UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2003

                                       or

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

                         For the transition period from
                                       to
                            ------------ ------------

                         Commission File Number 0-14412

                        FARMERS CAPITAL BANK CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


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


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

       Registrant's telephone number, including area code: (502) 227-1600

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

                                 Yes |X| No

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

                                 Yes |X| No

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

                    Common stock, par value $0.125 per share
                 6,712,976 shares outstanding at August 11, 2003

<PAGE>






                                TABLE OF CONTENTS


Part I - Financial Information                                          Page No.

     Item 1 - Financial Statements                                           3

         Unaudited Consolidated Balance Sheets -
             June 30, 2003 and December 31, 2002                             3

         Unaudited Consolidated Statements of Income -
             For the Three Months and Six Months Ended
             June 30, 2003 and June 30, 2002                                 4

         Unaudited Consolidated Statements of Comprehensive Income -
             For the Three Months and Six Months Ended
             June 30, 2003 and June 30, 2002                                 5

         Unaudited Consolidated Statements of Cash Flows -
             For the Six Months Ended
             June 30, 2003 and June 30, 2002                                 6

         Unaudited Consolidated Statements of Changes in
             Shareholders' Equity -
             For the Six Months Ended
             June 30, 2003 and June 30, 2002                                 7

         Notes to Unaudited Consolidated Financial Statements                8

     Item 2 - Management's Discussion and Analysis of Financial
                Condition and Results of Operations                         11

     Item 3 - Quantitative and Qualitative Disclosures About Market Risk    25

     Item 4 - Controls and Procedures                                       25

Part II - Other Information

     Item 1 - Legal Proceedings                                             26

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

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

     Signatures                                                             29



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------------------
                                                                                              June 30,       December 31,
(In thousands, except share data)                                                                2003               2002
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                <C>
ASSETS
Cash and cash equivalents:
     Cash and due from banks                                                               $    95,339        $    44,083
     Interest bearing deposits in other banks                                                    3,475              3,947
     Federal funds sold and securities purchased under
          agreements to resell                                                                  39,489             19,071
--------------------------------------------------------------------------------------------------------------------------
          Total cash and cash equivalents                                                      138,303             67,101
--------------------------------------------------------------------------------------------------------------------------
Investment securities:
     Available for sale, amortized cost of $295,327 (2003) and $407,560 (2002)                 301,222            413,038
     Held to maturity, fair value of $27,650 (2003) and $30,312 (2002)                          25,767             28,519
--------------------------------------------------------------------------------------------------------------------------
          Total investment securities                                                          326,989            441,557
--------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income                                                                  742,912            738,639
Allowance for loan losses                                                                      (11,155)           (11,061)
--------------------------------------------------------------------------------------------------------------------------
          Loans, net                                                                           731,757            727,578
--------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net                                                                     24,219             24,155
Company-owned life insurance                                                                    24,674
Other assets                                                                                    14,064             15,211
--------------------------------------------------------------------------------------------------------------------------
          Total assets                                                                     $ 1,260,006        $ 1,275,602
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
     Noninterest bearing                                                                   $   190,044        $   141,238
     Interest bearing                                                                          790,317            816,242
--------------------------------------------------------------------------------------------------------------------------
          Total deposits                                                                       980,361            957,480
--------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase                      73,639            115,979
Other short-term borrowings                                                                      9,175              9,207
Long-term debt                                                                                  59,372             57,152
Dividends payable                                                                                2,151              2,191
Other liabilities                                                                                9,117              7,820
--------------------------------------------------------------------------------------------------------------------------
          Total liabilities                                                                  1,133,815          1,149,829
--------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Common stock, par value $.125 per share
     9,608,000 shares authorized; 8,142,639 and 8,135,977
     shares issued at June 30, 2003 and December 31, 2002, respectively                          1,018              1,017
Capital surplus                                                                                 17,998             17,623
Retained earnings                                                                              143,509            141,199
Treasury stock, at cost
     1,425,163 and 1,344,463 shares at June 30, 2003 and
     December 31, 2002, respectively                                                           (40,166)           (37,627)
Accumulated other comprehensive income                                                           3,832              3,561
--------------------------------------------------------------------------------------------------------------------------
          Total shareholders' equity                                                           126,191            125,773
--------------------------------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity                                       $ 1,260,006        $ 1,275,602
--------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------------------------------------------------------------------------
                                                                          Three Months Ended                 Six Months Ended
                                                                               June 30,                          June 30,
(In thousands, except per share data)                                     2003           2002               2003           2002
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>                <C>            <C>
INTEREST INCOME
Interest and fees on loans                                            $ 12,139       $ 12,639           $ 24,368       $ 25,703
Interest on investment securities:
     Taxable                                                             1,201          2,601              3,500          5,343
     Nontaxable                                                            780            938              1,583          1,849
Interest on deposits in other banks                                         22            133                 37            153
Interest of federal funds sold and securities
     purchased under agreements to resell                                  215            244                377            455
---------------------------------------------------------------------------------------------------------------------------------
          Total interest income                                         14,357         16,555             29,865         33,503
---------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits                                                     4,316          5,771              8,963         11,752
Interest on federal funds purchased and securities
     sold under agreements to repurchase                                   243            434                502            907
Interest on other borrowed funds                                           557            414              1,107            753
---------------------------------------------------------------------------------------------------------------------------------
          Total interest expense                                         5,116          6,619             10,572         13,412
---------------------------------------------------------------------------------------------------------------------------------
          Net interest income                                            9,241          9,936             19,293         20,091
---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses                                                  351            988                736          1,109
---------------------------------------------------------------------------------------------------------------------------------
          Net interest income after provision for loan losses            8,890          8,948             18,557         18,982
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges and fees on deposits                                     2,018          1,960              3,853          3,779
Other service charges, commissions, and fees                               853            875              1,773          1,730
Data processing income                                                     389            387                734            723
Trust income                                                               413            361                812            728
Investment securities (losses) gains, net                                   (3)           396                144            993
Gain on sale of mortgage loans                                             323             90                512            185
Income from company-owned life insurance                                   408                               673
Other                                                                       77             72                143            124
---------------------------------------------------------------------------------------------------------------------------------
          Total noninterest income                                       4,478          4,141              8,644          8,262
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits                                           5,213          4,801             10,281          9,951
Occupancy expenses, net                                                    642            588              1,300          1,159
Equipment expenses                                                         924            914              1,861          1,840
Bank franchise tax                                                         331            306                665            613
Other                                                                    2,358          2,082              4,500          4,165
---------------------------------------------------------------------------------------------------------------------------------
          Total noninterest expense                                      9,468          8,691             18,607         17,728
---------------------------------------------------------------------------------------------------------------------------------
          Income before income taxes                                     3,900          4,398              8,594          9,516
---------------------------------------------------------------------------------------------------------------------------------
Income tax expense                                                         874          1,082              1,975          2,418
---------------------------------------------------------------------------------------------------------------------------------
          Net income                                                  $  3,026       $  3,316           $  6,619       $  7,098
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
     Basic                                                            $    .45       $    .48           $    .98       $   1.03
     Diluted                                                               .45            .48                .98           1.02
---------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
     Basic                                                               6,723          6,889              6,743          6,895
     Diluted                                                             6,765          6,941              6,781          6,943
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
---------------------------------------------------------------------------------------------------------------------------------
                                                                        Three Months Ended        Six Months Ended
                                                                              June 30,                June 30,
 (In thousands)                                                         2003           2002           2003          2002
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>           <C>
NET INCOME                                                           $ 3,026        $ 3,316        $ 6,619       $ 7,098
Other comprehensive income:
     Unrealized holding gain on available for sale
     securities arising during the period, net of tax
     of $606, $771, $207, and $405, respectively                       1,125          1,432            385           753

