitivity  to changes in
interest  rates  requires the Company to make  assumptions  about the volume and
characteristics  of  many  attributes,  including  assumptions  relating  to the
replacement  of  maturing  earning  assets and  liabilities.  Other  assumptions
include,  but are not limited to, projected  prepayments,  projected new volume,
and the predicted  relationship  between  changes in market  interest  rates and
changes in  customer  account  balances.  These  effects are  combined  with the
Company's estimate of the most likely rate environment to produce a forecast for
the next twelve months.  The forecasted  results are then compared to the effect
of a gradual 200 basis point  increase and decrease in market  interest rates on
the  Company's  net  interest  income and net income.  Because  assumptions  are
inherently uncertain, the model cannot precisely estimate net interest income or
net income or the effect of interest rate changes on net interest income and net
income. Actual results could differ significantly from simulated results.

At  December  31,  2004,  the model  indicated  that if rates were to  gradually
increase  by 200 basis  points over the next twelve  months,  then net  interest
income (TE) and net income would increase 1.0% and 2.0%, respectively,  compared
to  forecasted  results.  The model  indicated  that if rates were to  gradually
decrease  by 200 basis  points over the next twelve  months,  then net  interest
income (TE) and net income would decrease 6.2% and 13.6%, respectively, compared
to forecasted results.

In the current low interest rate environment, it is not practical or possible to
reduce certain  deposit rates by the same magnitude as rates on earning  assets.
The average rate paid on some of the  Company's  deposits is well below 2%. This
situation  magnifies the model's  predicted  results when modeling a decrease in
interest rates, as earning assets with higher yields have more of an opportunity
to reprice at lower rates than lower-rate deposits.

LIQUIDITY

The Company uses a liquidity  ratio to help measure its ability to meet its cash
flow  needs.  This  ratio is  monitored  by ALCO at both the bank level and on a
consolidated basis. The liquidity ratio is based on current and projected levels
of sources and uses of funds. This measure is useful in analyzing cash needs and
formulating strategies to achieve desired results. Fore example, a low liquidity
ratio could indicate that the Company's  ability to fund loans might become more
difficult.  A high  liquidity  ratio could  indicate that the Company may have a
disproportionate amount of funds in low yielding assets, which is more likely to
occur during periods of sluggish loan demand.  The Company's  liquidity position
at year-end 2004 is within ALCO guidelines and considered by management to be at
an appropriate level.

At the Parent Company level,  liquidity is primarily  affected by the receipt of
dividends from its  subsidiary  banks (see Note 16 of the Company's 2004 audited
consolidated  financial  statements)  and cash balances  maintained.  The Parent
Company's primary uses of cash include the payment of dividends to shareholders,
repurchasing  its common stock,  business  acquisitions,  and paying for general
operating  expenses.  The primary  source of funds for the Parent Company is the
receipt of  dividends  from its  subsidiary  banks.  As of  December  31,  2004,
combined retained earnings of the subsidiary banks were $47.6 million,  of which
$3.3 million was  available  for the payment of dividends to the Parent  Company
without obtaining prior approval from bank regulatory  agencies.  As a practical
matter,  payment of future dividends is also subject to the maintenance of other
capital  ratio  requirements.  Management  expects  that in the  aggregate,  its
subsidiary banks will continue to have the ability to dividend adequate funds to
the  Parent  Company.  In  addition,  the  Parent  Company  has a $10.0  million
unsecured line of credit with an unrelated financial  institution  available for
general corporate purposes. This line of credit has not been drawn upon and will
mature on May 31, 2005. The Parent Company had cash balances of $10.8 million at
year-end  2004, a decrease of $18.5  million or 63.2% from the priory  year-end.
The decrease in cash at the Parent Company is due primarily to the $14.6 million
purchase  of Citizens  Georgetown,  an  additional  equity  investment  in First
Citizens Bank of $4.0 million  related to the FiNET  acquisition,  and dividends
paid to the Company's  shareholders  of $8.9  million.  These cash outflows were
partially  offset by the receipt of $8.5 million in dividends form the Company's
subsidiary banks.  Dividends  received from the Company's  subsidiary banks were
$28.5  million  lower  during  2004  compared to 2003 due to a change in capital
policy for the bank  subsidiaries  during 2003 which created an unusually  large
dividend to the Parent  Company in 2003.  The policy change was made to increase
the efficiency of the Company's capital.  Each of the Company's subsidiary banks
continued  to  maintain  "well  capitalized"  status  as  defined  by  the  FDIC
subsequent to the dividend payments.

The  Company's  objective  as it  relates  to  liquidity  is to ensure  that the
subsidiary  banks have funds  available to meet deposit  withdrawals  and credit
demands without unduly penalizing  profitability.  In order to maintain a proper
level of liquidity, the subsidiary banks have several sources of funds available
on a daily basis that can be used for liquidity purposes. Those sources of funds
include the  subsidiary  banks' core  deposits,  consisting of both business and
nonbusiness deposits; cash flow generated by repayment of principal and interest
on loans and investment securities; FHLB borrowings; and federal funds purchased
and  securities  sold under  agreements  to  repurchase.  While  maturities  and
scheduled  amortization  of loans and  investment  securities  are  generally  a
predictable  source of funds,  deposit  outflows  and mortgage  prepayments  are
influenced  significantly by general interest rates,  economic  conditions,  and
competition  in our local  markets.  As of  December  31,  2004 the  Company had
approximately  $184.8  million in additional  borrowing  capacity  under various
FHLB, federal funds, and other borrowing agreements.

For the longer term, the liquidity position is managed by balancing the maturity
structure of the balance sheet. This process allows for an orderly flow of funds
over an  extended  period  of  time.  The  Company's  ALCO's,  both at the  bank
subsidiary level and on a consolidated  basis,  meets regularly and monitors the
composition of the balance sheet to ensure comprehensive  management of interest
rate risk and liquidity.

Liquid  assets  consist  of  cash,  cash  equivalents,  and  available  for sale
investment  securities.  At December  31, 2004,  liquid  assets  totaled  $428.6
million, a $56.8 million or 11.7% decrease compared to the prior year-end.  Cash
and cash equivalents decreased $48.0 million or 37.7% coupled with a decrease in
available  for  sale  investment  securities  of  $8.9  million  or  2.5% in the
comparison. The decrease in cash and cash equivalents is due mainly to a decline
of Commonwealth of Kentucky deposits of $61.1 million at the comparable year-end
periods.  These large  fluctuations in deposit  activity of the  Commonwealth of
Kentucky  are not  unusual.  Lower  balances of  available  for sale  investment
securities  are  reflective of the overall net funding  position of the Company,
which  changes as loan demand,  deposit  levels,  and other  sources and uses of
funds fluctuate.

Net cash provided by operating  activities was $17.9 million in 2004, a decrease
of $4.7 million or 20.7% from $22.5  million in the prior year.  The decrease is
due mainly to lower volume  activity  related to mortgage  loans  originated for
sale.  Net cash used in  investing  activities  was $62.5  million  during  2004
compared to net cash  provided by investing  activities  of $6.8 million  during
2003. The $69.3 million  difference in the comparison is attributed  mainly to a
decrease in net securities  transactions  of $31.3  million,  an increase in net
loans  originated  for  investment of $49.2  million,  and the  acquisitions  of
Citizens  Georgetown  (net of cash  acquired) and FiNET of $5.8 million and $6.6
million,  respectively.  These  uses of cash were  offset by the  absence of any
additional purchases of company-owned life insurance,  which was a $24.0 million
use of cash in the comparable period a year earlier.  Net cash used in financing
activities  totaled  $3.3 million for the year 2004.  This  compares to net cash
provided by financing  activities in 2003 of $30.8 million.  The decrease is due
primarily to lower net deposit activity and higher repayments of FHLB borrowings
during the current year as compared to the activity of a year earlier.

Information  relating to off-balance sheet  arrangements,  which for the Company
comprise  of  commitments  to extend  credit and standby  letters of credit,  is
disclosed  in Note  13 of the  Company's  2004  audited  consolidated  financial
statements.  These  transactions  are  entered  into in the  ordinary  course of
providing  traditional  banking  services  and are  considered  in managing  the
Company's liquidity  position.  The Company does not expect these commitments to
significantly  affect the liquidity position in future periods.  The Company has
not entered into any  contracts  for financial  derivative  instruments  such as
futures, swaps, options, or similar instruments.

CAPITAL RESOURCES

Shareholders' equity was $131.5 million on December 31, 2004. This represents an
increase of $5.0 million or 3.9% from year-end 2003 due mainly to an increase in
retained  earnings of $4.5  million or 3.1%.  Retained  earnings  increased as a
result of $13.4  million  in net  income  offset by $8.9  million,  or $1.32 per
share, in dividends declared during the year. The Company issued 70 thousand and
three thousand  shares of common stock during 2004 pursuant to its  nonqualified
stock option plan and employee stock purchase plan,  respectively.  The issuance
of these shares  increased  shareholders'  equity by $1.9  million.  The Company
purchased  approximately five thousand shares of its outstanding common stock at
a total cost of $178 thousand during 2004.

Accumulated other  comprehensive  income,  consisting of net unrealized  holding
gains on  available  for sale  securities  (net of tax),  was $700  thousand  at
December 31, 2004, a decrease of $1.4 million from year-end  2003.  The decrease
is due  primarily to the impact of changing  economic  conditions,  including an
increase in short-term  market  interest rates that have  generally  lowered the
value of the investment  portfolio at the end of the current period.  As overall
market  rates have  drifted  higher in the current  period,  the  portfolio  has
declined in value. Market values of fixed rate investments are inversely related
to changes in market interest rates. In addition, the sale of available for sale
investment   securities  during  2004  contributed  to  the  decrease  in  other
comprehensive income.

Consistent with the objective of operating a sound financial  organization,  the
Company's goal is to maintain  capital ratios well above the regulatory  minimum
requirements.  The  Company's  capital  ratios  as of  December  31,  2004,  the
regulatory  minimums,   and  the  regulatory  standard  for  a  well-capitalized
institution are as follows.

------------------------------------------------------------------
                   Farmers Capital     Regulatory          Well
                   Bank Corporation     Minimum     Capitalized
------------------------------------------------------------------
Tier 1 risk-based       12.69%           4.00%           6.00%
Total risk-based        13.94            8.00           10.00
Leverage                 8.36            4.00            5.00
------------------------------------------------------------------

The  capital  ratios of each  subsidiary  bank were in excess of the  applicable
minimum  regulatory  capital ratio  requirements at December 31, 2004. The table
below is an analysis of dividend  payout  ratios and equity to asset  ratios for
the previous five years.

--------------------------------------------------------------------------------
Years Ended December 31,                2004     2003     2002    2001     2000
--------------------------------------------------------------------------------
Percentage of dividends declared
 to net income                         66.43%   66.91%   68.38%  57.70%   59.33%
Percentage of average shareholders'
 equity to average total assets         9.50     9.98    10.37   10.75    12.06
--------------------------------------------------------------------------------

SHARE BUY BACK PROGRAM

In January  2003,  the  Company  announced  that it  intended  to purchase up to
300,000  additional shares of its outstanding common stock. This was in addition
to the stock purchase plans announced in July 2000 and November 1998 to purchase
500,000   and  400,000   shares,   respectively.   The  Company  has   purchased
approximately  106,000  shares  pursuant  to  the  January,  2003  announcement.
Purchases are dependent on market conditions and there is no guarantee as to the
number  of shares  to be  purchased  by the  Company.  Shares  would be used for
general  corporate  purposes.   Consistent  with  the  objective  of  maximizing
shareholder  value, the Company considers the purchase of its outstanding shares
in a given price range to be a good investment of the Company's available funds.
At the time of the most recent  announcement,  the Company had purchased  nearly
all of the previously authorized shares.

SHAREHOLDER INFORMATION

As of January 1, 2005, there were 794  shareholders of record.  This figure does
not include individual participants in security position listings.

STOCK PRICES

Farmers Capital Bank Corporation's  stock is traded on the National  Association
of Security Dealers Automated  Quotation System (NASDAQ) SmallCap Market tier of
The NASDAQ Stock Market, with sales prices reported under the symbol:  FFKT. The
table below lists the stock prices and dividends declared for 2004 and 2003.

STOCK PRICES
-----------------------------------------------------------------------------
                            High              Low      Dividends Declared
-----------------------------------------------------------------------------
2004
Fourth Quarter           $ 41.20          $ 33.54                   $ .33
Third Quarter              36.00            32.00                     .33
Second Quarter             35.75            31.15                     .33
First Quarter              37.99            32.50                     .33

2003
Fourth Quarter           $ 36.50          $ 33.11                   $ .33
Third Quarter              34.89            31.67                     .32
Second Quarter             33.03            30.88                     .32
First Quarter              33.54            30.00                     .32
-----------------------------------------------------------------------------

Dividends  declared  per share  increased  $.03 or 2.3% and $.04 or 3.2% for the
years 2004 and 2003, respectively.

RECENTLY ISSUED ACCOUNTING STANDARDS

Please refer to the caption  "Recently  Issued But Not Yet Effective  Accounting
Standards"  in  Note 1 of the  Company's  2004  audited  consolidated  financial
statements.

