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

|   | Kentucky                     |   | 0-14412      |   | 61-1017851          |   |
|--------|------------------------------|--------|--------------|--------|---------------------|--------|
|   | (State or other jurisdiction |   | (Commission  |   | (IRS Employer       |   |
|   | of incorporation)            |   | File Number) |   | Identification No.) |   |

|   | P.O. Box 309  Frankfort, KY    |   | 40602      |   |
|--------|------------------------------------------|--------|------------|--------|
|   | (Address of principal executive offices) |   | (Zip Code) |   |

|   | Not Applicable                                                 |   |
|--------|----------------------------------------------------------------|--------|
|   | (Former name or former address, if changed since last report.) |   |

----

| PART I – FINANCIAL INFORMATION                                                                           |   |
|----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                           |   |
| Item 1. Financial Statements                                                                                   |   |
| Unaudited Consolidated Balance Sheets                                                                          | 3      |
| Unaudited Consolidated Statements of Operations                                                                | 4      |
| Unaudited Consolidated Statements of Comprehensive (Loss) Income                                               | 5      |
| Unaudited Consolidated Statements of Cash Flows                                                                | 6      |
| Unaudited Consolidated Statements of Changes in Shareholders’ Equity                                     | 7      |
| Notes to Unaudited Consolidated Financial Statements                                                           | 8      |
|                                                                                                           |   |
| Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26     |
|                                                                                                           |   |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                  | 53     |
|                                                                                                           |   |
| Item 4.  Controls and Procedures                                                                     | 53     |
|                                                                                                           |   |
| PART II - OTHER INFORMATION                                                                                    |   |
|                                                                                                           |   |
| Item 1.  Legal Proceedings                                                                           | 53     |
|                                                                                                           |   |
| Item 1A. Risk Factors                                                                                          | 54     |
|                                                                                                           |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                 | 54     |
|                                                                                                           |   |
| Item 6.  Exhibits                                                                                    | 55     |
|                                                                                                           |   |
| SIGNATURES                                                                                                     | 57     |

----

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Unaudited Consolidated Balance Sheets

|                                                                                                                                                                                   |   | September 30, |      |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|--------------|--------|
| (In thousands, except share data)                                                                                                                                  |   | 2010          |      |   | 2009         |   |
| Assets                                                                                                                                                                                 |   |          |      |   |         |   |
| Cash and cash equivalents:                                                                                                                                                             |   |          |      |   |         |   |
| Cash and due from banks                                                                                                                                                                |   | $             | 24,407    |   |         | $      | 35,841 |   |
| Interest bearing deposits in other banks                                                                                                                                               |   |          | 143,153   |   |         |   | 175,926 |   |
| Federal funds sold and securities purchased under agreements to resell                                                                                                                 |   |          | 18,145    |   |         |   | 6,569 |   |
| Total cash and cash equivalents                                                                                                                                                        |   |          | 185,705   |   |         |   | 218,336 |   |
| Investment securities:                                                                                                                                                                 |   |          |      |   |         |   |   |   |
| Available for sale, amortized cost of $498,399 (2010) and $537,873 (2009)                                                                                                              |   |          | 506,023   |   |         |   | 547,873 |   |
| Held to maturity, fair value of $984 (2010) and $922 (2009)                                                                                                                            |   |          | 975       |   |         |   | 975 |   |
| Total investment securities                                                                                                                                                            |   |          | 506,998   |   |         |   | 548,848 |   |
| Loans, net of unearned income                                                                                                                                                          |   |          | 1,215,236 |   |         |   | 1,271,942 |   |
| Allowance for loan losses                                                                                                                                                              |   |          | (27,794   | )      |         |   | (23,364 | ) |
| Loans, net                                                                                                                                                                             |   |          | 1,187,442 |   |         |   | 1,248,578 |   |
| Premises and equipment, net                                                                                                                                                            |   |          | 40,291    |   |         |   | 39,121 |   |
| Company-owned life insurance                                                                                                                                                           |   |          | 28,851    |   |         |   | 36,626 |   |
| Other intangibles, net                                                                                                                                                                 |   |          | 3,911     |   |         |   | 4,989 |   |
| Other real estate owned                                                                                                                                                                |   |          | 29,022    |   |         |   | 31,232 |   |
| Other assets                                                                                                                                                                           |   |          | 41,657    |   |         |   | 43,832 |   |
| Total assets                                                                                                                                                                           |   | $             | 2,023,877 |   |         | $      | 2,171,562 |   |
| Liabilities                                                                                                                                                                            |   |          |      |   |         |   |   |   |
| Deposits:                                                                                                                                                                              |   |          |      |   |         |   |   |   |
| Noninterest bearing                                                                                                                                                                    |   | $             | 204,136   |   |         | $      | 214,518 |   |
| Interest bearing                                                                                                                                                                       |   |          | 1,259,116 |   |         |   | 1,418,915 |   |
| Total deposits                                                                                                                                                                         |   |          | 1,463,252 |   |         |   | 1,633,433 |   |
| Federal funds purchased and other short-term borrowings                                                                                                                                |   |          | 76,848    |   |         |   | 47,215 |   |
| Securities sold under agreements to repurchase and other long-term borrowings                                                                                                          |   |          | 258,406   |   |         |   | 267,962 |   |
| Subordinated notes payable to unconsolidated trusts                                                                                                                                    |   |          | 48,970    |   |         |   | 48,970 |   |
| Dividends payable                                                                                                                                                                      |   |          | 188       |   |         |   | 925 |   |
| Other liabilities                                                                                                                                                                      |   |          | 25,273    |   |         |   | 25,830 |   |
| Total liabilities                                                                                                                                                                      |   |          | 1,872,937 |   |         |   | 2,024,335 |   |
| Shareholders’ Equity                                                                                                                                                             |   |          |      |   |         |   |   |   |
| Preferred stock, no par value1,000,000 shares authorized; 30,000 Series A shares issued and outstanding at September 30, 2010 and December 31, 2009; Liquidation preference of $30,000 |   |          | 28,624    |   |         |   | 28,348 |   |
| Common stock, par value $.125 per share14,608,000 shares authorized; 7,402,666 and 7,378,605 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively   |   |          | 925       |   |         |   | 922 |   |
| Capital surplus                                                                                                                                                                        |   |          | 50,638    |   |         |   | 50,476 |   |
| Retained earnings                                                                                                                                                                      |   |          | 68,257    |   |         |   | 63,617 |   |
| Accumulated other comprehensive income                                                                                                                                                 |   |          | 2,496     |   |         |   | 3,864 |   |
| Total shareholders’ equity                                                                                                                                                       |   |          | 150,940   |   |         |   | 147,227 |   |
| Total liabilities and shareholders’ equity                                                                                                                                       |   | $             | 2,023,877 |   |         | $      | 2,171,562 |   |

----

Unaudited Consolidated Statements of Operations

|                                                                                      |   | Three Months Ended |   |   | Nine Months Ended |   |
|-------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                                                      |   | September 30,      |   |   | September 30,     |   |
| (In thousands, except per share data)                                                     |   | 2010               |   |   | 2009              |   |   | 2010 |   |   | 2009 |   |
| Interest Income                                                                           |   |               |   |   |              |   |   |   |   |   |   |   |
| Interest and fees on loans                                                                |   | $                  | 17,429 |   |              | $      | 19,381 |   |   | $ | 53,148 |   |   | $ | 58,717 |   |
| Interest on investment securities:                                                        |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                   |   |               | 3,950  |   |              |   | 5,019 |   |   |   | 13,332 |   |   |   | 15,559 |   |
| Nontaxable                                                                                |   |               | 680    |   |              |   | 916 |   |   |   | 2,287 |   |   |   | 2,684 |   |
| Interest on deposits in other banks                                                       |   |               | 44     |   |              |   | 60 |   |   |   | 189 |   |   |   | 207 |   |
| Interest of federal funds sold and securities purchased under agreements to resell        |   |               | 2      |   |              |   | 5 |   |   |   | 6 |   |   |   | 22 |   |
| Total interest income                                                                     |   |               | 22,105 |   |              |   | 25,381 |   |   |   | 68,962 |   |   |   | 77,189 |   |
| Interest Expense                                                                          |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                                                      |   |               | 5,265  |   |              |   | 8,412 |   |   |   | 17,962 |   |   |   | 25,567 |   |
| Interest on federal funds purchased and other short-term borrowings                       |   |               | 75     |   |              |   | 111 |   |   |   | 248 |   |   |   | 348 |   |
| Interest on securities sold under agreements to repurchase and other long-term borrowings |   |               | 2,616  |   |              |   | 2,829 |   |   |   | 7,869 |   |   |   | 8,457 |   |
| Interest on subordinated notes payable to unconsolidated trusts                           |   |               | 522    |   |              |   | 527 |   |   |   | 1,529 |   |   |   | 1,673 |   |
| Total interest expense                                                                    |   |               | 8,478  |   |              |   | 11,879 |   |   |   | 27,608 |   |   |   | 36,045 |   |
| Net interest income                                                                       |   |               | 13,627 |   |              |   | 13,502 |   |   |   | 41,354 |   |   |   | 41,144 |   |
| Provision for loan losses                                                                 |   |               | 6,244  |   |              |   | 6,653 |   |   |   | 13,660 |   |   |   | 14,269 |   |
| Net interest income after provision for loan losses                                       |   |               | 7,383  |   |              |   | 6,849 |   |   |   | 27,694 |   |   |   | 26,875 |   |
| Noninterest Income                                                                        |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and fees on deposits                                                      |   |               | 2,378  |   |              |   | 2,424 |   |   |   | 6,914 |   |   |   | 6,946 |   |
| Allotment processing fees                                                                 |   |               | 1,386  |   |              |   | 1,355 |   |   |   | 4,175 |   |   |   | 4,002 |   |
| Other service charges, commissions, and fees                                              |   |               | 1,147  |   |              |   | 1,183 |   |   |   | 3,487 |   |   |   | 3,340 |   |
| Data processing income                                                                    |   |               | 319    |   |              |   | 338 |   |   |   | 1,046 |   |   |   | 999 |   |
| Trust income                                                                              |   |               | 421    |   |              |   | 394 |   |   |   | 1,250 |   |   |   | 1,431 |   |
| Investment securities gains, net                                                          |   |               | 3,908  |   |              |   | 18 |   |   |   | 8,887 |   |   |   | 2,076 |   |
| Gains on sale of mortgage loans, net                                                      |   |               | 439    |   |              |   | 228 |   |   |   | 782 |   |   |   | 919 |   |
| Income from company-owned life insurance                                                  |   |               | 253    |   |              |   | 313 |   |   |   | 806 |   |   |   | 971 |   |
| Other                                                                                     |   |               | 73     |   |              |   | 275 |   |   |   | 336 |   |   |   | 394 |   |
| Total noninterest income                                                                  |   |               | 10,324 |   |              |   | 6,528 |   |   |   | 27,683 |   |   |   | 21,078 |   |
| Noninterest Expense                                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                                            |   |               | 6,643  |   |              |   | 7,409 |   |   |   | 20,501 |   |   |   | 22,285 |   |
| Occupancy expenses, net                                                                   |   |               | 1,158  |   |              |   | 1,208 |   |   |   | 3,625 |   |   |   | 3,925 |   |
| Equipment expenses                                                                        |   |               | 659    |   |              |   | 794 |   |   |   | 1,971 |   |   |   | 2,319 |   |
| Data processing and communication expenses                                                |   |               | 1,329  |   |              |   | 1,352 |   |   |   | 4,197 |   |   |   | 4,188 |   |
| Bank franchise tax                                                                        |   |               | 621    |   |              |   | 578 |   |   |   | 1,865 |   |   |   | 1,700 |   |
| Deposit insurance expense                                                                 |   |               | 1,099  |   |              |   | 726 |   |   |   | 3,300 |   |   |   | 2,887 |   |
| Correspondent bank fees                                                                   |   |               | 118    |   |              |   | 203 |   |   |   | 530 |   |   |   | 804 |   |
| Amortization of intangibles                                                               |   |               | 359    |   |              |   | 488 |   |   |   | 1,078 |   |   |   | 1,464 |   |
| Other real estate expenses, net                                                           |   |               | 2,141  |   |              |   | 516 |   |   |   | 4,805 |   |   |   | 937 |   |
| Other                                                                                     |   |               | 1,800  |   |              |   | 2,025 |   |   |   | 5,757 |   |   |   | 6,065 |   |
| Total noninterest expense                                                                 |   |               | 15,927 |   |              |   | 15,299 |   |   |   | 47,629 |   |   |   | 46,574 |   |
| Income (loss) before income taxes                                                         |   |               | 1,780  |   |              |   | (1,922 | ) |   |   | 7,748 |   |   |   | 1,379 |   |
| Income tax expense (benefit)                                                              |   |               | 525    |   |              |   | (1,748 | ) |   |   | 1,707 |   |   |   | (951 | ) |
| Net income (loss)                                                                         |   |               | 1,255  |   |              |   | (174 | ) |   |   | 6,041 |   |   |   | 2,330 |   |
| Dividends and accretion on preferred shares                                               |   |               | (469   | )      |              |   | (462 | ) |   |   | (1,401 | ) |   |   | (1,338 | ) |
| Net income (loss) available to common shareholders                                        |   | $                  | 786    |   |              | $      | (636 | ) |   | $ | 4,640 |   |   | $ | 992 |   |
| Per Common Share                                                                          |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss), basic and diluted                                                      |   | $                  | .11    |   |              | $      | (.09 | ) |   | $ | .63 |   |   | $ | .13 |   |
| Cash dividends declared                                                                   |   |               | N/A    |   |              |   | .25 |   |   |   | N/A |   |   |   | .75 |   |
| Weighted Average Common Shares Outstanding                                                |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                                         |   |               | 7,393  |   |              |   | 7,367 |   |   |   | 7,385 |   |   |   | 7,363 |   |