Reclassification adjustment for prior period
     unrealized gain recognized during current period,
     net of tax of $0, $57, $61, and $324, respectively                                (106)          (114)         (601)

---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                             1,125          1,326            271           152
---------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME                                                 $ 4,151        $ 4,642        $ 6,890        $7,250
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, (In thousands)                                                               2003            2002
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                                    $  6,619        $  7,098
     Adjustments to reconcile net income to net cash provided
          by operating activities:
          Depreciation and amortization                                                               1,496           1,472
          Net amortization of investment security premiums and (discounts):
                Available for sale                                                                    1,631             342
                Held to maturity                                                                        (36)            (33)
          Provision for loan losses                                                                     736           1,109
          Noncash compensation expense                                                                  213             296
          Mortgage loans originated for sale                                                        (34,986)        (14,399)
          Proceeds from sale of mortgage loans                                                       33,991          14,414
          Deferred income tax expense (benefit)                                                         106             (95)
          Gain on sale of mortgage loans                                                               (512)           (185)
          Gain on sale of premises and equipment                                                         (4)             (1)
          Gain on sale of available for sale investment securities, net                                (144)           (993)
          Decrease in accrued interest receivable                                                       596           1,154
          (Increase) decrease in other assets                                                          (122)            182
          Decrease in accrued interest payable                                                         (292)           (261)
          Increase in other liabilities                                                               1,337             556
---------------------------------------------------------------------------------------------------------------------------------
             Net cash provided by operating activities                                               10,629          10,656
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from maturities and calls of investment securities:
          Available for sale                                                                        223,257         222,201
          Held to maturity                                                                            2,788           5,033
     Proceeds from sale of available for sale investment securities                                  74,050         125,436
     Purchase of available for sale investment securities                                          (186,561)       (305,346)
     Loans originated for investment, net of principal collected                                     (3,408)          6,181
     Purchase of company-owned life insurance                                                       (24,001)
     Purchase of premises and equipment                                                              (1,562)           (701)
     Proceeds from sale of equipment                                                                      6               2
---------------------------------------------------------------------------------------------------------------------------------
             Net cash provided by (used in) investing activities                                     84,569          52,806
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits                                                                        22,881          27,258
     Net (decrease) increase in securities sold under agreements to repurchase                      (42,340)         31,651
     Proceeds from long-term debt                                                                     3,874          16,500
     Repayments of long-term debt                                                                    (1,654)         (1,064)
     Net (decrease) increase in other short-term borrowings                                             (32)          6,683
     Dividends paid                                                                                  (4,349)         (4,290)
     Purchase of common stock                                                                        (2,539)         (3,133)
     Stock options exercised                                                                            163           1,139
---------------------------------------------------------------------------------------------------------------------------------
             Net cash (used in ) provided by financing activities                                   (23,996)         74,744
---------------------------------------------------------------------------------------------------------------------------------
             Net increase in cash and cash equivalents                                               71,202         138,206
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                                                       67,101         106,385
---------------------------------------------------------------------------------------------------------------------------------
             Cash and cash equivalents at end of period                                            $138,303        $244,591
---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
     Interest                                                                                      $ 10,864        $ 13,673
     Income taxes                                                                                       500           2,490
Cash dividend declared and unpaid                                                                     2,151           2,137
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                                    Accumulated
                                                                                                            Other          Total
Six months ended                          Common Stock       Capital    Retained      Treasury Stock    Comprehensive  Shareholders'
June 30, 2003 and 2002                Shares     Amount      Surplus    Earnings   Shares     Amount       Income         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>         <C>        <C>         <C>     <C>             <C>            <C>
  Balance at January 1, 2003           8,136     $1,017      $17,623    $141,199    1,344   $(37,627)       $3,561         $125,773
Net income                                                                 6,619                                              6,619
Other comprehensive income                                                                                     271              271
Cash dividends declared,
  $.64 per share                                                          (4,309)                                            (4,309)
Purchase of common stock                                                               81     (2,539)                        (2,539)
Stock options exercised                    6          1          162                                                            163
Noncash compensation expense
  attributed to stock option grants                              213                                                            213
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2003             8,142     $1,018      $17,998    $143,509    1,425   $(40,166)       $3,832         $126,191
------------------------------------------------------------------------------------------------------------------------------------