2003 COMPARED TO 2002

Consolidated net income for 2003 was $13.0 million, an increase of $402 thousand
or 3.2%  compared to $12.6  million  for 2002.  Basic and diluted net income per
share for 2003 was $1.93 and $1.92,  respectively.  This represented an increase
of $.10 or 5.5% on both a basic and  diluted  basis.  Continued  declines in the
overall market interest rate environment  resulted in lower net interest income,
which slowed the growth in net income.  The decline in net  interest  income was
offset by a $2.2  million or 45.4%  decrease in the  provision  for loan losses.
This improvement is due primarily to unusually large provisions recorded in 2002
related to the decline in credit quality of a pool of construction loans secured
by residential real estate.  Noninterest income grew $1.3 million or 7.6% during
2003 and is  attributed  to  income  from the  purchase  of  company-owned  life
insurance. Noninterest expenses increased $1.4 million or 3.9%, which includes a
$650 thousand or 3.2% increase in personnel expenses.

The ROA was 1.04% in 2003,  unchanged  from  2002.  The ROE  increased  35 basis
points to 10.39%  compared to 10.04% in the prior year. The increase in ROE is a
result of the $402 thousand increase in reported net income combined with a $314
thousand decrease in the average balance of shareholders'  equity.

<PAGE>
REPORT OF MANAGEMENT


MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The management of Farmers Capital Bank  Corporation has the  responsibility  for
preparing  the  accompanying  consolidated  financial  statements  and for their
integrity and  objectivity.  The  statements  were  prepared in accordance  with
accounting  principles  generally accepted in the United States of America.  The
consolidated financial statements include amounts that are based on management's
best estimates and judgments.  Management also prepared other information in the
annual  report and is  responsible  for its  accuracy and  consistency  with the
financial statements.

The Company's 2004 consolidated  financial statements have been audited by Crowe
Chizek and Company LLC independent accountants. Management has made available to
Crowe Chizek and Company LLC all financial  records and related data, as well as
the  minutes of Boards of  Directors'  meetings.  Management  believes  that all
representations made to Crowe Chizek and Company LLC during the audit were valid
and appropriate.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The  management  of  Farmers   Capital  Bank   Corporation  is  responsible  for
establishing and maintaining adequate internal control over financial reporting.
The  Company's  internal  control  system  is  designed  to  provide  reasonable
assurance  to the  Company's  management  and board of directors  regarding  the
reliability of financial  reporting and the presentation of published  financial
statements.   The  system  of  internal   control   provides   for  division  of
responsibility  and is documented by written  policies and  procedures  that are
communicated  to employees  with  significant  roles in the financial  reporting
process and updated as  necessary.  Management  monitors  the system of internal
control for compliance.

The Company maintains an internal auditing program that  independently  assesses
the effectiveness of the internal controls and recommends possible  improvements
thereto.  However,  all internal control  systems,  no matter how well designed,
have  inherent  limitations.  Therefore,  even those  systems  determined  to be
effective  can provide  only  reasonable  assurance  with  respect to  financial
statement preparation and presentation.

The Company's  management  assessed the effectiveness of the Company's  internal
control  over  financial  reporting  as of  December  31,  2004.  In making this
assessment,  it used the  criteria  set  forth by the  Committee  of  Sponsoring
Organizations of the Treadway  Commision  (COSO) in Internal  Control-Integrated
Framework. Based on our assessment we believe that, as of December 31, 2004, the
Company's internal control over financial  reporting is effective based on those
criteria.

Our  assessment  of the  effectiveness  of the Company's  internal  control over
financial reporting as of December 31, 2004 has been audited by Crowe Chizek and
Company LLC as stated in their report which appears herein.




    /s/ G. Anthony Busseni                    /s/ C Douglas Carpenter
    G. Anthony Busseni                        C. Douglas Carpenter
    President and CEO                         Vice President,Secretary, and CFO

    February 28, 2005

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING


Board of Directors and Shareholders
Farmers Capital Bank Corporation
Frankfort, Kentucky

We  have  audited   management's   assessment,   included  in  the  accompanying
Management's Report on Internal Control Over Financial  Reporting,  that Farmers
Capital Bank Corporation  maintained  effective  internal control over financial
reporting  as of December 31, 2004,  based on criteria  established  in Internal
Control  -  Integrated   Framework   issued  by  the   Committee  of  Sponsoring
Organizations  of  the  Treadway   Commission   (COSO).   Farmers  Capital  Bank
Corporation management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's  assessment  and an opinion on the  effectiveness  of the company's
internal control over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion,  management's  assessment that Farmers Capital Bank  Corporation
maintained  effective  internal control over financial  reporting as of December
31,  2004  is  fairly  stated,  in all  material  respects,  based  on  criteria
established in Internal  Control - Integrated  Framework issued by the Committee
of Sponsoring  Organizations  of the Treadway  Commission  (COSO).  Also, in our
opinion, Farmers Capital Bank Corporation maintained,  in all material respects,
effective  internal  control  over  financial  reporting as of December 31, 2004
based on criteria  established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets of
Farmers  Capital  Bank  Corporation  as of  December  31,  2004 and 2003 and the
related  consolidated  statements of income,  comprehensive  income,  changes in
shareholders'  equity,  and cash  flows for the years  then ended and our report
dated February 28, 2005 expressed an unqualified opinion.


/s/ Crowe Chizek and Company LLC
Louisville, Kentucky
February 28, 2005
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS


Board of Directors and Shareholders
Farmers Capital Bank Corporation
Frankfort, Kentucky

We have audited the accompanying  consolidated balance sheets of Farmers Capital
Bank Corporation as of December 31, 2004 and 2003, and the related  consolidated
statements of income, comprehensive income, changes in shareholders' equity, and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  financial  statements  based on our audits.  The  consolidated
financial  statements  of Farmers  Capital Bank  Corporation  for the year ended
December 31, 2002 were audited by other  auditors whose report dated January 17,
2003 expressed an unqualified opinion on those statements

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Company as of December 31,
2004 and 2003,  and the  results  of its  operations  and its cash flows for the
years  then  ended  in  conformity  with  U.S.  generally  accepted   accounting
principles.

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States), the effectiveness of Farmers Capital
Bank Corporation's  internal control over financial reporting as of December 31,
2004, based on criteria  established in Internal Control - Integrated  Framework
issued by the Committee of Sponsoring  Organizations of the Treadway  Commission
and our report dated February 28, 2005 expressed as unqualified opinion thereon.


/s/ Crowe Chizek and Company LLC
Louisville, Kentucky
February 28, 2005

<PAGE>

CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
December 31, (In thousands, except share data)             2004           2003
--------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents:
 Cash and due from banks                             $   42,418     $   99,628
 Interest bearing deposits in other banks                 2,569          3,154
 Federal funds sold and securities purchased
  under agreements to resell                             34,273         24,434
--------------------------------------------------------------------------------
  Total cash and cash equivalents                        79,260        127,216
--------------------------------------------------------------------------------
Investment securities:
 Available for sale, amortized cost of
  $348,240 (2004) and $354,905 (2003)                   349,317        358,169
 Held to maturity, fair value of
  $20,555 (2004) and $26,201 (2003)                      19,803         24,789
--------------------------------------------------------------------------------
  Total investment securities                           369,120        382,958
--------------------------------------------------------------------------------
Loans, net of unearned income                           876,705        755,945
Allowance for loan losses                               (12,804)       (11,292)
--------------------------------------------------------------------------------
  Loans, net                                            863,901        744,653
--------------------------------------------------------------------------------
Premises and equipment, net                              27,415         24,115
Company-owned life insurance                             26,978         25,510
Goodwill                                                  8,722
Other intangible assets, net                              4,259
Other assets                                             17,489         14,113
--------------------------------------------------------------------------------
  Total assets                                       $1,397,144     $1,318,565
--------------------------------------------------------------------------------

LIABILITIES
Deposits:
 Noninterest bearing                                 $  173,522     $  226,650
 Interest bearing                                       965,505        841,672
--------------------------------------------------------------------------------
  Total deposits                                      1,139,027      1,068,322
--------------------------------------------------------------------------------
Federal funds purchased and securities sold
 under agreements to repurchase                          59,758         56,698
Other borrowed funds                                     54,949         56,831
Dividends payable                                         2,232          2,215
Other liabilities                                         9,728          8,028
--------------------------------------------------------------------------------
  Total liabilities                                   1,265,694      1,192,094
--------------------------------------------------------------------------------

Commitments and contingencies

SHAREHOLDERS' EQUITY
Common stock, par value $.125 per share;
 9,608,000 shares authorized; 8,234,423
 and 8,160,919 shares issued at
 December 31, 2004 and 2003, respectively                 1,029          1,020
Capital surplus                                          20,744         18,670
Retained earnings                                       149,985        145,489
Treasury stock, at cost, 1,450,055 and
 1,444,739 shares at December 31, 2004
 and 2003, respectively                                 (41,008)       (40,830)
Accumulated other comprehensive income                      700          2,122
--------------------------------------------------------------------------------
  Total shareholders' equity                            131,450        126,471
--------------------------------------------------------------------------------
  Total liabilities and shareholders' equity         $1,397,144     $1,318,565
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME

--------------------------------------------------------------------------------
(In thousands, except per share data)
Years Ended December 31,   2004     2003    2002
--------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans                        $49,439   $47,896   $51,459
Interest on investment securities:
 Taxable                                            7,934     6,549    10,062
 Nontaxable                                         3,927     3,284     3,534
Interest on deposits in other banks                    39        63       185
Interest on federal funds sold and securities
 purchased under agreements to resell                 563       621     1,051
--------------------------------------------------------------------------------
  Total interest income                            61,902    58,413    66,291
--------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits                               15,855    16,850    22,514
Interest on federal funds purchased and
 securities sold under agreements to repurchase     1,191       863     1,647
Interest on other borrowed funds                    2,130     2,170     1,585
--------------------------------------------------------------------------------
  Total interest expense                           19,176    19,883    25,746
--------------------------------------------------------------------------------
  Net interest income                              42,726    38,530    40,545
--------------------------------------------------------------------------------
Provision for loan losses                           2,129     2,592     4,748
--------------------------------------------------------------------------------
  Net interest income after provision
  for loan losses                                  40,597    35,938    35,797
--------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges and fees on deposits                8,467     7,728     7,898
Allotment processing fees                           1,124       829       862
Other service charges, commissions, and fees        2,726     2,725     2,636
Data processing income                              1,374     1,393     1,386
Trust income                                        1,583     1,610     1,551
Investment securities gains, net                      391       965     1,433
Gains on sale of mortgage loans, net                  370       880       561
Income from company-owned life insurance            1,478     1,509
Other                                                 238       254       309
--------------------------------------------------------------------------------
  Total noninterest income                         17,751    17,893    16,636
--------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits                     22,826    20,675    20,025
Occupancy expenses, net                             2,803     2,539     2,437
Equipment expenses                                  2,480     2,176     2,093
Data processing and communications expenses         4,121     3,658     3,392
Bank franchise tax                                  1,468     1,336     1,290
Correspondent bank fees                               824       925       788
Other                                               7,411     6,193     6,076
--------------------------------------------------------------------------------
  Total noninterest expense                        41,933    37,502    36,101
--------------------------------------------------------------------------------
  Income before income taxes                       16,415    16,329    16,332
--------------------------------------------------------------------------------
Income tax expense                                  3,023     3,366     3,771
--------------------------------------------------------------------------------
  Net income                                      $13,392   $12,963   $12,561
--------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
 Basic                                            $  1.99   $  1.93   $  1.83
 Diluted                                             1.98      1.92      1.82
--------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
 Basic                                              6,737     6,727     6,870
 Diluted                                            6,780     6,770     6,910
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


--------------------------------------------------------------------------------
(In thousands)
Years Ended December 31,                               2004      2003      2002
--------------------------------------------------------------------------------
NET INCOME                                         $ 13,392  $ 12,963  $ 12,561
Other comprehensive income:
 Unrealized holding (loss) gain on available
  for sale securities arising during the period
  on securities held at end of period, net of
  tax of $547, $113, and $1,595, respectively        (1,015)     (209)    2,962
 Reclassification adjustment for prior period
  unrealized gain previously reported in other
  comprehensive income recognized during current
  period, net of tax of $219, $662, and
  $337, respectively                                   (407)   (1,230)     (625)
--------------------------------------------------------------------------------
Other comprehensive (loss) income                    (1,422)   (1,439)    2,337
--------------------------------------------------------------------------------
Comprehensive income                               $ 11,970  $ 11,524  $ 14,898
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


------------------------------------------------------------------------------------------------------------------------------
                                                                                           Accumulated
(In thousands, except per share data)                                                         Other           Total
Years Ended                          Common Stock     Capital  Retained  Treasury Stock    Comprehensive   Shareholders'
December 31, 2004, 2003, and 2002   Shares   Amount   Surplus  Earnings  Shares   Amount      Income          Equity
------------------------------------------------------------------------------------------------------------------------------

