UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, 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 June 30, 2004


                                       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             (I.R.S. Employer
or organization)                                        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) 227-1600

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 an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

                                 Yes |X| No ____

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 $0.125 per share
                 6,736,138 shares outstanding at August 4, 2004

<PAGE>







                                TABLE OF CONTENTS


Part I - Financial Information                                          Page No.
------------------------------                                          --------

     Item 1 - Financial Statements                                            3

         Unaudited Consolidated Balance Sheets -
             June 30, 2004 and December 31, 2003                              3

         Unaudited Consolidated Statements of Income -
             For the Three Months and Six Months Ended
             June 30, 2004 and June 30, 2003                                  4

         Unaudited Consolidated Statements of Comprehensive Income -
             For the Three Months and Six Months Ended
             June 30, 2004 and June 30, 2003                                  5

         Unaudited Consolidated Statements of Cash Flows -
             For the Six Months Ended
             June 30, 2004 and June 30, 2003                                  6

         Unaudited Consolidated Statements of Changes in
             Shareholders' Equity -
             For the Six Months Ended
             June 30, 2004 and June 30, 2003                                  7

         Notes to Unaudited Consolidated Financial Statements                 8

     Item 2 - Management's Discussion and Analysis of Financial
                Condition and Results of Operations                          12

     Item 3 - Quantitative and Qualitative Disclosures About Market Risk     25

     Item 4 - Controls and Procedures                                        25

Part II - Other Information

     Item 1 - Legal Proceedings                                              25

     Item 2 - Changes in Securities, Use of Proceeds and Issuer Repurchases
                  of Equity Securities                                       25

     Item 4 - Submission of Matters to a Vote of Security Holders            26

     Item 6 - Exhibits and Reports on Form 8-K                               26

     Signatures                                                              28



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------------------------------------------
                                                                                              June 30,         December 31,
(In thousands, except share data)                                                               2004               2003
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                <C>
ASSETS
Cash and cash equivalents:
     Cash and due from banks                                                               $    64,341        $    99,628
     Interest bearing deposits in other banks                                                    2,838              3,154
     Federal funds sold and securities purchased under agreements to resell                      3,525             24,434
---------------------------------------------------------------------------------------------------------------------------
          Total cash and cash equivalents                                                       70,704            127,216
---------------------------------------------------------------------------------------------------------------------------
Investment securities:
     Available for sale, amortized cost of $355,450 (2004) and $354,905 (2003)                 351,975            358,169
     Held to maturity, fair value of $23,595 (2004) and $26,201 (2003)                          22,673             24,789
---------------------------------------------------------------------------------------------------------------------------
          Total investment securities                                                          374,648            382,958
---------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income                                                                  792,894            755,945
Allowance for loan losses                                                                      (11,419)           (11,292)
---------------------------------------------------------------------------------------------------------------------------
          Loans, net                                                                           781,475            744,653
---------------------------------------------------------------------------------------------------------------------------

Premises and equipment, net                                                                     24,131             24,115
Company-owned life insurance                                                                    26,267             25,510
Other assets                                                                                    16,944             14,113
---------------------------------------------------------------------------------------------------------------------------
          Total assets                                                                     $ 1,294,169        $ 1,318,565
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
     Noninterest bearing                                                                   $   178,486        $   226,650
     Interest bearing                                                                          824,095            841,672
---------------------------------------------------------------------------------------------------------------------------
          Total deposits                                                                     1,002,581          1,068,322
---------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase                     101,148             56,698
Other short-term borrowings                                                                      1,662                418
Long-term debt                                                                                  53,601             56,413
Dividends payable                                                                                2,221              2,215
Other liabilities                                                                                7,573              8,028
---------------------------------------------------------------------------------------------------------------------------
          Total liabilities                                                                  1,168,786          1,192,094
---------------------------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Common stock, par value $.125 per share
     9,608,000 shares authorized; 8,177,725 and 8,160,919
     shares issued at June 30, 2004 and December 31, 2003, respectively                          1,022              1,020
Capital surplus                                                                                 19,226             18,670
Retained earnings                                                                              148,297            145,489
Treasury stock, at cost; 1,446,934 and 1,444,739 shares
     at June 30, 2004 and December 31, 2003, respectively                                      (40,903)           (40,830)
Accumulated other comprehensive (loss) income                                                   (2,259)             2,122
---------------------------------------------------------------------------------------------------------------------------
          Total shareholders' equity                                                           125,383            126,471
---------------------------------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity                                       $ 1,294,169        $ 1,318,565
---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------------------------------------------------------
                                                                          Three Months Ended                  Six Months Ended
                                                                                 June 30,                          June 30,
(In thousands, except per share data)                                     2004           2003               2004           2003
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>                <C>            <C>
INTEREST INCOME
Interest and fees on loans                                            $ 11,802       $ 12,139           $ 23,531       $ 24,368
Interest on investment securities:
     Taxable                                                             2,021          1,201              3,985          3,500
     Nontaxable                                                            985            780              1,931          1,583
Interest on deposits in other banks                                          8             22                 18             37
Interest of federal funds sold and securities purchased
     under agreements to resell                                             77            215                167            377
--------------------------------------------------------------------------------------------------------------------------------
          Total interest income                                         14,893         14,357             29,632         29,865
--------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits                                                     3,602          4,316              7,276          8,963
Interest on federal funds purchased and securities sold
      under agreements to repurchase                                       249            243                467            502
Interest on other borrowed funds                                           493            557                995          1,107
--------------------------------------------------------------------------------------------------------------------------------
          Total interest expense                                         4,344          5,116              8,738         10,572
--------------------------------------------------------------------------------------------------------------------------------
          Net interest income                                           10,549          9,241             20,894         19,293
--------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses                                                  448            351                813            736
--------------------------------------------------------------------------------------------------------------------------------
          Net interest income after provision for loan losses           10,101          8,890             20,081         18,557

NONINTEREST INCOME
Service charges and fees on deposits                                     2,089          2,018              3,983          3,853
Other service charges, commissions, and fees                               890            853              1,774          1,773
Data processing income                                                     381            389                715            734
Trust income                                                               414            413                828            812
Investment securities (losses) gains, net                                  (17)            (3)                65            144
Gain on sale of mortgage loans                                              71            323                115            512
Income from company-owned life insurance                                   362            408                767            673
Other                                                                       46             77                 76            143
--------------------------------------------------------------------------------------------------------------------------------
          Total noninterest income                                       4,236          4,478              8,323          8,644
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits                                           5,383          5,213             10,777         10,281
Occupancy expenses, net                                                    634            642              1,296          1,300
Equipment expenses                                                         924            924              1,874          1,861
Bank franchise tax                                                         337            331                678            665
Other                                                                    2,351          2,358              4,686          4,500
--------------------------------------------------------------------------------------------------------------------------------
          Total noninterest expense                                      9,629          9,468             19,311         18,607
--------------------------------------------------------------------------------------------------------------------------------
          Income before income taxes                                     4,708          3,900              9,093          8,594
--------------------------------------------------------------------------------------------------------------------------------
Income tax expense                                                         967            874              1,844          1,975
--------------------------------------------------------------------------------------------------------------------------------
          Net income                                                  $  3,741       $  3,026           $  7,249       $  6,619
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
     Basic                                                            $    .56       $    .45           $   1.08       $    .98
     Diluted                                                               .55            .45               1.07            .98
WEIGHTED AVERAGE SHARES OUTSTANDING
     Basic                                                               6,730          6,723              6,727          6,743
     Diluted                                                             6,778          6,765              6,780          6,781
--------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-------------------------------------------------------------------------------------------------------------------------
                                                                        Three Months Ended             Six Months Ended
                                                                              June 30,                June 30,
 (In thousands)                                                         2004           2003           2004          2003
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>            <C>           <C>
Net Income                                                          $  3,741        $ 3,026        $ 7,249       $ 6,619
Other comprehensive income:
     Unrealized holding (loss) gain on available for sale
     securities arising during the period, net of tax
     of $2,633, $606, $2,332, and $207, respectively                  (4,890)         1,125         (4,330)          385