------------------------------------------------------------------------------------------------------------------------------------
  Balance at January 1, 2002           8,058     $1,007      $15,179    $137,227    1,153   $(31,077)      $ 1,224         $123,560
Net income                                                                 7,098                                              7,098
Other comprehensive income                                                                                     152              152
Cash dividends declared,
  $.62 per share                                                          (4,275)                                            (4,275)
Purchase of common stock                                                               91     (3,133)                        (3,133)
Stock options exercised                   47          6        1,133                                                          1,139
Noncash compensation expense
  attributed to stock option grants                              296                                                            296
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2002             8,105     $1,013      $16,608    $140,050    1,244   $(34,210)      $ 1,376         $124,837
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

The consolidated  financial  statements  include the accounts of Farmers Capital
Bank  Corporation  (the  "Company"),   a  financial  holding  company,  and  its
subsidiaries,  including its principal subsidiary,  Farmers Bank & Capital Trust
Company.  All  significant  intercompany  transactions  and  accounts  have been
eliminated in consolidation.

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

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

For further  information,  refer to the  consolidated  financial  statements and
footnotes  thereto  included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.

2.   RECLASSIFICATIONS

Certain   reclassifications   have  been  made  to  the  consolidated  financial
statements of prior periods to conform to the current period presentation.  Such
reclassifications   have  no  effect  on  previously   reported  net  income  or
shareholders' equity.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No.  46,   CONSOLIDATION  OF  VARIABLE  INTEREST  ENTITIES,   AN
INTERPRETATION OF ARB NO. 51. This Interpretation  provides new guidance for the
consolidation of variable  interest entities ("VIEs") and requires such entities
to be  consolidated  by  their  primary  beneficiaries  if the  entities  do not
effectively  disperse risk among parties involved.  The Interpretation also adds
disclosure  requirements  for investors  that are involved  with  unconsolidated
VIEs. The  consolidation  requirements  apply  immediately to VIEs created after
January 31, 2003 and are effective  for the first fiscal year or interim  period
beginning  after June 15, 2003 for VIEs acquired  before  February 1, 2003.  The
adoption of this interpretation is not expected have a significant impact on the
Company's financial condition of results of operations.

In April 2003,  The FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 149,  AMENDMENT  OF STATEMENT  133 ON  DERIVATIVE  INSTRUMENTS  AND
HEDGING ACTIVITIES.  SFAS No. 149 amends and clarifies financial  accounting and
reporting for derivative  instruments,  including certain derivative instruments
embedded  in other  contracts  and for  hedging  activities  under SFAS No. 133,
"ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES." This statement
is effective for contracts entered into or modified after June 30, 2003. Because
the Company does not have these  instruments  or is only  nominally  involved in
these  instruments,  management  expects the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "ACCOUNTING  FOR CERTAIN  FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY". This statement
affects the accounting for certain  financial  instruments  that, under previous
guidance,  issuers could  account for as equity.  This  statement  requires that
freestanding  financial  instruments  that embody  obligations for the issuer be
classified  as  liabilities  on the balance  sheet.  Most of this  statement  is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after  June 15,  2003.  Because  the  Company  does  not  have  these
instruments  or is only  nominally  involved  in these  instruments,  management
expects the adoption of this  statement  will not have a material  effect on the
Company's consolidated financial statements.

4.   COMPANY-OWNED LIFE INSURANCE

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

5.   NET INCOME PER COMMON SHARE

Basic net income per common  share is  determined  by dividing net income by the
weighted average total number of shares of common stock outstanding. Diluted net
income  per  common  share is  determined  by  dividing  net income by the total
weighted  average number of shares of common stock  outstanding,  plus the total
weighted average number of shares that would be issued upon exercise of dilutive
stock options  assuming  proceeds are used to repurchase  shares pursuant to the
treasury stock method.  Net income per common share computations were as follows
at June 30, 2003 and 2002.


<TABLE>
---------------------------------------------------------------------------------------------------------
                                                          Three Months Ended          Six Months Ended
                                                               June 30,                  June 30,
(In thousands, except per share data)                     2003          2002         2003         2002
---------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>          <C>          <C>
Net income, basic and diluted                          $ 3,026       $ 3,316      $ 6,619      $ 7,098
---------------------------------------------------------------------------------------------------------

Average shares outstanding                               6,723         6,889        6,743        6,895
Effect of dilutive stock options                            42            52           38           48
---------------------------------------------------------------------------------------------------------
Average diluted shares outstanding                       6,765         6,941        6,781        6,943
---------------------------------------------------------------------------------------------------------

Net income per share, basic                             $  .45        $  .48       $  .98      $  1.03
Net income per share, diluted                              .45           .48          .98         1.02
---------------------------------------------------------------------------------------------------------
</TABLE>


6.   STOCK-BASED COMPENSATION

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

The Company granted 54,000 options during 2000 in which there is no compensation
expense being recognized  pursuant to APB No. 25. Had compensation  expense been
determined under the fair value method described in SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, as amended by SFAS NO. 148, ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION  AND DISCLOSURE, the Company's net income and income per
common share would have been as shown in the table below.