----

Unaudited Consolidated Statements of Comprehensive (Loss) Income

|                                                                                                                                                        |   | Three Months Ended |   |   | Nine Months Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                                                                                                                        |   | September 30,      |   |   | September 30,     |   |
| (In thousands)                                                                                                                                              |   | 2010               |   |   | 2009              |   |   | 2010 |   |   | 2009 |   |
| Net Income (Loss)                                                                                                                                           |   | $                  | 1,255  |   |              | $      | (174 | ) |   | $ | 6,041 |   |   | $ | 2,330 |   |
| Other comprehensive (loss) income:                                                                                                                          |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized holding gain (loss) on available for sale securities arising during the period, net of tax of $344, $3,404, $1,028, and $3,293, respectively |   |               | (639   | )      |              |   | 6,322 |   |   |   | 1,910 |   |   |   | 6,116 |   |
|                                                                                                                                                        |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification adjustment for prior period unrealized gain recognized during current period, net of tax of $1,352, $9, $1,860, and $965, respectively     |   |               | (2,510 | )      |              |   | (16 | ) |   |   | (3,455 | ) |   |   | (1,793 | ) |
|                                                                                                                                                        |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Change in unfunded portion of postretirement benefit obligation, net of tax of $32, $39, $95, and $117, respectively                                        |   |               | 59     |   |              |   | 73 |   |   |   | 177 |   |   |   | 217 |   |
| Other comprehensive (loss) income                                                                                                                           |   |               | (3,090 | )      |              |   | 6,379 |   |   |   | (1,368 | ) |   |   | 4,540 |   |
| Comprehensive (Loss) Income                                                                                                                                 |   | $                  | (1,835 | )      |              | $      | 6,205 |   |   | $ | 4,673 |   |   | $ | 6,870 |   |

----

Unaudited Consolidated Statements of Cash Flows

| Nine months ended September 30, (In thousands)                                        |   | 2010   |         |   | 2009   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|
| Cash Flows from Operating Activities                                                  |   |   |         |   |   |   |
| Net income                                                                            |   | $      | 6,041        |   |   | $      | 2,330 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:     |   |   |         |   |   |   |   |   |
| Depreciation and amortization                                                         |   |   | 3,980        |   |   |   | 4,738 |   |
| Net amortization of investment security premiums and (discounts):                     |   |   |         |   |   |   |   |   |
| Available for sale                                                                    |   |   | 1,319        |   |   |   | 510 |   |
| Held to maturity                                                                      |   |   |         |   |   |   | (1 | ) |
| Provision for loan losses                                                             |   |   | 13,660       |   |   |   | 14,269 |   |
| Noncash compensation expense                                                          |   |   | 42           |   |   |   | 39 |   |
| Mortgage loans originated for sale                                                    |   |   | (32,752      | )      |   |   | (37,713 | ) |
| Proceeds from sale of mortgage loans                                                  |   |   | 32,430       |   |   |   | 39,660 |   |
| Deferred income tax expense                                                           |   |   | 1,879        |   |   |   | 1,639 |   |
| Gain on sale of mortgage loans, net                                                   |   |   | (782         | )      |   |   | (919 | ) |
| (Gain) loss on disposal of premises and equipment, net                                |   |   | (41          | )      |   |   | 59 |   |
| Loss on sale and write downs of other real estate                                     |   |   | 3,902        |   |   |   | 432 |   |
| Gain on sale of available for sale investment securities, net                         |   |   | (8,887       | )      |   |   | (2,076 | ) |
| Decrease in accrued interest receivable                                               |   |   | 1,376        |   |   |   | 1,603 |   |
| Income from company-owned life insurance                                              |   |   | (792         | )      |   |   | (918 | ) |
| Decrease in other assets                                                              |   |   | 200          |   |   |   | 3,400 |   |
| Decrease in accrued interest payable                                                  |   |   | (1,165       | )      |   |   | (37 | ) |
| Increase in other liabilities                                                         |   |   | 879          |   |   |   | 1,550 |   |
| Net cash provided by operating activities                                             |   |   | 21,289       |   |   |   | 28,565 |   |
| Cash Flows from Investing Activities                                                  |   |   |         |   |   |   |   |   |
| Proceeds from maturities and calls of investment securities:                          |   |   |         |   |   |   |   |   |
| Available for sale                                                                    |   |   | 221,177      |   |   |   | 170,293 |   |
| Held to maturity                                                                      |   |   |         |   |   |   | 620 |   |
| Proceeds from sale of available for sale investment securities                        |   |   | 311,063      |   |   |   | 109,202 |   |
| Purchase of available for sale investment securities                                  |   |   | (485,199     | )      |   |   | (325,733 | ) |
| Purchase of restricted stock investments                                              |   |   | (331         | )      |   |   | (176 | ) |
| Net loan principal amounts collected in excess of loan originations                   |   |   | 33,790       |   |   |   | 1,083 |   |
| Proceeds from liquidation of company-owned life insurance                             |   |   | 8,567        |   |   |   |   |   |
| Purchase of premises and equipment                                                    |   |   | (3,974       | )      |   |   | (1,587 | ) |
| Proceeds from sale of other real estate                                               |   |   | 12,774       |   |   |   | 2,775 |   |
| Proceeds from sale of equipment                                                       |   |   | 56           |   |   |   | 32 |   |
| Net cash provided by (used in) investing activities                                   |   |   | 97,923       |   |   |   | (43,491 | ) |
| Cash Flows from Financing Activities                                                  |   |   |         |   |   |   |   |   |
| Net (decrease) increase in deposits                                                   |   |   | (170,181     | )      |   |   | 71,292 |   |
| Net increase (decrease) in federal funds purchased and other short-term borrowings    |   |   | 29,633       |   |   |   | (27,974 | ) |
| Repayments of securities sold under agreements to repurchase and other long-term debt |   |   | (9,556       | )      |   |   | (6,065 | ) |
| Proceeds from issuance of preferred stock, net of issue costs                         |   |   |         |   |   |   | 29,961 |   |
| Dividends paid, common and preferred                                                  |   |   | (1,862       | )      |   |   | (7,006 | ) |
| Shares issued under Employee Stock Purchase Plan                                      |   |   | 123          |   |   |   | 184 |   |
| Net cash (used in) provided by financing activities                                   |   |   | (151,843     | )      |   |   | 60,392 |   |
| Net (decrease) increase in cash and cash equivalents                                  |   |   | (32,631      | )      |   |   | 45,466 |   |
| Cash and cash equivalents at beginning of year                                        |   |   | 218,336      |   |   |   | 190,775 |   |
| Cash and cash equivalents at end of period                                            |   | $      | 185,705      |   |   | $      | 236,241 |   |
| Supplemental Disclosures                                                              |   |   |         |   |   |   |   |   |
| Cash paid during the period for:                                                      |   |   |         |   |   |   |   |   |
| Interest                                                                              |   | $      |  28,773 |   |   | $      |  36,082 |   |
| Income taxes                                                                          |   |   | 1,889        |   |   |   | 2,450 |   |
| Transfers from loans to other real estate                                             |   |   | 14,790       |   |   |   | 7,000 |   |
| Transfers from premises to repossessed assets                                         |   |   |         |   |   |   | 1,506 |   |
| Cash dividends payable, common and preferred                                          |   |   | 188          |   |   |   | 2,029 |   |

----

Unaudited Consolidated Statements of Changes in Shareholders’ Equity

| (In thousands, except per share data)                                   |   |      |   |   |         |   |   |    |   |   |     |   |   | Accumulated   |   |   |                |   |
|-------------------------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|--------|---------|--------|--------|----------|--------|--------|---------------|--------|--------|---------------------|--------|
|                                                                    |   |      |   |   |         |   |   |    |   |   |     |   |   | Other         |   |   | Total               |   |
| Nine months ended                                                       |   | Preferred |   |   | Common Stock |   |   | Capital |   |   | Retained |   |   | Comprehensive |   |   | Shareholders’ |   |
| September 30, 2010 and 2009                                             |   | Stock     |   |   | Shares       |   |   | Amount  |   |   | Surplus  |   |   | Earnings      |   |   | Income              |   |   | Equity |   |
| Balance at January 1, 2010                                              |   | $         | 28,348 |   |         |   | 7,379  |    |   | $      | 922      |   |   | $             | 50,476 |   |                | $      | 63,617 |   |   | $ | 3,864 |   |   | $ | 147,227 |   |
| Net income                                                              |   |      |   |   |         |   |   |    |   |   |     |   |   |          |   |   |                |   | 6,041 |   |   |   |   |   |   |   | 6,041 |   |
| Other comprehensive loss                                                |   |      |   |   |         |   |   |    |   |   |     |   |   |          |   |   |                |   |   |   |   |   | (1,368 | ) |   |   | (1,368 | ) |
| Preferred stock dividends                                               |   |      |   |   |         |   |   |    |   |   |     |   |   |          |   |   |                |   | (1,125 | ) |   |   |   |   |   |   | (1,125 | ) |
| Preferred stock discount accretion                                      |   |      | 276    |   |         |   |   |    |   |   |     |   |   |          |   |   |                |   | (276 | ) |   |   |   |   |   |   |   |   |
| Shares issued pursuant to Employee Stock Purchase Plan                  |   |      |   |   |         |   | 24     |    |   |   | 3        |   |   |          | 120    |   |                |   |   |   |   |   |   |   |   |   | 123 |   |
| Noncash compensation expense attributed to Employee Stock Purchase Plan |   |      |   |   |         |   |   |    |   |   |     |   |   |          | 42     |   |                |   |   |   |   |   |   |   |   |   | 42 |   |
| Balance at September 30, 2010                                           |   | $         | 28,624 |   |         |   | 7,403  |    |   | $      | 925      |   |   | $             | 50,638 |   |                | $      | 68,257 |   |   | $ | 2,496 |   |   | $ | 150,940 |   |
|                                                                    |   |      |   |   |         |   |   |    |   |   |     |   |   |          |   |   |                |   |   |   |   |   |   |   |   |   |   |   |

|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |    |   |   |
|-------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|---------|--------|--------|
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |    |   |   |
| Balance at January 1, 2009                                              |   |   |   |   |   | 7,357  |   |   | $      | 920    |   |   | $      | 48,222 |   |   | $      | 116,419 |    |   | $      | 2,735 |   |   | $ | 168,296 |   |
| Issuance of 30,000 shares of Series A preferred stock                   |   | $      | 28,009 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |    |   |   |   |   |   |   |   | 28,009 |   |
| Issuance of common stock warrant                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,952  |   |   |    |    |   |   |   |   |   |   |   | 1,952 |   |
| Net income                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    | 2,330   |   |   |   |   |   |   |   | 2,330 |   |
| Other comprehensive income                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |    |   |   |   | 4,540 |   |   |   | 4,540 |   |
| Cash dividends declared-common, $.75 per share                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    | (5,521  | )      |   |   |   |   |   |   | (5,521 | ) |
| Preferred stock dividends                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    | (1,088  | )      |   |   |   |   |   |   | (1,088 | ) |
| Preferred stock discount accretion                                      |   |   | 250    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    | (250    | )      |   |   |   |   |   |   |   |   |
| Shares issued pursuant to Employee Stock Purchase Plan                  |   |   |   |   |   |   | 14     |   |   |   | 1      |   |   |   | 183    |   |   |    |    |   |   |   |   |   |   |   | 184 |   |
| Noncash compensation expense attributed to Employee Stock Purchase Plan |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 39     |   |   |    |    |   |   |   |   |   |   |   | 39 |   |
| Balance at September 30, 2009                                           |   | $      | 28,259 |   |   |   | 7,371  |   |   | $      | 921    |   |   | $      | 50,396 |   |   | $       | 111,890 |   |   | $ | 7,275 |   |   | $ | 198,741 |   |

----

Notes to Unaudited Consolidated Financial Statement

| 1. | Basis of Presentation and Nature of Operations |
|----|------------------------------------------------|