<S>                                  <C>    <C>       <C>      <C>        <C>   <C>          <C>            <C>
Balance at January 1, 2002           8,058  $ 1,007   $15,179  $137,227   1,153 $(31,077)    $ 1,224        $123,560
------------------------------------------------------------------------------------------------------------------------------
Net income                                                       12,561                                       12,561
Other comprehensive income                                                                     2,337           2,337
Cash dividends declared,
 $1.25 per share                                                 (8,589)                                     (8,589)
Purchase of common stock                                                    191   (6,550)                    (6,550)
Stock options exercised,
 including related tax benefits         78       10     1,894                                                  1,904
Noncash compensation expense
 attributed to stock option grants                        550                                                    550
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002         8,136    1,017    17,623   141,199   1,344  (37,627)      3,561         125,773
------------------------------------------------------------------------------------------------------------------------------
Net income                                                       12,963                                       12,963
Other comprehensive loss                                                                      (1,439)         (1,439)
Cash dividends declared,
 $1.29 per share                                                 (8,673)                                      (8,673)
Purchase of common stock                                                    101   (3,203)                     (3,203)
Stock options exercised,
 including related tax benefits         25        3       623                                                     626
Noncash compensation expense
 attributed to stock option grants                        424                                                     424
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003         8,161    1,020    18,670   145,489   1,445  (40,830)      2,122          126,471
------------------------------------------------------------------------------------------------------------------------------
Net income                                                       13,392                                        13,392
Other comprehensive loss                                                                      (1,422)          (1,422)
Cash dividends declared,
 $1.32 per share                                                 (8,896)                                       (8,896)
Purchase of common stock                                                      5     (178)                        (178)
Stock options exercised,
 including related tax benefits         70        9     1,764                                                   1,773
Shares issued pursuant to
 Employee Stock Purchase Plan            3                 93                                                      93
Noncash compensation expense
attributed to stock option grants                         217                                                     217
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004         8,234  $ 1,029   $20,744  $149,985   1,450 $(41,008)    $   700         $131,450
------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands)                                 2004         2003         2002
------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                         $  13,392    $  12,963    $  12,561
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                                        3,524        2,984        2,890
  Net amortization (accretion) of investment security
   premiums and discounts:
   Available for sale                                                  1,369        3,197          711
   Held to maturity                                                      (40)         (68)         (77)
 Provision for loan losses                                             2,129        2,592        4,748
 Noncash compensation expense                                            217          424          550
 Mortgage loans originated for sale                                  (20,243)     (60,089)     (45,330)
 Proceeds from sale of mortgage loans                                 19,052       61,781       45,362
 Deferred income tax expense (benefit)                                   712         (294)         561
 Gains on sale of mortgage loans, net                                   (370)        (880)        (561)
 Loss (gain) on sale of premises and equipment                            11           11         (103)
 Gain on sale of available for sale investment securities, net          (391)        (965)      (1,433)
 (Increase) decrease in accrued interest receivable                     (881)         360          967
 Income from company-owned life insurance                             (1,468)      (1,509)
 (Increase) decrease in other assets                                  (1,992)       1,224         (695)
 Increase (decrease) in accrued interest payable                         363         (523)        (399)
 Increase (decrease) in other liabilities                              2,473        1,318         (419)
------------------------------------------------------------------------------------------------------------
    Net cash provided by operating activities                         17,857       22,526       19,333
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of investment securities:
 Available for sale                                                  251,931      390,850      316,912
 Held to maturity                                                      5,028        5,058        9,019
Proceeds from sale of available for sale investment securities        66,916      108,975      172,229
Purchases of investment securities:
 Available for sale                                                 (300,949)    (449,402)    (589,782)
 Held to maturity                                                     (1,260)
Loans originated for investment, net of principal collected          (69,714)     (20,479)     (40,477)
Purchase of company-owned life insurance                                          (24,001)
Purchase of Citizens Bank (Kentucky), Inc., net of
 cash acquired                                                        (5,820)
Purchase of FiNET, Inc.                                               (6,586)
Purchases of premises and equipment                                   (4,300)      (2,964)      (2,259)
Proceeds from sale of equipment                                          993            9          117
------------------------------------------------------------------------------------------------------------
   Net cash (used in) provided by investing activities               (62,501)       6,786     (134,241)
------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits                                               8,265      110,842       43,995
Net increase (decrease) in federal funds purchased and
 securities sold under agreements to repurchase                        2,756      (59,281)       2,187
Proceeds from long-term debt                                           1,800        3,874       48,175
Repayments of long-term debt                                         (10,296)      (4,613)      (1,936)
Net increase (decrease) in other borrowed funds                        1,372       (8,789)      (3,601)
Dividends paid                                                        (8,879)      (8,649)      (8,550)
Purchase of common stock                                                (178)      (3,203)      (6,550)
Shares issued under Employee Stock Purchase Plan                          93
Stock options exercised                                                1,755          622        1,904
------------------------------------------------------------------------------------------------------------
   Net cash (used in) provided by financing activities                (3,312)      30,803       75,624
------------------------------------------------------------------------------------------------------------
   Net (decrease) increase in cash and cash equivalents              (47,956)      60,115      (39,284)
------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                       127,216       67,101      106,385
------------------------------------------------------------------------------------------------------------
   Cash and cash equivalents at end of year                        $  79,260    $ 127,216    $  67,101
------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
 Interest                                                          $  18,813    $  20,406    $  26,145
 Income taxes                                                          2,525        2,200        4,940
Transfers from loans to repossessed assets                             3,454        2,626          794
Cash dividend declared and unpaid at year-end                          2,232        2,215        2,191
------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting  policies of Farmers  Capital Bank  Corporation and
subsidiaries  conform to accounting  principles generally accepted in the United
States of America  and general  practices  applicable  to the banking  industry.
Significant accounting policies are summarized below.

PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
The consolidated  financial  statements  include the accounts of Farmers Capital
Bank  Corporation  (the  "Company"),   a  financial  holding  company,  and  its
wholly-owned  six bank and two active nonbank  subsidiaries.  Bank  subsidiaries
include  Farmers Bank & Capital Trust Co.  ("Farmers  Bank") in  Frankfort,  KY;
United  Bank & Trust  Co.  in  Versailles,  KY;  Lawrenceburg  National  Bank in
Harrodsburg,  KY; First  Citizens Bank in  Elizabethtown,  KY;  Farmers Bank and
Trust Company  ("Farmers  Georgetown") in Georgetown,  KY; and Kentucky  Banking
Centers,  Inc. in Glasgow, KY. The Company has two active nonbank  subsidiaries,
FCB  Services,   Inc.  ("FCB  Services")  and  Kentucky  General  Holdings,  LLC
("Kentucky  General").  FCB Services is a data processing  subsidiary located in
Frankfort,  KY,  which  provides  services  to the  Company's  banks  as well as
unaffiliated  banks.  Kentucky  General  holds  a 50%  voting  interest  in  KHL
Holdings,  LLC,  which is the parent  company of  Kentucky  Home Life  Insurance
Company.  Leasing One Corporation,  a commercial  leasing  company,  and Farmers
Capital   Insurance   Corporation,   an  insurance   agency,   are  wholly-owned
subsidiaries of Farmers Bank. Pro Mortgage  Partners,  LLC, a mortgage brokerage
company,  is a wholly-owned  subsidiary of Farmers  Georgetown.  All significant
intercompany transactions and balances are eliminated in consolidation.

The Company  provides  financial  services at its 27 locations in 16 communities
throughout Central Kentucky to individual,  business,  agriculture,  government,
and educational customers.  Its primary deposit products are checking,  savings,
and term  certificate  accounts.  Its primary  lending  products are residential
mortgage,  commercial lending and leasing, and installment loans.  Substantially
all loans and  leases are  secured by  specific  items of  collateral  including
business assets,  consumer  assets,  and commercial and residential real estate.
Commercial  loans and  leases  are  expected  to be  repaid  from cash flow from
operations of businesses.  Farmers Bank has served as the general depository for
the Commonwealth of Kentucky for over 70 years and also provides  investment and
other services to the Commonwealth.  Other services include, but are not limited
to,  cash  management  services,  issuing  letters of credit,  safe  deposit box
rental,  and providing funds transfer  services.  Other  financial  instruments,
which  potentially  represent  concentrations  of credit risk,  include  deposit
accounts in other financial institutions and federal funds sold.

USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period.  Estimates used in the preparation of the financial
statements  are based on various  factors  including  the current  interest rate
environment  and the  general  strength  of the local  economy.  Changes  in the
overall  interest rate  environment can  significantly  affect the Company's net
interest  income and the value of its recorded  assets and  liabilities.  Actual
results  could  differ  from  those  estimates  used in the  preparation  of the
financial  statements.  The  allowance  for loan  losses and the fair  values of
financial instruments are estimates that are particularly subject to change.

RECLASSIFICATIONS
Certain amounts in the accompanying  consolidated financial statements presented
for prior  years have been  reclassified  to  conform to the 2004  presentation.
These  reclassifications  do not affect net income or total shareholders' equity
as previously reported.

SEGMENT INFORMATION
The  Company  provides  a broad  range of  financial  services  to  individuals,
corporations,  and others through its 27 banking  locations  throughout  Central
Kentucky.  These  services  primarily  include  the  activities  of lending  and
leasing,  receiving deposits,  providing cash management services,  safe deposit
box  rental,  and  trust  activities.   Operations  are  managed  and  financial
performance is evaluated at the subsidiary  level.  The Company's chief decision
makers monitor the results of the various  banking  products and services of its
subsidiaries.  Accordingly,  all of the Company's  operations  are considered by
management to be aggregated in one reportable operating segment:  commercial and
retail banking.

CASH FLOWS
For  purposes of reporting  cash flows,  cash and cash  equivalents  include the
following:  cash on  hand,  amounts  due from  banks,  interest  bearing  demand
deposits in other banks,  federal funds sold,  and  securities  purchased  under
agreements to resell.  Generally,  federal funds sold and  securities  purchased
under agreements to resell are purchased and sold for one-day periods.  Net cash
flows are reported for loan and deposit transactions.

INVESTMENT SECURITIES
Investments in debt and equity  securities are classified into three categories.
Securities  that  management  has the positive  intent and ability to hold until
maturity are classified as held to maturity. Securities that are bought and held
specifically  for the purpose of selling them in the near term are classified as
trading  securities.   The  Company  currently  does  not  have  any  securities
classified  as trading.  All other  securities  are  classified as available for
sale.  Securities are designated as available for sale if management  intends to
use such securities in its asset/liability  management strategy;  and, therefore
such  securities  may be sold in  response  to  changes  in  interest  rates and
prepayment  risk.  Securities  classified  as trading and available for sale are
carried  at market  value.  Unrealized  holding  gains and  losses  for  trading
securities are included in current income.  Unrealized  holding gains and losses
for  available  for sale  securities  are  reported net of income taxes in other
comprehensive income until realized.  Investments classified as held to maturity
are  carried at  amortized  cost.  Interest  income  includes  amortization  and
accretion  of  purchase  premiums  or  discounts.   Premiums  and  discounts  on
securities are amortized using the interest method over the expected life of the
securities. Realized gains and losses on the sales of securities are recorded on
the trade  date and  computed  on the basis of  specific  identification  of the
adjusted cost of each security and are included in noninterest income. A decline
in the market value of any available for sale security below cost that is deemed
other than temporary  results in a charge to earnings and the establishment of a
new cost  basis for the  security.  Federal  Home Loan  Bank  ("FHLB")  stock is
carried at cost.

LOANS AND INTEREST INCOME
Loans that  management  has the intent and  ability to hold for the  foreseeable
future or until  maturity or pay-off  are  reported  at their  unpaid  principal
amount  outstanding  adjusted for any charge-offs and any deferred fees or costs
on originated  loans.  Interest income on loans is recognized using the interest
method based on loan principal  amounts  outstanding  during the period,  except
interest  on  certain   consumer   installment   loans   recognized   using  the
sum-of-the-months  digits  method,  which  does not differ  materially  from the
interest method. Interest income also includes amortization and accretion of any
premiums or discounts  over the expected  life of acquired  loans at the time of
purchase  or  business  acquisition.  Net  fees  and  incremental  direct  costs
associated with loan origination are deferred and amortized as yield adjustments
over the contractual  term of the loans.  Generally,  the accrual of interest on
loans is  discontinued  when it is determined that the collection of interest or
principal  is doubtful,  or when a default of interest or principal  has existed
for 90 days or more,  unless  such loan is well  secured  and in the  process of
collection.  Past due status is based on the contractual terms of the loan. Cash
payments  received on nonaccrual  loans generally are applied to principal,  and
interest income is only recorded once principal recovery is reasonably  assured.
Loans are returned to accrual status when all the principal and interest amounts
contractually  due are  brought  current  and  future  payments  are  reasonably
assured.

LOANS HELD FOR SALE
The Company's operations include a limited amount of mortgage banking.  Mortgage
banking  activities include the origination of fixed-rate  residential  mortgage
loans for sale to various investors.  Mortgage loans originated and intended for
sale in the secondary  market,  principally under programs with the Federal Home
Loan Mortgage Corporation,  the Federal National Mortgage Association, and other
commercial lending  institutions,  are carried at the lower of cost or estimated
market value  determined  in the  aggregate and are included in net loans on the
balance  sheet until sold.  Mortgage  loans held for sale  included in net loans
totaled  $1,615,000  and  $455,000 at December  31, 2004 and  December 31, 2003,
respectively.  Mortgage banking revenues,  including origination fees, servicing
fees, net gains or losses on sales of mortgages,  and other fee income were .6%,
1.2%,  and .8% of the Company's  total revenue for the years ended  December 31,
2004, 2003, and 2002, respectively.

PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses represents charges made to earnings to maintain an
allowance  for  loan  losses  at  an  adequate  level  based  on  credit  losses
specifically  identified in the loan  portfolio,  as well as  management's  best
estimate  of probable  loan  losses in the  remainder  of the  portfolio  at the
balance  sheet date.  The  allowance  for loan  losses is a valuation  allowance
increased by the  provision  for loan losses and  decreased by net  charge-offs.
Loan losses are charged  against the  allowance  when  management  believes  the
uncollectibility  of a loan is  confirmed.  Subsequent  recoveries,  if any, are
credited to the allowance.

