UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, DC 20549

# FORM 10-Q

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

# For the quarterly
period ended March 31, 2006

or

[ ] Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the transition
period from

____________ to
____________

Commission File Number
0-14412

Farmers Capital Bank
Corporation (Exact name of registrant as
specified in its charter)

|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Kentucky                                                       |  | 61-1017851                             
|                                                              
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

|                                         |           
|---------------------------------------- | ----------
|P.O. Box 309, 202 West Main Street       |           
|Frankfort, Kentucky                      | 40602     
|                                        
|(Address of principal executive offices) | (Zip Code)

Registrants
telephone number, including area code: (502) 227-1668

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes |X| No ____

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large
accelerated filer ___ Accelerated filer |X| Non-accelerated filer ___

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Act)

Yes ___ No |X|

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date.

Common stock, par value
$.125 per share 7,383,729 shares
outstanding at May 4, 2006

---

TABLE OF CONTENTS

|Part I - Financial Information                                                                | Page No.
|--------------------------------------------------------------------------------------------- | --------
|Item 1 - Financial Statements                                                                 |         
|Unaudited Consolidated Balance Sheets -                                                      
|March 31, 2006 and December 31, 2005                                                          | 3       
|Unaudited Consolidated Statements of Income -                                                
|For the Three Months Ended                                                                   
|March 31, 2006 and March 31, 2005                                                             | 4       
|Unaudited Consolidated Statements of Comprehensive Income -                                  
|For the Three Months Ended                                                                   
|March 31, 2006 and March 31, 2005                                                             | 5       
|Unaudited Consolidated Statements of Cash Flows -                                            
|For the Three Months Ended                                                                   
|March 31, 2006 and March 31, 2005                                                             | 6       
|Unaudited Consolidated Statements of Changes in Shareholders' Equity -                       
|For the Three Months Ended                                                                   
|March 31, 2006 and March 31, 2005                                                             | 7       
|Notes to Unaudited Consolidated Financial Statements                                          | 8       
|Item 2 - Management's Discussion and Analysis of FinancialCondition and Results of Operations | 12      
|Item 3 - Quantitative and Qualitative Disclosures About Market Risk                           | 22      
|Item 4 - Controls and Procedures                                                              | 23      
|Part II - Other Information                                                                  
|Item 1 - Legal Proceedings                                                                    | 23      
|Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds                          | 23      
|Item 6 - Exhibits                                                                             | 23      
|Signatures                                                                                    | 25      



---

# PART I  FINANCIAL
INFORMATION

# Item 1. Financial
Statements

|                                                                          
|--------------------------------------------------------------------------
|
|Assets                                                                    
|Cash and cash equivalents:                                                
|Cash and due from banks                                                   
|Interest bearing deposits in other banks                                  
|Federal funds sold and securities purchased under agreements to resell    
|                                                                          
|Total cash and cash equivalents                                           
|                                                                          
|Investment securities:                                                    
|Available for sale, amortized cost of $336,672 (2006) and $342,037 (2005) 
|Held to maturity, fair value of $13,500 (2006) and $19,234 (2005)         
|                                                                          
|Total investment securities                                               
|                                                                          
|Loans, net of unearned income                                             
|Allowance for loan losses                                                 
|                                                                          
|Loans, net                                                                
|                                                                          
|Premises and equipment, net                                               
|Company-owned life insurance                                              
|Goodwill                                                                  
|Other intangible assets, net                                              
|Other assets                                                              
|                                                                          
|Total assets                                                              
|                                                                          
|Liabilities                                                               
|Deposits:                                                                 
|Noninterest bearing                                                       
|Interest bearing                                                          
|                                                                          
|Total deposits                                                            
|                                                                          
|Federal funds purchased and securities sold under agreements to repurchase
|Subordinated notes payable to unconsolidated trusts                       
|Other borrowed funds                                                      
|Dividends payable                                                         
|Accrued purchase price-Citizens Bancorp, Inc.                             
|Other liabilities                                                         
|                                                                          
|Total liabilities                                                         
|                                                                          
|Shareholders' Equity                                                      
|Common stock, par value $.125 per share                                   
|9,608,000 shares authorized; 8,860,769 and 8,856,249                      
|shares issued at March 31, 2006 and December 31, 2005, respectively       
|Capital surplus                                                           
|Retained earnings                                                         
|Treasury stock, at cost                                                   
|1,477,351 and 1,467,351 shares at March 31, 2006                          
|and December 31, 2005, respectively                                       
|Accumulated other comprehensive loss                                      
|                                                                          
|Total shareholders' equity                                                
|                                                                          
|Total liabilities and shareholders' equity                                
|                                                                          
|See accompanying notes to unaudited consolidated financial statements.    

---



|                                                                                      
|--------------------------------------------------------------------------------------
|
|
|Interest Income                                                                       
|Interest and fees on loans                                                            
|Interest on investment securities:                                                    
|Taxable                                                                               
|Nontaxable                                                                            
|Interest on deposits in other banks                                                   
|Interest of federal funds sold and securities purchased under agreements to resell    
|                                                                                      
|Total interest income                                                                 
|                                                                                      
|Interest Expense                                                                      
|Interest on deposits                                                                  
|Interest on federal funds purchased and securities sold under agreements to repurchase
|Interest on subordinated notes payable to unconsolidated trust                        
|Interest on other borrowed funds                                                      
|                                                                                      
|Total interest expense                                                                
|                                                                                      
|Net interest income                                                                   
|                                                                                      
|Provision for loan losses                                                             
|                                                                                      
|Net interest income after provision for loan losses                                   
|                                                                                      
|Noninterest Income                                                                    
|Service charges and fees on deposits                                                  
|Allotment processing fees                                                             
|Other service charges, commissions, and fees                                          
|Data processing income                                                                
|Trust income                                                                          
|Gains on sale of mortgage loans, net                                                  
|Gain on sale of credit card portfolio                                                 
|Income from company-owned life insurance                                              
|Other                                                                                 
|                                                                                      
|Total noninterest income                                                              
|                                                                                      
|Noninterest Expense                                                                   
|Salaries and employee benefits                                                        
|Occupancy expenses, net                                                               
|Equipment expenses                                                                    
|Data processing and communications expenses                                           
|Bank franchise tax                                                                    
|Correspondent bank fees                                                               
|Other                                                                                 
|                                                                                      
|Total noninterest expense                                                             
|                                                                                      
|Income before income taxes                                                            
|                                                                                      
|Income tax expense                                                                    
|                                                                                      
|Net income                                                                            
|                                                                                      
|Net Income Per Common Share                                                           
|Basic                                                                                 
|Diluted                                                                               
|                                                                                      
|Weighted Average Shares Outstanding                                                   
|Basic                                                                                 
|Diluted                                                                               
|                                                                                      
|See accompanying notes to unaudited consolidated financial statements.                