----

| 2. | Reclassifications |
|----|-------------------|

| 3. | Recently Issued But Not Yet Effective Accounting Standards |
|----|------------------------------------------------------------|

|   | ·   | A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and |
|--------|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. |
|--------|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In addition, the guidance clarifies the requirements of the following existing disclosures: |
|---------------------------------------------------------------------------------------------|

|   | ·   | For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. |
|--------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | The nature of credit risk inherent in the entity’s portfolio of financing receivables; |
|--------------|----------------------------------------------------------------------------------------------|

| ·   | How that risk is analyzed and assessed in arriving at the allowance for credit losses; and |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | The changes and reasons for those changes in the allowance for credit losses. |
|--------------------|-------------------------------------------------------------------------------|

----

| To achieve these objectives, an entity should provide disclosures on a disaggregated basis on two defined levels: (1) portfolio segment; and (2) class of financing receivable. The ASU makes changes to existing disclosure requirements and includes additional disclosure requirements about financing receivables, including: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | The aging of past due financing receivables at the end of the reporting period by class of financing receivables; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | The nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. | Adoption of New Accounting Standards |
|----|--------------------------------------|

----

|                                                                  |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|-----------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
| (In thousands, except per share data)                                 |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
|                                                                  |   |                            |   |   |                           |   |   |   |   |   |   |   |
| Net  income (loss), basic and diluted                       |   | $                               | 1,255  |   |                           | $      | (174 | ) |   | $ | 6,041 |   |   | $ | 2,330 |   |
| Preferred stock dividends and discount accretion                      |   |                            | (469   | )      |                           |   | (462 | ) |   |   | (1,401 | ) |   |   | (1,338 | ) |
| Net income (loss) available to common shareholders, basic and diluted |   | $                               | 786    |   |                           | $      | (636 | ) |   | $ | 4,640 |   |   | $ | 992 |   |
|                                                                  |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Average common shares outstanding, basic and diluted                  |   |                            | 7,393  |   |                           |   | 7,367 |   |   |   | 7,385 |   |   |   | 7,363 |   |
|                                                                  |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share, basic and diluted                 |   | $                               | .11    |   |                           | $      | (.09 | ) |   | $ | .63 |   |   | $ | .13 |   |

|   | Level 1: | Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date. |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 2: | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: | Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | U.S. Treasury securities are priced using dealer quotes from active market makers and real-time trading systems. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | Marketable equity securities are priced utilizing real-time data feeds from active market exchanges for identical securities. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Government-sponsored agency debt securities, obligations of states and political subdivisions, corporate bonds, and other similar investment securities are priced with available market information through processes using benchmark yields, matrix pricing, prepayment speeds, cash flows, live trading data, and market spreads sourced from new issues, dealer quotes, and trade prices, among others sources. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                     |   |       |    |   | Fair Value Measurements Using                                 |
|--------------------------------------------------------------------------|--------|------------|---------|--------|---------------------------------------------------------------|
| (In thousands)   Available For Sale Investment Securities |   | Fair Value |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   | Significant Unobservable Inputs(Level 3) |
|                                                                     |   |       |    |   |                                                          |   |   |   |   |   |
| September 30, 2010                                                       |   |       |    |   |                                                          |   |   |   |   |   |
| U.S. Treasury securities                                                 |   | $          | 1,062   |   |                                                          | $ | 1,062 |   |   |   |   |   |
| Obligations of U.S. government-sponsored entities                        |   |       | 89,107  |   |                                                          |   |   |   |   | $ | 89,107 |   |   |
| Obligations of states and political subdivisions                         |   |       | 71,408  |   |                                                          |   |   |   |   |   | 71,408 |   |   |
| Mortgage-backed securities – residential                           |   |       | 337,937 |   |                                                          |   |   |   |   |   | 337,937 |   |   |
| Money market mutual funds                                                |   |       | 161     |   |                                                          |   | 161 |   |   |   |   |   |   |
| Corporate debt securities                                                |   |       | 6,348   |   |                                                          |   |   |   |   |   | 6,348 |   |   |
| Total                                                                    |   | $          | 506,023 |   |                                                          | $ | 1,223 |   |   | $ | 504,800 |   | $0 |

|                                                                     |   |       |    |   | Fair Value Measurements Using                                 |
|--------------------------------------------------------------------------|--------|------------|---------|--------|---------------------------------------------------------------|
| (In thousands)   Available For Sale Investment Securities |   | Fair Value |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   | Significant Unobservable Inputs(Level 3) |
|                                                                     |   |       |    |   |                                                          |   |   |   |   |   |
| December 31, 2009                                                        |   |       |    |   |                                                          |   |   |   |   |   |
| U.S. Treasury securities                                                 |   | $          | 3,002   |   |                                                          | $ | 3,002 |   |   |   |   |   |
| Obligations of U.S. government-sponsored entities                        |   |       | 90,752  |   |                                                          |   |   |   |   | $ | 90,752 |   |   |
| Obligations of states and political subdivisions                         |   |       | 108,958 |   |                                                          |   |   |   |   |   | 108,958 |   |   |
| Mortgage-backed securities – residential                           |   |       | 325,519 |   |                                                          |   |   |   |   |   | 325,519 |   |   |
| Money market mutual funds                                                |   |       | 910     |   |                                                          |   | 910 |   |   |   |   |   |   |
| Corporate debt securities                                                |   |       | 18,732  |   |                                                          |   |   |   |   |   | 18,732 |   |   |
|      Total                                      |   | $          | 547,873 |   |                                                          | $ | 3,912 |   |   | $ | 543,961 |   | $0 |

----

----

|                                                           |   |       |   | Fair Value Measurements Using                                 |                                         |
|----------------------------------------------------------------|--------|------------|--------|---------------------------------------------------------------|----------------------------------------------|
| (In thousands)  Description                          |   | Fair Value |   | Quoted Prices in Active Markets for Identical Assets(Level 1) | Significant Other Observable Inputs(Level 2) |   | Significant Unobservable Inputs(Level 3) |   |
| September 30, 2010                                             |   |       |   |                                                          |                                         |   |   |   |
| Impaired Loans                                                 |   |       |   |                                                          |                                         |   |   |   |
| Commercial, financial, and agriculture                         |   | $          | 190    |                                                          |                                         |   |   | $ | 190 |   |
| Real estate-construction                                       |   |       | 13,041 |                                                          |                                         |   |   |   | 13,041 |   |
| Real estate mortgage-residential                               |   |       | 10,529 |                                                          |                                         |   |   |   | 10,529 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 9,723  |                                                          |                                         |   |   |   | 9,723 |   |
| Other                                                          |   |       | 6      |                                                          |                                         |   |   |   | 6 |   |
| Total Impaired Loans                                           |   | $          | 33,489 |                                                          |                                         |   |   | $ | 33,489 |   |
|                                                           |   |       |   |                                                          |                                         |   |   |   |   |   |
| OREO                                                           |   |       |   |                                                          |                                         |   |   |   |   |   |
| Real estate-construction                                       |   | $          | 13,692 |                                                          |                                         |   |   | $ | 13,692 |   |
| Real estate mortgage-residential                               |   |       | 1,036  |                                                          |                                         |   |   |   | 1,036 |   |
| Real estate mortgage-farmland and other commercial enterprises |   |       | 3,899  |                                                          |                                         |   |   |   | 3,899 |   |
| Total OREO                                                     |   | $          | 18,627 |                                                          |                                         |   |   | $ | 18,627 |   |
|                                                           |   |       |   |                                                          |                                         |   |   |   |   |   |
| December 31, 2009                                              |   |       |   |                                                          |                                         |   |   |   |   |   |
| Impaired Loans                                                 |   | $          | 54,961 |                                                          |                                         |   |   | $ | 54,961 |   |
| OREO                                                           |   |       | 11,140 |                                                          |                                         |   |   |   | 11,140 |   |
| Total                                                          |   | $          | 66,101 |                                                          |                                         |   |   | $ | 66,101 |   |

|                |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|---------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
| (In thousands)      |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Impairment charges: |   |                            |   |   |                           |   |   |   |   |   |   |   |
| Impaired Loans      |   | $                               | 370    |   |                           | $      | 2,638 |   |   | $ | 2,063 |   |   | $ | 6,388 |   |
| OREO                |   |                            | 1,648  |   |                           |   | 92 |   |   |   | 3,149 |   |   |   | 183 |   |
| Total               |   | $                               | 2,018  |   |                           | $      | 2,730 |   |   | $ | 5,212 |   |   | $ | 6,571 |   |

----

----

|                                                                          |   |                 |      |   |              |   |
|-------------------------------------------------------------------------------|--------|----------------------|-----------|--------|-------------------|--------|
|                                                                          |   | September 30, 2010   |      |   | December 31, 2009 |   |
| (In thousands)                                                                |   | Carrying Amount |      |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Assets                                                                        |   |                 |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                                                     |   | $                    | 185,705   |   |              | $      | 185,705 |   |   | $ | 218,336 |   |   | $ | 218,336 |   |
| Investment securities:                                                        |   |                 |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale                                                            |   |                 | 506,023   |   |              |   | 506,023 |   |   |   | 547,873 |   |   |   | 547,873 |   |
| Held to maturity                                                              |   |                 | 975       |   |              |   | 984 |   |   |   | 975 |   |   |   | 922 |   |
| FHLB and similar stock                                                        |   |                 | 9,479     |   |              |   | N/A |   |   |   | 9,148 |   |   |   | N/A |   |
| Loans, net                                                                    |   |                 | 1,187,442 |   |              |   | 1,184,906 |   |   |   | 1,248,578 |   |   |   | 1,246,151 |   |
| Accrued interest receivable                                                   |   |                 | 8,005     |   |              |   | 8,005 |   |   |   | 9,381 |   |   |   | 9,381 |   |
|                                                                          |   |                 |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                   |   |                 |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |                 | 1,463,252 |   |              |   | 1,470,633 |   |   |   | 1,633,433 |   |   |   | 1,640,933 |   |
| Federal funds purchased and other short-term borrowings                       |   |                 | 76,848    |   |              |   | 76,848 |   |   |   | 47,215 |   |   |   | 47,215 |   |
| Securities sold under agreements to repurchase and other long-term borrowings |   |                 | 258,406   |   |              |   | 280,953 |   |   |   | 267,962 |   |   |   | 285,093 |   |
| Subordinated notes payable to unconsolidated trusts                           |   |                 | 48,970    |   |              |   | 24,379 |   |   |   | 48,970 |   |   |   | 28,528 |   |
| Accrued interest payable                                                      |   |                 | 3,520     |   |              |   | 3,520 |   |   |   | 4,685 |   |   |   | 4,685 |   |

|                                              |   |                |      |   |                  |   |   |                   |   |   |                |   |
|---------------------------------------------------|--------|---------------------|-----------|--------|-----------------------|--------|--------|------------------------|--------|--------|---------------------|--------|
| September 30, 2010 (In thousands)                 |   | Amortized Cost |      |   | GrossUnrealized Gains |   |   | GrossUnrealized Losses |   |   | EstimatedFair Value |   |
| Available For Sale                                |   |                |      |   |                  |   |   |                   |   |   |                |   |
| Obligations of U.S. government-sponsored entities |   | $                   | 88,898    |   |                  | $      | 224    |                   |   | $      |  15            |   |   | $ | 89,107 |   |
| Obligations of states and political subdivisions  |   |                | 69,410    |   |                  |   | 2,197  |                   |   |   | 199                 |   |   |   | 71,408 |   |
| Mortgage-backed securities – residential    |   |                | 331,484   |   |                  |   | 7,416  |                   |   |   | 963                 |   |   |   | 337,937 |   |
| U.S. Treasury securities                          |   |                | 1,060     |   |                  |   | 2      |                   |   |   |                |   |   |   | 1,062 |   |
| Money market mutual funds                         |   |                | 161       |   |                  |   |   |                   |   |   |                |   |   |   | 161 |   |
| Corporate debt securities                         |   |                | 7,386     |   |                  |   |   |                   |   |   | 1,038               |   |   |   | 6,348 |   |
| Total securities – available for sale       |   | $                   | 498,399   |   |                  | $      | 9,839  |                   |   | $      | 2,215               |   |   | $ | 506,023 |   |
| Held To Maturity                                  |   |                |      |   |                  |   |   |                   |   |   |                |   |   |   |   |   |
| Obligations of states and political subdivisions  |   | $                   |  975 |   |                  | $      | 9      |                   |   | $      |  0             |   |   | $ |  984 |   |