Management   estimates  the  allowance   balance  required  using  a  risk-rated
methodology.  Many factors are considered when  estimating the allowance.  These
include, but are not limited to, past loan loss experience, an assessment of the
financial  condition of individual  borrowers,  a determination of the value and
adequacy of  underlying  collateral,  the  condition  of the local  economy,  an
analysis  of the  levels  and  trends  of the loan  portfolio,  and a review  of
delinquent  and  classified  loans.  The allowance  for loan losses  consists of
specific and general  components.  The specific  component relates to loans that
are  individually  classified  as  impaired  or loans  otherwise  classified  as
substandard or doubtful.  The general component covers  non-classified loans and
is based on  historical  loss  experience  adjusted  for current  risk  factors.
Allocations  of the  allowance  may be made for specific  loans,  but the entire
allowance is available for any loan that, in  management's  judgment,  should be
charged  off.  Actual loan losses could  differ  significantly  from the amounts
estimated by management.

The risk-rated  methodology  includes  segregating watch list and past due loans
from the  general  portfolio  and  allocating  specific  reserves to these loans
depending  on  their  status.  For  example,  watch  list  loans,  which  may be
identified  by the  internal  loan review  risk-rating  system or by  regulatory
examiner classification, are assigned a certain loss percentage while loans past
due 30 days or more are  assigned a  different  loss  percentage.  Each of these
percentages  consider past experience as well as current factors.  The remainder
of the general loan portfolio is segregated into three components having similar
risk  characteristics  as follows:  commercial  loans,  consumer loans, and real
estate loans.  Each of these  components is assigned a loss percentage  based on
their respective three year historical loss percentage.  Additional  allocations
to the  allowance  may  then be  made  for  subjective  factors,  such as  those
mentioned  above, as determined by senior managers who are  knowledgeable  about
these matters.

The  Company  accounts  for  impaired  loans in  accordance  with the  Financial
Accounting  Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 114,  ACCOUNTING BY CREDITORS FOR  IMPAIRMENT OF A LOAN, as amended
by SFAS No. 118,  ACCOUNTING  BY  CREDITORS  FOR  IMPAIRMENT  OF A LOAN - INCOME
RECOGNITION.  SFAS No. 114, as amended, requires that impaired loans be measured
at the present  value of expected  future cash flows,  discounted  at the loan's
effective  interest rate, at the loan's  observable market price, or at the fair
value of the collateral if the loan is collateral dependent.  A loan is impaired
when  full  payment  under the  contractual  terms is not  expected.  Generally,
impaired loans are also in nonaccrual status. In certain circumstances, however,
the Company may continue to accrue  interest on an impaired loan.  Cash receipts
on impaired loans are applied to the recorded investment in the loan,  including
any  accrued  interest  receivable.  Loans  that  are  part of a large  group of
smaller-balance  homogeneous  loans,  such as residential  mortgage and consumer
loans, are collectively evaluated for impairment, and accordingly,  they are not
separately identified for impairment disclosures.

GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill  results from business  acquisitions  and  represents the excess of the
purchase price over the fair value of acquired  tangible  assets and liabilities
and identifiable  intangible assets.  Goodwill is assessed at least annually for
impairment and any such impairment is recognized in the period identified.

Other  intangible   assets  consist  of  core  deposit  and  acquired   customer
relationship  intangible  assets  arising from business  acquisitions.  They are
initially  measured at fair value and then are  amortized  on a declining  value
basis over their estimated useful lives.

OTHER REAL ESTATE
Other real estate  owned and held for sale,  included  with other  assets in the
accompanying  consolidated  balance sheets,  includes properties acquired by the
Company through actual loan foreclosures.  Other real estate owned is carried at
the lower of cost or fair value less estimated  costs to sell. Fair value is the
amount that the Company  could  reasonably  expect to receive in a current  sale
between  a  willing  buyer  and a  willing  seller,  other  than in a forced  or
liquidation  sale. Fair value of assets is measured by the market value based on
comparable sales. If fair value declines subsequent to foreclosure,  a valuation
allowance is recorded  through  expense.  Costs after  acquisition are expensed.
Other  real  estate  owned  included  in the  consolidated  balance  sheets  was
$3,739,000 and $1,803,000 at December 31, 2004 and 2003, respectively.

INCOME TAXES
Deferred  income tax assets and  liabilities  result from temporary  differences
between the tax basis of assets and  liabilities  and their reported  amounts in
the consolidated  financial statements that will result in taxable or deductible
amounts in future years.  Deferred tax assets and liabilities are measured using
enacted tax rates  expected  to apply to taxable  income in years in which those
temporary differences are expected to be recovered or settled. As changes in tax
laws or rates are  enacted,  deferred  tax assets and  liabilities  are adjusted
through income tax expense.

PREMISES AND EQUIPMENT
Premises,  equipment,  and  leasehold  improvements  are  stated  at  cost  less
accumulated depreciation and amortization. Depreciation is computed primarily on
the straight-line  method over the estimated useful lives generally ranging from
two to seven years for furniture and equipment and generally ten to 50 years for
buildings and related components.  Leasehold improvements are amortized over the
shorter of the  estimated  useful  lives or terms of the  related  leases on the
straight-line method.  Maintenance,  repairs, and minor improvements are charged
to operating  expenses as incurred and major  improvements are capitalized.  The
cost of assets  sold or retired  and the related  accumulated  depreciation  are
removed  from  the  accounts  and any  resulting  gain or  loss is  included  in
noninterest income. Land is carried at cost.

COMPANY-OWNED LIFE INSURANCE
The Company has purchased life insurance  policies on certain key employees with
their  knowledge and consent.  Company-owned  life  insurance is recorded at its
cash surrender value, i.e. the amount that can be realized,  on the consolidated
balance sheet. The related change in cash surrender value and proceeds  received
under the policies are  reported on the  consolidated  statement of income under
the caption "Income from company-owned life insurance".

NET INCOME PER COMMON SHARE
Basic net income per common  share is  determined  by dividing net income by the
weighted average total number of shares of common stock outstanding. Diluted net
income  per  common  share is  determined  by  dividing  net income by the total
weighted  average number of shares of common stock  outstanding,  plus the total
weighted average number of shares that would be issued upon exercise of dilutive
stock options  assuming  proceeds are used to repurchase  shares pursuant to the
treasury stock method.  Net income per common share computations were as follows
at December 31, 2004, 2003, and 2002:

------------------------------------------------------------------------
(In thousands, except per share data)
Years Ended December 31,                2004      2003      2002
------------------------------------------------------------------------
Net income, basic and diluted        $13,392   $12,963   $12,561
------------------------------------------------------------------------
Average shares outstanding             6,737     6,727     6,870
Effect of dilutive stock options          43        43        40
------------------------------------------------------------------------
Average diluted shares outstanding     6,780     6,770     6,910
------------------------------------------------------------------------
Net income per share, basic          $  1.99   $  1.93   $  1.83
Net income per share, diluted           1.98      1.92      1.82
------------------------------------------------------------------------

COMPREHENSIVE INCOME
SFAS  No.  130,  REPORTING  COMPREHENSIVE  INCOME,   establishes  standards  for
reporting and display of comprehensive income and its components.  Comprehensive
income is defined as the change in equity (net assets) of a business  enterprise
during a period  from  transactions  and other  events  and  circumstances  from
nonowner sources.  For the Company,  this includes net income and net unrealized
gains and losses on available for sale investment securities.

TREASURY STOCK
The purchase of the Company's common stock is recorded at cost.

STOCK-BASED COMPENSATION
In 1997, the Company's Board of Directors  approved a nonqualified  stock option
plan (the "Plan") that  provides for granting of stock  options to key employees
and officers of the Company. The Plan was subsequently ratified by the Company's
shareholders  at its annual  shareholders'  meeting  held on May 12,  1998,  the
measurement  date of the Plan. All stock options are awarded at a price equal to
the fair market value of the Company's  common stock at the date the options are
granted. The Company applies Accounting  Principles Board ("APB") Opinion No. 25
and related  interpretations  in  accounting  for its Plan.  Accordingly,  since
options were granted during 1997 at the fair market value of the Company's stock
on the grant date, and the  measurement  date occurred  during 1998, the Company
recognizes  noncash  compensation  expense based on the  intrinsic  value of the
stock options measured on the date of shareholder ratification of the Plan.

The Company granted 40,049 and 54,000  additional  options under the Plan during
2004  and  2000 in  which  there is no  compensation  expense  being  recognized
pursuant to APB No. 25. In addition,  the Company issued shares  pursuant to its
Employee  Stock  Purchase  Plan  ("ESPP")  during  2004 and  recorded no related
compensation  expense.  Had compensation  expense been determined under the fair
value method described in SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
as amended by SFAS No. 148,  ACCOUNTING FOR STOCK-BASED  COMPENSATION-TRANSITION
AND DISCLOSURE,  the Company's net income and income per common share would have
been as shown in the table below.

--------------------------------------------------------------------------------
Years Ended December 31,
(In thousands, except per share data)            2004        2003        2002
--------------------------------------------------------------------------------
NET INCOME
 As reported                                 $ 13,392    $ 12,963    $ 12,561
 Add:  Stock-based employee compensation
       expense included in reported net
       income, net of related tax effects         141         276         358
 Less: Stock-based compensation expense
       determined under fair value based
       method for all awards, net of
       related tax effects                       (208)       (336)       (424)
--------------------------------------------------------------------------------
 Proforma                                    $ 13,325    $ 12,903    $ 12,495
--------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
 Basic, as reported                          $   1.99    $   1.93    $   1.83
 Basic, proforma                                 1.98        1.92        1.82

 Diluted, as reported                            1.98        1.92        1.82
 Diluted, proforma                               1.97        1.91        1.81
--------------------------------------------------------------------------------

The fair value of the options granted are estimated as of the  measurement  date
using the Black-Scholes option pricing model with the following weighted average
assumptions  used  and  estimated  fair  market  value  for  each of the  grants
indicated.

--------------------------------------------------------------------------------
                                              Grant
--------------------------------------------------------------------------------
                                1997      2000      2004      ESPP
--------------------------------------------------------------------------------
Dividend yield                  3.18%     3.12%     3.80%     3.80%
Expected volatility            23.4      29.6      10.5      10.8
Risk-free interest rate         5.75      6.71      2.78      1.47
Expected life (in years)        7         7         3          .25
Fair value                   $ 16.11    $ 9.25    $ 1.79    $ 5.72
--------------------------------------------------------------------------------

The Plan  provides for the granting of options to purchase up to 450,000  shares
of the  Company's  common stock at a price equal to the fair market value of the
Company's  common  stock on the  date the  option  is  granted.  The term of the
options  expires after ten years from the date on which the options are granted.
Options  granted  under the Plan vest ratably over various time periods  ranging
from three to seven years. All options granted must be held for a minimum of one
year before they can be  exercised.  Forfeited  options  are  available  for the
granting of additional stock options under the Plan.

The Company's ESPP was approved by its shareholders at the Company's 2004 annual
meeting on May 11, 2004.  The purpose of the ESPP is to provide a means by which
eligible  employees may purchase,  at a discount,  shares of common stock of the
Company through payroll  withholding.  The purchase price of the shares is equal
to 85% of their fair market value on specified dates as defined in the plan. The
ESPP was effective  beginning July 1, 2004. There were 3,190 shares issued under
the plan during  2004.  Compensation  cost  related to the ESPP  included in the
proforma net income disclosure in the table above was $12,000 for 2004.

RECENTLY ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS
In December 2004, the FASB issued SFAS No. 123 (revised),  SHARE-BASED  PAYMENT.
This Statement  requires all public  companies to record  compensation  cost for
stock  options  provided  to  employees  in return  for  employee  service.  The
Company's  ESPP is  considered  an option plan under the  Statement  and will be
subject to cost recognition.  Compensation cost is measured at the fair value of
the options when granted,  and this cost is expensed  over the employee  service
period, which is normally the vesting period of the options. This Statement will
apply to awards  granted or modified  after the first quarter or year  beginning
after June 15,  2005.  Compensation  cost will also be recorded for prior option
grants that vest after the date of adoption. The effect on results of operations
will depend on the level of future option grants and the calculation of the fair
value of the options granted at such future date, as well as the vesting periods
provided,   which  cannot  currently  be  predicted.   However,  the  additional
annualized  expense  associated  with the ESPP that would have been  recorded in
2004 had this Standard been in effect would have been approximately $24,000, net
of tax effect.  Options that will vest after the  adoption  date are expected to
result in additional  compensation expense, net of tax, of approximately $47,000
during the balance of 2005,  $95,000 in 2006, and $44,000 in 2007. There will be
no significant effect on financial position as total equity will not change. The
increase  in  compensation  expense  will be offset by an  increase  to  capital
surplus.

In December  2003,  the Accounting  Standards  Executive  Committee of the AICPA
issued Statement of Position ("SOP") 03-3,  ACCOUNTING FOR CERTAIN LOANS OR DEBT
SECURITIES ACQUIRED IN A TRANSFER.  SOP 03-3 requires that a valuation allowance
for loans acquired in a transfer,  including in a business combination,  reflect
only  losses   incurred  after   acquisition  and  should  not  be  recorded  at
acquisition.  It applies to any loan acquired in a transfer that showed evidence
of credit quality  deterioration  since it was made. This Statement is effective
for loans or debt  securities  acquired in fiscal years beginning after December
15, 2004. The adoption of this Statement on the Company's consolidated financial
statements is not expected to be material.