<TABLE>
-------------------------------------------------------------------------------------------------------
                                                      Three Months Ended           Six Months Ended
                                                            June 30,                   June 30,
(In thousands, except per share data)                  2003         2002          2003          2002
-------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>           <C>           <C>
NET INCOME
  As reported                                       $ 3,026      $ 3,316       $ 6,619       $ 7,098
  Add:  Stock-based employee compensation
        expense included in reported net
        income, net of related tax effects               68           84           138           192
  Less: Stock-based compensation expense
        determined under fair value based
        method for all awards, net of related
        tax effects                                     (83)        (100)         (168)         (226)
-------------------------------------------------------------------------------------------------------
Proforma                                            $ 3,011      $ 3,300       $ 6,589       $ 7,064
-------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
  Basic, as reported                                $   .45      $   .48       $   .98       $  1.03
  Basic, proforma                                       .45          .47           .98          1.02

  Diluted, as reported                                  .45          .48           .98          1.02
  Diluted, proforma                                     .44          .48           .97          1.02
-------------------------------------------------------------------------------------------------------
</TABLE>

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

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


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

FORWARD-LOOKING STATEMENTS

This report contains  forward-looking  statements  under the Private  Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. Although the
Company believes that the assumptions underlying the forward-looking  statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore,  there  can  be no  assurance  that  the  forward-looking  statements
included  herein will prove to be  accurate.  Factors  that could  cause  actual
results to differ from the results discussed in the  forward-looking  statements
include,  but are not limited to: economic  conditions  (both generally and more
specifically in the markets in which the Company and its subsidiaries  operate);
competition  for the  Company's  customers  from other  providers  of  financial
services; government legislation and regulation (which changes from time to time
and over which the Company has no control);  changes in interest rates; material
unforeseen  changes  in the  liquidity,  results  of  operations,  or  financial
condition of the Company's customers;  and other risks detailed in the Company's
filings with the Securities and Exchange Commission,  all of which are difficult
to predict and many of which are beyond the control of the Company.

RESULTS OF OPERATIONS

                   SECOND QUARTER 2003 VS. SECOND QUARTER 2002
                   -------------------------------------------

The Company  reported  net income of $3.0  million or $.45 per basic and diluted
share for the second  quarter of 2003  compared to net income of $3.3 million or
$.48 per basic and diluted share for the second quarter of 2002. This represents
a 6.3%  decrease in basic and diluted per share  earnings  compared to the prior
period.  The decrease in net income in the three-month  comparison is attributed
primarily  to a $695  thousand or 7.0%  decrease  in net  interest  income.  The
decline in net  interest  income is  attributed  to  continued  declines  in the
overall  market  interest  rate  environment.  Interest  rates earned on earning
assets have  declined  more  rapidly  than the  interest  rates paid on interest
paying  liabilities  since many of the Company's  funding sources,  particularly
deposits, have approached their repricing floors.

The  provision  for loan losses  decreased  $637  thousand or 64.5% in the three
month  comparison.  Higher provisions in the second quarter of 2002 related to a
group of  nonperforming  constructions  loans secured by residential real estate
led to the decrease.

Total  noninterest  income  increased  $337 thousand or 8.1% despite lower gains
reported on the sale of investment  securities of $399 thousand in the quarterly
comparison. Income from the purchase of company-owned life insurance, instituted
in the  first  quarter  of 2003 to  offset  the  rising  costs of the  Company's
employee  benefits  plans,  totaled $408  thousand for the current three months.
Gains  on the  sale of  mortgage  loans  also  increased  $233  thousand  in the
comparisons as the low interest rate environment continues to fuel the Company's
secondary market mortgage loan originations.

Offsetting  the increase in  noninterest  income were  increases in  noninterest
expenses   totaling  $777  thousand  or  8.9%  for  the  current  three  months.
Noninterest  expense  increased  primarily  due to an increase  in salaries  and
employee  benefits of $412 thousand or 8.6%. These increases relate primarily to
employee  benefits and normal  salary  increases.  An increase in  correspondent
banking  fees  totaling  $187  thousand  also  contributed  to the  increase  in
noninterest expenses. The effective income tax rate declined 220 basis points to
22.4% for the three  months  ended June 30, 2003  compared to the same periods a
year earlier.

Return on average assets ("ROA") was 0.98% for the current  quarter,  a decrease
of 12 basis  points  compared  to 1.10%  reported  for the same  period in 2002.
Negatively  impacting ROA was a 46 basis point decline in net interest margin to
3.48% and an increase in  noninterest  expenses  of 19 basis  points.  Partially
offsetting  these  declines  that  positively  effected  ROA was an  increase in
earning assets that contributed 12 basis points, a decrease in the provision for
loan losses that contributed 22 basis points, an increase in noninterest  income
contributing  8  basis  points,  and a  decrease  in  income  tax  expense  that
contributed 11 basis points.  Return on average equity ("ROE") was 9.71% for the
second  quarter  of 2003  compared  to  10.71% in the same  period of 2002.  The
decrease is due to lower net income  reported in the current period coupled with
a slight increase in average equity compared to the same period a year ago.

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

Continuing  weaknesses in the overall  economic  environment  remain present and
have impacted the Company's net interest  income.  The interest rate environment
has continued to trend downward after a period of relative stability  throughout
much of 2002.  Additional actions taken by the Federal Reserve Board (the "Fed")
in the fourth  quarter of 2002 and the second quarter of 2003 have resulted in a
general  reduction  in  short-term  interest  rates  in the  reporting  periods.
Short-term  interest rates,  left unchanged since December 2001, were reduced 50
basis points by the Fed in November  2002 and an  additional  25 basis points in
June 2003.  The prime rate as reported in The Wall Street Journal was lowered in
an identical manner shortly following the Fed changes. The effects of prior rate
reductions by the Fed along with intense  competition  in the  Company's  market
areas continue to negatively impact net interest margin. The effect of the Fed's
actions on the Company has  generally  led to interest  rates on earning  assets
declining more rapidly than rates paid on interest bearing liabilities. During a
falling rate environment,  the challenge is to reduce the rates paid on interest
bearing liabilities  (primarily  deposits) to offset the decline in the yield on
variable  rate assets  (primarily  loans)  while  remaining  competitive  in our
markets.