Reclassification adjustment for prior period
     unrealized gain recognized during current period,
     net of tax of $9, $0, $27, and $61, respectively                    (16)                          (51)         (114)
-------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                            (4,906)         1,125         (4,381)          271
-------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME                                                $ (1,165)       $ 4,151        $ 2,868       $ 6,890
-------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, (In thousands)                                                               2004            2003
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                                 $     7,249    $      6,619
     Adjustments to reconcile net income to net cash provided by operating activities:
          Depreciation and amortization                                                               1,437           1,496
          Net amortization of investment security premiums and (discounts):
                Available for sale                                                                      928           1,631
                Held to maturity                                                                        (22)            (36)
          Provision for loan losses                                                                     813             736
          Noncash compensation expense                                                                  138             213
          Mortgage loans originated for sale                                                         (9,629)        (34,986)
          Proceeds from sale of mortgage loans                                                        8,696          33,991
          Deferred income tax  (benefit) expense                                                       (490)            106
          Gains on sale of mortgage loans, net                                                         (115)           (512)
          Gains on sale of premises and equipment, net                                                   (2)             (4)
          Gains on sale of available for sale investment securities, net                                (65)           (144)
          Decrease in accrued interest receivable                                                       141             596
          Income from company-owned life insurance                                                     (757)           (673)
          (Increase) decrease in other assets                                                        (1,860)            551
          Decrease in accrued interest payable                                                          (65)           (292)
          Increase in other liabilities                                                               1,349           1,337
-----------------------------------------------------------------------------------------------------------------------------------
             Net cash provided by operating activities                                                7,746          10,629
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from maturities and calls of investment securities:
          Available for sale                                                                        169,136         223,257
          Held to maturity                                                                            2,140           2,788
     Proceeds from sale of available for sale investment securities                                  35,039          74,050
     Purchase of available for sale investment securities                                          (205,585)       (186,561)
     Loans originated for investment, net of principal collected                                    (36,587)         (3,408)
     Purchase of company-owned life insurance                                                                       (24,001)
     Purchase of premises and equipment                                                              (1,454)         (1,562)
     Proceeds from sale of equipment                                                                      3               6
-----------------------------------------------------------------------------------------------------------------------------------
             Net cash (used in) provided by  investing activities                                   (37,308)         84,569
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net (decrease) increase in deposits                                                            (65,741)         22,881
     Net increase (decrease) in securities sold under agreements to repurchase                       44,450         (42,340)
     Proceeds from long-term debt                                                                     1,800           3,874
     Repayments of long-term debt                                                                    (4,612)         (1,654)
     Net increase (decrease) in other short-term borrowings                                           1,244             (32)
     Dividends paid                                                                                  (4,435)         (4,349)
     Purchase of common stock                                                                           (73)         (2,539)
     Stock options exercised                                                                            417             163
-----------------------------------------------------------------------------------------------------------------------------------
             Net cash used in provided by financing activities                                      (26,950)        (23,996)
-----------------------------------------------------------------------------------------------------------------------------------
             Net (decrease) increase in cash and cash equivalents                                   (56,512)         71,202
-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                                                      127,216          67,101
-----------------------------------------------------------------------------------------------------------------------------------
             Cash and cash equivalents at end of period                                         $    70,704    $    138,303
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures Cash paid during the period for:
     Interest                                                                                   $     8,803    $     10,864
     Income taxes                                                                                     1,450             500
Transfers from loans to repossessed assets                                                            2,954             183
Cash dividend declared and unpaid                                                                     2,221           2,151
-----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                                  Accumulated
                                                                                                          Other            Total
Six months ended                         Common Stock       Capital    Retained    Treasury Stock     Comprehensive    Shareholders'
June 30, 2004 and 2003                Shares     Amount     Surplus    Earnings   Shares     Amount      Income           Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>               <C>       <C>        <C>        <C>         <C>     <C>             <C>             <C>
  Balance at January 1, 2004           8,161     $1,020     $18,670    $145,489    1,445   $(40,830)       $ 2,122         $126,471
Net income                                                                7,249                                               7,249
Other comprehensive income                                                                                  (4,381)          (4,381)
Cash dividends declared,
  $.66 per share                                                         (4,441)                                             (4,441)
Purchase of common stock                                                               2        (73)                            (73)
Stock options exercised,
   including related tax benefits         17          2         418                                                             420
Noncash compensation expense
  attributed to stock option grants                             138                                                             138
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2004             8,178     $1,022     $19,226    $148,297    1,447   $(40,903)       $(2,259)        $125,383
------------------------------------------------------------------------------------------------------------------------------------



------------------------------------------------------------------------------------------------------------------------------------
  Balance at January 1, 2003           8,136     $1,017     $17,623    $141,199    1,344   $(37,627)       $ 3,561         $125,773
Net income                                                                6,619                                               6,619
Other comprehensive income                                                                                     271              271
Cash dividends declared,
  $.64 per share                                                         (4,309)                                             (4,309)
Purchase of common stock                                                              81     (2,539)                         (2,539)
Stock options exercised                    6          1         162                                                             163
Noncash compensation expense
  attributed to stock option grants                             213                                                             213
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2003             8,142     $1,018     $17,998    $143,509    1,425   $(40,166)       $ 3,832         $126,191
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>

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
wholly-owned six bank and one nonbank  subsidiaries.  Bank subsidiaries  include
Farmers Bank & Capital Trust Co. ("Farmers Bank") in Frankfort,  KY; United Bank
& Trust Co. in Versailles,  KY; Lawrenceburg  National Bank in Harrodsburg,  KY;
First  Citizens Bank in  Shepherdsville,  KY;  Farmers Bank and Trust Company in
Georgetown, KY; and Kentucky Banking Centers, Inc. in Glasgow, KY. The Company's
nonbank subsidiary is FCB Services,  Inc., a data processing  subsidiary located
in  Frankfort,  KY.  Intercompany  transactions  and balances are  eliminated in
consolidation. Leasing One Corporation and Farmers Capital Insurance Corporation
are wholly-owned  subsidiaries of Farmers Bank. Pro Mortgage Partners,  LLC is a
wholly-owned subsidiary of Farmers Bank and Trust Company.

The Company  provides  financial  services  through its 28 locations  throughout
Central  Kentucky  to  individual,   business,   agriculture,   government,  and
educational customers.  Its primary deposit products are checking,  savings, and
term  certificate  accounts.   Its  primary  lending  products  are  residential
mortgage,  commercial lending and leasing, and installment loans.  Substantially
all loans and  leases are  secured by  specific  items of  collateral  including
business assets,  consumer  assets,  and commercial and residential real estate.
Commercial  loans and  leases  are  expected  to be  repaid  from cash flow from
operations of businesses.  Farmers Bank has served as the general depository for
the Commonwealth of Kentucky for over 70 years and also provides  investment and
other services to the Commonwealth.  Other services include, but are not limited
to,  cash  management  services,  issuing  letters of credit,  safe  deposit box
rental,  and providing funds transfer  services.  Other  financial  instruments,
which  potentially  represent  concentrations  of credit risk,  include  deposit
accounts in other financial institutions and federal funds sold.

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, 2003.

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. 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 June 30, 2004 and 2003.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------
                                                          Three Months Ended         Six Months Ended
                                                                June 30,                  June 30,
(In thousands, except per share data)                     2004          2003         2004         2003
-------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>          <C>          <C>
Net income, basic and diluted                          $ 3,741       $ 3,026      $ 7,249      $ 6,619
-------------------------------------------------------------------------------------------------------

Average shares outstanding                               6,730         6,723        6,727        6,743
Effect of dilutive stock options                            48            42           53           38
-------------------------------------------------------------------------------------------------------
Average diluted shares outstanding                       6,778         6,765        6,780        6,781
-------------------------------------------------------------------------------------------------------

Net income per share, basic                             $  .56        $  .45      $  1.08       $  .98
Net income per share, diluted                              .55           .45         1.07          .98
-------------------------------------------------------------------------------------------------------
</TABLE>


4. STOCK-BASED COMPENSATION

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

The Company granted 54,000  additional  options during 2000 in which there is no
compensation  expense being recognized  pursuant to APB No. 25. Had compensation
expense been determined  under the fair value method  described in the Financial
Accounting  Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 123,  Accounting for Stock-Based  Compensation,  as amended by SFAS
No. 148, Accounting for Stock-Based  Compensation-Transition and Disclosure, the
Company's net income and income per common share would have been as shown in the
table below.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
                                                                   Three Months Ended          Six Months Ended
                                                                        June 30,                   June 30,
(In thousands, except per share data)                              2004         2003          2004          2003
-----------------------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>           <C>           <C>
NET INCOME
  As reported                                                   $ 3,741      $ 3,026       $ 7,249       $ 6,619
  Add:  Stock-based employee compensation expense
        included in reported net income, net of
        related tax effects                                          45           68            90           138
  Less:  Stock-based compensation expense determined
         under fair value based method for all awards, net
         of related tax effects                                     (58)         (83)         (117)         (168)
-----------------------------------------------------------------------------------------------------------------
Proforma                                                        $ 3,728      $ 3,011       $ 7,222       $ 6,589
-----------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
  Basic, as reported                                            $   .56      $   .45       $  1.08       $   .98
  Basic, proforma                                                   .55          .45          1.07           .98

  Diluted, as reported                                              .55          .45          1.07           .98
  Diluted, proforma                                                 .55          .44          1.07           .97
-----------------------------------------------------------------------------------------------------------------
</TABLE>

The fair value of the options granted are estimated as of the  measurement  date
using the Black-Scholes option pricing model with the following weighted average
assumptions  used for grants in 2000 and 1997,  respectively:  dividend yield of
3.12% and 3.18%; expected volatility of 29.6% and 23.4%; risk-free interest rate
of 6.71% and  5.75%;  and  expected  life of seven  years for both  grants.  The
weighted  average fair value of options  granted  during 2000 and 1997 was $9.25
and $16.11 per share, respectively.