2.   INVESTMENT SECURITIES

The following  summarizes  the amortized  cost and estimated  fair values of the
securities portfolio at December 31, 2004. The summary is divided into available
for sale and held to maturity securities.
<TABLE>

------------------------------------------------------------------------------------------------------------------------
                                                  Amortized                 Gross                Gross     Estimated
December 31, 2004 (In thousands)                       Cost      Unrealized Gains    Unrealized Losses    Fair Value
------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                   <C>                  <C>           <C>
AVAILABLE FOR SALE
Obligations of U.S. Government agencies            $146,542              $     35             $    433      $146,144
Obligations of states and political subdivisions     82,298                 2,194                  247        84,245
Mortgage-backed securities                          113,043                   600                1,072       112,571
Equity securities                                     6,357                                                    6,357
------------------------------------------------------------------------------------------------------------------------
Total securities - available for sale              $348,240              $  2,829             $  1,752      $349,317
------------------------------------------------------------------------------------------------------------------------
HELD TO MATURITY
Obligations of states and political subdivisions   $ 19,803              $    752             $      0      $ 20,555
------------------------------------------------------------------------------------------------------------------------
Total securities - held to maturity                $ 19,803              $    752             $      0      $ 20,555
------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following  summarizes  the amortized  cost and estimated  fair values of the
securities portfolio at December 31, 2003.

<TABLE>

------------------------------------------------------------------------------------------------------------------------
                                                  Amortized                 Gross                Gross     Estimated
December 31, 2003 (In thousands)                       Cost      Unrealized Gains    Unrealized Losses    Fair Value
------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                   <C>                  <C>           <C>
AVAILABLE FOR SALE
Obligations of U.S. Government agencies            $130,914              $    224             $    118      $131,020
Obligations of states and political subdivisions     71,274                 2,518                  141        73,651
Mortgage-backed securities                          146,539                 1,300                  729       147,110
Equity securities                                     6,178                   210                              6,388
------------------------------------------------------------------------------------------------------------------------
Total securities - available for sale              $354,905              $  4,252             $    988      $358,169
------------------------------------------------------------------------------------------------------------------------
HELD TO MATURITY
Obligations of states and political subdivisions   $ 24,718              $  1,407             $      0      $ 26,125
Mortgage-backed securities                               71                     5                                 76
------------------------------------------------------------------------------------------------------------------------
Total securities - held to maturity                $ 24,789              $  1,412             $      0      $ 26,201
------------------------------------------------------------------------------------------------------------------------
</TABLE>


The  amortized  cost and  estimated  fair value of the  securities  portfolio at
December 31, 2004, by contractual  maturity,  are detailed below. The summary is
divided  into  available  for  sale and held to  maturity  securities.  Expected
maturities may differ from contractual maturities because borrowers may have the
right  to  call  or  prepay  obligations  with or  without  call  or  prepayment
penalties.  Equity  securities in the available  for sale  portfolio  consist of
restricted FHLB and Federal Reserve Board stocks,  which have no stated maturity
and are not  included in the maturity  schedule  that  follows.  Mortgage-backed
securities  are stated  separately  due to the nature of payment and  prepayment
characteristics of these securities.

<TABLE>

-----------------------------------------------------------------------------------------------
                                           Available For Sale            Held To Maturity
                                        Amortized     Estimated     Amortized      Estimated
December 31, 2004 (In thousands)             Cost    Fair Value          Cost     Fair Value
-----------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>            <C>
Due in one year or less                  $ 84,858      $ 84,806      $  4,151       $  4,202
Due after one year through five years      72,983        73,185        13,918         14,584
Due after five years through ten years     53,360        54,301           474            509
Due after ten years                        17,639        18,097         1,260          1,260
Mortgage-backed securities                113,043       112,571
-----------------------------------------------------------------------------------------------
Total                                    $341,883      $342,960      $ 19,803       $ 20,555
-----------------------------------------------------------------------------------------------
</TABLE>

Gross gains of approximately $527,000,  $965,000, and $1,529,000 for 2004, 2003,
and 2002,  respectively,  were  realized on the sale of  investment  securities.
Gross losses of  approximately  $136,000,  $0, and $96,000 were realized  during
2004, 2003, and 2002, respectively.

Investment  securities with a carrying value of $234,922,000 and $244,817,000 at
December  31, 2004 and 2003 were  pledged to secure  public and trust  deposits,
repurchase agreements, and for other purposes.

Investment  securities  with  unrealized  losses at  year-end  2004 and 2003 not
recognized  in income are  presented  in the table below.  The table  segregates
investment  securities  that have been in a continuous  unrealized loss position
for less than twelve months from those that have been in a continuous unrealized
loss position for twelve months or more.  The table also includes the fair value
of the related securities.

<TABLE>

--------------------------------------------------------------------------------------------------------------------------
                                                  Less than 12 Months       12 Months or More             Total
                                                            Unrealized              Unrealized                Unrealized
December 31, 2004 (In thousands)                 Fair Value     Losses    Fair Value    Losses    Fair Value      Losses
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>           <C>        <C>          <C>        <C>
Obligations of U.S. Government agencies            $ 82,485   $    372      $  6,188   $    61      $ 88,673   $    433
Obligations of states and political subdivisions     18,616        178         2,199        69        20,815        247
Mortgage-backed securities                           60,690        636        24,300       436        84,990      1,072
--------------------------------------------------------------------------------------------------------------------------
  Total                                            $161,791   $  1,186      $ 32,687   $   566      $194,478   $  1,752
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
--------------------------------------------------------------------------------------------------------------------------
                                                  Less than 12 Months       12 Months or More            Total
                                                            Unrealized              Unrealized               Unrealized
December 31, 2003 (In thousands)                 Fair Value     Losses    Fair Value    Losses    Fair Value     Losses
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>                                   <C>        <C>
Obligations of U.S. Government agencies            $ 51,565   $    118                              $ 51,565   $    118
Obligations of states and political subdivisions     10,768        141                                10,768        141
Mortgage-backed securities                           73,199        727      $     90   $     2        73,289        729
--------------------------------------------------------------------------------------------------------------------------
  Total                                            $135,532   $    986      $     90   $     2      $135,622   $    988
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


Unrealized  losses  included  in the tables  above have not been  recognized  in
income since they have been  identified as temporary.  The Company  periodically
evaluates securities for other-than-temporary impairment. Consideration is given
to the  length of time and the extent to which the fair value has been less than
cost,  the financial  condition and near-term  prospects of the issuer,  and the
intent and ability of the Company to retain its  investment  in the issuer for a
period of time sufficient to allow for any  anticipated  recovery in fair value.
The  Company  attributes  the  unrealized  losses  mainly to  changes  in market
interest  rates and does not expect to incur a loss  unless the  securities  are
sold.  Management has the intent and ability to hold these  securities until the
foreseeable  future. As the securities  approach their maturity date, their fair
value is expected to recover.  A decline in certain market  interest rates could
also favorably impact fair values.

3.   LOANS

Major classifications of loans are summarized as follows.

----------------------------------------------------------------------------
December 31, (In thousands)                             2004         2003
----------------------------------------------------------------------------
Commercial, financial, and agricultural            $ 134,016    $ 110,657
Real estate - construction                            63,156       45,390
Real estate mortgage - residential                   313,711      270,638
Real estate mortgage - farmland and other
 commercial enterprises                              251,094      222,100
Installment loans                                     75,283       71,582
Lease financing                                       43,835       39,834
----------------------------------------------------------------------------
   Total loans                                       881,095      760,201
----------------------------------------------------------------------------
Less unearned income                                  (4,390)      (4,256)
----------------------------------------------------------------------------
   Total loans, net of unearned income             $ 876,705    $ 755,945
----------------------------------------------------------------------------


Loans to directors,  executive officers, and principal  shareholders  (including
loans to affiliated  companies of which they are principal  owners) and loans to
members of the immediate family of such persons were $17,089,000 and $15,235,000
at December 31, 2004 and 2003, respectively.  Such loans were made in the normal
course of business on substantially the same terms, including interest rates and
collateral,  as those  prevailing at the time for comparable  transactions  with
other customers and did not involve more than the normal risk of collectibility.
An analysis of the activity with respect to these loans follows.

---------------------------------------------------------------------
(In thousands)                                             Amount
---------------------------------------------------------------------
Balance, December 31, 2003                               $ 15,235
New loans                                                   9,937
Repayments                                                 (7,516)
Loans no longer meeting disclosure requirements
 and other adjustments                                       (567)
---------------------------------------------------------------------
   Balance, December 31, 2004                            $ 17,089
---------------------------------------------------------------------

4.   ALLOWANCE FOR LOAN LOSSES

The Company's  recorded  investment in impaired  loans,  measured using the fair
value of  collateral  method as  defined  in SFAS No.  114,  was  $3,158,000  at
December  31, 2004 and  $4,753,000  at December  31,  2003.  Those  amounts also
represent  loans for which an allowance  for loan losses  totaling  $195,000 and
$79,000 for 2004 and 2003,  respectfully,  has been  established.  The  recorded
investment in impaired loans averaged $4,497,000,  $10,860,000, and $16,525,000,
respectively  for the years ended December 31, 2004,  2003,  and 2002.  Interest
income recognized on impaired loans totaled $34,000,  $55,000,  and $268,000 for
the years 2004, 2003, and 2002, respectively.

The  Company's  charge-off  policy for  impaired  loans does not differ from the
charge-off  policy for loans outside the  definition of SFAS No. 114. Loans that
are  delinquent  in excess  of 120 days are  charged  off  unless  the  borrower
continues to maintain a satisfactory  financial  standing  and/or the collateral
securing the debt is of such value that any loss appears to be unlikely.

An analysis of the allowance for loan losses follows.

--------------------------------------------------------------------------------
Years Ended December 31, (In thousands)            2004        2003        2002
--------------------------------------------------------------------------------
Balance, beginning of year                     $ 11,292    $ 11,061    $ 10,549
Acquisition of Citizens Bank (Kentucky), Inc.     2,005
Provision for loan losses                         2,129       2,592       4,748
Recoveries                                          595         426         371
Loans charged off                                (3,217)     (2,787)     (4,607)
--------------------------------------------------------------------------------
Balance, end of year                           $ 12,804    $ 11,292    $ 11,061
--------------------------------------------------------------------------------

Nonperforming loans were as follows.

December 31, (In thousands)                            2004      2003
--------------------------------------------------------------------------
Nonaccrual loans                                    $ 6,350   $ 5,258
Loans past due 90 days or more and still accruing     3,670     3,856
--------------------------------------------------------------------------
Total nonperforming loans                           $10,020   $ 9,114
--------------------------------------------------------------------------

5.  PREMISES AND EQUIPMENT

Premises and equipment consist of the following.

--------------------------------------------------------------------------
December 31, (In thousands)                          2004        2003
Land, buildings, and leasehold improvements      $ 35,920    $ 32,237
Furniture and equipment                            18,818      17,626
Total premises and equipment                       54,738      49,863
Less accumulated depreciation and amortization    (27,323)    (25,748)
--------------------------------------------------------------------------
Premises and equipment, net                      $ 27,415    $ 24,115
--------------------------------------------------------------------------

Depreciation   and  amortization  of  premises  and  equipment  was  $3,139,000,
$2,984,000, and $2,890,000 in 2004, 2003, and 2002, respectively.

6.  DEPOSIT LIABILITIES

Time  deposits  of  $100,000  or  more  at  December  31,  2004  and  2003  were
$140,080,000 and $115,655,000,  respectively.  Interest expense on time deposits
of $100,000 or more was $3,138,000,  $3,554,000,  and $3,894,000 for 2004, 2003,
and 2002, respectively.

At December 31, 2004 the scheduled maturities of time deposits were as follows.

--------------------------------------------------------------
(In thousands)                          Amount
--------------------------------------------------------------
2005                                  $244,026
2006                                    99,714
2007                                    34,348
2008                                   122,596
2009                                    10,443
Thereafter                               5,144
--------------------------------------------------------------
  Total                               $516,271
--------------------------------------------------------------

Deposits  from  directors,   executive  officers,   and  principal  shareholders
(including  deposits  from  affiliated  companies  of which  they are  principal
owners) and deposits from members of the  immediate  family of such persons were
$27,769,000  and $32,217,000 at December 31, 2004 and 2003,  respectively.  Such
deposits  were accepted in the normal  course of business on  substantially  the
same terms as those  prevailing  at the time for  comparable  transactions  with
other customers.

7. FEDERAL FUNDS PURCHASED,  SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, AND
   OTHER BORROWED FUNDS

Federal  funds  purchased  and  securities  sold under  agreements to repurchase
represent  borrowings  by the Company  that  generally  mature one  business day
following the date of the transaction. Information pertaining to such borrowings
is as follows.

-----------------------------------------------------------------------
December 31, (Dollars in thousands)             2004        2003
-----------------------------------------------------------------------
Average balance during the year             $ 81,520    $ 70,242
Average interest rate during the year           1.46%       1.23%
Maximum month-end balance during the year   $121,667    $133,150
-----------------------------------------------------------------------

The table below  displays a summary of the ending  balance and average  rate for
borrowed funds on the dates indicated.  For FHLB advances,  the subsidiary banks
pledge FHLB stock and fully disbursed,  otherwise unencumbered, 1-4 family first
mortgage loans as collateral  for these advances as required by the FHLB.  Based
on this  collateral  and the  Company's  holdings of FHLB stock,  the Company is
eligible to borrow up to an additional $85,287,000 at year-end 2004.