----

|                                              |   |           |    |   |                  |   |   |                   |   |   |                      |   |
|---------------------------------------------------|--------|----------------|---------|--------|-----------------------|--------|--------|------------------------|--------|--------|---------------------------|--------|
| December 31, 2009 (In thousands)                  |   | Amortized Cost |    |   | GrossUnrealized Gains |   |   | GrossUnrealized Losses |   |   | Estimated Fair Value |   |
| Available For Sale                                |   |           |    |   |                  |   |   |                   |   |   |                      |   |
| Obligations of U.S. government-sponsored entities |   | $              | 90,889  |   |                  | $      | 162    |                   |   | $      | 299                       |   |   | $ | 90,752 |   |
| Obligations of states and political subdivisions  |   |           | 107,190 |   |                  |   | 2,423  |                   |   |   | 655                       |   |   |   | 108,958 |   |
| Mortgage-backed securities – residential    |   |           | 315,546 |   |                  |   | 10,446 |                   |   |   | 473                       |   |   |   | 325,519 |   |
| U.S. Treasury securities                          |   |           | 2,997   |   |                  |   | 5      |                   |   |   |                      |   |   |   | 3,002 |   |
| Money market mutual funds                         |   |           | 910     |   |                  |   |   |                   |   |   |                      |   |   |   | 910 |   |
| Corporate debt securities                         |   |           | 20,341  |   |                  |   | 195    |                   |   |   | 1,804                     |   |   |   | 18,732 |   |
| Total securities – available for sale       |   | $              | 537,873 |   |                  | $      | 13,231 |                   |   | $      | 3,231                     |   |   | $ | 547,873 |   |
| Held To Maturity                                  |   |           |    |   |                  |   |   |                   |   |   |                      |   |   |   |   |   |
| Obligations of states and political subdivisions  |   | $              | 975     |   |                  | $      | 0      |                   |   | $      | 53                        |   |   | $ | 922 |   |

|                                   |   |                |    |   |                      |   |
|----------------------------------------|--------|---------------------|---------|--------|---------------------------|--------|
|                                   |   | Available For Sale  |    |   | Held To Maturity          |   |
| September 30, 2010 (In thousands)      |   | Amortized Cost |    |   | Estimated Fair Value |   |   | Amortized Cost |   |   | Estimated Fair Value |   |
| Due in one year or less                |   | $                   | 6,709   |   |                      | $      | 6,759 |   |   |   |   |   |   |   |
| Due after one year through five years  |   |                | 96,770  |   |                      |   | 97,346 |   |   |   |   |   |   |   |
| Due after five years through ten years |   |                | 40,484  |   |                      |   | 41,538 |   |   |   |   |   |   |   |
| Due after ten years                    |   |                | 22,952  |   |                      |   | 22,443 |   |   | $ | 975 |   |   | $ | 984 |   |
| Mortgage-backed securities-residential |   |                | 331,484 |   |                      |   | 337,937 |   |   |   |   |   |   |   |   |   |
| Total                                  |   | $                   | 498,399 |   |                      | $      | 506,023 |   |   | $ | 975 |   |   | $ | 984 |   |

|                                                                      |   | Three Months Ended |    |   | Nine Months Ended |   |
|---------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                                      |   | September 30,      |    |   | September 30,     |   |
| (In thousands)                                                            |   | 2010               |    |   | 2009              |   |   | 2010 |   |   | 2009 |   |
|                                                                      |   |               |    |   |              |   |   |   |   |   |   |   |
| Gross realized gains                                                      |   | $                  | 3,910   |   |              | $      | 18 |   |   | $ | 9,163 |   |   | $ |  2,119 |   |
| Gross realized losses                                                     |   |               | 2       |   |              |   |   |   |   |   | 276 |   |   |   | 43 |   |
| Net realized gains                                                        |   | $                  | 3,908   |   |              | $      | 18 |   |   | $ | 8,887 |   |   | $ | 2,076 |   |
|                                                                      |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sales and calls of available for sale investment securities |   | $                  | 224,073 |   |              | $      | 36,288 |   |   | $ | 465,798 |   |   | $ | 207,265 |   |

----

|                                              |   |                |    |   |              |   |   |       |   |
|---------------------------------------------------|--------|---------------------|---------|--------|-------------------|--------|--------|------------|--------|
|                                              |   | Less than 12 Months |    |   | 12 Months or More |   |   | Total      |   |
|  September 30, 2010 (In thousands)           |   | Fair Value          |    |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
| Obligations of U.S. government-sponsored entities |   | $                   | 5,018   |   |              | $      | 15     |       |   |   |   |   |   |   |   | $ | 5,018 |   |   | $ | 15 |   |
| Obligations of states and political subdivisions  |   |                | 6,773   |   |              |   | 28     |       |   | $ | 5,748 |   |   | $ | 171 |   |   |   | 12,521 |   |   |   | 199 |   |
| Mortgage-backed securities – residential    |   |                | 153,240 |   |              |   | 963    |       |   |   |   |   |   |   |   |   |   |   | 153,240 |   |   |   | 963 |   |
| Corporate debt securities                         |   |                |    |   |              |   |   |       |   |   | 4,782 |   |   |   | 1,038 |   |   |   | 4,782 |   |   |   | 1,038 |   |
| Total                                             |   | $                   | 165,031 |   |              | $      | 1,006  |       |   | $ | 10,530 |   |   | $ | 1,209 |   |   | $ | 175,561 |   |   | $ | 2,215 |   |

|                                              |   |                |    |   |              |   |   |       |   |
|---------------------------------------------------|--------|---------------------|---------|--------|-------------------|--------|--------|------------|--------|
|                                              |   | Less than 12 Months |    |   | 12 Months or More |   |   | Total      |   |
|  December 31, 2009 (In thousands)            |   | Fair Value          |    |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
| Obligations of U.S. government-sponsored entities |   | $                   | 39,445  |   |              | $      | 299    |       |   |   |   |   |   |   |   | $ | 39,445 |   |   | $ | 299 |   |
| Obligations of states and political subdivisions  |   |                | 22,795  |   |              |   | 552    |       |   | $ | 3,605 |   |   | $ | 156 |   |   |   | 26,400 |   |   |   | 708 |   |
| Mortgage-backed securities – residential    |   |                | 41,120  |   |              |   | 473    |       |   |   |   |   |   |   |   |   |   |   | 41,120 |   |   |   | 473 |   |
| Corporate debt securities                         |   |                |    |   |              |   |   |       |   |   | 11,710 |   |   |   | 1,804 |   |   |   | 11,710 |   |   |   | 1,804 |   |
| Total                                             |   | $                   | 103,360 |   |              | $      | 1,324  |       |   | $ | 15,315 |   |   | $ | 1,960 |   |   | $ | 118,675 |   |   | $ | 3,284 |   |

----

| 8. | Loans |
|----|-------|

|                                                             |   | September 30, 2010 |      |   | December 31, 2009 |   |
|------------------------------------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
| (Dollars in thousands)                                           |   | Amount                  |      |   | Amount                 |   |
|                                                             |   |                    |      |   |                   |   |
| Commercial, financial, and agriculture                           |   | $                       | 108,466   |   |                   | $      | 114,687 |   |
| Real estate – construction                                 |   |                    | 163,576   |   |                   |   | 211,725 |   |
| Real estate mortgage – residential                         |   |                    | 474,149   |   |                   |   | 473,644 |   |
| Real estate mortgage - farmland and other commercial enterprises |   |                    | 421,484   |   |                   |   | 411,309 |   |
| Installment                                                      |   |                    | 30,350    |   |                   |   | 36,280 |   |
| Lease financing                                                  |   |                    | 17,211    |   |                   |   | 24,297 |   |
| Total                                                       |   | $                       | 1,215,236 |   |                   | $      | 1,271,942 |   |

| (Dollars in thousands)     |   | September 30, 2010 |         |   | September 30, 2009 |   |
|----------------------------|--------|-------------------------|--------------|--------|-------------------------|--------|
|                       |   |                    |         |   |                    |   |
| Balance, beginning of year |   | $                       |  23,364 |   |                    | $      | 16,828 |   |
| Provision for loan losses  |   |                    | 13,660       |   |                    |   | 14,269 |   |
| Recoveries                 |   |                    | 453          |   |                    |   | 389 |   |
| Loans charged off          |   |                    | (9,683       | )      |                    |   | (9,464 | ) |
| Balance, end of period     |   | $                       |  27,794 |   |                    | $      | 22,022 |   |

| (Dollars in thousands)                                     |   | September 30, 2010 |         |   | December 31, 2009 |   |
|------------------------------------------------------------|--------|-------------------------|--------------|--------|------------------------|--------|
|                                                       |   |                    |         |   |                   |   |
| Impaired loans with no allocated allowance for loan losses |   | $                       | 60,917       |   |                   | $      | 47,746 |   |
| Impaired loans with allocated allowance for loan losses    |   |                    | 72,139       |   |                   |   | 60,723 |   |
| Total impaired loans                                       |   | $                       | 133,056      |   |                   | $      | 108,469 |   |
|                                                       |   |                    |         |   |                   |   |   |   |
| Allowance for loan losses related to impaired loans        |   | $                       | 6,135        |   |                   | $      | 7,374 |   |
| Average impaired loans                                     |   |                    | 123,175      |   |                   |   | 70,845 |   |
|                                                       |   |                    |         |   |                   |   |   |   |
| Nonaccrual loans                                           |   | $                       |  53,866 |   |                   | $      |  56,630 |   |
| Restructured loans                                         |   |                    | 37,395       |   |                   |   | 17,911 |   |
| Loans past due 90 days or more and still accruing          |   |                    | 472          |   |                   |   | 1,807 |   |
| Total nonperforming loans                                  |   | $                       | 91,733       |   |                   | $      | 76,348 |   |

----

|                |   | September 30, 2010             |   |   | December 31, 2009       |   |
|---------------------|--------|--------------------------------|--------|--------|-------------------------|--------|
|                |   | Tier 1Risk-based Capital1 |   |   | TotalRisk-basedCapital1 |   |   |  Tier 1Leverage2 |   |   | Tier 1Risk-based Capital |   |   | TotalRisk-basedCapital |   |   |  Tier 1Leverage |   |
| Consolidated        |   |                           | 15.36  | %      |                    |   | 16.62 | % |   |   | 9.31 | % |   |   | 13.95 | % |   |   | 15.20 | % |   |   | 8.15 | % |
| Farmers Bank        |   |                           | 15.26  |   |                    |   | 16.53 |   |   |   | 8.40 |   |   |   | 13.22 |   |   |   | 14.48 |   |   |   | 7.05 |   |
| United Bank         |   |                           | 13.25  |   |                    |   | 14.52 |   |   |   | 8.31 |   |   |   | 12.49 |   |   |   | 13.75 |   |   |   | 7.35 |   |
| First Citizens Bank |   |                           | 12.60  |   |                    |   | 13.34 |   |   |   | 8.31 |   |   |   | 12.02 |   |   |   | 12.76 |   |   |   | 7.96 |   |
| Citizens Northern   |   |                           | 11.17  |   |                    |   | 12.43 |   |   |   | 7.82 |   |   |   | 9.70 |   |   |   | 10.95 |   |   |   | 6.23 |   |

| Parent Company |
|----------------|

----

|   | Additionally, under the Memorandum, the Company agreed to: |
|--------|------------------------------------------------------------|

| ·   | utilize its financial and managerial resources to assist its subsidiary banks in addressing weaknesses identified at their most recent examinations and achieving and maintaining compliance with any regulatory supervisory actions respecting the subsidiary banks; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not pay any new salaries, bonuses, management fees or make any other payments to insiders without prior approval of the FRB St. Louis and the KDFI; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not incur additional debt or purchase or redeem any stock without the prior written approval of the FRB St. Louis and the KDFI; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | submit to the FRB St. Louis and the KDFI an acceptable plan detailing the source and timing of funds for meeting the Company’s debt service requirements and other parent company expenses for 2010 and 2011; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | within thirty days of the end of each calendar quarter submit to the FRB St. Louis and the KDFI parent company financial statements along with a status report on compliance with the provisions of the Memorandum. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Subsidiary Banks |
|------------------|

| ·   | adopt, implement and adhere to a plan to reduce its risk position in each asset (loan) in excess of $750,000 which is delinquent or classified “Substandard” in its most recent examination, which plan must establish target dollar levels to which Farmers Bank will use best efforts to reduce delinquencies and classified assets at stated intervals and provide for monthly progress reports to the Farmers Bank board of directors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower already obligated to the Bank on any extension of credit that has either been (a) charged off (or classified “Loss” by regulators or in a subsequent review by the bank’s consultants or a regulatory body) as long as such credit remains uncollected, or (b) classified as “Substandard” or “Doubtful” and is uncollected, except in cases where the Farmers Bank board of directors approves such extension of credit as in the best interest of Farmers Bank; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | submit to the FRB St. Louis and KDFI a written three-year strategic plan adopted by the Farmers Bank board of directors addressing mission statement, economic issues of the industries and markets served, strengths and weaknesses, strategies to improve earnings, staff training, financial goals, and identification of new lines of business and new types of lending; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | address underwriting and credit administration concerns raised by regulators in their most recent examination; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | address and monitor weaknesses regarding specific construction and development loans identified by regulators in their most recent examination; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | formulate and implement a written profit plan consistent with Farmers Bank’s loan, investment and funds management policies and including realistic and comprehensive budgets and review processes, which profit plan is submitted to the FRB St. Louis and KDFI for review and comment; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | if at the end of any quarter Farmers Bank’s Tier 1 Leverage ratio is less than 8.0%, within thirty days it must submit to the FRB St. Louis and KDFI a plan for implementation of the capital accounts of Farmers Bank or other measures to bring the ratio to the required 8.0% level. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 20     |   |                     | $      | 35,103 |                                  |   | $ | 24,478 |   |   |   | 13 |   |   | $ | 5,813 |   |   | $ | 3,483 |   |   | $ | 6,340 |   |   | $ | 43,945 |   |   |   | 30 |   |

| 1Represents repossession activity to other real estate owned. |
|---------------------------------------------------------------|