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

5. EMPLOYEE STOCK PURCHASE PLAN

The Company's 2004 Employee Stock Purchase Plan was approved by its shareholders
at the  Company's  2004 annual  meeting on May 11, 2004.  This Plan is effective
beginning July 1, 2004.

6. SUBSEQUENT EVENT - CITIZENS BANK (KENTUCKY), INC.

On July 2, 2004 the  Company  announced  that the  required  approvals  from the
appropriate  regulatory  authorities  were received and that the  acquisition of
100% of the  outstanding  common  shares of Citizens  Bank  (Kentucky),  Inc. in
Georgetown,   Kentucky  had  been  completed.   The  results  presented  in  the
consolidated  financial  statements herein do not include any results related to
this acquisition, which occurred during the third quarter of 2004.

The total cost  related to this  acquisition,  which has been paid  entirely  in
cash,  was  approximately  $14.6  million.  The  following  table  presents  the
estimated fair value of the assets acquired and the  liabilities  assumed at the
date of purchase. Additional legal expenses incurred but unbilled will result in
further purchase price and goodwill adjustments.

At July 1, 2004 ($000's)
------------------------------------------------------------------------------

ASSETS
Cash & equivalents                                                  $   8,768
Investment securities                                                  11,600
Loan, net of unearned income & allowance for loan losses               50,102
Goodwill                                                                5,183
Core deposit intangible                                                 2,230
Other assets                                                            4,897
------------------------------------------------------------------------------
   Total assets                                                     $  82,780
------------------------------------------------------------------------------

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

NET ASSETS ACQUIRED                                                 $  14,555
------------------------------------------------------------------------------

7. SUBSEQUENT EVENT - FINANCIAL NATIONAL ELECTRONIC TRANSFER, INC.

On July 2, 2004 the  Company  announced  that First  Citizens  Bank had signed a
definitive  agreement to acquire Financial National  Electronic  Transfer,  Inc.
("FINET") in a cash  transaction  for $6.5 million.  FINET is a data  processing
company that  specializes  in the  processing  of federal  benefit  payments and
military  allotments and is  headquartered  in Radcliff,  Kentucky.  The results
presented herein do not include any results related to this  acquisition,  which
is expected to close late during the third  quarter or in the fourth  quarter of
2004.


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

                   SECOND QUARTER 2004 VS. SECOND QUARTER 2003
                   -------------------------------------------

The Company  reported net income of $3.7 million for the second quarter of 2004,
an increase of $715  thousand or 23.6%  compared to $3.0  million for the second
quarter of 2003.  Basic and diluted net income per share for the current quarter
was $.56 and $.55, an increase of $.11 or 24.4% and $.10 or 22.2%, respectively.

The increase in net income for the three months ended June 30, 2004 is primarily
attributed to an increase in net interest  income.  Net interest  income for the
current quarter was $10.5 million, an increase of $1.3 million or 14.2% compared
to the same period a year  earlier.  The increase in net interest  income in the
quarterly  comparison  can be attributed to both an increase in interest  income
totaling $536 thousand or 3.7% along with a decline in interest  expense of $772
thousand or 15.1%.

Lower  noninterest  income and an increase  in  noninterest  expenses  partially
offset the reported  increase in net interest income in the current  three-month
reporting  period.  Noninterest  income  declined  $242  thousand or 5.4% in the
three-month  comparison  primarily  due to lower  gains on the sale of  mortgage
loans of $252 thousand.  The decline is the result of lower origination activity
in the current period.  Noninterest expenses increased $161 thousand or 1.7% due
mainly to increases in salaries and employee  benefits of $170 thousand or 3.3%.
The  increase in salaries and  employee  benefits was affected by normal  salary
increases  and an  increase  in the  average  number  of  full  time  equivalent
employees of seven.  The effective  income tax rate declined 187 basis points to
20.5% for the three  months  ended June 30,  2004  compared to the same period a
year earlier.

The return on average  assets  ("ROA")  was 1.15% for the  current  quarter,  an
increase of 17 basis  points  compared to .98%  reported  for the same period in
2003.  The  increase  in ROA was  driven  by a 35 basis  point  increase  in net
interest margin to 3.83% from 3.48%. The increase in net interest margin,  along
with a decrease in noninterest expenses as a percentage of average total assets,
more than offset the following which negatively  impacted ROA: a decrease in the
earning asset ratio contributing nine basis points; an increase in the provision
for loan losses  contributing  three  basis  points;  a decrease in  noninterest
income   contributing  15  basis  points;   and  an  increase  in  income  taxes
contributing three basis points. Return on average equity ("ROE") was 11.93% for
the second  quarter of 2004  compared to 9.71% in the same period of 2003.  This
represents  an  increase  of 222 basis  points and is  attributed  to higher net
income  reported in the current  period  coupled  with an increase in  financial
leverage compared to the same period a year ago. Financial  leverage  represents
the degree in which  borrowed  funds,  as  opposed  to  equity,  are used in the
funding  of  assets.  Financial  leverage  increased  to 10.8%  from 9.8% in the
comparison.


NET INTEREST INCOME
-------------------

Although many economic  measures are beginning to improve,  weaknesses remain in
the  overall  economic  environment.  The  general  trend of the  interest  rate
environment for 2003 was downward  primarily as a result of previous  short-term
interest rate reductions taken by the Federal Reserve Board ("Fed"). The effects
of the  downward  trend  in  general  interest  rates  for  2003  have  began to
positively  affect the Company's net interest  income during 2004. A significant
amount of time deposits,  the largest component of interest bearing liabilities,
have repriced to lower rates and have contributed to an increase in net interest
income for the current  period.  The  repricing of time deposits for the Company
have generally taken longer to occur than for other interest paying  liabilities
and   interest   earning   assets  due  to  their  fixed   nature  and  maturity
characteristics.  The increase in the short-term  federal funds rate of 25 basis
points by the Fed near the end of current quarter did not  significantly  impact
the Company's net interest income during the reporting periods.

The  Company's  tax  equivalent  ("TE") yield on earning  assets for the current
three  months was 5.3%,  unchanged  from the same period a year ago. The cost of
funds for the  current  three  months  was 1.8%,  a decline  of 42 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  while
maintaining  relatively low interest rates paid on interest bearing liabilities.
However,  many of the Company's  funding sources,  particularly  deposits,  have
neared their repricing floors. Average earning assets increased $49.2 million or
4.4% to $1.2  billion in the  quarterly  comparison.  As a  percentage  of total
average assets, earning assets decreased 137 basis points to 89.06% from 90.43%.
This  decrease  had the  effect  of  reducing  ROA by nine  basis  points in the
quarterly comparison.

Interest  income  totaled  $14.9  million  for the second  quarter  of 2004,  an
increase of $536 thousand or 3.7% compared to the same period in the prior year.
Interest expense totaled $4.3 million, a decrease of $772 thousand or 15.1%. Net
interest  income rose $1.3 million or 14.2% in the  comparison and totaled $10.5
million for the three months ended June 30, 2004.

Interest and fees on loans  totaled $11.8  million,  a decrease of $337 thousand
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$40.9 million or 5.5% to $783.1  million in the comparison due to increased loan
demand in a low rate environment. The tax equivalent yield on loans decreased 52
basis points to 6.1% from 6.6% and offset the effects of higher average balances
on interest income. Interest on taxable securities was $2.0 million, an increase
of $820  thousand or 68.3% due  primarily  to an  increase  in the average  rate
earned, which was negatively affected by the unusually high premium amortization
on mortgage-backed  securities in the prior year. Prepayments on mortgage-backed
securities in the prior year increased greatly due to corresponding  refinancing
of home mortgages that serve as collateral for these investment securities.  The
increase in activity  was directly  related to the  historic  low interest  rate
environment  that existed  throughout  much of 2003.  The average rate earned on
taxable  securities  increased  114 basis  points  to 3.2%  from 2.1%  while the
average  balance  increased to $252.5 million from $231.3  million.  Interest on
nontaxable  securities  increased  $205 thousand or 26.3% due to a $26.0 million
increase  in the  average  balance  to $96.2  million  from $70.1  million.  The
increase in average  nontaxable  securities  offset a 47 basis point  decline in
yield to 6.1% from 6.6%.  Interest on  short-term  investments,  including  time
deposits in other banks,  federal funds sold,  and  securities  purchased  under
agreements to resell,  decreased $152 thousand due primarily to a combination of
both a decrease in the average balance to $34.6 million from $73.6 million and a
decrease in average rate earned on these  investments of 30 basis points to 1.0%
from 1.3%.