--------------------------------------------------------------------------------
                                               Average                 Average
December 31, (Dollars in thousands)     2004      Rate         2003       Rate
--------------------------------------------------------------------------------
SHORT-TERM
Federal funds purchased and
 securities sold under agreements
 to repurchase                       $59,758      2.10%     $56,698      1.06%
FHLB advances                          1,000      2.24
Other                                    791       .50          418       .97
--------------------------------------------------------------------------------
Total short-term                     $61,549      2.09%     $57,116      1.06%
--------------------------------------------------------------------------------
LONG-TERM
FHLB advances                        $52,527      4.04%     $55,511      3.62%
Other                                    631      2.32          902      2.32
--------------------------------------------------------------------------------
Total long-term                      $53,158      4.02%     $56,413      3.60%
--------------------------------------------------------------------------------

FHLB advances are made pursuant to several different credit programs, which have
their  own  interest  rates  and  range of  maturities.  Interest  rates on FHLB
advances are generally fixed and range between 2.89% and 7.10%, averaging 4.04%,
over a  remaining  maturity  period of up to 19 years as of December  31,  2004.
Approximately  $29.0  million  of the  total  long-term  advances  from FHLB are
convertible to a floating  interest rate. These advances may convert,  at FHLB's
option,  to a floating  interest  rate  indexed to LIBOR only if LIBOR equals or
exceeds 7%.

Maturities of long-term borrowings at December 31, 2004 are as follows.

-------------------------------------------------
(In thousands)                      Amount
2005                              $  7,531
2006                                12,984
2007                                11,759
2008                                 5,617
2009                                   582
Thereafter                          14,685
-------------------------------------------------
   Total                          $ 53,158
-------------------------------------------------

8. INCOME TAXES

The components of income tax expense are as follows.

--------------------------------------------------------------------------------
December 31, (In thousands)                        2004       2003       2002
--------------------------------------------------------------------------------
Currently payable                               $ 2,311    $ 3,660    $ 3,210
Deferred                                            712       (294)       561
--------------------------------------------------------------------------------
   Total applicable to operations                 3,023      3,366      3,771
--------------------------------------------------------------------------------
Charged to components of shareholders' equity
 Net unrealized securities (losses) gains          (765)      (775)     1,258
--------------------------------------------------------------------------------
   Total income taxes                           $ 2,258    $ 2,591    $ 5,029
--------------------------------------------------------------------------------

An analysis of the  difference  between the  effective  income tax rates and the
statutory federal income tax rate follows.

--------------------------------------------------------------------------------
December 31,                                       2004       2003       2002
--------------------------------------------------------------------------------
Federal statutory rate                             35.0%      35.0%      35.0%
Changes from statutory rates resulting from:
 Tax-exempt interest                               (9.7)      (8.6)      (9.6)
 Nondeductible interest to carry tax-exempt
  obligations                                        .7         .6         .9
Tax credits                                        (4.0)      (4.0)      (3.8)
Company-owned life insurance                       (2.6)      (2.4)
Other, net                                         (1.0)                   .6
--------------------------------------------------------------------------------
Effective tax rate                                 18.4%      20.6%      23.1%
--------------------------------------------------------------------------------

The tax effects of the significant  temporary differences that comprise deferred
tax assets and liabilities at December 31, 2004 and 2003 follows.

--------------------------------------------------------------------------------
December 31, (In thousands)                         2004       2003
--------------------------------------------------------------------------------
ASSETS
Allowance for loan losses                        $ 4,482    $ 3,952
Deferred directors' fees                             129        127
Postretirement benefit obligations                 1,041        824
Stock options                                      1,078      1,285
Commission                                           135        216
Self-funded insurance                                209        168
Other                                                  7         71
--------------------------------------------------------------------------------
Total deferred tax assets                          7,081      6,643
--------------------------------------------------------------------------------
LIABILITIES
Depreciation                                       1,459      1,382
Investment securities                                888      1,017
Deferred loan fees                                 1,166      1,087
Lease financing operations                         3,151      2,691
Intangibles                                          663
Unrealized gains on investment securities, net       377      1,142
--------------------------------------------------------------------------------
Total deferred tax liabilities                     7,704      7,319
--------------------------------------------------------------------------------
Net deferred tax liability                       $  (623)   $  (676)
--------------------------------------------------------------------------------

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning  strategies in making this assessment.  Based upon the level of
historical  taxable  income and  projections  for future taxable income over the
periods in which the deferred tax assets are deductible,  management believes it
is more  likely  than  not the  Company  will  realize  the  benefits  of  these
deductible differences at December 31, 2004.

9.  RETIREMENT PLANS

Prior to April 1, 2003,  the Company and its  subsidiaries  maintained a pension
plan and a salary savings plan.  The pension plan had two components  which were
the Money Purchase  Pension Plan and the Employee Stock Ownership Plan ("ESOP").
Effective  April 1, 2003 the money  purchase  component  was moved to the salary
savings plan.

The  Company  may at its  discretion  contribute  an amount  (up to the  maximum
imposed by federal law) to the ESOP which will be allocated to all  participants
in the ratio that each  participant's  compensation  bears to all  participants'
compensation.  Such  discretionary  contributions  will be  utilized to purchase
shares of the Company's common stock to be held in the  participants'  accounts.
There were no  contributions  to the ESOP in any of the years in the  three-year
period ended  December 31, 2004. The fair market value of Company shares held by
the ESOP was $2,953,000  and $2,431,000 at year-end  December 31, 2004 and 2003,
respectively.

The  Company's  salary  savings plan covers  substantially  all  employees.  The
Company matches all eligible voluntary tax deferred employee contributions up to
4% of the participant's compensation.  The Company may, at the discretion of the
Board,  contribute  an  additional  amount  based upon a  percentage  of covered
employees'  salaries.  The Company made a 4%  discretionary  contribution to the
plan during each of the years in the three-year  period ended December 31, 2004.
Discretionary  contributions are allocated among  participants in the ratio that
each  participant's  compensation  bears  to  all  participants'   compensation.
Eligible employees are presented with various investment alternatives related to
the salary  savings  plan.  Those  alternatives  include  various stock and bond
mutual  funds that vary from  traditional  growth  funds to more  stable  income
funds. Company shares are not an available investment  alternative in the salary
savings plan.

The total  retirement  plan  expense for 2004,  2003,  and 2002 was  $1,190,642,
$1,017,000, and 1,014,000, respectively.

10.  COMMON STOCK OPTIONS

As  described  in  Note  1  of  the  Company's  audited  consolidated  financial
statements,  the Company recognizes noncash  compensation  expense attributed to
its stock option plan in accordance with APB No. 25 and related interpretations.
The amount of such expense  recorded in 2004,  2003,  and 2002,  net of tax, was
$141,000,  $276,000,  and $358,000,  respectively.  Future noncash  compensation
expense related to the Company's stock option plan is scheduled to be zero under
APB No. 25 since the vesting period on options resulting in expense ended during
2004.

A summary of the status of the  Company's  stock  option plan as of December 31,
2004,  2003,  and 2002 and  changes  during  the years  ended on those  dates is
presented below.

<TABLE>

---------------------------------------------------------------------------------------------------------
                                         2004                      2003                  2002
---------------------------------------------------------------------------------------------------------
                                             Weighted                 Weighted               Weighted
                                              Average                  Average                Average
                                    Shares      Price        Shares      Price      Shares      Price
---------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>           <C>        <C>         <C>        <C>
Outstanding at January 1           252,922    $ 25.47       278,436    $ 25.42     369,436    $ 25.19
Granted                             40,049      34.80
Forfeited                                                      (572)     24.50     (13,267)     24.50
Exercised                          (70,314)     24.95       (24,942)     24.92     (77,733)     24.50
---------------------------------------------------------------------------------------------------------
Outstanding at December 31         222,657    $ 27.31       252,922    $ 25.47     278,436    $ 25.42
---------------------------------------------------------------------------------------------------------

Options exercisable at year-end    162,037    $ 25.15       204,136    $ 24.98     190,531    $ 24.87
---------------------------------------------------------------------------------------------------------
</TABLE>


Options outstanding at year-end 2004 were as follows.
<TABLE>

--------------------------------------------------------------------------------------------------------------
                                            Outstanding                                 Exercisable
--------------------------------------------------------------------------------------------------------------
                                         Weighted Average
                                                Remaining          Weighted                       Weighted
                                              Contractual           Average                        Average
 Range of Exercise Prices     Number         Life (Years)    Exercise Price        Number   Exercise Price
--------------------------------------------------------------------------------------------------------------
<S>                          <C>                    <C>             <C>           <C>              <C>
   $ 24.50                   142,036                2.75            $ 24.50       142,036          $ 24.50
   $ 29.75                    40,572                5.00              29.75        20,001          $ 29.75
   $ 34.80                    40,049                9.83              34.80
--------------------------------------------------------------------------------------------------------------
Outstanding at Year-end      222,657                4.43            $ 27.31       162,037          $ 25.15
--------------------------------------------------------------------------------------------------------------
</TABLE>

11. POSTRETIREMENT BENEFITS

Prior to 2003, the Company  provided  lifetime  medical and dental benefits upon
retirement for certain retired employees meeting the eligibility requirements as
of December  31,  1989.  During  2003,  the Company  implemented  an  additional
postretirement  health insurance program.  Under the new  postretirement  health
insurance  plan, any employee  meeting the service  requirements  of 20 years of
full time service to the Company and is at least age 55 upon  retirement will be
eligible to continue their health  insurance  coverage.  The coverage offered to
eligible  retirees  will be identical to the coverage  that is offered to active
employees.  The retiree  will pay 50% of the cost and the Company  will pay 50%.
The Company pays for the entire costs of the benefits under the first plan. Both
plans are unfunded.

The following  schedules set forth a reconciliation  of the changes in the plans
benefit obligation and funded status for the periods ended December 31, 2004 and
2003.

------------------------------------------------------------------------------
(In thousands)                                            2004       2003
------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Obligation at beginning of year                        $ 6,501    $ 3,046
Service cost                                               161        108
Interest cost                                              396        313
Prior service cost                                          21      2,373
Actuarial loss                                              14        934
Benefit payments                                          (324)      (273)
Actuarial gain due to Medicare drug subsidy               (355)
------------------------------------------------------------------------------
Obligation at end of year                              $ 6,414    $ 6,501
------------------------------------------------------------------------------
FUNDED STATUS (PLAN ASSETS LESS BENEFIT OBLIGATIONS)
Accumulated postretirement benefit obligation          $(6,414)   $(6,501)
Unrecognized transition obligation                         812        913
Unamortized prior service cost                           2,202      2,431
Unrecognized net actuarial loss                            473        832
------------------------------------------------------------------------------
Accrued postretirement benefit costs                   $(2,927)   $(2,325)
------------------------------------------------------------------------------

The following table provides  disclosure of the net periodic  benefit cost as of
December 31.

-----------------------------------------------------------
(In thousands)                          2004    2003
-----------------------------------------------------------
Service cost                            $161    $108
Interest cost                            396     313
Amortization of transition obligation    101     101
Recognized prior service cost            250     198
Amortization of net loss                  18
-----------------------------------------------------------
Net periodic benefit cost               $926    $720
-----------------------------------------------------------
Major assumptions:
Discount rate                           6.00%   6.25%
-----------------------------------------------------------

Assumed  health care cost trend rates have a  significant  effect on the amounts
reported  for the health  care  plans.  For  measurement  purposes,  the rate of
increase in pre-Medicare  medical care claims costs was 10% in 2005 grading down
by 1% to 5% for 2010 and thereafter.  For Medicare  Supplement  claims costs, it
was 8% in 2005  grading  down by 1% to 5% for 2008 and  thereafter.  For  dental
claims  cost,  it was 5% for 2005 and  thereafter.  A 1% change  in the  assumed
health care cost trend rates would have the following incremental effects:

--------------------------------------------------------------------------------
(In thousands)                                   1% Increase       1% Decrease
--------------------------------------------------------------------------------
Effect on total of service and interest cost
 components of net periodic postretirement
 health care benefit cost                              $  55           $  (45)
Effect on postretirement benefit obligation              914             (750)
--------------------------------------------------------------------------------

The following  table presents  estimated  future benefit  payments in the period
indicated.

------------------------------------------------
(In thousands)           Amount
------------------------------------------------
2005                   $   307
2006                       311
2007                       335
2008                       335
2009                       348
2010-2014                1,938
------------------------------------------------
   Total               $ 3,574
------------------------------------------------

12.  LEASES

The Company  leases  certain branch sites and certain  banking  equipment  under
various operating leases.  All of the branch site leases have renewal options of
varying lengths and terms. The aggregate minimum rental  commitments under these
leases over the next five years are approximately $1,340,000.

13.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial  instruments with off-balance  sheet risk in
the normal course of business to meet the financing needs of its customers.  The
financial  instruments  include commitments to extend credit and standby letters
of credit.

These financial  instruments involve to varying degrees,  elements of credit and
interest  rate risk in  excess  of the  amount  recognized  in the  consolidated
balance sheets. The contract amounts of these instruments  reflect the extent of
involvement the Company has in particular classes of financial instruments.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  the payment of a fee.  Since many of the  commitments  are  expected to
expire  without  being  drawn  upon,  the  total  commitment   amount  does  not
necessarily  represent  future cash  requirements.  Total  commitments to extend
credit  were  $154,042,000  and  $123,714,000  at  December  31,  2004 and 2003,
respectively.  The  Company  evaluates  each  customer's  creditworthiness  on a
case-by-case  basis. The amount of collateral obtained upon extension of credit,
if deemed necessary by the Company,  is based on management's  credit evaluation
of  the  counter  party.  Collateral  held  varies,  but  may  include  accounts
receivable,   marketable   securities,   inventory,   premises  and   equipment,
residential real estate, and income producing commercial properties.