---



|                                                                      
|----------------------------------------------------------------------
|
|Net Income                                                            
|Other comprehensive loss:                                             
|Unrealized holding loss on available for sale                         
|securities arising during the period on securities held at            
|end of period, net of tax of $648 and $1,320, respectively            
|                                                                      
|Other comprehensive loss                                              
|                                                                      
|Comprehensive Income                                                  
|                                                                      
|See accompanying notes to unaudited consolidated financial statements.

---



|                                                                                 
|---------------------------------------------------------------------------------
|
|Cash Flows from Operating Activities                                             
|Net income                                                                       
|Adjustments to reconcile net income to net cash provided by operating activities:
|Depreciation and amortization                                                    
|Net amortization of investment security premiums and (discounts):                
|Available for sale                                                               
|Held to maturity                                                                 
|Provision for loan losses                                                        
|Noncash compensation expense                                                     
|Mortgage loans originated for sale                                               
|Proceeds from sale of mortgage loans                                             
|Deferred income tax expense (benefit)                                            
|Gains on sale of mortgage loans, net                                             
|Gain on sale of credit card portfolio                                            
|Gains on sale of premises and equipment, net                                     
|Decrease in accrued interest receivable                                          
|Income from company-owned life insurance                                         
|Increase in other assets                                                         
|Increase in accrued interest payable                                             
|Decrease in other liabilities                                                    
|                                                                                 
|Net cash provided by (used in) operating activities                              
|                                                                                 
|Cash Flows from Investing Activities                                             
|Proceeds from maturities and calls of investment securities:                     
|Available for sale                                                               
|Held to maturity                                                                 
|Proceeds from sale of available for sale investment  securities                  
|Purchase of available for sale investment securities                             
|Loans originated for investment, net of principal collected                      
|Payment of prior year accrued purchase price-Citizens Bancorp, Inc.              
|Purchase price refinements-Citizens Bancorp, Inc.                                
|Additions to mortgage servicing rights                                           
|Purchase of premises and equipment                                               
|Proceeds from sale of equipment                                                  
|                                                                                 
|Net cash used in investing activities                                            
|                                                                                 
|Cash Flows from Financing Activities                                             
|Net increase in deposits                                                         
|Net (decrease) increase in federal funds purchased and securities                
|sold under agreements to repurchase                                              
|Repayments of long-term debt                                                     
|Net (decrease) increase in other short-term borrowings                           
|Dividends paid                                                                   
|Purchase of common stock                                                         
|Shares issued under Employee Stock Purchase Plan                                 
|Stock options exercised                                                          
|                                                                                 
|Net cash provided by financing activities                                        
|                                                                                 
|Net (decrease) increase in cash and cash equivalents                             
|                                                                                 
|Cash and cash equivalents at beginning of year                                   
|                                                                                 
|Cash and cash equivalents at end of period                                       
|                                                                                 
|Supplemental Disclosures                                                         
|Cash paid during the period for:                                                 
|Interest                                                                         
|Income taxes                                                                     
|Transfers from loans to repossessed assets                                       
|Cash dividend declared and unpaid                                                
|                                                                                 
|See accompanying notes to unaudited consolidated financial statements.           

---



|                              
|------------------------------
|
|
|
|Balance at January 1, 2006    
|                              
|Net income                    
|Other comprehensive loss      
|Cash dividends declared,      
|$.33 per share                
|Purchase of common stock      
|Stock options exercised,      
|including related tax benefits
|Shares issued pursuant to     
|Employee Stock Purchase plan  
|Stock-based compensation      
|expense                       
|                              
|Balance at March 31, 2006     
|                              
|                              
|                              
|Balance at January 1, 2005    
|                              
|Net income                    
|Other comprehensive loss      
|Cash dividends declared,      
|$.33 per share                
|Purchase of common stock      
|Stock options exercised,      
|including related tax benefits
|Shares issued pursuant to     
|Employee Stock Purchase Plan  
|                              
|Balance at March 31, 2005     
|                              



---

# NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS

# 1. Basis of Presentation
and Nature of Operations

The consolidated financial statements
include the accounts of Farmers Capital Bank Corporation (the Company), a
financial holding company, and its bank and nonbank subsidiaries. Bank 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 (Pro
Mortgage), 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; Kentucky
Banking Centers, Inc. in Glasgow, KY; and Citizens Bank of Northern Kentucky, Inc. in
Newport, KY (Citizens Northern). The Company has three active nonbank
subsidiaries, FCB Services, Inc. (FCB Services), Kentucky General Holdings,
LLC (Kentucky General), and FFKT Insurance Services, Inc. (FFKT
Insurance). 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. FFKT Insurance is a captive property and
casualty insurance company insuring primarily deductible exposures and uncovered liability
related to properties of the Company. All significant intercompany transactions and
balances are eliminated in consolidation.

The Company provides financial
services through its 34 locations in 23 communities throughout Central and Northern
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.

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 as of 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 financial information presented
as of any date other than December 31 has been prepared from the books and records without
audit. The accompanying consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all
of the information and the footnotes required by accounting principles generally accepted
in the United States of America for complete statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair presentation
of such financial statements, have been included. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for the full
year.

For further information, refer to the
consolidated financial statements and footnotes thereto included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2005.

# 2. Reclassifications

Certain reclassifications have been
made to the consolidated financial statements of prior periods to conform to the current
period presentation. These reclassifications do not affect net income or total
shareholders equity as previously reported.

# 3. Recently Issued
Accounting Standards

In December 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 123 (revised 2004), Share-Based
Payment, that requires the cost resulting from stock options be measured at fair
value and recognized in earnings. This Statement replaces SFAS No. 123,
Accounting for Stock-Based Compensation and supersedes Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, which permitted the recognition of compensation expense
using the intrinsic value method. The Companys Employee Stock Purchase Plan
(ESPP) is considered an option plan under SFAS No. 123 (R). The Company
adopted SFAS No. 123(R) on January 1, 2006 using the modified-prospective
application. Under the modified-prospective application, compensation costs for unvested
awards will be based on the grant-date fair value as calculated for pro forma disclosures
under SFAS No. 123, as originally issued. All new awards and awards that are modified,
repurchased, or cancelled after the date of adoption will be accounted for under the
provisions of SFAS No. 123(R). As a result of adopting SFAS No. 123(R), the Companys
income before income taxes for the three months ended March 31, 2006 includes stock
option compensation cost of $42 thousand. Prior periods have not been revised. See Note 5,
Stock-Based Compensation, for additional information.

In November 2005, the FASB issued
FASB Staff Position (FSP) No. FAS 123(R)-3, Transition Election to
Accounting for the Tax Effects of Share-Based Payment Awards. This FSP provides
a simplified method to calculate the Companys hypothetical additional paid-in
capital (APIC) pool for the beginning balance of excess tax benefits and the
method of determining the subsequent impact on the pool of option awards that are
outstanding and fully or partially vested upon adoption of SFAS 123(R). This FSP allows
companies up to one year from the later of the adoption date of SFAS 123(R) or November
10, 2005 to evaluate the available transition alternatives and make a one-time election.
The Company is currently evaluating the impact of the new method provided by this
guidance.