Interest expense on deposits decreased $714 thousand or 16.5% to $3.6 million in
the quarterly  comparison.  This decrease resulted from a general decline in the
average rate paid throughout the deposit portfolio,  particularly time deposits,
and  correlates  with  the  general  decline  in  market  interest  rates in the
reporting  periods.  The  decline in the  average  rates  paid  offset a general
increase in average balances. The decline in interest expense on deposits was as
follows:  time deposits $649 thousand or 18.3%; interest bearing demand deposits
$62  thousand or 17.6%;  and savings  deposits $3 thousand or 0.7%.  The average
rate paid on time deposits,  the largest component of interest bearing deposits,
was 2.7% for the second  quarter of 2004 compared to 3.3% for the same period of
2003.  The average  balance of time deposits  increased  $4.3 million or 1.0% to
$430.5  million.  The average  rate paid on  interest  bearing  demand  deposits
declined 16 basis points to .49% from .65% while the average  balance  increased
$17.8  million  or 8.1% to $236.8  million.  The  average  rate paid on  savings
deposits  decreased 16 basis  points to .8% from 1.0% while the average  balance
increased $29.1 million or 17.9% to $192.1 million from $163.0 million. Interest
expense on overnight  borrowings,  consisting  of federal  funds  purchased  and
securities sold under agreements to repurchase, increased $6 thousand as a $16.1
million  increase in the average  balance  offset a decline in the average  rate
paid of 24 basis points to 1.2% from 1.4%.  Interest  expense on other  borrowed
funds  decreased $64 thousand in the comparison due mainly to a reduction in the
outstanding  average  balance,  which  offset a 30 basis  point  increase in the
average rate paid to 3.7% from 3.4%. The average balance of other borrowed funds
totaled $54.3 million, a decrease of $12.4 million or 18.6% in the comparison.

The net  interest  margin (TE)  increased  35 basis  points to 3.83%  during the
second  quarter of 2004  compared  to 3.48% in the second  quarter of 2003.  The
increase in net  interest  margin is  primarily  attributed  to a 43 basis point
increase in the spread between rates earned on earning assets and the rates paid
on interest  bearing  liabilities to 3.58% in the current  quarter from 3.15% in
the second quarter of 2003. The effect of noninterest  bearing  sources of funds
offset the 43 basis point increase in spread by 8 basis points, resulting in the
increase in net interest  margin.  The effect of noninterest  bearing sources of
funds on net interest margin typically declines in a falling rate environment.

The  following  tables  present  an  analysis  of net  interest  income  for the
quarterly periods ended June 30.
<TABLE>
<CAPTION>

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
-----------------------------------------------------------------------------------------------------------------------------------
Quarter Ended June 30,                                         2004                                         2003
-----------------------------------------------------------------------------------------------------------------------------------
                                             Average                         Average         Average                    Average
(In thousands)                               Balance         Interest          Rate          Balance      Interest        Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>                <C>      <C>             <C>              <C>
EARNING ASSETS
Investment securities
  Taxable                                 $   252,474        $  2,021           3.22%    $   231,260     $  1,201         2.08%
  Nontaxable1                                  96,168           1,456           6.09          70,133        1,147         6.56
Time deposits with banks, federal
  funds sold and securities purchased
  under agreements to resell                   34,595              85            .99          73,562          237         1.29
Loans1,2,3                                    783,088          11,885           6.10         742,142       12,245         6.62
-----------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                   1,166,325        $ 15,447           5.33%      1,117,097     $ 14,830         5.32%
-----------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                     (11,383)                                       (11,248)
-----------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net of
     allowance for loan losses              1,154,942                                      1,105,849
-----------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                        91,741                                         70,281
Premises and equipment, net                    24,242                                         24,314
Other assets                                   38,611                                         34,838
-----------------------------------------------------------------------------------------------------------------------------------
     Total assets                         $ 1,309,536                                    $ 1,235,282
-----------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                 $   236,795        $    291            .49%    $   219,011     $    353          .65%
  Savings                                     192,147             415            .87         163,032          418         1.03
  Time                                        430,452           2,896           2.71         426,174        3,545         3.34
Federal funds purchased and
  securities sold under agreements
  to repurchase                                84,941             249           1.18          68,815          243         1.42
Other borrowed funds                           54,309             493           3.65          66,747          557         3.35
-----------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities       998,644        $  4,344           1.75%        943,779     $  5,116         2.17%
-----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits              41,075                                         38,662
Other demand deposits                         134,952                                        122,979
Other liabilities                               8,734                                          4,845
-----------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                      1,183,405                                      1,110,265
-----------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                     126,131                                        125,017
-----------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity                 $ 1,309,536                                    $ 1,235,282
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            11,103                                       9,714
TE basis adjustment                                              (554)                                       (473)
-----------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                     $ 10,549                                    $  9,241
-----------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                             3.58%                                     3.15%
Impact of noninterest bearing sources
  of funds                                                                       .25                                       .33
-----------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                             3.83%                                     3.48%
-----------------------------------------------------------------------------------------------------------------------------------

1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amounted to $625 thousand and $612 thousand in 2004 and 2003, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
-----------------------------------------------------------------------------------------------------
(In thousands)                                           Variance         Variance Attributed to
Quarter Ended June 30,                                  2004/20031         Volume          Rate
-----------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>          <C>
INTEREST INCOME
Taxable investment securities                              $  820           $ 118        $   702
Nontaxable investment securities2                             309             812           (503)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell           (152)           (106)           (46)
Loans2                                                       (360)          3,036         (3,396)
-----------------------------------------------------------------------------------------------------
     Total interest income                                    617           3,860         (3,243)
-----------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest bearing demand deposits                              (62)            159           (221)
Savings deposits                                               (3)            278           (281)
Time deposits                                                (649)            239           (888)
Federal funds purchased and securities sold under
   agreements to repurchase                                     6             195           (189)
Other borrowed funds                                          (64)           (314)           250
-----------------------------------------------------------------------------------------------------
     Total interest expense                                  (772)            557         (1,329)
-----------------------------------------------------------------------------------------------------
Net interest income                                       $ 1,389         $ 3,303       $ (1,914)
-----------------------------------------------------------------------------------------------------
Percentage change                                           100.0%          237.8%        (137.8)%
-----------------------------------------------------------------------------------------------------

1The 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.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
</TABLE>

NONINTEREST INCOME
------------------

Noninterest  income was $4.2 million for the current quarter, a decrease of $242
thousand or 5.4% compared to the second  quarter of the prior year.  The largest
component of noninterest income,  service charges and fees on deposits,  totaled
$2.1  million at June 30,  2004,  an  increase  of $71  thousand  or 3.5% due to
increased  overdraft  volumes.  Other  service  charges,  commissions,  and fees
increased $37 thousand or 4.3% to $890  thousand.  Data  processing  fees dipped
slightly to $381 thousand from $389 thousand in the comparison. Trust income was
relatively  unchanged  at $414  thousand  compared to $413  thousand in the same
quarter a year earlier.  Net losses on the sale of available for sale securities
for the current quarter were $17 thousand  compared to net losses of $3 thousand
in the prior year as the Company  continues  its efforts to properly  manage its
balance sheet composition in the current economic environment.  Net gains on the
sale of mortgage loans were $71 thousand,  a decrease of $252 thousand from $323
thousand in the prior year.  Mortgage loans  originated for sale, which began to
decline in the fourth  quarter of 2003,  declined  $13.5 million or 69.6% in the
current quarterly  comparison.  Mortgage loan activity in the current quarter is
reflective  of lower  refinancing  activity  compared  to the same period a year
earlier.  Consumer  refinancing  activity  in  the  prior  year  was  driven  by
historically low interest rates.  Income from the purchase of company-owned life
insurance  declined  $46  thousand  or 11.3%  to $362  thousand  in the  current
three-month period as a result of the structure of fee vesting schedules.  Other
noninterest income totaled $46 thousand,  a decrease of $31 thousand compared to
the prior period.

NONINTEREST EXPENSE
-------------------

Total noninterest  expenses were $9.6 million for the second quarter of 2004, an
increase  of $161  thousand  or 1.7%  compared  to the  second  quarter of 2003.
Salaries  and  employee   benefits  rose  $170  thousand  or  3.3%  while  other
noninterest expense categories remained relatively flat or have decreased in the
comparison.  Employee salaries and payroll taxes increased $221 thousand or 5.4%
while benefit expenses and noncash compensation expense related to the Company's
nonqualified stock option plan declined $13 thousand or 1.3% and $37 thousand or
35.2%,  respectively.  The increase in salary  expense is  attributed  to normal
salary  increases  along with an  increase  in the  average  number of full time
equivalent  employees  of seven.  The  slight  decline in  benefit  expenses  is
attributed to lower health insurance costs during the current period. The number
of full time equivalent  employees as of June 30, 2004 was 469 compared to 462 a
year earlier.