Standby letters of credit are conditional  commitments  issued by the Company to
guarantee  the  performance  of a customer to a third  party.  Since many of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amount does not necessarily  represent future cash requirements.  The
credit risk  involved in issuing  letters of credit is  essentially  the same as
that  received  when  extending  credit to  customers.  The fair  value of these
instruments is not considered  material for disclosure under FASB Interpretation
No. 45. The Company had  $5,205,000  and  $6,702,000 in  irrevocable  letters of
credit outstanding at December 31, 2004 and 2003, respectively.

The contractual amount of financial  instruments with off-balance sheet risk was
as follows at year-end.

--------------------------------------------------------------------------------
December 31,                           2004                      2003
(In thousands)                Fixed Rate Variable Rate  Fixed Rate Variable Rate
--------------------------------------------------------------------------------
Commitments to extend credit    $ 44,484      $109,558    $ 41,479      $ 82,235
Standby letters of credit          4,640           565         720         5,982
--------------------------------------------------------------------------------
   Total                        $ 49,124      $110,123    $ 42,199      $ 88,217
--------------------------------------------------------------------------------

14. CONCENTRATION OF CREDIT RISK

The Company's bank subsidiaries  actively engage in lending,  primarily in their
home counties and adjacent areas.  Collateral is received to support these loans
when deemed  necessary.  The more significant  categories of collateral  include
cash  on  deposit  with  the  Company's  banks,  marketable  securities,  income
producing property,  home mortgages,  and consumer durables.  Loans outstanding,
commitments to make loans,  and letters of credit range across a large number of
industries  and  individuals.  The  obligations  are  significantly  diverse and
reflect no material concentration in one or more areas.

15. LOSS CONTINGENCIES

Loss  contingencies,  including claims and legal actions arising in the ordinary
course of business,  are recorded as liabilities  when the likelihood of loss is
probable  and an  amount  or range of loss can be  reasonably  estimated.  As of
December 31, 2004,  there were various  pending  legal  actions and  proceedings
against  the Company  arising  from the normal  course of business  and in which
claims  for  damages  are  asserted.  Management,  after  discussion  with legal
counsel,  believes  that these  actions are without  merit and that the ultimate
liability  resulting from these legal actions and proceedings,  if any, will not
have a  material  effect  upon  the  consolidated  financial  statements  of the
Company.

16. REGULATORY MATTERS

Payment of dividends  by the  Company's  subsidiary  banks is subject to certain
regulatory  restrictions  as set forth in national  and state  banking  laws and
regulations.  Generally,  capital distributions are limited to undistributed net
income for the  current  and prior two years.  At December  31,  2004,  combined
retained  earnings of the  subsidiary  banks were  approximately  $47,637,000 of
which  $3,280,000  was  available  for the payment of  dividends in 2005 without
obtaining prior approval from bank regulatory agencies.

Included in cash and due from banks are  certain  noninterest  bearing  deposits
that are held at the Federal Reserve Bank and correspondent  banks in accordance
with regulatory reserve  requirements  specified by the Federal Reserve Board of
Governors.  The reserve  requirement was $14,708,000 and $12,251,000 at December
31, 2004 and 2003, respectively.

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and its  subsidiary  banks to maintain  minimum  amounts and
ratios  (set forth in the tables  below) of total and Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined),  and of Tier I capital
to average  assets (as defined).  The Company and each of the  subsidiary  banks
meet all capital adequacy  requirements to which they are subject as of December
31, 2004.

As of December 31, 2004, the most recent  notification from the FDIC categorized
the  banks  as well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action.  To be  categorized  as well  capitalized,  the  banks  must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set  forth in the  tables.  There are no  conditions  or  events  since  that
notification that management believes have changed the institutions' category.

The  capital  amounts and ratios of the  consolidated  Company and the banks are
presented in the following tables.

<TABLE>

----------------------------------------------------------------------------------------------------------------
                                                                                      To Be Well Capitalized
                                                                    For Capital       Under Prompt Corrective
                                                   Actual         Adequacy Purposes     Action Provisions
----------------------------------------------------------------------------------------------------------------
December 31, 2004 (Dollars in thousands)     Amount      Ratio     Amount     Ratio     Amount       Ratio
----------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>     <C>           <C>    <C>            <C>
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated                               $117,769      12.69%  $ 37,123      4.00%  $ 55,684       6.00%
Farmers Bank & Capital Trust Co.             33,752      11.28     11,968      4.00     17,952       6.00
Farmers Bank and Trust Company               22,328      11.13      8,022      4.00     12,032       6.00
Lawrenceburg National Bank                   11,537      10.70      4,311      4.00      6,467       6.00
First Citizens Bank                          10,732       8.99      4,774      4.00      7,162       6.00
United Bank & Trust Co.                      12,330      10.65      4,630      4.00      6,945       6.00
Kentucky Banking Centers, Inc.                9,603      10.55      3,641      4.00      5,461       6.00
----------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated                               $129,385      13.94%  $ 74,246      8.00%  $ 92,807      10.00%
Farmers Bank & Capital Trust Co.             37,494      12.53     23,937      8.00     29,921      10.00
Farmers Bank and Trust Company               24,842      12.39     16,043      8.00     20,054      10.00
Lawrenceburg National Bank                   12,887      11.96      8,623      8.00     10,779      10.00
First Citizens Bank                          12,159      10.19      9,549      8.00     11,936      10.00
United Bank & Trust Co.                      13,779      11.90      9,260      8.00     11,575      10.00
Kentucky Banking Centers, Inc.               10,741      11.80      7,281      8.00      9,101      10.00
----------------------------------------------------------------------------------------------------------------
TIER 1 CAPITAL (TO AVERAGE ASSETS)
Consolidated                               $117,769       8.36%  $ 56,368      4.00%  $ 70,460       5.00%
Farmers Bank & Capital Trust Co.             33,752       6.13     22,027      4.00     27,533       5.00
Farmers Bank and Trust Company               22,328       7.93     11,260      4.00     14,075       5.00
Lawrenceburg National Bank                   11,537       7.40      6,234      4.00      7,792       5.00
First Citizens Bank                          10,732       6.36      6,749      4.00      8,436       5.00
United Bank & Trust Co.                      12,330       7.15      6,895      4.00      8,619       5.00
Kentucky Banking Centers, Inc.                9,603       7.07      5,433      4.00      6,791       5.00
----------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
<TABLE>

----------------------------------------------------------------------------------------------------------------
                                                                                      To Be Well Capitalized
                                                                    For Capital       Under Prompt Corrective
                                                   Actual         Adequacy Purposes     Action Provisions
----------------------------------------------------------------------------------------------------------------
December 31, 2003 (Dollars in thousands)     Amount      Ratio     Amount     Ratio     Amount       Ratio
----------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>     <C>           <C>    <C>            <C>
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated                               $124,349      15.07%  $ 33,008      4.00%  $ 49,511       6.00%
Farmers Bank & Capital Trust Co.             33,251      11.11     11,968      4.00     17,952       6.00
Farmers Bank and Trust Company               13,652      10.34      5,283      4.00      7,925       6.00
Lawrenceburg National Bank                   10,645      10.88      3,915      4.00      5,872       6.00
First Citizens Bank                          11,527      10.77      4,282      4.00      6,423       6.00
United Bank & Trust Co.                      11,033      10.62      4,156      4.00      6,234       6.00
Kentucky Banking Centers, Inc.                8,873      10.41      3,408      4.00      5,113       6.00
----------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated                               $134,770      16.33%  $ 66,015      8.00%  $ 82,519      10.00%
Farmers Bank & Capital Trust Co.             36,992      12.36     23,936      8.00     29,920      10.00
Farmers Bank and Trust Company               15,306      11.59     10,567      8.00     13,209      10.00
Lawrenceburg National Bank                   11,872      12.13      7,830      8.00      9,787      10.00
First Citizens Bank                          12,866      12.02      8,564      8.00     10,706      10.00
United Bank & Trust Co.                      12,334      11.87      8,312      8.00     10,390      10.00
Kentucky Banking Centers, Inc.                9,940      11.67      6,817      8.00      8,521      10.00
----------------------------------------------------------------------------------------------------------------
TIER 1 CAPITAL (TO AVERAGE ASSETS)
Consolidated                               $124,349       9.94%  $ 50,030      4.00%  $ 62,537       5.00%
Farmers Bank & Capital Trust Co.             33,251       6.06     21,965      4.00     27,456       5.00
Farmers Bank and Trust Company               13,652       6.82      8,008      4.00     10,010       5.00
Lawrenceburg National Bank                   10,645       7.69      5,538      4.00      6,922       5.00
First Citizens Bank                          11,527       7.37      6,257      4.00      7,822       5.00
United Bank & Trust Co.                      11,033       7.29      6,051      4.00      7,564       5.00
Kentucky Banking Centers, Inc.                8,873       7.95      4,466      4.00      5,582       5.00
----------------------------------------------------------------------------------------------------------------
</TABLE>



17. FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  table  presents  the  estimated  fair  values  of the  Company's
financial  instruments made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL  INSTRUMENTS.  This Statement requires
disclosure of fair value information about financial instruments, whether or not
recognized  in the balance  sheet for which it is  practicable  to estimate that
value.  The  estimated  fair value  amounts have been  determined by the Company
using  available  market  information  and  present  value  or  other  valuation
techniques.  These  derived  fair  values  are  subjective  in  nature,  involve
uncertainties  and matters of  significant  judgment and,  therefore,  cannot be
determined with precision.  SFAS No. 107 excludes certain financial  instruments
and all nonfinancial instruments from the disclosure requirements.  Accordingly,
the  aggregate  fair value  amounts  presented are not intended to represent the
underlying value of the Company.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.

CASH AND CASH  EQUIVALENTS,  ACCRUED INTEREST  RECEIVABLE,  AND ACCRUED INTEREST
PAYABLE
The carrying amount is a reasonable estimate of fair value.

INVESTMENT SECURITIES
For marketable equity securities,  fair values are based on quoted market prices
or dealer quotes.  For other securities,  fair value equals quoted market price,
if available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

LOANS
The fair value of loans is estimated by discounting  the future cash flows using
current  discount  rates at which similar loans would be made to borrowers  with
similar credit ratings and for the same remaining maturities.

DEPOSIT LIABILITIES
The fair value of demand deposits,  savings  accounts,  and certain money market
deposits is the amount  payable on demand at the reporting  date. The fair value
of fixed maturity certificates of deposit is estimated by discounting the future
cash flows using the rates  currently  offered for  certificates of deposit with
similar remaining maturities.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
Pricing  of these  financial  instruments  is based on the  credit  quality  and
relationship,   fees,  interest  rates,  probability  of  funding,  compensating
balance,  and other covenants or requirements.  Loan commitments  generally have
fixed  expiration  dates,  variable  interest rates and contain  termination and
other  clauses  that  provide  for relief  from  funding in the event there is a
significant  deterioration  in the  credit  quality of the  customer.  Many loan
commitments  are expected to, and typically do, expire without being drawn upon.
The rates and terms of the Company's  commitments to lend and standby letters of
credit are  competitive  with others in the various markets in which the Company
operates. There are no unamortized fees relating to these financial instruments,
as such the carrying value and fair value are both zero.

FEDERAL FUNDS  PURCHASED,  SECURITIES SOLD UNDER  AGREEMENTS TO REPURCHASE,  AND
OTHER BORROWED FUNDS
The fair value of federal funds  purchased,  securities sold under agreements to
repurchase,  and  other  borrowed  funds  is  estimated  using  rates  currently
available for debt with similar terms and remaining maturities.

The estimated fair values of the Company's financial instruments are as follows.