In February 2006, the FASB issued
SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an
amendment of SFAS No. 133 and SFAS No. 140. This statement permits fair value
re-measurement for any hybrid financial instrument that contains an embedded derivative
that otherwise would require bifurcation. It establishes a requirement to evaluate
interests in securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded derivative
requiring bifurcation. In addition, SFAS 155 clarifies which interest-only strips and
principal-only strips are not subject to the requirements of Statement 133. It also
clarifies that concentrations of credit risk in the form of subordination are not embedded
derivatives. SFAS 155 amends Statement 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. This Statement is
effective for all financial instruments acquired or issued after the beginning of an
entitys first fiscal year that begins after September 15, 2006. The Company is
evaluating the impact, if any, of the adoption of this Statement on its financial results.

In March 2006, the FASB issued SFAS
No. 156, Accounting for Servicing of Financial Assets. This Statement
amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, and requires that all separately recognized
servicing assets and servicing liabilities be initially measured at fair value, if
practicable and permits the entities to elect either fair value measurement with changes
in fair value reflected in earnings or the amortization and impairment requirements of
SFAS No. 140 for subsequent measurement. The subsequent measurement of separately
recognized servicing assets and servicing liabilities at fair value eliminates the
necessity for entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and eliminates the
characterization of declines in fair value as impairments or direct write-downs. This
Statement is effective as of the beginning of an entitys first fiscal year that
begins after September 15, 2006. The Company is evaluating the impact, if any, of the
adoption of this Statement on its financial results.

# 4. 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 March 31, 2006
and 2005.

|                                  
|----------------------------------
|
|Net income, basic and diluted     
|                                  
|Average shares outstanding        
|Effect of dilutive stock options  
|                                  
|Average diluted shares outstanding
|                                  
|Net income per share, basic       
|Net income per share, diluted     
|                                  

Options for 36,049 and 0 shares of
common stock were not included in the determination of diluted earnings per share for the
three months ended March 31, 2006 and 2005, respectively because they were antidilutive.

# 5. Stock-Based
Compensation

During 1997, the Companys Board
of Directors and shareholders approved a nonqualified stock option plan (the
Plan) that has periodically provided for the granting of stock options to key
employees and officers of the Company. 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 and expire ten years from the date of the grant. Total options granted were
450,000, 54,000, and 40,049 in the years 1997, 2000, and 2004, respectively. As of March
31, 2006 the Plan allows for additional option grants of up to 5,896 shares.

Prior to January 1, 2006, the Company
accounted for its Plan under the recognition and measurement provisions of APB Opinion No.
25 and related interpretations as allowed by SFAS No. 123. Effective January 1, 2006, the
Company adopted the fair value recognition provisions of SFAS No. 123(R),
Share-Based Payment, applying the modified-prospective application.
Under the modified-prospective application, prior year amounts are not restated. The
following table presents the effect on net income and earnings per share prior to adoption
as if expense was measured using the fair value recognition provisions of SFAS No. 123(R).

|                                               
|-----------------------------------------------
|
|Net Income                                     
|As reported                                    
|Less:  Stock-based compensation expense determi
|under fair value based method for all awards,  
|net of related tax effects                     
|                                               
|Proforma                                       
|                                               
|Net Income Per Common Share                    
|Basic, as reported                             
|Basic, proforma                                
|                                               
|Diluted, as reported                           
|Diluted, proforma                              
|                                               

On March 16, 2005 the Compensation
Committee of the Companys Board of Directors acted to approve an immediate and full
acceleration of the vesting on options granted during 2004. As a result, options to
purchase 40,049 unvested and out-of-the-money shares of the Companys
common stock became immediately exercisable as of March 16, 2005. The exercise price of
these options remains unchanged at $34.80 per share. The closing price of the
Companys shares was $34.50 on March 15, 2005. None of the accelerated options are
granted to directors or executive officers of the Company.

The purpose of the accelerated
vesting was to allow the Company to reduce anticipated future compensation expense
attributed to its stock option grants pursuant to SFAS No. 123(R).

Option activity under the Plan as of
March 31, 2006 is presented in the following table.

|                               
|-------------------------------
|
|
|Outstanding at January 1       
|Granted                        
|Forfeited                      
|Exercised                      
|                               
|Outstanding at March 31        
|                               
|                               
|                               
|Options exercisable at March 31
|                               

Options outstanding at March 31, 2006
were as follows.

|                              | 
|----------------------------- | 
|
|
|$24.50                        | 
|$29.75                        | 
|$34.80                        | 
|                             
|Outstanding at March 31, 2006 | 
|                             

The aggregate intrinsic value for
options outstanding and options exercisable at March 31, 2006 was $854,000 and $841,000,
respectively. There was $98,000 in total compensation cost related to unvested options not
recognized at March 31, 2006, with a weighted-average period of 10 months over which the
cost is expected to be recognized. There were no modifications or cash paid to settle
stock option awards during the quarter ended March 31, 2006.

The following table presents further
information regarding the Companys stock option Plan for the periods indicated.

|                                                         
|---------------------------------------------------------
|
|Compensation expense recognized for stock options        
|Related tax benefit recognized                           
|Weighted average grant date fair value of options granted
|Total intrinsic value of options exercised               
|Total fair value of options vested                       
|Cash received from options exercised                     
|                                                         

In addition to the compensation
expense attributed to option grants in the table above, the Company recorded $13,000 in
compensation expense related to its ESPP during the three months ended March 31, 2006.

The fair value of options awarded is
estimated on the date of the grant using the Black-Scholes option pricing model. The
assumptions used in the valuations are summarized in the table below. The assumptions
related to the 1997 Grant are not included since all of these options were fully vested
during 2004.

|                        
|------------------------
|
|
|Dividend yield          
|Expected volatility     
|Risk-free interest rate 
|Expected life (in years)
|                        
|Fair value              
|                        

# 6. Employee Stock
Purchase Plan

The Companys 2004 ESPP was
approved by its shareholders at the Companys 2004 annual meeting. 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 July 1, 2004. There were 2,270 and 1,600 shares issued under
the plan during the first quarter of 2006 and 2005, respectively. Compensation cost
related to the ESPP included in the proforma net income disclosure in the table in Note 4
above was $7,300 for the three months ended March 31, 2005.

7.    
          Pending Business Combination  Citizens National Bancshares, Inc.

On April 12, 2006, the Company
announced the signing of an agreement and plan of merger with Citizens National
Bancshares, Inc. (Citizens National) whereby Citizens National will be
acquired in a cash and stock transaction valued at approximately $30.0 million.
Approximately 50% of the purchase price will be paid in cash and the remaining amount will
be in the form of newly issued shares of the Companys common stock. The Company
intends to borrow additional funds for the cash portion of the purchase price.