----

| ·   | continue to retain qualified management, assessed on its ability to comply with the Order, operate United Bank in a safe and sound manner, comply with applicable laws, rules and regulations, and restore United Bank to a safe and sound condition; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not add directors or senior executive officers without prior approval of the FDIC and KDFI; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | comply with certain disclosure guidelines in connection with selling any securities by United Bank to raise capital.  The Company and United Bank do not currently have plans to sell securities of United Bank to raise capital; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | charge off any asset (loan) which was classified as a “Loss” by the FDIC and KDFI in their most recent examination; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower obligated on any extension of credit that has been charged off (or classified as a “Loss” in the most recent examination), so long as the credit remains uncollected; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower whose loan or other credit has been classified “Substandard” or “Doubtful” (or is listed as “Special Mention” by regulators in the most recent exam), and is uncollected, unless United Bank’s board of directors makes special determinations that extending such credit is in United Bank’s best interest; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adopt, implement and adhere to a plan to reduce its risk position in each borrower relationship in excess of $1,000,000 which is more than thirty days delinquent or classified as “Substandard” or “Doubtful” by regulators in the most recent examination.  Such plan is required to be submitted to the FDIC and KDFI and include a prohibition on extending credit to pay interest absent specific board determinations that such is in United Bank’s best interest, establish target levels to which  United Bank shall reduce delinquencies and classified assets within given time permits and provide for monthly reporting to United Bank’s board of directors on progress of the plan; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of maintaining a written contingency funding plan which must be submitted to the FDIC and KDFI and on each Friday United Bank must submit to the FDIC and KDFI a liquidity analysis report; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not declare or pay dividends to the Parent Company without the prior written consent of the FDIC and KDFI; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | prior to submission of its quarterly call reports, have its board of directors review its allowance for loan and lease losses (“ALLL”), provide an adequate ALLL and accurately report the ALLL; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of adopting, implementing and adhering to a written profit plan and comprehensive budget for 2009 and 2010 and each year the Order is in effect, which must be submitted to the FDIC and KDFI for review and comment and include realistic and comprehensive budgets and review processes by both management and United Bank’s board of directors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | formulate, adopt and implement a plan to manage concentrations of credit that were identified by regulators in their most recent examination, which must provide for procedures for measurement and monitoring of concentrations of credit and a limit on concentrations commensurate with United Bank’s capital position, safe and sound banking practices and overall risk profile; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | eliminate and correct all violations of laws, rules and regulations identified by the regulators in their most recent examination; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of having procedures for managing its sensitivity to interest rate risk, which must implement recommendations of the regulators and be submitted to the FDIC and KDFI; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the board of directors maintain a program to provide for monitoring United Bank’s compliance with the Order and on a quarterly basis United Bank’s directors are required to sign a progress report to be furnished to the FDIC and KDFI detailing actions taken by United Bank to secure compliance with the Order. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 15     |   |                     | $      | 42,870 |                                  |   | $ | 49,481 |   |   |   | 18 |   |   | $ | 12,178 |   |   | $ | 6,330 |   |   | $ | 12,887 |   |   | $ | 60,956 |   |   |   | 29 |   |

| 1Represents repossession activity to other real estate owned. |
|---------------------------------------------------------------|

| ·   | present to the FDIC and KDFI a plan for the augmentation of the capital accounts of the bank or other measures to bring the Tier 1 Leverage ratio to 8.0% if such ratio is less than 8.0% of the bank’s total assets as of March 31, June 30, September 30, or December 31 while the Memorandum is in effect; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | formulate, adopt, and submit for review and comment a written plan of action to lessen its risk position in each asset classified  “Substandard” and “Doubtful” by regulators in the most recent examination, and which aggregated a relationship of $250,000 or more.  Such plan shall include |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    | a) dollar levels to which it will strive to reduce each relationship within 6 and 12 months from the effective date of the Memorandum |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------|

|    | b) provisions for the submission of monthly written progress reports to its board of directors for review and notation in the board of directors’ minutes; |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend or renew any additional or existing credit to, or for the benefit of, any borrower who is already obligated in any manner to Citizens Northern on any extension of credit (including any portion thereof) that |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    | a) has been charged off or classified as a “Loss” in the most recent examination or in any subsequent review by its consultants or by a regulatory body, so long as such credit remains uncollected |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | b) has been classified “Substandard” or “Doubtful” in the most recent examination, on the bank’s internal watch list, or in any subsequent review by its consultants, and is uncollected, unless its board of directors or loan committee has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the bank. A copy of the statement, including a thorough financial analysis gauging the borrowers financial condition and overall ability to service the existing and new debt, shall be placed in the appropriate loan file and shall be incorporated in the minutes of the applicable loan committee; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | eliminate from its books, by collection, charge-off or other proper entries, all assets or potions of assets classified “Loss” by the FDIC and KDFI in their most recent examination that have not been previously charged off or collected; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | take all steps necessary to correct all contraventions of statements of policy and all the violations scheduled on the Violations of Laws and Regulations pages in the most recent examination and adopt procedures to assure future compliance with all applicable statements of policies, laws, rules and regulations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adopt, implement, and adhere to a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar years 2010 through 2011. The plan and budgets shall contain formal goals and strategies, and a description of the operating assumptions that form the basis for major projected income and expense components. A copy of the plan and budgets shall be submitted to the FDIC and KDFI upon completion. The written profit plan shall address, at a minimum: income forecasts, national and local economic conditions forecasts, funding strategies, the bank’s asset structure, specific growth objectives, operating costs, and the likely effect of competition from other financial institutions in the bank’s market area. Within 30 days from the end of each calendar quarter following the completion of the profit plan(s) and budget(s), the bank’s board of directors shall evaluate the bank’s actual performance in relation to the plan and budget, record the results of the evaluation, and note any actions taken by the bank in the minutes of the board of directors’ meeting at which such evaluation is undertaken; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | within 30 days following each calendar quarter after the date of the Memorandum, progress reports covering each of the provisions of the Memorandum shall be submitted to the FDIC and KDFI, until notification that the reports need no longer be submitted. The bank’s board of directors shall review all reports prior to submission and note their considerations in the minutes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 8      |   |                     | $      | 11,857 |                                  |   | $ | 3,387 |   |   |   | 2 |   |   | $ | 718 |   |   | $ | 146 |   |   | $ | 200 |   |   | $ | 14,180 |   |   |   | 10 |   |

| 1Represents repossession activity to other real estate owned. |
|---------------------------------------------------------------|

----

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

| §   | The improvement in net income was driven by an increase in net securities gains in the current quarter, which offset higher expenses of repossessed real estate properties. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net interest income was relatively flat, increasing $125 thousand or .9% in the quarterly comparison. Although interest expense declined $3.4 million or 28.6%, interest income declined $3.3 million or 12.9%. The decrease in interest income was the result of lower rates and lower volume in the loan portfolio and by lower interest income from investment securities due to lower rates. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net interest margin was 3.0% in the current quarter, an increase of 16 basis points from 2.84% in the third quarter a year ago. Net interest spread was 2.76%, an increase of 15 basis points compared to 2.61%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | The provision for loan losses decreased $409 thousand or 6.1% in the current quarter compared to the same quarter a year earlier. The decrease in the provision for loan losses is attributed to a decline in loan volume and an improvement in nonperforming loans during the comparable quarters. Nonperforming loans decreased $7.1 million or 7.2% during the third quarter of 2010. In the third quarter a year ago, nonperforming loans moved upward $182 thousand. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Noninterest income increased $3.8 million or 58.1% mainly due to a $3.9 million increase in net gains on the sale of investment securities. All other categories of noninterest income were relatively unchanged, decreasing $94 thousand or 1.4%. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Total noninterest expenses increased $628 thousand or 4.1% driven by higher costs associated with repossessed real estate of $1.6 million. All other net noninterest expenses decreased $997 thousand or 6.7% as improvements were made in numerous areas. Significant decreases in noninterest expense categories include salaries and employee benefits of $766 thousand or 10.3%, equipment expenses of $135 thousand or 17.0%, and amortization of intangible assets of $129 thousand or 26.4%. Partially offsetting these lower noninterest expenses was an increase in deposit insurance expense of $373 thousand or 51.4%. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Income tax expense was $525 thousand in the current quarter compared to a tax benefit of $1.7 million for the third quarter of 2009. The effective income tax rate was 29.5% in the current quarter. The effective tax rate has risen as a result of an increase in the taxable income component of pre-tax income. In the previous period, the tax-free components were larger than total pre-tax income. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Return on average assets (“ROA”) and equity (“ROE”) was .24% and 3.23%, respectively, for the current quarter compared to -.03% and -.35% for the same quarter a year ago. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Quarter Ended September 30,                                                                                                             |   | 2010           |          |   | 2009     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|---------------|--------|----------|--------|
|  (In thousands)                                                                                                                    |   | AverageBalance |          |   | Interest |   |   | AverageRate |   |   | AverageBalance |   |   | Interest |   |   | AverageRate |   |
| Earning Assets                                                                                                                          |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities                                                                                                                   |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                                                 |   | $              | 454,004       |   |     | $      | 3,950 |   |   |   | 3.45 | % |   | $ | 460,003 |   |   | $ | 5,019 |   |   |   | 4.33 | % |
| Nontaxable1                                                                                                                             |   |           | 80,561        |   |     |   | 995 |   |   |   | 4.90 |   |   |   | 101,465 |   |   |   | 1,330 |   |   |   | 5.20 |   |
| Time deposits with banks, federal funds sold and securities purchased under agreements to resell                                        |   |           | 107,076       |   |     |   | 46 |   |   |   | .17 |   |   |   | 111,445 |   |   |   | 65 |   |   |   | .23 |   |
| Loans1,2,3                                                                                                                              |   |           | 1,228,797     |   |     |   | 17,657 |   |   |   | 5.70 |   |   |   | 1,304,705 |   |   |   | 19,623 |   |   |   | 5.97 |   |
| Total earning assets                                                                                                                    |   |           | 1,870,438     |   |     | $      | 22,648 |   |   |   | 4.80 | % |   |   | 1,977,618 |   |   | $ | 26,037 |   |   |   | 5.22 | % |
| Allowance for loan losses                                                                                                               |   |           | (26,131       | )      |     |   |   |   |   |   |   |   |   |   | (20,706 | ) |   |   |   |   |   |   |   |   |
| Total earning assets, net of allowance for loan losses                                                                                  |   |           | 1,844,307     |   |     |   |   |   |   |   |   |   |   |   | 1,956,912 |   |   |   |   |   |   |   |   |   |
| Nonearning Assets                                                                                                                       |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                                                                                                                 |   |           | 59,442        |   |     |   |   |   |   |   |   |   |   |   | 106,584 |   |   |   |   |   |   |   |   |   |
| Premises and equipment, net                                                                                                             |   |           | 40,576        |   |     |   |   |   |   |   |   |   |   |   | 40,222 |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                                                            |   |           | 123,595       |   |     |   |   |   |   |   |   |   |   |   | 164,624 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                                            |   | $              | 2,067,920     |   |     |   |   |   |   |   |   |   |   | $ | 2,268,342 |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                                                                                                            |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                                                                                 |   | $              | 248,045       |   |     | $      | 94 |   |   |   | .15 | % |   | $ | 236,643 |   |   | $ | 145 |   |   |   | .24 | % |
| Savings                                                                                                                                 |   |           | 271,978       |   |     |   | 389 |   |   |   | .57 |   |   |   | 257,038 |   |   |   | 503 |   |   |   | .78 |   |
| Time                                                                                                                                    |   |           | 773,260       |   |     |   | 4,782 |   |   |   | 2.45 |   |   |   | 924,712 |   |   |   | 7,764 |   |   |   | 3.33 |   |
| Federal funds purchased and other short-term borrowings                                                                                 |   |           | 49,616        |   |     |   | 75 |   |   |   | .60 |   |   |   | 59,692 |   |   |   | 111 |   |   |   | .74 |   |
| Securities sold under agreements to     repurchase and other long-term     borrowings |   |           |  308,080 |   |     |   |  3,138 |   |   |   |  4.04 |   |   |   |  329,654 |   |   |   |  3,356 |   |   |   |  4.04 |   |
| Total interest bearing liabilities                                                                                                      |   |           | 1,650,979     |   |     | $      | 8,478 |   |   |   | 2.04 | % |   |   | 1,807,739 |   |   | $ | 11,879 |   |   |   | 2.61 | % |
| Noninterest Bearing Liabilities                                                                                                         |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commonwealth of Kentucky deposits                                                                                                       |   |           | 532           |   |     |   |   |   |   |   |   |   |   |   | 29,347 |   |   |   |   |   |   |   |   |   |
| Other demand deposits                                                                                                                   |   |           | 207,163       |   |     |   |   |   |   |   |   |   |   |   | 191,623 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                                                                       |   |           | 54,878        |   |     |   |   |   |   |   |   |   |   |   | 42,914 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                                                       |   |           | 1,913,552     |   |     |   |   |   |   |   |   |   |   |   | 2,071,623 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                                                                                              |   |           | 154,368       |   |     |   |   |   |   |   |   |   |   |   | 196,719 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                                                                        |   | $              | 2,067,920     |   |     |   |   |   |   |   |   |   |   | $ | 2,268,342 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                     |   |           |          |   |     |   | 14,170 |   |   |   |   |   |   |   |   |   |   |   | 14,158 |   |   |   |   |   |
| TE basis adjustment                                                                                                                     |   |           |          |   |     |   | (543 | ) |   |   |   |   |   |   |   |   |   |   | (656 | ) |   |   |   |   |
| Net interest income                                                                                                                     |   |           |          |   |     | $      | 13,627 |   |   |   |   |   |   |   |   |   |   | $ | 13,502 |   |   |   |   |   |
| Net interest spread                                                                                                                     |   |           |          |   |     |   |   |   |   |   | 2.76 | % |   |   |   |   |   |   |   |   |   |   | 2.61 | % |
| Impact of noninterest bearing sources of funds                                                                                          |   |           |          |   |     |   |   |   |   |   | .24 |   |   |   |   |   |   |   |   |   |   |   | .23 |   |
| Net interest margin                                                                                                                     |   |           |          |   |     |   |   |   |   |   | 3.00 | % |   |   |   |   |   |   |   |   |   |   | 2.84 | % |