The  Company's  tax  equivalent  ("TE") yield on earning  assets for the current
three  months was 5.3%,  a reduction  of 111 basis  points from 6.4% in the same
period a year ago.  The cost of funds for the current  three  months was 2.2%, a
decline of 71 basis points compared to 2.9% in the same period a year earlier. A
goal of the  Company in the current  interest  rate  environment  is to increase
earning  assets  and  decrease  the  interest  rates  paid on  interest  bearing
liabilities.  However,  many  of the  Company's  funding  sources,  particularly
deposits,  have  approached  their  repricing  floors.  Average  earning  assets
increased $48.5 million or 4.5% to $1.1 billion in the quarterly comparison.  As
a percentage of total average assets,  earning assets increased 205 basis points
to 90.43% from 88.38%.  This  increase had the effect of adding an additional 12
basis points to ROA in the comparison.

Interest income totaled $14.4 million for the second quarter of 2003, a decrease
of $2.2 million or 13.3% compared to the same period in the prior year. Interest
expense totaled $5.1 million,  a decrease of $1.5 million or 22.7%. Net interest
income fell $695 thousand or 7.0% in the comparison and totaled $9.2 million for
the three months ended June 30, 2003.

Interest and fees on loans  totaled $12.1  million,  a decrease of $500 thousand
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$50.7  million or 7.3% to $742.1  million in the  comparison  due to higher loan
demand in a lower rate environment.  The tax equivalent yield on loans decreased
79 basis  points to 6.6% from 7.4% and  offset  the  effects  of higher  average
balances on interest income.  Interest on taxable securities was $1.2 million, a
decrease  of $1.4  million or 53.8% due  primarily  to a decrease in the average
rate earned and the effect of higher  premium  amortization  on  mortgage-backed
securities. Prepayemnts on mortgage-backed securities have increased greatly due
to  corresponding  refinancing  of home  mortgages  that serve as collateral for
these investment securities. The increase in activity is directly related to the
lower interest rate environment.  The average rate earned on taxable  securities
decreased 243 basis points to 2.1% from 4.5% while the average balance  remained
relatively  unchanged  at $231.3  million.  Interest  on  nontaxable  securities
declined $158  thousand or 16.8% due to a $12.2 million  decrease in the average
balance to $70.1 million from $82.3 million. Interest on short-term investments,
including  time  deposits in other banks,  federal  funds sold,  and  securities
purchased under agreements to resell, decreased $140 thousand due primarily to a
decrease in the average rate earned on these  investments of 110 basis points to
1.3% from 2.4%.

Interest expense on deposits  decreased $1.5 million or 25.2% to $4.3 million in
the quarterly  comparison.  This decrease resulted from a general decline in the
average rate paid  throughout  the deposit  portfolio  and  correlates  with the
general decline in market interest rates in the reporting  periods.  The decline
in the average  rates paid offset a general  increase in average  balances.  The
decline in interest  expense on  deposits  was as follows:  time  deposits  $1.1
million or 23.8%;  interest  bearing demand deposits $170 thousand or 32.5%; and
savings deposits $180 thousand or 30.1%. The average rate paid on time deposits,
the largest  component  of interest  bearing  deposits,  was 3.3% for the second
quarter  of 2003  compared  to 4.6% for the same  period  of 2002.  The  average
balance of time deposits increased $22.9 million or 5.7% to $426.2 million.  The
average rate paid on interest  bearing demand deposits  declined 33 basis points
to .65% from .98% while the average  balance  increased  $4.9 million or 2.3% to
$219.0  million.  The average rate paid on savings  deposits  decreased 42 basis
points to 1.0% from 1.5% while the average balance declined $2.9 million or 1.7%
to $163.0 million from $165.9 million. Interest expense on overnight borrowings,
consisting of federal funds  purchased and securities  sold under  agreements to
repurchase,  decreased  $191  thousand  due to a 44 basis  point  decline in the
average  rate paid along with a $24.7  million  decline in the average  balance.
Interest  expense  on  other  borrowed  funds  increased  $143  thousand  in the
comparison as additional  borrowings  from the Federal Home Loan Bank  increased
the average  balance  outstanding.  The average  balance of other borrowed funds
totaled $66.7 million,  an increase of $21.2 million or 46.5% in the comparison.
The average rate paid on other  borrowed  funds declined 29 basis points to 3.4%
from 3.6%.

The net  interest  margin (TE)  decreased  46 basis  points to 3.48%  during the
second  quarter of 2003  compared  to 3.94% in the second  quarter of 2002.  The
decrease in net  interest  margin is  primarily  attributed  to a 40 basis point
decline in the spread  between rates earned on earning assets and the rates paid
on interest  bearing  liabilities to 3.15% in the current  quarter from 3.55% in
the second quarter of 2002. The effect of noninterest  bearing  sources of funds
contributed an additional 6 basis points to the decline in net interest  margin.
The  effect of  noninterest  bearing  sources  of funds on net  interest  margin
typically declines in a falling rate environment.
<PAGE>