INCOME TAXES
------------

Income tax expense for the second quarter of 2004 was $967 thousand, an increase
of $93 thousand or 10.6% from the same period a year earlier.  The effective tax
rate  decreased  187 basis points to 20.5% from 22.41% in 2003.  The decrease in
the  effective  tax  rate is due to  additional  revenues  from  investments  in
municipal  securities  and a reduction  of net  revenue  expected  from  taxable
sources.

              FIRST SIX MONTHS OF 2004 VS. FIRST SIX MONTHS OF 2003
              -----------------------------------------------------

Net income for the six months ended June 30, 2003 was $7.2  million  compared to
net income of $6.6  million  for the same  period in 2003,  an  increase of $630
thousand or 9.5%. Basic and diluted net income per share was $1.08 and $1.07 for
the  current  six  months,  an  increase  of $.10 or  10.2%  and  $.09 or  9.2%,
respectively.  The increase in net income is primarily attributed to an increase
in net interest income. Net interest income for the current six-month period was
$20.9  million an  increase  of $1.6  million or 8.3%  compared  to the same six
months in 2003.  The increase in net interest  income is due to the reduction in
interest  expense of $1.8  million or 17.3%,  which  offset a slight  decline in
interest income of $233 thousand or .8%.

Lower  noninterest  income and an increase  in  noninterest  expenses  partially
offset the  reported  increase in net interest  income in the current  six-month
reporting  period.  Noninterest  income  declined  $321  thousand or 3.7% in the
comparison  primarily  due to lower gains on the sale of mortgage  loans of $397
thousand. The decline is the result of lower origination activity in the current
period.  Noninterest  expenses  increased  $704  thousand or 3.8% in the current
six-month  period due mainly to increases  in salaries and employee  benefits of
$496  thousand or 4.8%.  The  increase in salaries  and  employee  benefits  was
affected by normal  salary  increases  and an increase in the average  number of
full time equivalent  employees of three. The effective income tax rate declined
270 basis points to 20.3% for the six months ended June 30, 2004 compared to the
same period a year earlier.

ROA was 1.12% for the six months ended June 30, 2004,  an increase of five basis
points  compared to 1.07%  reported for the same period in 2003. The increase in
ROA was driven by a 22 basis point increase in net interest margin to 3.83% from
3.61%. The increase in net interest margin, along with a decrease in noninterest
expenses and income tax expense as a percentage of average  total  assets,  more
than  offset the  following  which  negatively  impacted  ROA: a decrease in the
earning asset ratio  contributing 10 basis points;  an increase in the provision
for loan losses  contributing  one basis  point;  and a decrease in  noninterest
income  contributing 11 basis points. ROE was 11.51% for the first six months of
2004 compared to 10.68% in the same period of 2003.  This represents an increase
of 83 basis  points  and is  attributed  to higher net  income  reported  in the
current  period coupled with an increase in financial  leverage  compared to the
same  period a year  ago.  Financial  leverage  represents  the  degree in which
borrowed  funds,  as  opposed  to  equity,  are used in the  funding  of assets.
Financial leverage increased to 10.3% from 9.9% in the comparison.

NET INTEREST INCOME
-------------------

Although many economic  measures are beginning to improve,  weaknesses remain in
the  overall  economic  environment.  The  general  trend of the  interest  rate
environment for 2003 was downward  primarily as a result of previous  short-term
interest rate reductions  taken by the Fed. The effects of the downward trend in
general  interest  rates for 2003 have began to positively  affect the Company's
net interest  income during 2004. A  significant  amount of time  deposits,  the
largest component of interest bearing liabilities,  have repriced to lower rates
and have  contributed  to an  increase  in net  interest  income for the current
period.  The  repricing of time  deposits for the Company have  generally  taken
longer to occur than for other interest paying  liabilities and interest earning
assets due to their fixed nature and maturity  characteristics.  The increase in
the short-term  federal funds rate of 25 basis points by the Fed near the end of
current quarter did not  significantly  impact the Company's net interest income
during the reporting periods

The Company's tax equivalent  yield on earning assets for the current six months
was 5.4%,  a  reduction  of 14 basis  points from 5.5% in the same period a year
ago.  The cost of funds for the  current  six months  was 1.8%,  a decline of 47
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
while  maintaining  relatively  low  interest  rates  paid on  interest  bearing
liabilities.  However,  many  of the  Company's  funding  sources,  particularly
deposits,  have  approached  their  repricing  floors.  Average  earning  assets
increased  $22.5  million  or 2.0%  to  $1.2  billion  in the  comparison.  As a
percentage of total average assets,  earning assets declined 218 basis points to
89.06% from  91.24%.  This  increase  had the effect of reducing ROA by 10 basis
points in the six-month comparison.

Interest  income  totaled  $29.6  million  for the first six  months of 2004,  a
decrease of $233  thousand or .8% compared to the same period in the prior year.
Interest expense totaled $8.7 million,  a decrease of $1.8 million or 17.3%. Net
interest  income  increased  $1.6 million or 8.3% in the  comparison and totaled
$20.9 million at June 30, 2004.

Interest and fees on loans  totaled $23.5  million,  a decrease of $837 thousand
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$34.5  million or 4.7% to $773.6  million in the  comparison  due to higher loan
demand in a continued low rate  environment.  The tax equivalent  yield on loans
decreased  55 basis  points to 6.2% from 6.7% and offset  the  effects of higher
loan demand on interest income. Interest on taxable securities was $4.0 million,
an  increase  of $485  thousand  or 13.9% due  primarily  to an  increase in the
average rate earned, which was negatively affected by the unusually high premium
amortization  on  mortgage-backed  securities in the prior year.  Prepayments on
mortgage-backed   securities  in  the  prior  year  increased   greatly  due  to
corresponding  refinancing  of home mortgages that serve as collateral for these
investment  securities.  The increase in activity  was  directly  related to the
historic low interest rate environment that existed throughout much of 2003. The
average rate earned on taxable securities increased 45 basis points to 3.2% from
2.8% while the  average  balance  declined  $6.7  million or 2.6%.  Interest  on
nontaxable securities increased $348 thousand or 22.0% due to a $23.2 million or
32.8%  increase  in the average  balance to $94.1  million  from $70.9  million.
Interest on  short-term  investments,  including  time  deposits in other banks,
federal  funds  sold,  and  securities  purchased  under  agreements  to resell,
decreased  $229  thousand  due to a  decrease  in the  average  balance of $28.6
million or 43.1%  combined  with a decrease in the average  rate earned on these
investments of 27 basis points to 1.0% from 1.3%.

Interest expense on deposits  decreased $1.7 million or 18.8% to $7.3 million in
the six-month  comparison.  This decrease resulted from a general decline in the
average rate paid throughout the deposit portfolio,  particularly time deposits,
and  correlates  with  the  general  decline  in  market  interest  rates in the
reporting  periods.  The  decline in the  average  rates  paid  offset a general
increase in average balances. The decline in interest expense on deposits was as
follows:  time deposits $1.5 million or 20.4%;  interest bearing demand deposits
$134 thousand or 19.0%;  and savings  deposits $47 thousand or 5.4%. The average
rate paid on time deposits,  the largest component of interest bearing deposits,
was 2.8% for the six months  ended June 30,  2004  compared to 3.5% for the same
period of 2003. The average  balance of time deposits  increased $6.2 million or
1.5% to $428.2  million.  The  average  rate  paid on  interest  bearing  demand
deposits  declined 16 basis  points to .49% from .65% while the average  balance
increased  $15.0  million or 6.8% to $235.9  million.  The average  rate paid on
savings  deposits  decreased  18 basis points to .9% from 1.1% while the average
balance  increased $24.2 million or 14.5% to $190.8 million from $166.6 million.
Interest expense on overnight borrowings,  consisting of federal funds purchased
and securities sold under  agreements to repurchase,  decreased $35 thousand due
to a 20 basis  point  decline  in the  average  rate paid,  which  offset a $6.9
million  increase in the average  balance.  Interest  expense on other  borrowed
funds decreased $112 thousand in the comparison as net repayments  decreased the
average  outstanding  balance  by $11.5  million  or 17.4%.  The  decline in the
average balance outstanding offset an increase in the average rate paid on other
borrowed funds of 29 basis points to 3.7% from 3.4%.