----

| (In thousands)                                                                                   |   | Variance |      |          | Variance Attributed to |   |
|--------------------------------------------------------------------------------------------------|--------|----------|-----------|---------------|------------------------|--------|
| Quarter Ended September 30,                                                                      |   |     | 2010/2009 | 1             |                   | Volume |   |   | Rate |   |
|                                                                                             |   |     |      |          |                   |   |   |   |   |   |
| Interest Income                                                                                  |   |     |      |          |                   |   |   |   |   |   |
| Taxable investment securities                                                                    |   | $        | (1,069    | )   |                   | $      | (65 | )   |   | $ | (1,004 | )   |
| Nontaxable investment securities2                                                                |   |     | (335      | )   |                   |   | (262 | )   |   |   | (73 | )   |
| Time deposits with banks, federal funds sold and securities purchased under agreements to resell |   |     | (19       | )   |                   |   | (2 | )   |   |   | (17 | )   |
| Loans2                                                                                           |   |     | (1,966    | )   |                   |   | (1,106 | )  |   |   | (860 | )   |
| Total interest income                                                                            |   |     | (3,389    | )   |                   |   | (1,435 | )   |   |   | (1,954 | )   |
| Interest Expense                                                                                 |   |     |      |          |                   |   |   |   |   |   |   |   |
| Interest bearing demand deposits                                                                 |   |     | (51       | )   |                   |   | 42 |   |   |   | (93 | )   |
| Savings deposits                                                                                 |   |     | (114      | )   |                   |   | 172 |   |   |   | (286 | )   |
| Time deposits                                                                                    |   |     | (2,982    | )   |                   |   | (1,141 | )   |   |   | (1,841 | )   |
| Federal funds purchased and other short-term borrowings                                          |   |     | (36       | )   |                   |   | (17 | )   |   |   | (19 | )   |
| Securities sold under agreements to repurchase and  other long-term borrowings         |   |     | (218      | )        |                   |   | (218 | )   |   |   |   |   |
| Total interest expense                                                                           |   |     | (3,401    | )   |                   |   | (1,162 | )   |   |   | (2,239 | )   |
| Net interest income                                                                              |   | $        | 12   |          |                   | $      | (273 | )   |   | $ | 285 |   |
| Percentage change                                                                                |   |     | 100.0     | %             |                   |   | (2275.0 | )% |   |   | 2375.0 | % |

| 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. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| §   | The $3.7 million or $.50 per common share increase in net income for the nine months ending September 30, 2010 compared to the first nine months of 2009 was driven mainly by higher net gains on the sale of investment securities. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net interest income was relatively flat, increasing $210 thousand or .5% in the nine-month comparison. Although interest expense declined $8.4 million or 23.4%, interest income declined $8.2 million or 10.7%. The decrease in interest income was the result of lower rates and lower volume in the loan portfolio and by lower interest income from investment securities due to lower rates. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The provision for loan losses decreased $609 thousand or 4.3% in the current nine months compared to the same nine months a year earlier. The decrease in the provision for loan losses is attributed to a decline in loan volume and a lower rate of increase in nonperforming loans during the comparable nine month periods. Nonperforming loans increased $15.4 million or 20.2% in the current nine months. During the first nine months of 2009, nonperforming loans increased $19.0 million or 74.7%. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Net interest margin was 3.02% for the first nine months of 2010, an increase of 11 basis points from 2.91% in the same period a year ago. Net interest spread was 2.81%, up 15 basis points compared to 2.66%. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Noninterest income increased $6.6 million or 31.3% due primarily to a $6.8 million increase in net gains on the sale of investment securities. Significant other favorable increases included allotment processing fees of $173 thousand or 4.3% and non-deposit service charges of $147 thousand or 4.4%. Decreases in noninterest income line items include trust income of $181 thousand or 12.6%, income from company-owned life insurance of $165 thousand or 17.0%, and net gains on the sale of mortgage loans of $137 thousand or 14.9%. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Improvements continue to be made in a significant number of noninterest expense categories; however, overall noninterest expenses increased $1.1 million or 2.3% due mainly to a $3.9 million increase in expenses related to foreclosed real estate. Decreases in noninterest expense categories include salaries and employee benefits of $1.8 million or 8.0%, amortization of intangible assets of $386 thousand or 26.4%, equipment expense of $348 thousand or 15.0%, and occupancy expense of $300 thousand or 7.6%. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Income tax expense was $1.7 million for the first nine months of 2010 with an effective income tax rate of 22.0%. Income previously classified as tax-free from company-owned life insurance became taxable when certain of the policies were liquidated in the current year. For the first nine months of 2009, the Company recorded an income tax benefit of $951 thousand that was a result of an increase in tax-exempt investments in 2009 as well as lower expected annual pre-tax income for 2009. The effective tax rate fluctuates as a result of changes in the taxable income component of pre-tax income. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | ROA and ROE was .38% and 5.31%, respectively, for the current nine months compared to .14% and 1.58% for the first nine months a year ago. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Nine Months Ended September 30,                                                                                                                     |   | 2010           |          |   | 2009     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|---------------|--------|----------|--------|
|  (In thousands)                                                                                                                                |   | AverageBalance |          |   | Interest |   |   | AverageRate |   |   | AverageBalance |   |   | Interest |   |   | AverageRate |   |
| Earning Assets                                                                                                                                      |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities                                                                                                                               |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                                                             |   | $              | 451,995       |   |     | $      | 13,332 |   |   |   | 3.94 | % |   | $ | 440,306 |   |   | $ | 15,559 |   |   |   | 4.72 | % |
| Nontaxable1                                                                                                                                         |   |           | 87,137        |   |     |   | 3,345 |   |   |   | 5.13 |   |   |   | 97,258 |   |   |   | 3,896 |   |   |   | 5.36 |   |
| Time deposits with banks, federal funds sold and securities purchased under agreements to resell                                                    |   |           | 122,087       |   |     |   | 195 |   |   |   | .21 |   |   |   | 129,055 |   |   |   | 229 |   |   |   | .24 |   |
| Loans1,2,3                                                                                                                                          |   |           | 1,247,796     |   |     |   | 53,838 |   |   |   | 5.77 |   |   |   | 1,313,182 |   |   |   | 59,365 |   |   |   | 6.04 |   |
| Total earning assets                                                                                                                                |   |           | 1,909,015     |   |     | $      | 70,710 |   |   |   | 4.95 | % |   |   | 1,979,801 |   |   | $ | 79,049 |   |   |   | 5.34 | % |
| Allowance for loan losses                                                                                                                           |   |           | (24,538       | )      |     |   |   |   |   |   |   |   |   |   | (18,325 | ) |   |   |   |   |   |   |   |   |
| Total earning assets, net of allowance for loan losses                                                                                              |   |           | 1,884,477     |   |     |   |   |   |   |   |   |   |   |   | 1,961,476 |   |   |   |   |   |   |   |   |   |
| Nonearning Assets                                                                                                                                   |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                                                                                                                             |   |           | 78,635        |   |     |   |   |   |   |   |   |   |   |   | 88,723 |   |   |   |   |   |   |   |   |   |
| Premises and equipment, net                                                                                                                         |   |           | 39,405        |   |     |   |   |   |   |   |   |   |   |   | 41,525 |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                                                                        |   |           | 132,296       |   |     |   |   |   |   |   |   |   |   |   | 162,482 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                                                        |   | $              | 2,134,813     |   |     |   |   |   |   |   |   |   |   | $ | 2,254,206 |   |   |   |   |   |   |   |   |   |
| Interest Bearing Liabilities                                                                                                                        |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                            |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing demand                                                                                                                             |   | $              | 260,548       |   |     | $      | 363 |   |   |   | .19 | % |   | $ | 248,719 |   |   | $ | 579 |   |   |   | .31 | % |
| Savings                                                                                                                                             |   |           | 269,512       |   |     |   | 1,281 |   |   |   | .64 |   |   |   | 255,954 |   |   |   | 1,476 |   |   |   | .77 |   |
| Time                                                                                                                                                |   |           | 835,589       |   |     |   | 16,318 |   |   |   | 2.61 |   |   |   | 895,477 |   |   |   | 23,512 |   |   |   | 3.51 |   |
| Federal funds purchased and other short-term borrowings                                                                                             |   |           | 46,764        |   |     |   | 248 |   |   |   | .71 |   |   |   | 65,232 |   |   |   | 348 |   |   |   | .71 |   |
| Securities sold under agreements to      repurchase and other long-term      borrowings |   |           |  311,923 |   |     |   |  9,398 |   |   |   |  4.03 |   |   |   |  332,869 |   |   |   |  10,130 |   |   |   |  4.07 |   |
| Total interest bearing liabilities                                                                                                                  |   |           | 1,724,336     |   |     | $      | 27,608 |   |   |   | 2.14 | % |   |   | 1,798,251 |   |   | $ | 36,045 |   |   |   | 2.68 | % |
| Noninterest Bearing Liabilities                                                                                                                     |   |           |          |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commonwealth of Kentucky deposits                                                                                                                   |   |           | 1,634         |   |     |   |   |   |   |   |   |   |   |   | 34,939 |   |   |   |   |   |   |   |   |   |
| Other demand deposits                                                                                                                               |   |           | 207,108       |   |     |   |   |   |   |   |   |   |   |   | 186,988 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                                                                                   |   |           | 49,612        |   |     |   |   |   |   |   |   |   |   |   | 37,401 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                                                                   |   |           | 1,982,690     |   |     |   |   |   |   |   |   |   |   |   | 2,057,579 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                                                                                                                          |   |           | 152,123       |   |     |   |   |   |   |   |   |   |   |   | 196,627 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity                                                                                                    |   | $              | 2,134,813     |   |     |   |   |   |   |   |   |   |   | $ | 2,254,206 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                                 |   |           |          |   |     |   | 43,102 |   |   |   |   |   |   |   |   |   |   |   | 43,004 |   |   |   |   |   |
| TE basis adjustment                                                                                                                                 |   |           |          |   |     |   | (1,748 | ) |   |   |   |   |   |   |   |   |   |   | (1,860 | ) |   |   |   |   |
| Net interest income                                                                                                                                 |   |           |          |   |     | $      | 41,354 |   |   |   |   |   |   |   |   |   |   | $ | 41,144 |   |   |   |   |   |
| Net interest spread                                                                                                                                 |   |           |          |   |     |   |   |   |   |   | 2.81 | % |   |   |   |   |   |   |   |   |   |   | 2.66 | % |
| Impact of noninterest bearing sources of funds                                                                                                      |   |           |          |   |     |   |   |   |   |   | .21 |   |   |   |   |   |   |   |   |   |   |   | .25 |   |
| Net interest margin                                                                                                                                 |   |           |          |   |     |   |   |   |   |   | 3.02 | % |   |   |   |   |   |   |   |   |   |   | 2.91 | % |