The  following  tables  present  an  analysis  of net  interest  income  for the
quarterly periods ended June 30.
<TABLE>
<CAPTION>
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
---------------------------------------------------------------------------------------------------------------------------------
Quarter Ended June 30,                                         2003                                         2002
---------------------------------------------------------------------------------------------------------------------------------
                                             Average                         Average         Average                    Average
(In thousands)                               Balance         Interest          Rate          Balance      Interest        Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>         <C>            <C>             <C>
EARNING ASSETS
Investment securities
  Taxable                                $   231,260        $  1,201           2.08%       $ 231,433      $ 2,601         4.51%
  Nontaxable1                                 70,133           1,147           6.56           82,347        1,372         6.68
Time deposits with banks,
  federal funds sold and
  securities purchased
  under agreements to resell                  73,562             237           1.29           63,383          377         2.39
Loans1,2,3                                   742,142          12,245           6.62          691,429       12,775         7.41
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                  1,117,097        $ 14,830           5.32%       1,068,592      $17,125         6.43%
---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                    (11,248)                                        (10,393)
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net
     of allowance for loan losses          1,105,849                                       1,058,199
---------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                       70,281                                         112,936
Premises and equipment, net                   24,314                                          24,312
Other assets                                  34,838                                          13,602
---------------------------------------------------------------------------------------------------------------------------------
     Total assets                        $ 1,235,282                                     $ 1,209,049
---------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                $   219,011        $    353           0.65%     $   214,116      $   523         0.98%
  Savings                                    163,032             418           1.03          165,918          598         1.45
  Time                                       426,174           3,545           3.34          403,276        4,650         4.62
Federal funds purchased
  and securities sold
  under agreements to repurchase              68,815             243           1.42           93,539          434         1.86
Other borrowed funds                          66,747             557           3.35           45,576          414         3.64
---------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities      943,779        $  5,116           2.17%         922,425      $ 6,619         2.88%
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits             38,662                                          39,927
Other demand deposits                        122,979                                         114,413
Other liabilities                              4,845                                           8,095
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                     1,110,265                                       1,084,860
---------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                    125,017                                         124,189
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity                $ 1,235,282                                     $ 1,209,049
---------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            9,714                                       10,506
TE basis adjustment                                             (473)                                        (570)
---------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                    $  9,241                                      $ 9,936
---------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                            3.15%                                      3.55%
Impact of noninterest bearing
  sources of funds                                                              .33                                        .39
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                            3.48%                                      3.94%
---------------------------------------------------------------------------------------------------------------------------------
1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amount to $612 thousand and $476 thousand in 2003 and 2002, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
-------------------------------------------------------------------------------------------------------------------
(In thousands)                                                          Variance         Variance Attributed to
Quarter Ended June 30,                                                2003/20021         Volume           Rate
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>           <C>
INTEREST INCOME
Taxable investment securities                                           $(1,400)        $    (2)      $ (1,398)
Nontaxable investment securities2                                          (225)           (201)           (24)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell                         (140)            324           (464)
Loans2                                                                     (530)          4,237         (4,767)
-------------------------------------------------------------------------------------------------------------------
     Total interest income                                               (2,295)          4,358         (6,653)
-------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest bearing demand deposits                                           (170)             79           (249)
Savings deposits                                                           (180)            (10)          (170)
Time deposits                                                            (1,105)          1,568         (2,673)
Federal funds purchased and securities sold under
   agreements to repurchase                                                (191)           (101)           (90)
Other borrowed funds                                                        143             348           (205)
-------------------------------------------------------------------------------------------------------------------
     Total interest expense                                              (1,503)          1,884         (3,387)
-------------------------------------------------------------------------------------------------------------------
Net interest income                                                      $ (792)        $ 2,474       $ (3,266)
-------------------------------------------------------------------------------------------------------------------
Percentage change                                                         100.0%        (312.4)%         412.4%
-------------------------------------------------------------------------------------------------------------------
1The changes that are not solely due to rate or volume are allocated on a percentage basis using the
 absolute values of rate and volume variances as a basis for allocation.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
</TABLE>

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

Noninterest income was $4.5 million for the current quarter, an increase of $337
thousand  or 8.1%  compared  to the second  quarter of the prior  year.  Service
charges and fees on  deposits,  the largest  component  of  noninterest  income,
increased a modest $58 thousand or 3.0% to $2.0 million. Overdraft fees declined
$61 thousand or 4.6% and service charges on demand deposit accounts declined $19
thousand or 7.7% in the comparison.  Partially  offsetting these declines was an
increase in fees related to the Commonwealth of Kentucky of $119 thousand. Other
service  charges,  commissions,  and fees  declined $22 thousand or 2.5% to $853
thousand. Data processing fees were relatively unchanged at $389 thousand. Trust
income totaled $413  thousand,  an increase of $52 thousand or 14.4% compared to
$361 thousand a year earlier. A net loss of $3 thousand on the sale of available
for sale securities was reported in the current  quarter  compared to a net gain
of $396 thousand in the  comparable  period a year ago as the Company  sought to
manage  the  composition  of its  balance  sheet  in an  increasingly  difficult
economic  environment.  Net  gains  on the  sale of  mortgage  loans  were  $323
thousand,  an increase of $233  thousand  from $90 thousand in the prior year as
mortgage loans originated for sale increased $13.7 million in the comparison due
to the low interest rate environment.  Income from the purchase of company-owned
life  insurance  near the end of the first  quarter of 2003 was $408 thousand in
the current three-month  period.  Other noninterest income totaled $77 thousand,
an increase of $5 thousand or 6.9%.

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

Total  noninterest  expenses  increased  $777  thousand  or 8.9% from the second
quarter of 2003 compared to the second quarter of 2002 and totaled $9.5 million.
Salaries and employee  benefits account for more than half of the total increase
in noninterest  expense.  Total salaries and benefits increased $412 thousand or
8.6% to $5.2  million in the  quarterly  comparison.  Employee  benefit  related
expenses  account for a  significant  amount of the increase.  Employee  benefit
expenses  increased $283 thousand  primarily due to increased  health  insurance
costs,  which include  additional amounts associated with the new postretirement
health insurance coverage initiated during the first quarter of 2003. Salary and
related payroll expenses increased $155 thousand or 3.9% in the comparison while
noncash compensation expense related to the Company's  nonqualified stock option
plan declined $26 thousand or 19.6% due to the structure of the vesting schedule
and forfeitures.  The number of full time equivalent  employees decreased to 462
from 469 reported in the prior period.  Occupancy expense, net of rental income,
increased  $54 thousand or 9.2% and totaled $642  thousand.  The increase in net
occupancy  expense is  attributed  to  increases  in  maintenance  and  repairs,
utilities costs, and depreciation. Equipment expense was relatively unchanged at
$924 thousand.  Other  noninterest  expense,  including  bank  franchise  taxes,
increased  $301  thousand or 12.6% to $2.7 million due mainly to a $187 thousand
increase  in  correspondent  bank fees  related to  activity  attributed  to the
Commonwealth of Kentucky.