Citizens National is a one-bank
holding company headquartered in Nicholasville, Kentucky and the parent corporation of
Citizens National Bank of Jessamine County (Citizens Jessamine). Pending the
required approvals from the appropriate regulatory authorities and subject to the
satisfaction of the conditions set forth in the definitive agreement, this transaction is
expected to close during the third quarter of 2006. The operating results of Citizens
National are not included herein. Citizens Jessamine operates four offices located in
Jessamine County, Kentucky. As of March 31, 2006, Citizens Jessamine had total assets of
$157 million, total loans (net of unearned income) of $128 million, total deposits of $165
million, and shareholders equity of $13.6 million.

# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations

# FORWARD-LOOKING
STATEMENTS

This report contains forward-looking
statements under the Private Securities Litigation Reform Act of 1995 that involve risks
and uncertainties. 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); competition for the
Companys customers from other providers of financial services; government
legislation and regulation (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; and other
risks 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.

# RESULTS OF OPERATIONS

# First Quarter 2006 vs. First Quarter 2005

The Company reported net income of
$4.4 million for the first three months of 2006, an increase of $335 thousand or 8.3%
compared to $4.1 million for the same period in 2005. Basic and diluted net income per
share were $.59 for the current quarter. This represents a decrease $.01 or 1.7% a basic
per share basis. Diluted per share earnings were unchanged in the quarter to quarter
comparison. The percentage increase in net income is not reflected in the percentage
change in per share earnings due to the additional 584 thousand shares issued in
connection with the acquisition of Citizens Bancorp, Inc. (Citizens Bancorp).
The operating results related to Citizens Bancorp, acquired on December 6, 2005, generally
increased reported income and expense line items in the current three-month period
compared to a year ago since there are no operating results attributed to Citizens Bancorp
in the comparable period. Net loans and deposits acquired from Citizens Bancorp on the
date of purchase were $149 million and $173 million, respectively.

The increase in net income for the
current three months was driven by higher net interest income mainly attributed to the
Citizens Bancorp acquisition. Net interest income for the current period was $13.7
million, an increase of $2.6 million or 23.1% compared to $11.1 million for the same
period a year earlier. The increase in net interest income is due mainly to a $5.3 million
or 38.4% increase in interest income on loans. This offset an increase in interest expense
of $3.4 million or 57.4% that was driven primarily by an increase in interest expense on
deposits of $2.7 million or 55.0%. The Citizens Bancorp acquisition accounted for $1.8
million of the increase in net interest income in the comparison, including $2.7 million
higher interest on loans partially offset by $1.2 million higher interest expense on
deposits.

The provision for loan losses
decreased $124 thousand in the quarterly comparison. The negative $171 thousand provision
recorded in the current period is reflective of the overall improved credit quality in the
Companys loan portfolio. This improvement is attributed to several factors,
including a decline in delinquent and classified loans from year-end 2005, lower
annualized net charge-offs as a percentage of average loans outstanding, and lower
historical loss ratios.

Noninterest income declined $314
thousand or 5.7% in the quarterly comparison. The decline in noninterest income was due
primarily to a one-time gain of $700 thousand on the sale of the Companys $3.2
million credit card portfolio recorded in the first quarter of 2005. Excluding the effect
of the one-time gain on the credit card portfolio in the prior year, noninterest income
rose $386 thousand or 8.0%. Income from company-owned life insurance was up $143 thousand
or 61.9% due to higher crediting rates and additional amounts outstanding attributed to
the purchase of Citizens Bancorp. Other income line items were $243 thousand higher in the
aggregate due mainly to the Citizens Bancorp acquisition.

Noninterest expenses increased $2.1
million or 18.0% for the current three months compared to the same period a year ago. The
increase in noninterest expenses was led by higher salaries and employee benefit expenses,
which grew $1.5 million or 25.9%. The increase in salaries and employee benefits was led
by a $782 thousand increase attributed to the Citizens Bancorp acquisition combined with
higher health insurance costs. Other noninterest expenses increased $526 thousand or 9.5%
and occurred across a broad range of line items. These increases are generally attributed
to the purchase of Citizens Bancorp and the Companys other business expansion
activities. The effective income tax rate was 19.7% for the current three months compared
to 21.5% a year earlier.

The return on average assets
(ROA) was 1.06% for the first quarter of 2006, a decrease of 8 basis points
compared to 1.14% reported for the same period of 2005. The return on average equity
(ROE) was 11.55% for the first quarter of 2006, a decrease of 96 basis points
compared to 12.51% for the same period of 2005. The decrease in ROE is attributed to a
combination of the lower ROA and an 11 basis point decrease in financial leverage to
10.85% from 10.96%. Financial leverage represents the degree in which borrowed funds, as
opposed to equity, are used in the funding of assets.

# Net Interest Income

The trend of the general interest
rate environment in the current three months compared to a year earlier has been upward
primarily as a result of short-term interest rate increases by the Board of Governors of
the Federal Reserve Board (the Fed). The Fed has increased short-term interest
rates by 200 basis points in eight equal increments of 25 basis points since March 31,
2005. The effects of these rate increases by the Fed has generally led to higher average
rates earned and paid on interest earning assets and interest bearing liabilities with a
faster increase in the average rates earned on earning assets, particularly loans and
temporary investments, due to their repricing characteristics.

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%.

The Companys tax equivalent
(TE) yield on earning assets for the current three months was 6.5%, an
increase of 97 basis points from 5.6% in the same period a year ago. The cost of funds for
the current three months was 3.0%, an increase of 78 basis points compared to 2.2% in the
same period a year earlier. A goal of the Company in the current interest rate environment
is to increase earning assets and maintain the current relatively low interest rates paid
on interest bearing liabilities. The Company strives to accomplish this goal while
providing excellent service to its customers and maintaining its core deposit base.
Maintaining the relatively low cost of funds is becoming increasingly difficult due to the
upward trend in general interest rates and competitive market forces. Average earning
assets were $1.5 billion for the current quarter, an increase of $184 million or 14.3%
compared to $1.3 billion a year ago. As a percentage of total average assets, earning
assets decreased 139 basis points to 88.1% from 89.5%. This decrease had a negative 8
basis point effect on ROA in the comparison.

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 the first quarter
of 2006 was $23.1 million, an increase of $6.0 million or 35.1% compared to the comparable
period in the previous year. The growth in interest income was mainly attributed to higher
interest income on loans of $5.3 million or 38.4%. Interest income on loans increased as a
result of higher average loan balances outstanding resulting from the Citizens Bancorp
acquisition, higher internally generated loan growth, and a 91 basis point increase in the
average rate earned on loans. The Citizens Bancorp acquisition accounted for $2.7 million
of the increase in interest income on loans. The Companys tax equivalent yield on
earning assets for the current period was 6.5%, an increase of 97 basis points compared to
the same period a year ago.