----

| (In thousands)                                                                                   |   | Variance |      |          | Variance Attributed to |   |
|--------------------------------------------------------------------------------------------------|--------|----------|-----------|---------------|------------------------|--------|
| Nine Months Ended September 30,                                                                  |   |     | 2010/2009 | 1             |                   | Volume |   |   | Rate |   |
|                                                                                             |   |     |      |          |                   |   |   |   |   |   |
| Interest Income                                                                                  |   |     |      |          |                   |   |   |   |   |   |
| Taxable investment securities                                                                    |   | $        | (2,227    | )   |                   | $      | 643 |   |   | $ | (2,870 | ) |
| Nontaxable investment securities2                                                                |   |     | (551      | )   |                   |   | (390 | )  |   |   | (161 | ) |
| Time deposits with banks, federal funds sold and securities purchased under agreements to resell |   |     | (34       | )   |                   |   | (10 | )  |   |   | (24 | ) |
| Loans2                                                                                           |   |     | (5,527    | )   |                   |   | (2,912 | ) |   |   | (2,615 | ) |
| Total interest income                                                                            |   |     | (8,339    | )   |                   |   | (2,669 | )  |   |   | (5,670 | ) |
| Interest Expense                                                                                 |   |     |      |          |                   |   |   |   |   |   |   |   |
| Interest bearing demand deposits                                                                 |   |     | (216      | )   |                   |   | 42 |   |   |   | (258 | ) |
| Savings deposits                                                                                 |   |     | (195      | )   |                   |   | 112 |   |   |   | (307 | ) |
| Time deposits                                                                                    |   |     | (7,194    | )   |                   |   | (1,488 | )  |   |   | (5,706 | ) |
| Federal funds purchased and other short-term borrowings                                          |   |     | (100      | )   |                   |   | (100 | )    |   |   |   |   |
| Securities sold under agreements to repurchase and other long-term borrowings                    |   |     | (732      | )   |                   |   | (633 | )  |   |   | (99 | ) |
| Total interest expense                                                                           |   |     | (8,437    | )   |                   |   | (2,067 | )  |   |   | (6,370 | ) |
| Net interest income                                                                              |   | $        | 98        |          |                   | $      | (602 | ) |   | $ | 700 |   |
| Percentage change                                                                                |   |     | 100.0     | %             |                   |   | (614.3 | %) |   |   | 714.3 | % |

----

----

----

----

|                                                             |   | September 30, 2010 |      |   | December 31, 2009 |   |
|------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
| (Dollars in thousands)                                           |   | Amount             |      |   | %                 |   |   | Amount |   |   | % |   |
|                                                             |   |               |      |   |              |   |   |   |   |   |   |   |
| Commercial, financial, and agriculture                           |   | $                  | 108,466   |   |              |   | 8.9 | % |   | $ | 114,687 |   |   |   | 9.0 | % |
| Real estate – construction                                 |   |               | 163,576   |   |              |   | 13.5 |   |   |   | 211,725 |   |   |   | 16.7 |   |
| Real estate mortgage – residential                         |   |               | 474,149   |   |              |   | 39.0 |   |   |   | 473,644 |   |   |   | 37.2 |   |
| Real estate mortgage - farmland and other commercial enterprises |   |               | 421,484   |   |              |   | 34.7 |   |   |   | 411,309 |   |   |   | 32.3 |   |
| Installment                                                      |   |               | 30,350    |   |              |   | 2.5 |   |   |   | 36,280 |   |   |   | 2.9 |   |
| Lease financing                                                  |   |               | 17,211    |   |              |   | 1.4 |   |   |   | 24,297 |   |   |   | 1.9 |   |
| Total                                                       |   | $                  | 1,215,236 |   |              |   | 100.0 | % |   | $ | 1,271,942 |   |   |   | 100.0 | % |

----

----

| (In thousands)                                                             |   | September 30, 2010 |   |   | December 31, 2009 |   |
|----------------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
| Nonaccrual Loans                                                           |   |                    |   |   |                   |   |
| Commercial, financial, and agriculture                                     |   | $                       | 694    |   |                   | $      | 965 |   |
| Real estate-construction                                                   |   |                    | 37,744 |   |                   |   | 35,648 |   |
| Real estate mortgage-residential                                           |   |                    | 10,588 |   |                   |   | 8,633 |   |
| Real estate mortgage-farmland and other commercial enterprises             |   |                    | 4,489  |   |                   |   | 11,038 |   |
| Installment                                                                |   |                    | 155    |   |                   |   | 241 |   |
| Lease financing                                                            |   |                    | 196    |   |                   |   | 105 |   |
|   Total nonaccrual loans                                         |   | $                       | 53,866 |   |                   | $      | 56,630 |   |
|                                                                       |   |                    |   |   |                   |   |   |   |
| Restructured Loans                                                         |   |                    |   |   |                   |   |   |   |
| Commercial, financial, and agriculture                                     |   |                    |   |   |                   | $      | 670 |   |
| Real estate-construction                                                   |   | $                       | 18,263 |   |                   |   | 11,047 |   |
| Real estate mortgage-residential                                           |   |                    | 8,062  |   |                   |   | 2,053 |   |
| Real estate mortgage-farmland and other commercial enterprises             |   |                    | 11,070 |   |                   |   | 4,141 |   |
|   Total restructured loans                                       |   | $                       | 37,395 |   |                   | $      | 17,911 |   |
|                                                                       |   |                    |   |   |                   |   |   |   |
| Past Due 90 Days or More and Still Accruing                                |   |                    |   |   |                   |   |   |   |
| Commercial, financial, and agriculture                                     |   |                    |   |   |                   | $      | 450 |   |
| Real estate-construction                                                   |   |                    |   |   |                   |   | 477 |   |
| Real estate mortgage-residential                                           |   | $                       | 98     |   |                   |   | 458 |   |
| Real estate mortgage-farmland and other commercial enterprises             |   |                    |   |   |                   |   | 27 |   |
| Installment                                                                |   |                    | 374    |   |                   |   | 395 |   |
|   Total past due 90 days or more and still accruing              |   | $                       | 472    |   |                   | $      | 1,807 |   |
|                                                                       |   |                    |   |   |                   |   |   |   |
| Total nonperforming loans                                                  |   | $                       | 91,733 |   |                   | $      | 76,348 |   |
|                                                                       |   |                    |   |   |                   |   |   |   |
| Ratio of total nonperforming loans to total loans (net of unearned income) |   |                    | 7.5    | %      |                   |   | 6.0 | % |

----

| ·   | repricing a loan to a current market rate of interest to a borrower with good credit and adequate collateral value in order to retain the customer, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changing the payment frequency from monthly to quarterly, semi-annually or annually where the loan is performing, the borrower has good credit and adequate collateral value and the bank believes valid reasons exist for the change, or |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | extending the interest only payment period of a performing loan where the borrower has good credit and adequate collateral value in instances where a project may still be in a phase of development or leasing-up, but where the bank believes completion will occur in the near future, or such extension is otherwise in the bank’s best interest. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | The bank made a concession on the loan terms, and |
|--------|----|---------------------------------------------------|

|   | 2. | The borrower was experiencing financial difficulty. |
|--------|----|-----------------------------------------------------|

----

| # of Loans |   |  Loan Type |                                                                   | Average Loan Balance |   |      | Range of Loan Balances |   |  Modification Type |
|------------|--------|-----------------|------------------------------------------------------------------------|----------------------|--------|-----------|------------------------|--------|-------------------------|
|       | 4      |            | Commercial, financial and agricultural                                 |                 | $      | 28,638    |                   |   |                    | $6,722 - $45,989 |   | Changed repayment frequency |
|       | 60     |            | Commercial, financial and agricultural                                 |                 | $      | 61,059    |                   |   |                    | $371 - $1,000,000 |   | lowered interest rate to market rate to retain loan |
|       | 30     |            | Installment loan                                                       |                 | $      | 15,825    |                   |   |                    | $475 - $68,100 |   | lowered interest rate to market rate to retain loan |
|       | 1      |            | Installment loan                                                       |                 | $      | 52,979    |                   |   |                    | n/a |   | changed repayment frequency |
|       | 50     |            | Real estate mortgage – farmland and other commercial enterprises |                 | $      | 628,611   |                   |   |                    | $100 - $4,529,503 |   | lowered interest rate to market rate to retain loan |
|       | 7      |            | Real estate mortgage – farmland and other commercial enterprises |                 | $      | 415,448   |                   |   |                    | $55,000 - $1,249,507 |   | changed repayment frequency |
|       | 69     |            | Real estate mortgage - residential                                     |                 | $      | 205,516   |                   |   |                    | $1,914 - $5,527,552 |   | lowered interest rate to market to retain loan |
|       | 7      |            | Real estate mortgage - residential                                     |                 | $      | 36,196    |                   |   |                    | $10,000 - $73,987 |   | changed repayment frequency (in 1 case reduced interest rate to market rate) |
|       | 1      |            | Real estate mortgage - residential                                     |                 | $      | 192,882   |                   |   |                    | n/a |   | modify payment terms for estates of deceased borrowers at representative’s request |
|       | 3      |            | Real estate - construction                                             |                 | $      | 1,395,942 |                   |   |                    | $83,600 - $2,942,530 |   | Lowered interest rate to market rate to retain loan (in 2 cases extended interest only period) |

----

|                |   | End of Period     |      |   | Average          |   |
|---------------------|--------|-------------------|-----------|--------|------------------|--------|
| (In thousands)      |   | September 30,2010 |      |   | December 31,2009 |   |   | Difference |   |   | (Nine Months)September 30,2010 |   |   | (Twelve Months)December 31,2009 |   |   | Difference |   |
| Noninterest Bearing |   |              |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commonwealth        |   | $                 | 102       |   |             | $      | 13,463 |   |   | $ | (13,361 | ) |   | $ | 1,634 |   |   | $ | 34,992 |   |   | $ | (33,358 | ) |
| Other               |   |              | 204,034   |   |             |   | 201,055 |   |   |   | 2,979 |   |   |   | 207,108 |   |   |   | 191,656 |   |   |   | 15,452 |   |
| Total               |   | $                 | 204,136   |   |             | $      | 214,518 |   |   | $ | (10,382 | ) |   | $ | 208,742 |   |   | $ | 226,648 |   |   | $ | (17,906 | ) |
|                |   |              |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Bearing    |   |              |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand              |   | $                 | 244,105   |   |             | $      | 255,133 |   |   | $ | (11,028 | ) |   | $ | 260,548 |   |   | $ | 247,235 |   |   | $ | 13,313 |   |
| Savings             |   |              | 272,138   |   |             |   | 258,804 |   |   |   | 13,334 |   |   |   | 269,512 |   |   |   | 256,063 |   |   |   | 13,449 |   |
| Time                |   |              | 742,873   |   |             |   | 904,978 |   |   |   | (162,105 | ) |   |   | 835,589 |   |   |   | 902,066 |   |   |   | (66,477 | ) |
| Total               |   | $                 | 1,259,116 |   |             | $      | 1,418,915 |   |   | $ | (159,799 | ) |   | $ | 1,365,649 |   |   | $ | 1,405,364 |   |   | $ | (39,715 | ) |
|                |   |              |      |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Deposits      |   | $                 | 1,463,252 |   |             | $      | 1,633,433 |   |   | $ | (170,181 | ) |   | $ | 1,574,391 |   |   | $ | 1,632,012 |   |   | $ | (57,621 | ) |

----

----

----

|                       |   |                            |   |   |              |   |
|----------------------------|--------|---------------------------------|--------|--------|-------------------|--------|
|                       |   | Farmers CapitalBank Corporation |   |   | RegulatoryMinimum |   |
| Tier 1 Risk-based Capital1 |   |                            | 15.36  | %      |              |   | 4.00 | % |
| Total Risk-based Capital1  |   |                            | 16.62  |   |              |   | 8.00 |   |
| Tier 1 Leverage2           |   |                            | 9.31   |   |              |   | 4.00 |   |

----

| Additionally, under the Memorandum, the Company agreed to: |
|------------------------------------------------------------|

| ·   | utilize its financial and managerial resources to assist its subsidiary banks in addressing weaknesses identified at their most recent examinations and achieving and maintaining compliance with any regulatory supervisory actions respecting the subsidiary banks; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not pay any new salaries, bonuses, management fees or make any other payments to insiders without prior approval of the FRB St. Louis and the KDFI; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not incur additional debt or purchase or redeem any stock without the prior written approval of the FRB St. Louis and the KDFI; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | submit to the FRB St. Louis and the KDFI an acceptable plan detailing the source and timing of funds for meeting the Company’s debt service requirements and other parent company expenses for 2010 and 2011; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | within thirty days of the end of each calendar quarter submit to the FRB St. Louis and the KDFI parent company financial statements along with a status report on compliance with the provisions of the Memorandum. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                |   | Tier 1 Leverage Capital Ratio |   |   | Total Risk-based Capital Ratio |   |
|---------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
|                |   |                          |   |   |                           |   |
| Farmers Bank        |   |                          | 8.40   | %      |                           |   | 16.53 | % |
| United Bank         |   |                          | 8.31   |   |                           |   | 14.52 |   |
| First Citizens Bank |   |                          | 8.31   |   |                           |   | 13.34 |   |
| Citizens Northern   |   |                          | 7.82   |   |                           |   | 12.43 |   |