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

Income tax expense for the second quarter of 2003 was $874 thousand,  a decrease
of $208 thousand or 19.2% from the same period a year earlier. The effective tax
rate  decreased 220 basis points to 22.4% from 24.6% in 2002.  The change in the
effective  tax rate is due to a  combination  of  factors,  primarily  including
credits derived from qualified zone academy bonds and nontaxable  income accrued
from the increase in cash  surrender  value on life  insurance  purchased on key
employees.

              FIRST SIX MONTHS OF 2003 VS. FIRST SIX MONTHS OF 2002
              -----------------------------------------------------

Net income for the six months ended June 30, 2003 was $6.6  million  compared to
net income of $7.1  million  for the same  period in 2002,  a  decrease  of $479
thousand  or 6.7%.  Basic and  diluted  net  income per share were $0.98 for the
current six months,  a decrease of $.05 or 4.9% and $.04 or 3.9%,  respectively.
The decrease in net income in the six-month  comparison is attributed  primarily
to a $798 thousand or 4.0% decrease in net interest  income.  The decline in net
interest  income is  attributed  to  continued  declines in the  overall  market
interest rate environment. Interest rates earned on earning assets have declined
more rapidly than the interest rates paid on interest paying  liabilities  since
many of the Company's funding sources,  particularly  deposits,  have approached
their repricing floors.

The  provision  for loan losses  decreased  $373,000  or 33.6% in the  six-month
comparison.  Higher  provisions in the second quarter of 2002 related to a group
of nonperforming  constructions  loans secured by residential real estate led to
the decrease.

Total  noninterest  income  increased  $382 thousand or 4.6% in the  comparisons
despite  lower  gains  reported  on the sale of  investment  securities  of $849
thousand in the current period.  Income from the purchase of company-owned  life
insurance, instituted in the first quarter of 2003 to offset the rising costs of
the Company's employee benefits plans, totaled $673 thousand for the current six
months.  Gains on the sale of mortgage loans also increased $327 thousand in the
comparison as the low interest rate environment  continues to fuel the Company's
secondary market mortgage loan originations.

Offsetting  the increase in  noninterest  income were  increases in  noninterest
expenses totaling $879 thousand or 5.0% for the current six months.  Noninterest
expense increased primarily due to an increase in salaries and employee benefits
of $330  thousand or 3.3%.  These  increases  relate  primarily  to increases in
employee  benefits and normal  salary  increases.  An increase in  correspondent
banking  fees  totaling  $301  thousand  also  contributed  to the  increase  in
noninterest expenses. The effective income tax rate declined 243 basis points to
23.0% for the six months ended June 30, 2003  compared to the same period a year
earlier.

ROA was 1.07% for the six months  ended June 30,  2003,  a decrease  of 12 basis
points from the same  period in 2002.  Negatively  impacting  ROA was a 35 basis
point  decline in net  interest  margin to 3.61% and an increase in  noninterest
expenses of 5 basis points.  Partially offsetting these declines that positively
effected ROA was an increase in earning assets that  contributed 9 basis points,
a decrease in the provision for loan losses that contributed 7 basis points,  an
increase in noninterest  income  contributing  1 basis point,  and a decrease in
income tax expense that  contributed  11 basis points.  Return on average equity
("ROE")  was 10.68% for the first six months of 2003  compared to 11.53% for the
same period of 2002.  The  decrease  is due to lower net income  reported in the
current period coupled with a slight  increase in average equity compared to the
same period a year ago.

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

Continuing  weaknesses in the overall  economic  environment  remain present and
have impacted the Company's net interest  income.  The interest rate environment
has continued to trend downward after a period of relative stability  throughout
much of 2002.  Additional actions taken by the Fed in the fourth quarter of 2002
and  the  second  quarter  of 2003  have  resulted  in a  general  reduction  in
short-term  interest rates in the reporting periods.  Short-term interest rates,
left unchanged  since December 2001,  were reduced 50 basis points by the Fed in
November 2002 and an additional 25 basis points in June 2003.  The prime rate as
reported in The Wall Street  Journal was lowered in an identical  manner shortly
following the Fed changes. The effects of prior rate reductions by the Fed along
with intense  competition  in the Company's  market areas continue to negatively
impact net interest  margin.  The effect of the Fed's actions on the Company has
generally led to interest  rates on earning  assets  declining more rapidly than
rates paid on interest bearing  liabilities.  During a falling rate environment,
the  challenge  is to reduce  the rates  paid on  interest  bearing  liabilities
(primarily  deposits) to offset the decline in the yield on variable rate assets
(primarily loans) while remaining competitive in our markets.

The Company's tax equivalent  yield on earning assets for the current six months
was 5.5%,  a  reduction  of 98 basis  points from 6.5% in the same period a year
ago.  The cost of funds for the  current  six months  was 2.2%,  a decline of 69
basis points  compared to 2.9% in the same period a year earlier.  A goal of the
Company in the current  interest rate  environment is to increase earning assets
and decrease the interest rates paid on interest bearing  liabilities.  However,
many of the Company's funding sources,  particularly  deposits,  have approached
their repricing  floors.  Average earning assets increased $54.7 million or 5.1%
to $1.1 billion in the  comparison.  As a percentage  of total  average  assets,
earning assets  increased 161 basis points to 91.24% from 89.63%.  This increase
had the effect of adding an additional 9 basis points to ROA in the comparison.