<TABLE>

---------------------------------------------------------------------------------------------
December 31,                                       2004                      2003
---------------------------------------------------------------------------------------------
                                         Carrying         Fair     Carrying         Fair
(In thousands)                             Amount        Value       Amount        Value
---------------------------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>          <C>
ASSETS
Cash and cash equivalents              $   79,260   $   79,260   $  127,216   $  127,216
Investment securities:
 Available for sale                       349,317      349,317      358,169      358,169
 Held to maturity                          19,803       20,555       24,789       26,201
Loans, net                                863,901      860,426      744,653      749,214
Accrued interest receivable                 7,694        7,694        6,813        6,813

LIABILITIES
Deposits                                1,139,027    1,137,710    1,068,322    1,072,141
Federal   funds
purchased, securities sold
 under agreements to repurchase,
 and other borrowed funds                 114,707      122,329      113,529      121,258
Accrued interest payable                    1,693        1,693        1,330        1,330
---------------------------------------------------------------------------------------------
</TABLE>


18.  PARENT COMPANY FINANCIAL STATEMENTS

CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------
December 31, (In thousands)                       2004         2003
--------------------------------------------------------------------------
ASSETS
Cash on deposit with subsidiaries               $  10,792    $  29,291
Investment securities available for sale                           885
Investment in subsidiaries                        117,629       93,158
Other assets                                        8,187        7,418
--------------------------------------------------------------------------
   Total assets                                 $ 136,608    $ 130,752
--------------------------------------------------------------------------

LIABILITIES
Dividends payable                               $   2,232    $   2,215
Other liabilities                                   2,926        2,066
--------------------------------------------------------------------------
   Total liabilities                                5,158        4,281
--------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Common stock                                        1,029        1,020
Capital surplus                                    20,744       18,670
Retained earnings                                 149,985      145,489
Treasury stock                                    (41,008)     (40,830)
Accumulated other comprehensive income                700        2,122
--------------------------------------------------------------------------
   Total shareholders' equity                     131,450      126,471
--------------------------------------------------------------------------
   Total liabilities and shareholders' equity   $ 136,608    $ 130,752
--------------------------------------------------------------------------


CONDENSED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
Years Ended December 31, (In thousands)           2004       2003        2002
--------------------------------------------------------------------------------
INCOME
Dividends from subsidiaries                   $  8,457   $ 37,005    $  9,585
Interest income                                     80         90          95
Other dividend income                               24         26          24
Investment securities gains, net                   250                    110
Other noninterest income                         2,003      1,690       1,078
--------------------------------------------------------------------------------
   Total income                                 10,814     38,811      10,892
--------------------------------------------------------------------------------
EXPENSE
Noninterest expense                              3,417      2,613       2,393
--------------------------------------------------------------------------------
   Total expense                                 3,417      2,613       2,393
--------------------------------------------------------------------------------
   Income before income tax benefit
   and equity in undistributed income
   of subsidiaries                               7,397     36,198       8,499
Income tax benefit                                 608        386         318
--------------------------------------------------------------------------------
   Income before equity in undistributed
   income of subsidiaries                        8,005     36,584       8,817
--------------------------------------------------------------------------------
Equity in undistributed income
 of subsidiaries                                 5,387    (23,621)      3,744
--------------------------------------------------------------------------------
Net income                                    $ 13,392   $ 12,963    $ 12,561
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands)                                2004        2003        2002
------------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                         $ 13,392    $ 12,963    $ 12,561
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Equity in undistributed income of subsidiaries                     (5,387)     23,621      (3,744)
  Noncash compensation expense                                           39          91          27
  Gain on sale of available for sale investment securities             (250)                   (110)
  Change in other assets and liabilities, net                           691       2,772        (848)
  Deferred income tax (benefit) expense                                (512)        190         205
------------------------------------------------------------------------------------------------------
   Net cash provided by operating activities                          7,973      39,637       8,091
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available for sale investment securities          925                     399
Investment in nonbank subsidiary                                     (1,600)     (2,000)
Investment in bank subsidiary                                        (4,000)
Purchase of Citizens Bank (Kentucky), Inc.                          (14,588)
Purchase of company-owned life insurance                                         (6,807)
------------------------------------------------------------------------------------------------------
   Net cash (used in) provided by investing activities              (19,263)     (8,807)        399
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid                                                       (8,879)     (8,649)     (8,550)
Purchase of common stock                                               (178)     (3,203)     (6,550)
Shares issued under Employee Stock Purchase Plan                         93
Stock options exercised                                               1,755         622       1,904
------------------------------------------------------------------------------------------------------
   Net cash used in financing activities                             (7,209)    (11,230)    (13,196)
------------------------------------------------------------------------------------------------------
   Net (decrease) increase in cash and cash equivalents             (18,499)     19,600      (4,706)
------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                       29,291       9,691      14,397
------------------------------------------------------------------------------------------------------
   Cash and cash equivalents at end of year                        $ 10,792    $ 29,291    $  9,691
------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for income taxes                         $  2,525    $  2,200    $  4,940
Cash dividend declared and unpaid at year-end                         2,232       2,215       2,191
------------------------------------------------------------------------------------------------------
</TABLE>



19.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>

-----------------------------------------------------------------------------------------------
(In thousands, except per share data)
Quarters Ended 2004                                  March 31   June 30  Sept. 30   Dec. 31
-----------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>       <C>       <C>
Interest income                                       $14,739   $14,893   $15,930   $16,340
Interest expense                                        4,394     4,344     4,888     5,550
-----------------------------------------------------------------------------------------------
   Net interest income                                 10,345    10,549    11,042    10,790
-----------------------------------------------------------------------------------------------
Provision for loan losses                                 365       448       666       650
-----------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses  9,980    10,101    10,376    10,140
-----------------------------------------------------------------------------------------------
Noninterest income                                      4,087     4,236     4,539     4,889
Noninterest expense 1                                   9,682     9,629    10,989    11,633
-----------------------------------------------------------------------------------------------
   Income before income taxes                           4,385     4,708     3,926     3,396
-----------------------------------------------------------------------------------------------
Income tax expense                                        877       967       727       452
-----------------------------------------------------------------------------------------------
   Net income                                         $ 3,508   $ 3,741   $ 3,199   $ 2,944
-----------------------------------------------------------------------------------------------
Net income per common share, basic                    $   .52   $   .56   $   .47   $   .44
Net income per common share, diluted                      .52       .55       .47       .43
-----------------------------------------------------------------------------------------------
Weighted average shares outstanding, basic              6,723     6,730     6,736     6,759
Weighted average shares outstanding, diluted            6,784     6,778     6,787     6,812
-----------------------------------------------------------------------------------------------

1    The increase in noninterest expense during the third and fourth quarters of
     2004 are mainly  attributed  to the  Citizens  Bank  (Kentucky),  Inc.  and
     Financial National Electronic Transfer,  Inc.  acquisitions on July 1, 2004
     and October 8, 2004, respectively.
</TABLE>
<TABLE>

-----------------------------------------------------------------------------------------------
(In thousands, except per share data)
Quarters Ended 2003                                  March 31   June 30  Sept. 30   Dec. 31
-----------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>       <C>       <C>
Interest income                                       $15,508   $14,357   $14,189   $14,359
Interest expense                                        5,456     5,116     4,757     4,554
-----------------------------------------------------------------------------------------------
   Net interest income                                 10,052     9,241     9,432     9,805
-----------------------------------------------------------------------------------------------
Provision for loan losses                                 385       351       642     1,214
-----------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses  9,667     8,890     8,790     8,591
-----------------------------------------------------------------------------------------------
Noninterest income                                      4,166     4,478     5,151     4,098
Noninterest expense                                     9,139     9,468     9,209     9,686
-----------------------------------------------------------------------------------------------
   Income before income taxes                           4,694     3,900     4,732     3,003
-----------------------------------------------------------------------------------------------
Income tax expense                                      1,101       874       831       560
-----------------------------------------------------------------------------------------------
   Net income                                         $ 3,593   $ 3,026   $ 3,901   $ 2,443
-----------------------------------------------------------------------------------------------
Net income per common share, basic                    $   .53   $   .45   $   .58   $   .36
Net income per common share, diluted                      .53       .45       .58       .36
-----------------------------------------------------------------------------------------------
Weighted average shares outstanding, basic              6,764     6,723     6,712     6,712
Weighted average shares outstanding, diluted            6,798     6,765     6,761     6,768
-----------------------------------------------------------------------------------------------
</TABLE>


20.  BUSINESS COMBINATION - CITIZENS BANK (KENTUCKY), INC.

On July 2, 2004 the  Company  announced  that the  required  approvals  from the
appropriate  regulatory  authorities  were received and that the  acquisition of
100%  of the  outstanding  common  shares  of  Citizens  Bank  (Kentucky),  Inc.
("Citizens Georgetown") in Georgetown,  Kentucky had been completed. The results
presented in the consolidated financial statements herein include the results of
Citizens  Georgetown  since the date of  acquisition.  On October 22, 2004,  the
Company merged Citizens Georgetown into Farmers Georgetown.

The total cost  related to this  acquisition,  which has been paid  entirely  in
cash,  was  approximately  $14.6  million.  The  following  table  presents  the
estimated fair value of the assets acquired and the  liabilities  assumed at the
date  of  purchase.  The  core  deposit  intangible  asset  of $2.2  million  at
acquisition  is  being  amortized  over a life of 7.5  years  under a  declining
amortization  schedule through year 2010 with the remaining 10% amortized during
year 2011. Goodwill is not subject to periodic  amortization in the consolidated
financial  statements,  but will be deductible  for federal  income tax purposes
over a period of 15 years.

------------------------------------------------------------------------------
(In thousands)                                                July 1, 2004
------------------------------------------------------------------------------
ASSETS
Cash and equivalents                                               $ 8,768
Investment securities                                               12,213
Loans, net of unearned income and allowance for loan losses         50,102
Goodwill                                                             4,850
Core deposit intangible                                              2,230
Other assets                                                         4,650
------------------------------------------------------------------------------
   Total assets                                                    $82,813
------------------------------------------------------------------------------

LIABILITIES
Deposits                                                           $62,440
Short-term borrowings                                                  304
Long-term borrowings                                                 5,242
Other liabilities                                                      239
------------------------------------------------------------------------------
   Total liabilities                                                68,225
------------------------------------------------------------------------------

------------------------------------------------------------------------------
NET ASSETS ACQUIRED                                                $14,588
------------------------------------------------------------------------------


21.  BUSINESS COMBINATION - FINANCIAL NATIONAL ELECTRONIC TRANSFER, INC.

On October 8, 2004 the Company  announced that First Citizens Bank had completed
the acquisition of 100% of the outstanding  common shares of Financial  National
Electronic  Transfer,  Inc.  ("FiNET")  in a cash  transaction.  FINET is a data
processing  company  that  specializes  in the  processing  of  federal  benefit
payments and military allotments and is headquartered in Radcliff, Kentucky. The
results  presented in the consolidated  financial  statements herein include the
results  related to FiNET since the date of  acquisition.  Effective  January 1,
2005, FiNET was merged into First Citizens Bank.

The total cost  related to this  acquisition,  which has been paid  entirely  in
cash, was approximately $6.6 million. The following table presents the estimated
fair value of the assets  acquired  and the  liabilities  assumed at the date of
purchase.  The customer list  intangible of $2.4 million at acquisition is being
amortized  over a life of 10.5 years  under a  declining  amortization  schedule
through year 2013 with the remaining 11% amortized during year 2014. Goodwill is
not subject to periodic  amortization in the consolidated  financial statements,
but will be  deductible  for  federal  income tax  purposes  over a period of 15
years.

------------------------------------------------------
(In thousands)                    October 8, 2004
------------------------------------------------------
ASSETS
Goodwill                                  $ 3,872
Customer list intangible                    2,414
Other assets                                  300
------------------------------------------------------
   Total assets                           $ 6,586
------------------------------------------------------

------------------------------------------------------
LIABILITIES
------------------------------------------------------

------------------------------------------------------
NET ASSETS ACQUIRED                       $ 6,586
------------------------------------------------------


22. GOODWILL AND INTANGIBLE ASSETS

GOODWILL

The change in balance for goodwill is as follows.

-------------------------------------------------------
(In thousands)                        2004
-------------------------------------------------------
Beginning of year                  $     0
Acquired goodwill                    8,722
Impairment
-------------------------------------------------------
End of year                        $ 8,722
-------------------------------------------------------


ACQUIRED INTANGIBLE ASSETS

Acquired intangible assets were as follows as of year-end.

--------------------------------------------------------------------------------
                                                               2004
--------------------------------------------------------------------------------
                                                          Gross     Accumulated
Amortized Intangible Assets (In thousands):     Carrying Amount    Amortization
--------------------------------------------------------------------------------
Core deposit intangible                                  $2,230          $  255
Other customer relationship intangibles                   2,414             130
--------------------------------------------------------------------------------
Total                                                    $4,644          $  385
--------------------------------------------------------------------------------

Aggregate  amortization  expense was $385,000 for 2004.  Estimated  amortization
expense for each of the next five years is as follows.

---------------------------------------------
(In thousands)                    Amount
---------------------------------------------
2005                              $  983
2006                                 817
2007                                 632
2008                                 467
2009                                 344
---------------------------------------------


<PAGE>
SHAREHOLDER INFORMATION



CORPORATE ADDRESS
The headquarters of Farmers Capital Bank Corporation is located at:
   202 West Main Street
   Frankfort, Kentucky 40601

Direct correspondence to:
   Farmers Capital Bank Corporation
   P.O. Box 309 Frankfort, Kentucky 40602-0309
   Phone: (502) 227-1668
   www.farmerscapital.com

ANNUAL MEETING
The annual meeting of shareholders of Farmers Capital Bank  Corporation  will be
held  Tuesday,  May 10, 2005 at 11:00 a.m. at the main office of Farmers  Bank &
Capital Trust Co., Frankfort, Kentucky.

FORM 10-K
For a free copy of Farmers Capital Bank Corporation's Annual Report on Form 10-K
filed with the Securities and Exchange Commission, please write:
   C. Douglas Carpenter, Vice President, Secretary, & Chief Financial Officer
   Farmers Capital Bank Corporation
   P.O. Box 309 Frankfort, Kentucky 40602-0309
   Phone: (502) 227-1668

WEB SITE ACCESS TO FILINGS
All reports filed electronically by the Company to the United States Securities
and Exchange Commission, including annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all amendments to those
reports, are available at no cost on the Company's Web site at
www.farmerscapital.com.

STOCK INFORMATION
Farmers Capital Bank Corporation's  stock is traded on the National  Association
of Securities  Dealers Automated  Quotation System (NASDAQ) SmallCap Market tier
of The NASDAQ Stock Market, with sales prices reported under the symbol: FFKT.

NASDAQ MARKET MAKERS
J.J.B. Hilliard, W.L. Lyons, Inc.
(800) 260-0280
(800) 444-1854

Morgan, Keegan and Company
(502) 588-8400

Knight Equity Markets, L.P.
(800) 621-2364

Howe Barnes Investments, Inc.
(888) 302-9197

The Transfer  Agent and Registrar for Farmers  Capital Bank  Corporation  is the
Farmers Bank & Capital Trust Co., Frankfort, Kentucky.