Interest and fees on loans was $19.0
million, an increase of $5.3 million or 38.4% compared to a year earlier. Average loans
increased $185 million or 21.0% to $1.1 billion in the comparison due mainly to a $156
million higher average balance outstanding from the acquisition of Citizens Bancorp and,
to a lesser extent, higher loan demand in what remains a relatively low rate environment.
Interest income on loans was also boosted by a 91 basis point increase in the tax
equivalent yield to 7.3% from 6.4% in the quarterly comparison. Interest on taxable
securities was $2.6 million, an increase of $719 thousand or 37.6% due to nearly equally
to both a 61 basis point increase in the average rate earned and a $38.4 million or 16.9%
higher average balance outstanding. Interest on nontaxable securities was relatively
unchanged at $988 thousand. Interest on short-term investments, including time deposits in
other banks, federal funds sold, and securities purchased under agreements to resell,
increased $24 thousand or 4.7% due to an increase in the average rate earned of 242 basis
points nearly offset by a decline in the average balances outstanding $50.0 million.

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 $9.5 million for first quarter of 2006, an increase of $3.4 million
or 57.4% from the same period in the prior year. Interest expense increased mainly as a
result of higher interest expense on deposits of $2.7 million or 55.0%. Interest expense
on deposits increased as a result of higher deposit balances outstanding from the Citizens
Bancorp acquisition, higher deposits generated internally, and higher rates paid on
interest bearing deposits throughout the entire deposit portfolio. The Companys cost
of funds was 3.0% for the first quarter of 2006, an increase of 78 basis points from 2.2%
for the prior year. The increase in cost of funds was led by a 219 basis point increase in
federal funds purchased and securities sold under agreements to repurchase, which
generally reprice more quickly than other interest bearing sources of funds and correlates
with the increase in general short-term market interest rates.

Interest expense on time deposits,
the largest component of total interest expense, increased $1.7 million or 44.7% to $5.6
million. The increase is due to a 70 basis point increase in the average rate paid to 3.7%
from 3.0% combined with an $89.9 million or 17.1% higher average balance outstanding,
which totaled $614 million in the current quarter compared to $524 million in the same
quarter a year earlier. The growth in average time deposits outstanding was fueled by an
additional $73.0 million of time deposits related to the Citizens Bancorp acquisition.
Interest expense on savings deposits and interest bearing demand deposits increased $461
thousand or 84.6% and $533 thousand or 99.4%, respectively. The increase in interest
expense on savings deposits was due to a 65 basis point increase in the average rates paid
to 1.8% from 1.14% and, to a lesser extent, an increase in the average balance outstanding
of $34.5 million or 17.8% to $228 million from $194 million. The Citizens Bancorp
acquisition contributed an additional $30.9 million in average savings deposits with
higher average rates than existing savings deposits in the comparison. Interest on
interest bearing demand deposits increased due mainly to a higher average rate paid of 60
basis points to 1.5% and, to a lesser extent, an increase in the average balance
outstanding of $46.3 million or 18.6%. Excluding the $54.0 million additional average
interest bearing demand deposits attributed to the Citizens Bancorp acquisition, average
interest bearing demand deposits for the Company declined $7.7 million or 3.1% in the
comparison. The increase in average rates paid for deposits follows the trend of
increasing general short-term market interest rates between the comparable periods.

Interest expense on federal funds
purchased and securities sold under agreements to repurchase increased $335 thousand or
62.7% due mainly to a 219 basis point increase in the average rate paid to 4.7% from 2.5%
a year ago and is attributed to the increase in general short-term market interest rates
experienced since the comparable period of last year. Interest expense on other borrowed
funds consists primarily of Federal Home Loan Bank (FHLB) borrowings and
subordinated notes payable to unconsolidated trusts. Interest expense on other borrowed
funds was increased $392 thousand and is due to an increase in interest expense related to
the notes payable to unconsolidated trusts of $394 thousand. The Company issued $25.0
million subordinated notes payable issued in connection with the Companys trust
preferred securities offering during the third quarter of 2005.

The net interest margin (TE)
increased 26 basis points to 3.92% during the first quarter of 2006 compared to 3.66% in
the first quarter of 2005. The higher net interest margin is primarily attributed to a 19
basis point increase in the spread between rates earned on earning assets and the rates
paid on interest bearing liabilities to 3.55% in the current quarter from 3.36% in the
first quarter of 2005. The remaining seven basis point increase in margin is attributed to
the effect of noninterest bearing sources of funds. The effect of noninterest bearing
sources of funds on net interest margin typically increases in a rising rate environment.

---



The following tables present an
analysis of net interest income for the quarterly periods ended March 31.

|Distribution of Assets, Liabilities and Shareholders' Equity: Interest Rates and Interest Differential
|------------------------------------------------------------------------------------------------------
|
|
|Earning Assets                                                                                        
|Investment securities                                                                                 
|Taxable                                                                                               
|Nontaxable(1)                                                                                         
|Time deposits with banks, federal                                                                     
|funds sold and securities purchased                                                                   
|under agreements to resell                                                                            
|Loans(1,2,3)                                                                                          
|                                                                                                      
|Total earning assets                                                                                  
|                                                                                                      
|Allowance for loan losses                                                                             
|                                                                                                      
|Total earning assets, net of                                                                          
|allowance for loan losses                                                                             
|                                                                                                      
|Nonearning Assets                                                                                     
|Cash and due from banks                                                                               
|Premises and equipment, net                                                                           
|Other assets                                                                                          
|                                                                                                      
|Total assets                                                                                          
|                                                                                                      
|Interest Bearing Liabilities                                                                          
|Deposits                                                                                              
|Interest bearing demand                                                                               
|Savings                                                                                               
|Time                                                                                                  
|Federal funds purchased and                                                                           
|securities sold under agreements                                                                      
|to repurchase                                                                                         
|Other borrowed funds                                                                                  
|                                                                                                      
|Total interest bearing liabilities                                                                    
|                                                                                                      
|Noninterest Bearing Liabilities                                                                       
|Commonwealth of Kentucky deposits                                                                     
|Other demand deposits                                                                                 
|Other liabilities                                                                                     
|                                                                                                      
|Total liabilities                                                                                     
|                                                                                                      
|Shareholders' equity                                                                                  
|                                                                                                      
|Total liabilities and shareholders'                                                                   
|equity                                                                                                
|                                                                                                      
|Net interest income                                                                                   
|TE basis adjustment                                                                                   
|                                                                                                      
|Net interest income                                                                                   
|                                                                                                      
|Net interest spread                                                                                   
|Impact of noninterest bearing sources                                                                 
|of funds                                                                                              
|                                                                                                      
|Net interest margin                                                                                   
|                                                                                                      

(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 $810 thousand and $553
thousand in 2006 and 2005, respectively.

---



|Analysis of Changes in Net Interest Income (tax equivalent basis)
|-----------------------------------------------------------------
|
|
|Interest Income                                                  
|Taxable investment securities                                    
|Nontaxable investment securities(2)                              
|Time deposits with banks, federal funds sold and                 
|securities purchased under agreements to resell                  
|Loans(2)                                                         
|                                                                 
|Total interest income                                            
|                                                                 
|Interest Expense                                                 
|Interest bearing demand deposits                                 
|Savings deposits                                                 
|Time deposits                                                    
|Federal funds purchased and securities sold under                
|agreements to repurchase                                         
|Other borrowed funds                                             
|                                                                 
|Total interest expense                                           
|                                                                 
|Net interest income                                              
|                                                                 
|Percentage change                                                
|                                                                 

(1)The changes that 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%.