The net interest  margin (TE)  increased 22 basis points to 3.83% during the six
months  ended June 30, 2004  compared  to 3.61% in the same period of 2003.  The
increase in net interest margin is primarily attributed to a 33 basis point rise
in the  spread  between  rates  earned on  earning  assets and the rates paid on
interest  bearing  liabilities  to 3.58% in the current six months from 3.25% in
the same  period in 2003.  The effect of  noninterest  bearing  sources of funds
offset the 33 basis point  increase in spread by 11 basis  points,  resulting in
the increase in net interest margin.  The effect of noninterest  bearing sources
of  funds  on  net  interest  margin  typically   declines  in  a  falling  rate
environment.

<PAGE>
<TABLE>
<CAPTION>
The  following  tables  present an analysis of net  interest  income for the six
months ended June 30.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
--------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30,                                    2004                                         2003
--------------------------------------------------------------------------------------------------------------------------------
                                             Average                       Average        Average                       Average
(In thousands)                               Balance        Interest        Rate          Balance       Interest         Rate
--------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>             <C>       <C>               <C>              <C>
EARNING ASSETS
Investment securities
  Taxable                                $   250,214        $  3,985        3.20%     $   256,913       $  3,500         2.75%
  Nontaxable1                                 94,121           2,854        6.10           70,891          2,328         6.62
Time deposits with banks, federal
  funds sold and securities purchased
  under agreements to resell                  37,737             185         .99           66,295            414         1.26
Loans1,2,3                                   773,642          23,703        6.16          739,127         24,584         6.71
--------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                  1,155,714        $ 30,727        5.35%       1,133,226       $ 30,826         5.49%
--------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                    (11,394)                                     (11,263)
--------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net of
     allowance for loan losses             1,144,320                                    1,121,963
--------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                       92,817                                       67,332
Premises and equipment, net                   24,216                                       24,180
Other assets                                  36,268                                       28,576
--------------------------------------------------------------------------------------------------------------------------------
     Total assets                        $ 1,297,621                                  $ 1,242,051
--------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                $   235,922        $    573         .49%     $   220,945       $    707          .65%
  Savings                                    190,787             824         .87          166,608            871         1.05
  Time                                       428,162           5,879        2.76          421,920          7,385         3.53
Federal funds purchased and
  securities sold under agreements
  to repurchase                               81,684             467        1.15           74,823            502         1.35
Other borrowed funds                          54,679             995        3.66           66,179          1,107         3.37
--------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities      991,234         $ 8,738        1.77%         950,475       $ 10,572         2.24%
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits             38,729                                       35,790
Other demand deposits                        133,889                                      121,996
Other liabilities                              7,121                                        8,821
--------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                     1,170,973                                    1,117,082
--------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                    126,648                                      124,969
--------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and shareholders'
     equity                              $ 1,297,621                                  $ 1,242,051
--------------------------------------------------------------------------------------------------------------------------------
Net interest income                                           21,989                                      20,254
TE basis adjustment                                           (1,095)                                       (961)
--------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                    $ 20,894                                    $ 19,293
--------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                         3.58%                                        3.25%
Impact of noninterest bearing sources
  of funds                                                                   .25                                          .36
--------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                         3.83%                                        3.61%
--------------------------------------------------------------------------------------------------------------------------------

1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amounted to $1.2 million and $1.1 million in 2004 and 2003, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
------------------------------------------------------------------------------------------------------------
(In thousands)                                                     Variance         Variance Attributed to
Six Months Ended June 30,                                         2004/20031        Volume           Rate
------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>            <C>           <C>
INTEREST INCOME
Taxable investment securities                                       $   485        $  (251)      $    736
Nontaxable investment securities2                                       526          1,019           (493)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell                     (229)          (153)           (76)
Loans2                                                                 (881)         2,631         (3,512)
------------------------------------------------------------------------------------------------------------
     Total interest income                                              (99)         3,246         (3,345)
------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest bearing demand deposits                                       (134)           123           (257)
Savings deposits                                                        (47)           254           (301)
Time deposits                                                        (1,506)           317         (1,823)
Federal funds purchased and securities sold under
   agreements to repurchase                                             (35)           101           (136)
Other borrowed funds                                                   (112)          (332)           220
------------------------------------------------------------------------------------------------------------
     Total interest expense                                          (1,834)           463         (2,297)
------------------------------------------------------------------------------------------------------------
Net interest income                                                 $ 1,735        $ 2,783       $ (1,048)
------------------------------------------------------------------------------------------------------------
Percentage change                                                     100.0%         160.4%         (60.4)%
------------------------------------------------------------------------------------------------------------

1The 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.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
</TABLE>

NONINTEREST INCOME
------------------

Noninterest income was $8.3 million for the first six months of 2004, a decrease
of $321  thousand  or 3.7%  compared  to the same  period in 2003.  The  largest
component of noninterest income, service charges and fees on deposits, increased
$130  thousand or 3.4% to $4.0 million due  primarily to a $118 thousand or 4.9%
increase in overdraft  activity.  Other service charges,  commissions,  and fees
were flat at $1.8  million.  Data  processing  fees fell $19 thousand or 2.6% to
$715 thousand due mainly to lower transaction volumes.  Trust fees increased $16
thousand or 2.0%. Net gains on the sale of available for sale securities was $65
thousand  for the  current  six  months,  a decrease  of $79  thousand  or 54.9%
compared  to $144  thousand in the  comparable  period a year ago as the Company
continues its efforts to properly manage the composition of its balance sheet in
the current economic  environment.  Net gains on the sale of mortgage loans were
$115 thousand, a decrease of $397 thousand from $512 thousand in the prior year.
Mortgage loans originated for sale, which began to decline in the fourth quarter
of 2003,  declined  $25.4  million  or 72.5% in the  six-month  comparison.  The
decrease in mortgage loan  origination  is  reflective of the lower  refinancing
activity  compared  to the same  period  a year  earlier.  Consumer  refinancing
activity in the prior year was driven by historically low interest rates. Income
from the purchase of company-owned life insurance was $767 thousand, an increase
of $94  thousand or 14.0%.  The increase is  attributed  to a full six months of
income being  recognized in the current period compared to a shorter time period
in the prior year due to the timing of the purchase.  Other  noninterest  income
totaled $76  thousand,  a decrease of $67 thousand  compared to $143 thousand in
the prior year. This decrease is attributable to the operations of the Company's
investment in a low income tax partnership.

NONINTEREST EXPENSE
-------------------

Noninterest  expenses totaled $19.3 million for the first six months of 2004, an
increase of $704 thousand or 3.8% compared to the same period in 2003.  Salaries
and employee benefits,  the largest component of noninterest expense,  increased
$496  thousand  or 4.8% and totaled  $10.8  million at June 30,  2004.  Employee
benefit  expenses  increased  $261 thousand or 13.6%  primarily due to increased
health  insurance  costs,  including  the timing  effect of  additional  amounts
associated with the new postretirement  health insurance coverage initiated late
in the first quarter of 2003. Salary and related payroll expenses increased $308
thousand or 3.8% in the comparison while noncash compensation expense related to
the Company's  nonqualified stock option plan declined $74 thousand or 34.8% due
to the structure of the fee vesting schedule. The number of full time equivalent
employees  increased  to 469 at June 30, 2004 from 462 reported on the same date
in the prior period.  On average,  the number of full time equivalent  employees
increased  to 461 from 458 in the  comparison.  All other  noninterest  expenses
increased $208 thousand or 2.5%, with $96 thousand in higher telephone  expenses
driving  the  increase.  The  increase  is the  result  of  adding  higher  data
transmission capacity for both internal and external usage.

INCOME TAXES
------------

Income tax expense for the first six months of 2004 was $1.8 million, a decrease
of $131 thousand or 6.6% from the same period a year earlier.  The effective tax
rate decreased 270 basis points to 20.3% from 23.0% in 2003. The decrease in the
effective tax rate is due to additional  revenues from  investments in municipal
securities and a reduction of net revenue expected from taxable sources.

FINANCIAL CONDITION

Total assets were $1.3 billion on June 30, 2004, a decrease of $24.4  million or
1.9% from December 31, 2003. The decrease in assets  primarily  includes a $56.5
million or 44.4% lower  balance in cash and cash  equivalents  and a decrease in
investment securities of $8.3 million or 2.2% offset by an increase in net loans
of $36.8  million  or 4.9%.  The  decrease  in total  assets is  related  to the
corresponding  decline in the Company's funding sources.  The decline in funding
sources  includes a $65.7 million or 6.2% decrease in deposits offset by a $42.9
million  or 37.8%  increase  in other  borrowings.  Total  shareholders'  equity
declined $1.1 million or .9% due to an increase in unrealized  holding losses in
the  available  for sale  investment  securities  portfolio.  The  makeup of the
balance  sheet  continually   changes  as  the  Company  responds  to  extremely
competitive market forces.

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,
these agencies issue checks drawn on Farmers Bank, including 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
also important to understanding the financial condition of the Company.