----

| ·   | adopt, implement and adhere to a plan to reduce its risk position in each asset (loan) in excess of $750,000 which is delinquent or classified “Substandard” in its most recent examination, which plan must establish target dollar levels to which Farmers Bank will use best efforts to reduce delinquencies and classified assets at stated intervals and provide for monthly progress reports to the Farmers Bank board of directors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower already obligated to the Bank on any extension of credit that has either been (a) charged off (or classified “Loss” by regulators or in a subsequent review by the bank’s consultants or a regulatory body) as long as such credit remains uncollected, or (b) classified as “Substandard” or “Doubtful” and is uncollected, except in cases where the Farmers Bank board of directors approves such extension of credit as in the best interest of Farmers Bank; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | submit to the FRB St. Louis and KDFI a written three-year strategic plan adopted by the Farmers Bank board of directors addressing mission statement, economic issues of the industries and markets served, strengths and weaknesses, strategies to improve earnings, staff training, financial goals, and identification of new lines of business and new types of lending; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | address underwriting and credit administration concerns raised by regulators in their most recent examination; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | address and monitor weaknesses regarding specific construction and development loans identified by regulators in their most recent examination; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | formulate and implement a written profit plan consistent with Farmers Bank’s loan, investment and funds management policies and including realistic and comprehensive budgets and review processes, which profit plan is submitted to the FRB St. Louis and KDFI for review and comment; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | if at the end of any quarter Farmers Bank’s Tier 1 Leverage ratio is less than 8.0%, within thirty days it must submit to the FRB St. Louis and KDFI a plan for implementation of the capital accounts of Farmers Bank or other measures to bring the ratio to the required 8.0% level. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 20     |   |                     | $      | 35,103 |                                  |   | $ | 24,478 |   |   |   | 13 |   |   | $ | 5,813 |   |   | $ | 3,483 |   |   | $ | 6,340 |   |   | $ | 43,945 |   |   |   | 30 |   |

| 1Represents repossession activity to other real estate owned. |
|---------------------------------------------------------------|

----

| ·   | continue to retain qualified management, assessed on its ability to comply with the Order, operate United Bank in a safe and sound manner, comply with applicable laws, rules and regulations, and restore United Bank to a safe and sound condition; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not add directors or senior executive officers without prior approval of the FDIC and KDFI; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | comply with certain disclosure guidelines in connection with selling any securities by United Bank to raise capital.  The Company and United Bank do not currently have plans to sell securities of United Bank to raise capital; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | charge off any asset (loan) which was classified as a “Loss” by the FDIC and KDFI in their most recent examination; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower obligated on any extension of credit that has been charged off (or classified as a “Loss” in the most recent examination), so long as the credit remains uncollected; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend additional credit for any borrower whose loan or other credit has been classified “Substandard” or “Doubtful” (or is listed as “Special Mention” by regulators in the most recent exam), and is uncollected, unless United Bank’s board of directors makes special determinations that extending such credit is in United Bank’s best interest; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adopt, implement and adhere to a plan to reduce its risk position in each borrower relationship in excess of $1,000,000 which is more than thirty days delinquent or classified as “Substandard” or “Doubtful” by regulators in the most recent examination.  Such plan is required to be submitted to the FDIC and KDFI and include a prohibition on extending credit to pay interest absent specific board determinations that such is in United Bank’s best interest, establish target levels to which  United Bank shall reduce delinquencies and classified assets within given time permits and provide for monthly reporting to United Bank’s board of directors on progress of the plan; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of maintaining a written contingency funding plan which must be submitted to the FDIC and KDFI and on each Friday United Bank must submit to the FDIC and KDFI a liquidity analysis report; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not declare or pay dividends to the Parent Company without the prior written consent of the FDIC and KDFI; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | prior to submission of its quarterly call reports, have its board of directors review its allowance for loan and lease losses (“ALLL”), provide an adequate ALLL and accurately report the ALLL; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of adopting, implementing and adhering to a written profit plan and comprehensive budget for 2009 and 2010 and each year the Order is in effect, which must be submitted to the FDIC and KDFI for review and comment and include realistic and comprehensive budgets and review processes by both management and United Bank’s board of directors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | formulate, adopt and implement a plan to manage concentrations of credit that were identified by regulators in their most recent examination, which must provide for procedures for measurement and monitoring of concentrations of credit and a limit on concentrations commensurate with United Bank’s capital position, safe and sound banking practices and overall risk profile; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | eliminate and correct all violations of laws, rules and regulations identified by the regulators in their most recent examination; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | continue its practice of having procedures for managing its sensitivity to interest rate risk, which must implement recommendations of the regulators and be submitted to the FDIC and KDFI; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the board of directors maintain a program to provide for monitoring United Bank’s compliance with the Order and on a quarterly basis United Bank’s directors are required to sign a progress report to be furnished to the FDIC and KDFI detailing actions taken by United Bank to secure compliance with the Order. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 15     |   |                     | $      | 42,870 |                                  |   | $ | 49,481 |   |   |   | 18 |   |   | $ | 12,178 |   |   | $ | 6,330 |   |   | $ | 12,887 |   |   | $ | 60,956 |   |   |   | 29 |   |

| 1Represents repossession activity to other real estate owned. |
|---------------------------------------------------------------|

| ·   | present to the FDIC and KDFI a plan for the augmentation of the capital accounts of the bank or other measures to bring the Tier 1 Leverage ratio to 8.0% if such ratio is less than 8.0% of the bank’s total assets as of March 31, June 30, September 30, or December 31 while the Memorandum is in effect; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | formulate, adopt, and submit for review and comment a written plan of action to lessen its risk position in each asset classified  “Substandard” and “Doubtful” by regulators in the most recent examination, and which aggregated a relationship of $250,000 or more.  Such plan shall include |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) dollar levels to which it will strive to reduce each relationship within 6 and 12 months from the effective date of the Memorandum |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | b) provisions for the submission of monthly written progress reports to its board of directors for review and notation in the board of directors’ minutes; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | not extend or renew any additional or existing credit to, or for the benefit of, any borrower who is already obligated in any manner to Citizens Northern on any extension of credit (including any portion thereof) that |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | a) has been charged off or classified as a “Loss” in the most recent examination or in any subsequent review by its consultants or by a regulatory body, so long as such credit remains uncollected |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) has been classified “Substandard” or “Doubtful” in the most recent examination, on the bank’s internal watch list, or in any subsequent review by its consultants, and is uncollected, unless its board of directors or loan committee has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the bank. A copy of the statement, including a thorough financial analysis gauging the borrowers financial condition and overall ability to service the existing and new debt, shall be placed in the appropriate loan file and shall be incorporated in the minutes of the applicable loan committee; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | eliminate from its books, by collection, charge-off or other proper entries, all assets or potions of assets classified “Loss” by the FDIC and KDFI in their most recent examination that have not been previously charged off or collected; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | take all steps necessary to correct all contraventions of statements of policy and all the violations scheduled on the Violations of Laws and Regulations pages in the most recent examination and adopt procedures to assure future compliance with all applicable statements of policies, laws, rules and regulations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adopt, implement, and adhere to a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar years 2010 through 2011. The plan and budgets shall contain formal goals and strategies, and a description of the operating assumptions that form the basis for major projected income and expense components. A copy of the plan and budgets shall be submitted to the FDIC and KDFI upon completion. The written profit plan shall address, at a minimum: income forecasts, national and local economic conditions forecasts, funding strategies, the bank’s asset structure, specific growth objectives, operating costs, and the likely effect of competition from other financial institutions in the bank’s market area. Within 30 days from the end of each calendar quarter following the completion of the profit plan(s) and budget(s), the bank’s board of directors shall evaluate the bank’s actual performance in relation to the plan and budget, record the results of the evaluation, and note any actions taken by the bank in the minutes of the board of directors’ meeting at which such evaluation is undertaken; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | within 30 days following each calendar quarter after the date of the Memorandum, progress reports covering each of the provisions of the Memorandum shall be submitted to the FDIC and KDFI, until notification that the reports need no longer be submitted. The bank’s board of directors shall review all reports prior to submission and note their considerations in the minutes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Substandard Loans |
|-------------------|

| (Dollars in thousands) |   |   | Activity Since Exam Date |   |   |                                  |   |
|------------------------|--------|--------|--------------------------|--------|--------|---------------------------------------|--------|
| As of Exam Date        |   |   | Increases                |   |   | Decreases                             |   |   | September 30, 2010 |   |
| NumberofCredits        |   |   | Balance                  |   |   | Additional Credit/New Classifications |   |   | Number of Credits |   |   | Principal Payments |   |   | Charge Off’s |   |   | Transfers1 |   |   | Balance |   |   | NumberofCredits |   |
|                   |   |   |                     |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   | 8      |   |                     | $      | 11,857 |                                  |   | $ | 3,387 |   |   |   | 2 |   |   | $ | 718 |   |   | $ | 146 |   |   | $ | 200 |   |   | $ | 14,180 |   |   |   | 10 |   |

|   | 1Represents repossession activity to other real estate owned. |
|--------|---------------------------------------------------------------|

----

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Item 4.  Controls and Procedures

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

----

Item 1A.    Risk Factors

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

----

Item 6.  Exhibits

| 3.1    | 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, 2006, the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, and Current Report on Form 8-K dated January 13, 2009). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                             |
| 3.2    | Amended and Restated Bylaws of Farmers Capital Bank Corporation (incorporated by reference to Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009).                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.1*   | Junior Subordinated Indenture, dated as of July 21, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.                                                                            |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.2*   | Amended and Restated Trust Agreement, dated as of July 21, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).*                                        |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.3*   | Guarantee Agreement, dated as of July 21, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.*                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.4*   | Junior Subordinated Indenture, dated as of July 26, 2005, between Farmers Capital Bank Corporation and Wilmington Trust Company, as Trustee, relating to unsecured junior subordinated deferrable interest notes that mature in 2035.*                                                                           |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.5*   | Amended and Restated Trust Agreement, dated as of July 26, 2005, among Farmers Capital Bank Corporation, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).*                                        |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.6*   | Guarantee Agreement, dated as of July 26, 2005, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.*                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.7*   | Indenture, dated as of August 14, 2007 between Farmers Capital Bank Corporation, as Issuer, and Wilmington Trust Company, as Trustee, relating to fixed/floating rate junior subordinated debt due 2037.*                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.8*   | Amended and Restated Declaration of Trust, dated as of August 14, 2007, by Farmers Capital Bank Corporation, as Sponsor, Wilmington Trust Company, as Delaware and Institutional Trustee, the Administrative Trustees (as named therein), and the Holders (as defined therein).*                                 |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.9*   | Guarantee Agreement, dated as of August 14, 2007, between Farmers Capital Bank Corporation, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.*                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.10   | Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A(incorporated by reference to the Current Report on Form 8-K dated January 13, 2009).                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                             |
| 4.11   | Warrant for Purchase of Shares of Common Stock(incorporated by reference to the Current Report on Form 8-K dated January 13, 2009).                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                             |
| 10.1   | Agreement and Plan of Merger, Dated July 1, 2005, as Amended, by and among Citizens Bancorp, Inc., Citizens Acquisition Subsidiary Corp, and Farmers Capital Bank Corporation(incorporated by reference to Appendix A of Registration Statement filed on Form S-4 on October 11, 2005).                          |

----

| 10.2   | Amended and Restated Plan of Merger of Citizens National Bancshares, Inc. with and into FCBC Acquisition Subsidiary, LLC (incorporated by reference to Appendix A of Proxy Statement for Special Meeting of Shareholders of Citizens National Bancshares, Inc. and Prospectus in connection with an offer of up to 600,000 shares of its common stock of Farmers Capital Bank Corporation filed on Form 424B3 on August 7, 2006). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.3   | Stock Purchase Agreement Dated June 1, 2006 by and among Farmers Capital Bank Corporation, Kentucky Banking Centers, Inc. and Citizens First Corporation (incorporated by reference to Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 31.1** | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 31.2** | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 32**   | CEO & CFO Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                             |

| * Exhibit not included pursuant to Item 601(b)(4)(iii) and (v) of Regulation S-K. The Company will provide a copy of such exhibit to the Securities and Exchange Commission upon request. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

SIGNATURES

| Date:  |    11-3-10 |   |   /s/ Lloyd C. Hillard, Jr.        |
|--------|----------------------|--------|----------------------------------------------|
|   |                 |   | Lloyd C. Hillard, Jr.                        |
|   |                 |   | President and CEO                            |
|   |                 |   | (Principal Executive Officer)                |
|   |                 |   |                                         |
| Date:  |   11-3-10  |   |   /s/ Doug Carpenter               |
|   |                 |   | C. Douglas Carpenter                         |
|   |                 |   | Senior Vice President, Secretary, and CFO    |
|   |                 |   | (Principal Financial and Accounting Officer) |

----