# Noninterest Income

Noninterest income totaled $5.2
million for the first quarter of 2006, a decrease of $314 thousand or 5.7% compared to
$5.5 million for the same period in the prior year. Noninterest income represents 18.4% of
total revenue for the current quarter, a decrease of 569 basis points from 24.4% for the
same period last year. The decrease in noninterest income is due primarily to a one-time
gain of $700 thousand on the sale of the Companys $3.2 million credit card portfolio
recorded in the first quarter of 2005. Excluding the effect of the one-time gain on the
credit card portfolio in the prior year, noninterest income rose $386 thousand or 8.0%.

Income from company-owned life
insurance was up $143 thousand or 61.9% due to higher crediting rates and additional
amounts outstanding attributed to the purchase of Citizens Bancorp. Non-deposit related
service charges, commissions, and fees were $715 thousand, an increase of $76 thousand or
11.9% driven mainly by $39 thousand and $20 thousand of additional loan servicing
fees and ATM surcharge fees, respectively, attributed to Citizens Bancorp
acquisition. Service charges and fees on deposits grew $62 thousand or 2.7% to $2.3
million. A significant portion of the increase is attributed to the Citizens Bancorp
acquisition, which added $171 thousand to this line item, primarily through an additional
$133 thousand of net overdraft charges. Excluding the effect of Citizens Bancorp, service
charges and fees on deposits declined $198 thousand or 8.8% led by lower fees from the
Commonwealth of Kentucky of $72 thousand, lower dormant account fees of $36 thousand, and
lower net overdraft charges of $31 thousand. Trust income increased $54 thousand or 13.6%
to $450 thousand as a result of $24 thousand of additional fees attributed to the Citizens
Northern acquisition along with higher assets under management at previously existing
locations. Allotment processing fees increased $44 thousand or 6.7% to $697 thousand
attributed to higher transaction volumes. Net gains on the sale of mortgage loans were up
$24 thousand or 12.8% to $212 thousand in the current quarter as origination activity
increased 9.5% in the comparison. Data processing fees dropped $22 thousand or 6.5% due
mainly to a higher percentage of electronic transactions versus paper transactions, which
are less costly and result in smaller revenue for the Company.

# Noninterest Expense

Total noninterest expenses were $13.6
million for the three months ended March 31, 2006, an increase of $2.1 million or 18.0%
compared to $11.5 million for the same period in 2005. The increase in noninterest
expenses are reflected across a broad range of line items. A significant factor
contributing to the higher expenses is the Citizens Bancorp acquisition during December
2005. The largest increases in noninterest expenses is attributed to salaries and employee
benefits, which jumped $1.5 million or 25.9%, net occupancy expense of $300 thousand or
39.6%, and data processing and communication expenses of $173 thousand or 16.7%.

The increase in salaries and employee
benefits resulted from the addition of 62 average full time equivalent employees from the
Citizens Bancorp acquisition, normal salary increases for existing employees, and a sharp
increase in benefits. Salaries and related payroll taxes increased $743 thousand or 15.1%,
with Citizens Bancorp accounting for $606 thousand of the increase. Benefit expenses grew
$760 thousand or 73.5%, with Citizens Bancorp contributing $176 thousand or 23.2% of the
increase. The increase in benefit expenses is mainly attributed to higher health care
costs in the comparable periods. Employee health care claims are up appreciably in the
current quarter compared to the same period a year earlier. Within specified contractual
limits, benefit costs move in tandem with their related claims. Noncash compensation
expense related to the Companys nonqualified stock option plan and employee stock
purchase plan was $40 thousand. There was no such expense recorded in the comparable
period last year since the current period includes the initial recognition of such costs
pursuant to SFAS No. 123(R).

Occupancy expense, net of rental
income, increased $300 thousand or 39.6% and totaled $1.1 million at March 31, 2006. The
increase was led by $108 thousand attributed to the Citizens Bancorp acquisition along
with normal operating increases in insurance of $59 thousand, rent expense of $33
thousand, and utilities of $25 thousand. Data processing and communications expense rose
$173 thousand or 16.7% to $1.2 million from $1.0 million. The increase is attributed to
the Citizens Bancorp acquisition, which added $227 thousand of expense for the current
quarter. A significant portion of this amount is related to data processing, which is
expected to decline once Citizens Bancorps processing system is converted to the
Companys. Bank franchise taxes increased $104 thousand or 28.8% led by $69 thousand
attributed to Citizens Bancorp. Correspondent bank fees declined $42 thousand or 18.9% and
is correlated to the decline in service charges and fees on deposits related to the
Commonwealth of Kentucky noted in the previous section of this report.

# Income Taxes

Income tax expense for the first
quarter of 2006 was $1.1 million, a decline of $33 thousand or 3.0% compared to the same
period a year earlier. The effective federal income tax rate decreased 179 basis points to
19.7% from 21.5% in the comparison. The change in the effective tax rate is due to an
increase in revenue from nontaxable sources, which outpaced the growth in revenue from
taxable sources.

# FINANCIAL CONDITION

Total assets were $1.7 billion on
March 31, 2006, a decrease of $19.3 million or 1.2% from the prior year-end. The decline
in assets was the result of a $21.7 million or 16.2% decrease in cash and cash
equivalents, a $19.5 million or 5.3% decrease in securities, partially offset by a growth
in net loans of $21.7 million or 2.1%. The decrease in total assets correlates to the
overall funding position of the Company. Cash and cash equivalents declined $21.7 million
due mainly to the payment of the prior year-end accrued purchase price of Citizens Bancorp
of $21.8 million. The balance of investment securities fell primarily to fund new loan
growth. Total deposits and shareholders equity were relatively unchanged at $1.3
billion and $155 million, respectively.

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 $1.7 billion for the first three months of 2006, an increase of $210 million or 14.4%
from year-end 2005 driven mainly by the Citizens Bancorp purchase during December 2005.
Average earning assets, primarily loans and securities, were $1.5 billion at March 31,
2006, an increase of $169 million or 13.0% from year-end 2005. Average earning assets
represent 88.1% of total average assets on March 31, 2006, a decrease of 111 basis points
compared to 89.2% at year-end 2005. The decline in the ratio of average earning assets
compared to total average assets is due mainly to the additional goodwill recorded in the
acquisition of Citizens Bancorp.

# Loans

Loans, net of unearned income,
totaled $1.1 billion at March 31, 2006, an increase of $21.4 million or 2.0% from year-end
2005. The composition of the loan portfolio is summarized in the table below.

|                                   
|-----------------------------------
|
|
|Commercial, financial,             
|and agriculture                    
|Real estate - construction         
|Real estate mortgage - residential 
|Real estate mortgage - farmland and
|Other commercial enterprises       
|Installment                        
|Lease financing                    
|                                   
|Total                              
|                                   

On average, loans represented 72.2%
of earning assets during the current period, an increase of 300 basis points from 69.2%
from year-end 2005. The increase was due mainly to the Citizens Bancorp acquisition, which
had an 86.2% average loans to average earning assets ratio for the quarter ended March 31,
2006. As loan demand fluctuates, the available funds are reallocated between loans and
temporary investments or investment securities, which typically involve a decrease in
credit risk and lower yields.