On an average basis,  total assets were $1.3 billion for the first six months of
2004, an increase of $46.9 million or 3.7% from year-end 2003.  Average  earning
assets,  primarily loans and securities,  were $1.2 billion at June 30, 2004, an
increase of $28.3 million or 2.5% from year-end  2003.  Average  earning  assets
represent  89.06% of total average assets on June 30, 2004, a decrease 108 basis
points compared to 90.14% at year-end 2003.

LOANS
-----

Loans,  net of unearned  income,  totaled  $792.9  million at June 30, 2004,  an
increase of $36.9 million or 4.9% from year-end  2003.  The  composition  of the
loan portfolio is summarized in the table below.

--------------------------------------------------------------------------------
                                         June 30, 2004        December 31, 2003
(Dollars in thousands)                  Amount        %         Amount       %
--------------------------------------------------------------------------------

Commercial, financial,
  and agriculture                    $ 119,292      15.0%   $ 110,657      14.6%
Real estate - construction              49,714       6.3       45,390       6.0
Real estate mortgage - residential     286,885      36.2      270,638      35.8
Real estate mortgage farmland and
 other commercial enterprises          230,718      29.1      222,100      29.4
Installment                             69,693       8.8       71,565       9.5
Lease financing                         36,592       4.6       35,595       4.7
--------------------------------------------------------------------------------
     Total                           $ 792,894     100.0%   $ 755,945     100.0%
--------------------------------------------------------------------------------

On average,  loans  represented  66.9% of earning  assets during the current six
month period compared to 65.9% for year-end 2003. As loan demand fluctuates, the
available  funds are  reallocated  between  loans and  lower  earning  temporary
investments or investment securities, which typically have lower credit risk and
lower yields.

ALLOWANCE FOR LOAN LOSSES
-------------------------

The allowance for loan losses was $11.4 million at June 30, 2004, an increase of
$127 thousand or 1.1% from the prior year-end. The allowance for loan losses was
1.44% of loans net of unearned income at June 30, 2004, a decrease of five basis
points  from 1.49%  from  December  31,  2003.  The  provision  for loan  losses
increased  $97  thousand  or 27.6%  and $77  thousand  or  10.5% in the  current
three-month and six-month period, respectively,  compared to the same periods in
2003. The Company had net  charge-offs of $324 thousand and $687 thousand in the
current three and six months of 2004, respectively,  compared to net charge-offs
of $324 thousand and $642 thousand in the same periods of 2003.  Annualized  net
charge-offs  represent  .17% and .18% of  average  net  loans  for three and six
months ended June 30, 2004,  respectively compared to .32% at year-end 2003. The
allowance for loan losses as a percentage of nonperforming  loans totaled 141.3%
and 123.9% at June 30, 2004 and December 31, 2003, respectively. The increase is
primarily  reflective of the decline in nonperforming  assets of $1.0 million in
the  comparison.  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 $12.1 million at
June 30,  2004,  an increase of $936  thousand or 8.4% from the prior  year-end.
Nonperforming  loans  totaled  $8.1  million at June 30, 2004 a decrease of $1.0
million or 11.3% compared to year-end 2003.  Nonperforming  loans include a pool
of  constructions  loans  secured by  residential  real estate to a  financially
troubled  builder.  This pool of loans  totaled $1.3 million at June 30, 2004, a
decrease of $2.9 million or 68.3% from the prior year end.  Nonperforming  loans
as a percentage  of net loans were 1.0% at June 30, 2004, a decrease of 20 basis
points from 1.2% compared to year-end 2003.

Other real estate owned,  which had a balance of $1.8 million at year-end  2003,
increased  $2.1 million to $3.9 million on June 30, 2004.  The increase in other
real estate owned is  reflective of $2.8 million of the  underlying  real estate
collateral  on the pool of loans to a  financially  troubled  builder  mentioned
above being transferred to the Company through foreclosure.

TEMPORARY INVESTMENTS
---------------------

Temporary  investments  consist of interest  bearing  deposits with other banks,
federal funds sold,  and  securities  purchased  under  agreements to resell and
totaled $6.4 million at June 30, 2004, a decrease of $21.2 million or 76.9% from
year-end 2003.  Temporary  investments  averaged $37.7 million for the first six
months of 2004, a decrease of $21.7  million or 36.5% from  year-end  2003.  The
decrease is  primarily a result of the  Company's  net funding  position and the
relationship  between its principal  subsidiary and the Commonwealth of Kentucky
as described in preceding  sections of this report.  Temporary  investments  are
reallocated  as loan  demand  and  other  investment  alternatives  present  the
opportunity.

INVESTMENT SECURITIES
---------------------

Investment  securities  were $374.6 million on June 30, 2004, a decrease of $8.3
million or 2.2% from  year-end  2003.  Available  for sale and held to  maturity
securities  were $352.0  million  and $22.6  million,  respectively.  Investment
securities averaged $344.3 million for the first six months of 2004, an increase
of $18.6 million or 5.7% from year-end 2003. The increase in average  investment
securities  was  driven by an $18.5  million  or 24.4%  increase  in  nontaxable
securities and is attributable to the Company's  continued efforts to manage its
net interest margin during a period of low market  interest  rates.  The Company
had an  unrealized  loss on available  for sale  investment  securities  of $3.5
million at June 30,  2004  compared  to an  unrealized  gain of $3.3  million at
year-end  2003.  The change is due primarily to the impact of changing  economic
conditions,  including an increase in short-term  market interest rates near the
end of the  current  quarter.  The  market  value of fixed rate  investments  is
inversely related to changes in market interest rates.

COMPANY-OWNED LIFE INSURANCE
----------------------------

The Company  purchased  life insurance  policies on certain key employees,  with
their  knowledge and consent,  during the first  quarter of 2003.  Company-owned
life insurance is recorded at its cash surrender value, i.e. the amount that can
be realized,  on the  consolidated  balance  sheets.  The related change in cash
surrender  value and  proceeds  received  under the policies are reported on the
consolidated  statements of income under the caption "Income from  company-owned
life  insurance".  Expected  income from the purchase of the insurance  policies
will be used to offset the rising costs of the Company's  various  benefit plans
as well as the  additional  costs  of the new  postretirement  health  insurance
program  implemented  during 2003.  Company-owned  life insurance  totaled $26.3
million at June 30,  2004,  an increase of $757  thousand or 3.0% from  year-end
2003.

DEPOSITS
--------

Total  deposits  were $1.0 billion at June 30, 2004, a decrease of $65.7 million
or 6.2% from year-end 2003. Noninterest bearing deposits decreased $48.2 million
or 21.3% in the comparison.  This decrease is primarily due to the  relationship
between the Company's  principal  subsidiary and the Commonwealth of Kentucky as
described in preceding sections of this report. On average,  noninterest bearing
deposits were $172.6  million  during the current  period,  an increase of $10.7
million or 6.6% from  year-end  2003.  End of period  interest  bearing  deposit
balances  decreased  $17.6  million or 2.1% during the six months ended June 30,
2004 due to decreases in interest bearing checking  accounts of $10.3 million or
4.4%,  money  market  deposit  accounts  of $9.3  million or 8.1%,  and  savings
accounts of $2.5 million or 3.4%.  Time deposits  increased $4.5 million or 1.1%
in the end of period  comparisons.  On average,  interest  bearing deposits were
$854.9 million in the current period,  an increase of $33.0 million or 4.0% from
year-end 2003. The increase in average interest bearing deposits is attributable
to growth  throughout  the entire  deposit  portfolio  represented  as  follows:
interest  bearing demand deposits of $8.7 million or 3.8%,  money market deposit
accounts of $10.8 million or 10.0%,  time deposits of $5.4 million or 1.3%,  and
savings  accounts  of $18.8  million  or 11.0%.  Total  deposits  averaged  $1.0
billion, an increase of $43.6 million or 4.4% from year-end 2003.

BORROWED FUNDS
--------------

Borrowed  funds  totaled  $156.4  million at June 30, 2004, an increase of $42.8
million or 37.8% from  $113.5  million at  year-end  2003.  A $2.8  million  net
decrease  in  long-term  borrowings  was offset by a $45.7  million  increase in
short-term  borrowings.  Federal  funds  purchased  and  securities  sold  under
agreements  to  repurchase  increased  $44.5  million or 78.4% due  primarily to
increased  correspondent  banking  activity  and the  relationship  between  the
Company's principal  subsidiary and the Commonwealth of Kentucky as described in
preceding sections of this report.  Other short-term  borrowings  increased $1.2
million to $1.7 million due  primarily to  additional  net  borrowings  from the
Federal Home Loan Bank  ("FHLB") of $1.0 million.  The $2.8 million  decrease in
long-term  borrowings is mainly  attributed to net  repayments of borrowed funds
from the FHLB. Total borrowed funds averaged $136.4 million, an increase of $3.1
million or 2.3% from year-end 2003.