# Allowance for Loan Losses

The allowance for loan losses was
$12.2 million at March 31, 2006, a decrease of $304 thousand or 2.4% from the prior
year-end. The allowance for loan losses was 1.13% of loans net of unearned income at March
31, 2006, a decrease of 5 basis points compared to 1.18% at December 31, 2005. A $171
thousand negative provision for loan losses in the current quarter resulted in a $124
thousand decrease in provision for loan losses compared to the same period in 2005. The
negative provision for loan losses is attributed to continued improvement in the credit
quality of the Companys loan portfolio, including a decline in delinquent and
classified loans from year-end 2005, lower annualized net charge-offs as a percentage of
average loans outstanding, and lower historical loss ratios. Since year-end 2005, loans
past due 90 days or more and still accruing are down $706 thousand or 22.3% to $2.5
million, nonaccrual loans are down $80 thousand or 2.5%, and annualized net charge-offs as
a percentage of average loans are down 22 basis points to .05% at March 31, 2006 from .27%
at December 31, 2005. For the first quarter of 2006 compared to the first quarter of 2005,
loans past due 90 days or more and still accruing are were up $194 thousand or 8.6% to
$2.5 million offset by $759 thousand or 19.8% lower nonaccrual loans to $3.1 million. In
addition, annualized net charge-offs as a percentage of average loans declined 11 basis
points to .05% from .16% in the quarter to quarter comparison.

The allowance for loan losses as a
percentage of nonperforming loans totaled 220.1%, 197.5% and 203.9% at March 31, 2006,
December 31, 2005, and March 31, 2005, respectively. The increase is in the current
quarter compared to the prior year-end is primarily attributed to the $706 thousand
decline in loans past due 90 days or more and still accruing. Management continues to
emphasize collection efforts and evaluation of risks within the loan portfolio.

# Nonperforming Assets

Nonperforming assets for the Company
include nonperforming loans, other real estate owned, and other foreclosed assets.
Nonperforming loans consist of nonaccrual loans, restructured loans, and loans past due
ninety days or more on which interest is still accruing. Nonperforming assets totaled
$14.3 million at March 31, 2006, a decrease of $849 thousand or 5.6% from the prior
year-end. Nonperforming loans were $5.5 million at March 31, 2006, a $786 thousand or
12.5% decline compared to year-end 2005. The decline in nonperforming loans relates
primarily to loans past due 90 days or more, which improvement consisted of mainly a small
number of larger credits. Nonperforming loans represent .5% of loans net of unearned
income at March 31, 2006, a decrease of 9 basis points from .6% compared to year-end 2005.

Other real estate owned was $8.6
million at March 31, 2006. This represents a decrease of $156 thousand or 1.8% compared to
$8.8 million at year-end 2005. Approximately $7.9 million of the balance in other real
estate owned is attributed to foreclosures related to the Companys previous
disclosures regarding a financially troubled builder.

# 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. At March 31, 2006, temporary investments were $33.2
million, a decrease of $25.3 million or 43.3% compared to $58.5 million at year-end 2005.
Temporary investments averaged $44.9 million during the first three months of 2006, a
decrease of $23.1 million or 34.0% from year-end 2005. The decrease is primarily a result
of the Companys net funding position, which was driven by $21.8 million cash payment
to Citizens Northern stockholders during the current quarter. 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 $345 million on March 31, 2006, a decrease of $19.5 million or 5.3% from
year-end 2005.

Investment securities averaged $364
million in total for the current three months, an increase of $30.8 million or 9.2%
compared to the year-end 2005 balance. The increase in average investment securities was
driven by a $30.4 million net increase in U.S. Government agency securities. The Company
had a net unrealized loss on available for sale investment securities of $4.8 million at
March 31, 2006 compared to a net unrealized loss of $2.9 million at year-end 2005. The
$1.9 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 interest rates have continued to climb 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.

# Company-owned Life
Insurance

Company-owned life insurance totaled
$31.9 million at March 31, 2006, an increase of $360 thousand or 1.1% from $31.6 million
at year-end 2005. Income from company-owned life insurance was $374 thousand during the
first three months of 2006, an increase of $143 thousand or 61.9% compared to $231
thousand for the same period in 2005. The increase is due to higher crediting rates and an
additional $3.4 million balance outstanding attributed to the purchase of Citizens Bancorp
during the fourth quarter of 2005.

# 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
March 31, 2006, deposits totaled $1.3 billion, an increase of $4.6 million or .3% from
year-end 2005. The increase in deposits was due to a $3.9 million or 2.0% increase in
noninterest bearing deposits while interest bearing deposits grew an additional $650
thousand or 0.1%. The increase in noninterest bearing deposits is attributed to $11.0
million higher balance related to the Commonwealth of Kentucky. Excluding the Commonwealth
of Kentucky deposits, noninterest bearing deposits decreased $7.0 million or 4.0% in the
comparison. The net increase in interest bearing deposits include higher time deposits of
$13.4 million or 2.2%, offset by lower savings deposit balances of $7.8 million or 3.4%
and lower interest bearing demand deposits of $5.0 million or 1.7%. Average total deposits
were $1.3 billion for the first three months of 2006, an increase of $172 million or 14.7%
compared to year-end 2005. Net increases in average deposits were consistent throughout
most of the deposit portfolio as follows: noninterest bearing demand of $13.3 million or
6.8%; interest bearing demand of $52.2 million or 21.4%; savings accounts of $29.4 million
or 14.8%; and time deposits of $77.1 million or 14.4%. The increase in average deposits
outstanding is primarily attributed to the Citizens Northern acquisition late in the
fourth quarter of 2005.

# Borrowed Funds

Borrowed funds totaled $148 million
at March 31, 2006, a decrease of $1.4 million or 1.0% from $149 million at year-end 2005.
Total borrowed funds averaged $152 million, an increase of $10.7 million or 7.5% from $141
million at year-end 2005. The increase in average borrowed funds since year-end 2005 was
led by the $25.8 million of subordinated notes payable to unconsolidated trusts. The
average outstanding balances are higher due to the timing of the transaction, which took
place during the middle of 2005.

# LIQUIDITY

The Parent Companys primary use
of cash consists of dividend payments to its common shareholders, purchases of its common
stock, corporate acquisitions, interest expense on borrowings, and other general operating
purposes. Liquidity of the Parent Company depends primarily on the receipt of dividends
from its subsidiary banks and cash balances maintained. As of March 31, 2006 combined
retained earnings of the subsidiary banks was $65.4 million, of which $21.9 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 pay
dividends in order to provide funds to the Parent Company during the remainder of 2006
sufficient to meet its liquidity needs. 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
August 31, 2006. The Parent Company had cash balances of $6.1 million at March 31, 2006, a
decrease of $26.0 million or 81.2% from $32.1 million at year-end 2005. The $26.0 million
decrease in cash at the Parent Company is due primarily to $21.8 million cash paid during
the current quarter for the acquisition of Citizens Bancorp.