LIQUIDITY

The Parent  Company's  primary use of cash consists of dividend  payments to its
common shareholders,  purchases of its common stock, corporate acquisitions, 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 June 30,  2004  combined  retained  earnings of the
subsidiary banks were $45.4 million, of which $2.3 million was available for the
payment of dividends to the Parent Company without obtaining prior approval from
bank regulatory agencies. As a practical matter,  payment of future dividends is
also subject to the maintenance of other capital ratio requirements.  During the
current six months ended June 30, 2004 the Parent Company received  dividends of
$4.3 million.  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 2004 sufficient to meet its liquidity
needs.  The Parent  Company had cash balances of $28.1 million at June 30, 2004.
Additionally,  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 will mature on May 31, 2005.

The Company's  objective as it relates to liquidity is to insure that 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 banks have several  sources of funds available on a daily basis,
which can be used for  liquidity  purposes.  These  sources  of funds  primarily
include the  subsidiary  banks' core  deposits,  consisting of both business and
nonbusiness  deposits;  cash flow  generated by repayment of loan  principal and
interest; FHLB borrowings; and federal funds purchased and securities sold under
agreements  to  repurchase.  As of June 30, 2004 the  Company had  approximately
$173.6  million in additional  borrowing  capacity  under various FHLB,  federal
funds, and other borrowing agreements.  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.

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  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 June 30, 2004, such assets totaled $422.7 million,  a decrease of $62.7
million or 12.9% from year-end 2003. The decrease in liquid assets is attributed
to the overall funding  position of the Company,  including  deposit activity of
the Commonwealth of Kentucky. Net cash provided by operating activities was $7.7
million in the first six months of 2004,  a decrease of $2.9  million from $10.6
million in the same period last year. Net cash used in investing  activities was
$37.3  million  compared to net cash  provided by investing  activities of $84.6
million in the prior year six-month period. The $121.9 decrease is due primarily
to a $112.8 million decrease from investment  securities  transactions and $33.2
million related to loan growth.  The purchase of company-owned life insurance in
the prior year created an additional $24.0 million cash outflow while there were
no  purchases in the current six months.  Net cash used in financing  activities
was $27.0  million  for the six months  ended June 30,  2004  compared  to $24.0
million in the prior year. The $3.0 million increase in net cash used is related
to higher net cash outflows of deposits and  repayments of borrowed funds during
the current  six-month period compared to the activity in the same period a year
earlier.

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 $125.4  million on June 30,  2004,  a decrease of $1.1
million or 1.0% from year-end 2003  primarily due to a $4.4 million  decrease in
accumulated  comprehensive  income.   Accumulated  other  comprehensive  income,
consisting  of  unrealized  holding  gains  on  available  for  sale  investment
securities (net of tax),  decreased as a result of changing economic  conditions
and  changes  in  market  interest  rates on the  Company's  available  for sale
investment securities portfolio. An increase in short-term market interest rates
near the end of the  current  quarter was a  significant  factor  affecting  the
decrease in the  unrealized  holding gains on the available for sale  portfolio.
The market value of fixed rate  investments  is inversely  related to changes in
market interest  rates.  Retained  earnings  increased $2.8 million or 1.9% as a
result of $7.2 million in net income offset by $4.4 million,  or $.66 per share,
in dividends declared during the first six months of 2004. The Company issued 17
thousand  shares of common stock during the first six months of 2004 pursuant to
its  nonqualified  stock  option plan.  The  issuance of these shares  increased
shareholders'  equity by $420 thousand.  The Company purchased 2 thousand shares
of its outstanding  common stock during the first six months of 2004 for a total
cost of $73 thousand.

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 June 30, 2004, the regulatory
minimums and the regulatory standard for a "well capitalized" institution are as
follows.


                      Farmers Capital          Regulatory             Well
                      Bank Corporation           Minimum           Capitalized
-------------------------------------------------------------------------------
Tier 1 risk based           14.96%                4.00%               6.00%
Total risk based            16.22%                8.00%              10.00%
Leverage                     9.84%                4.00%               5.00%

As of June 30, 2004, 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.


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 June 30, 2004, 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 .4% and 1.0%,  respectively  for the year ending  December
31, 2004. 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 2.0% and 4.5%, 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  rates paid on some of the  Company's  deposits are well 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 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 material  weaknesses in the controls  which  required  corrective
action.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
-------------------------

As of June 30, 2004,  there were various  pending legal actions and  proceedings
against  the Company  arising  from the normal  course of business  and in which
claims  for  damages  are  asserted.  Management,  after  discussion  with legal
counsel,  believes  that these  actions are without  merit and that the ultimate
liability  resulting from these legal actions and proceedings,  if any, will not
have a material adverse effect upon the consolidated financial statements of the
Company.

ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER REPURCHASES OF EQUITY
--------------------------------------------------------------------------------
SECURITIES
----------

The following table provides  information with respect to shares of common stock
repurchased by the Company during the quarter ended June 30, 2004.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                               Total Number of Shares    Maximum Number of Shares
                                                                                Purchased as Part of         that May Yet Be
                                     Total Number of    Average Price Paid    Publicly Announced Plans      Purchased Under the
             Period                 Shares Purchased        per Share               or Programs              Plans or Programs
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                      <C>                        <C>
April 1, 2004 to April 30, 2004           2,195               $ 33.32                  2,195                      199,126
-----------------------------------------------------------------------------------------------------------------------------------
May 1, 2004 to May 31, 2004                                                                                       199,126
-----------------------------------------------------------------------------------------------------------------------------------
June 1, 2004 to June 30, 2004                                                                                     199,126
-----------------------------------------------------------------------------------------------------------------------------------
      Total                               2,195               $ 33.32                  2,195
-----------------------------------------------------------------------------------------------------------------------------------

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.
</TABLE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

The annual meeting of shareholders  was held May 11, 2004. The matters that were
voted upon included the election of four directors for  three-year  terms ending
in 2007 or until  their  successors  have been  elected  and  qualified  and the
approval of the Company's 2004 Employee Stock Purchase Plan.

The outcome of the voting was as follows:


ELECTION OF DIRECTORS
NAME                                   FOR     AGAINST    WITHHELD    ABSTAINED
--------------------------------------------------------------------------------

Lloyd C. Hillard, Jr.               5,306,676      0       349,205         0
Harold G. Mays                      5,655,381      0           500         0
Robert Roach, Jr.                   5,518,981      0       136,900         0
Cecil D. Bell, Jr.                  5,655,591      0           300         0

APPROVAL OF THE COMPANY'S 2004
EMPLOYEE STOCK PURCHASE PLAN        4,063,534    554,196         0     118,344

Listed below are the names of each director whose term of office continued after
the meeting.

Frank W. Sower, Jr.                        Shelley S. Sweeney
J. Barry Banker                             Dr. Donald J. Mullineaux
Dr. John D. Sutterlin                       Michael M. Sullivan
Gerald R. Hignite                           G. Anthony Busseni

In addition to the directors above, Dr. John P. Stewart,  Chairman Emeritus,  E.
Bruce  Dungan,  and  Charles T.  Mitchell  serve as advisory  directors  for the
Company.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

a)       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 of Form 10-Q for
               the quarterly period ended March 31, 2003).

          31.1 CEO Certification (page 29)

          31.2 CFO Certification (page 30)

          32   CEO  &  CFO  Certifications   Pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002 (page 31)


b)       Reports on Form 8-K
         -------------------

          On April 20,  2004,  the  Registrant  filed a report on Form 8-K under
          Item 12 reporting  its earnings for the first  quarter of 2004.  There
          were no financial statements filed with this Form 8-K.

          On July 6, 2004, the Registrant filed a report on Form 8-K under Items
          five and seven  announcing  that First  Citizens  Bank, a wholly-owned
          subsidiary  of the  Company,  has  signed a  definitive  agreement  to
          acquire Financial  National  Electronic  Transfer,  Inc. There were no
          financial statements filed with this Form 8-K.

          On July 6, 2004, the Registrant filed a report on Form 8-K under Items
          five  and  seven  announcing  the  completion  of its  acquisition  of
          Citizens  Bank  (Kentucky),  Inc.  There were no financial  statements
          filed with this Form 8-K.

          On July 19, 2004 the Registrant  filed a report on Form 8-K under Item
          12 reporting its earning for the second quarter of 2004. There were no
          financial statements filed with this Form 8-K.


<PAGE>








                                   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:     8-5-04                    /s/ G. Anthony Busseni
      --------------------          --------------------------------------------
                                    G. Anthony Busseni,
                                    President and CEO
                                    (Principal Executive Officer)


Date:     8-5-04                    /s/ C Douglas Carpenter
      --------------------          --------------------------------------------
                                    C. Douglas Carpenter,
                                    Vice President, Secretary, and CFO
                                    (Principal Financial and Accounting Officer)