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 March 31, 2006 the Company had
approximately $200 million in additional borrowing capacity under various FHLB, federal
funds, and other borrowing agreements. However, there is no guarantee that these sources
of funds will continue to be available to the Company, or that current borrowings can be
refinanced upon maturity, although the Company is not aware of any events or uncertainties
that are likely to cause a decrease in our liquidity from these sources. The Company
intends to borrow additional funds for the cash portion of the purchase price for the
recently announced Citizens National acquisition.

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
Asset and Liability Management Committee, 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 securities available for sale. At March 31, 2006, such assets totaled
$444 million, a decrease of $39.3 million or 8.1% from year-end 2005. The decrease in
liquid assets is attributed to the cash paid in connection with the Citizens Bancorp
acquisition and the overall funding position of the Company. The overall funding position
of the Company changes as loan demand, deposit levels, and other sources and uses of funds
fluctuate.

Net cash provided by operating
activities was $4.2 million in the first three months of 2006 compared to net cash used in
operating activities of $6.6 million for the same period a year earlier. Net cash used in
investing activities was $26.8 million in the current period compared to $294 thousand in
the same period last year. The most significant items included in the $26.2 million higher
cash outflows of investing activities are the $21.8 million cash payment for the purchase
of Citizens Bancorp and $14.4 million net outflows related to increased loan activity,
partially offset by $10.5 million net cash received related to investment securities
transactions. Net cash provided by financing activities was $695 thousand for the three
months ended March 31, 2006, a decrease of $20.4 million compared to the same period a
year earlier. This decrease is related mainly to lower net inflows in the comparable
periods from the following: $12.2 million from federal funds purchased and securities sold
under agreements to repurchase; $5.4 million from other borrowings; and $2.4 million
related to deposit activity.

Commitments to extend credit are
considered in addressing the Companys liquidity management. The Company does not
expect these commitments to significantly effect the liquidity position in future periods.

# CAPITAL RESOURCES

Shareholders equity was $155
million on March 31, 2006, relatively unchanged from $154 million at December 31, 2005.
The net change in shareholders equity from year-end was $586 thousand or .4%.
Retained earnings grew $2.0 million or 1.2% as a result of $4.4 million of net income
partially offset by $2.4 million or $.33 per share in cash dividends declared. The Company
issued two thousand shares of common stock during the current quarter pursuant to each of
its nonqualified stock option and employee stock purchase plans. The issuance of these
shares increased shareholders equity by $117 thousand. Shareholders equity
also increased as a result of $42 thousand of noncash compensation expense attributed to
its nonqualified stock option and employee stock purchase plans. The Company purchased 10
thousand shares of its outstanding common stock during the current quarter, which reduced
shareholders equity $328 thousand.

Accumulated other comprehensive
income, consisting of net unrealized holding losses on available for sale securities (net
of tax), was $3.1 million at March 31, 2006, a decrease of $1.2 million from year-end
2005. 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 moved 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.

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 March 31, 2006, the regulatory minimums, and the regulatory standard for a
well-capitalized institution are as follows.

|                 
|-----------------
|
|Tier 1 risk based
|Total risk based 
|Leverage         
|                 

As of March 31, 2006, all of the
Companys subsidiary banks were in excess of the well-capitalized regulatory ratio
requirements as calculated under guidelines established by federal banking agencies.

# RECENTLY ISSUED
ACCOUNTING STANDARDS

Please refer to Note three of the
Companys March 31, 2006 unaudited consolidated financial statements included herein.

# Item 3. Quantitative and
Qualitative Disclosures About Market Risk

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
over future time periods. 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 of net interest income and net income. The forecasted results are then
adjusted for the effect of a gradual 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 March 31, 2006, the model
indicated that if rates were to gradually increase by 150 basis points during the calendar
year, then net interest income and net income would increase .19% and .29%, respectively
for the year ending December 31, 2006. The model indicated that if rates were to gradually
decrease by 150 basis points over the same period, then net interest income and net income
would decrease 1.43% and 3.49%, respectively.

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, primarily savings and interest bearing checking accounts, remains below 1.5%.
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.

# Item 4. Controls and
Procedures

The Registrants Chief Executive
Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the
Registrants disclosure controls and procedures as of the end of the period covered
by this report, and have concluded that the Registrants disclosure controls and
procedures were adequate and effective to ensure that all material information required to
be disclosed in this annual report has been made known to them in a timely fashion.

There were no significant changes in
the Registrants internal controls or in other factors that could significantly
affect these controls subsequent to the date of the Chief Executive Officer and Chief
Financial Officers evaluation, nor were there any significant deficiencies or material
weaknesses in the controls which required corrective action.

# PART II  OTHER
INFORMATION

# Item 1. Legal Proceedings

As of March 31, 2006, 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.

# Item 2 
Unregistered Sales of Equity Securities and Use of Proceeds

|                                     
|-------------------------------------
|
|January 1, 2006 to January 31, 2006  
|                                     
|February 1, 2006 to February 28, 2006
|                                     
|March 1, 2006 to March 31, 2006      
|                                     
|Total                                
|                                     

On January 27, 2003, the
Companys Board of Directors authorized the purchase of up to 300,000 shares of the
Companys outstanding common stock. No stated expiration date was established under
this plan.

# Item 6. Exhibits

| |  |  | List of
Exhibits
| |  |  | ----------------

| | 3i. |  | Amended
and Restated  Articles of  Incorporation  of Farmers  Capital  Bank  Corporation
 (incorporated  by reference to                Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998).
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3ii. |  | Amended
and  Restated  By-Laws of Farmers  Capital Bank  Corporation  (incorporated  by
 reference to Annual  Report of                Form 10-K for the fiscal year ended
December 31, 1997.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3iia |  | Amendments
to By-Laws of Farmers Capital Bank  Corporation  (incorporated by reference to Quarterly
Report on Form 10-Q                for the quarterly period ended March 31, 2003).
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 |  | CEO
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (page 26)
| | ---- |  | -------------------------------------------------------------------------------------

| | 31.2 |  | CFO
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (page 27)
| | ---- |  | -------------------------------------------------------------------------------------

| | 32 |  | CEO
and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Page 28)
| | -- |  | ---------------------------------------------------------------------------------------------

---

# SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

|                  |  |                                                
|----------------- |  | -----------------------------------------------
|Date: May 7, 2006 |  | /s/ G. Anthony Busseni                         
|                 
|                  |  | G. Anthony Busseni,                            
|                  |  | President and CEO (Principal Executive Officer)
|                 
|                 
|                 
|Date: 5-5-06      |  | /s/ C Douglas Carpenter                        
|                 
|                  |  | C. Douglas Carpenter,                          
|                  |  | Senior Vice President, Secretary, and CFO      
|                  |  | (Principal Financial and Accounting Officer)