Interest  income  totaled  $29.9  million  for the first six  months of 2003,  a
decrease of $3.6 million or 10.9% compared to the same period in the prior year.
Interest expense totaled $10.6 million, a decrease of $2.8 million or 21.2%. Net
interest  income fell $798 thousand or 4.0% in the  comparison and totaled $19.3
million at June 30, 2003.

Interest and fees on loans  totaled  $24.4  million,  a decrease of $1.3 million
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$48.9  million or 7.1% to $739.1  million in the  comparison  due to higher loan
demand in a lower rate environment.  The tax equivalent yield on loans decreased
88 basis  points to 6.7% from 7.6% and  offset  the  effects  of higher  average
balances on interest income.  Interest on taxable securities was $3.5 million, a
decrease  of $1.8  million or 34.5% due  primarily  to a decrease in the average
rate earned and the effect of higher  premium  amortization  on  mortgage-backed
securities.  Prepayements on  mortgage-backed  securities have increased greatly
due to corresponding  refinancing of home mortgages that serve as collateral for
these investment securities. The increase in activity is directly related to the
lower interest rate environment.  The average rate earned on taxable  securities
decreased 163 basis points to 2.8% from 4.4% while the average balance increased
$10.8 million or 4.4%. Interest on nontaxable  securities declined $266 thousand
or 14.4% due to an $11.0  million or 13.4%  decrease in the  average  balance to
$70.9 million from $81.9 million. Interest on short-term investments,  including
time deposits in other banks, federal funds sold, and securities purchased under
agreements to resell, decreased $194 thousand due primarily to a decrease in the
average rate earned on these investments of 77 basis points to 1.3% from 2.0%.

Interest expense on deposits  decreased $2.8 million or 23.7% to $9.0 million in
the six month  comparison.  This decrease resulted from a general decline in the
average rate paid  throughout  the deposit  portfolio  and  correlates  with the
general decline in market interest rates in the reporting  periods.  The decline
in the average  rates paid offset a general  increase in average  balances.  The
decline in interest  expense on  deposits  was as follows:  time  deposits  $2.1
million or 21.9%;  interest  bearing demand deposits $375 thousand or 34.7%; and
savings deposits $340 thousand or 28.1%. The average rate paid on time deposits,
the largest component of interest bearing deposits,  was 3.5% for the six months
ended June 30, 2003  compared  to 4.8% for the same period of 2002.  The average
balance of time deposits increased $20.3 million or 5.1% to $421.9 million.  The
average rate paid on interest  bearing demand deposits  declined 36 basis points
to .65% from 1.01% while the average  balance  increased $5.7 million or 2.6% to
$220.9  million.  The average rate paid on savings  deposits  decreased 44 basis
points to 1.1% from 1.5% while the average  balance  increased  $2.3  million or
1.4% to $166.6  million  from  $164.3  million.  Interest  expense on  overnight
borrowings,  consisting of federal funds  purchased  and  securities  sold under
agreements  to  repurchase,  decreased  $405  thousand  due to a 46 basis  point
decline  in the  average  rate paid along  with a $26.2  million  decline in the
average  balance.  Interest  expense  on other  borrowed  funds  increased  $354
thousand in the comparison as additional  borrowings  from the Federal Home Loan
Bank increased the average  balance  outstanding.  The average  balance of other
borrowed funds totaled $66.2  million,  an increase of $25.7 million or 63.7% in
the comparison.  The average rate paid on other borrowed funds declined 39 basis
points to 3.4% from 3.8%.

The net interest  margin (TE)  decreased 35 basis points to 3.61% during the six
months  ended June 30, 2003  compared  to 3.96% in the same period of 2002.  The
decrease in net  interest  margin is  primarily  attributed  to a 29 basis point
decline in the spread  between rates earned on earning assets and the rates paid
on interest bearing liabilities to 3.25% in the current six months from 3.54% in
the same  period in 2002.  The effect of  noninterest  bearing  sources of funds
contributed an additional 6 basis points to the decline in net interest  margin.
The  effect of  noninterest  bearing  sources  of funds on net  interest  margin
typically declines in a falling rate environment.

<PAGE>
The following tables present an analysis of net interest income for the six
months ended June 30.
<TABLE>
<CAPTION>
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30,                                      2003                                        2002
---------------------------------------------------------------------------------------------------------------------------------
                                              Average                        Average       Average                      Average
(In thousands)                                Balance         Interest        Rate         Balance       Interest         Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>               <C>     <C>               <C>              <C>
EARNING ASSETS
Investment securities
  Taxable                                 $   256,913        $  3,500          2.75%   $   246,098       $  5,343         4.38%
  Nontaxable1                                  70,891           2,328          6.62         81,876          2,699         6.65
Time deposits with banks,
  federal funds sold and
  securities purchased under
  agreements to resell                         66,295             414          1.26         60,279            608         2.03
Loans1,2,3                                    739,127          24,584          6.71        690,242         25,968         7.59
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                   1,133,226        $ 30,826          5.49%     1,078,495       $ 34,618         6.47%
---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                     (11,263)                                     (10,476)
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net
     of allowance for loan losses           1,121,963                                    1,068,019
---------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                        67,332                                       99,222
Premises and equipment, net                    24,180                                       24,502
Other assets                                   28,576                                       11,511
---------------------------------------------------------------------------------------------------------------------------------
     Total assets                         $ 1,242,051                                  $ 1,203,254
---------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                 $   220,945        $    707          0.65%   $   215,265       $  1,082         1.01%
  Savings                                     166,608             871          1.05        164,324          1,211         1.49
  Time                                        421,920           7,385          3.53        401,646          9,459         4.75
Federal funds purchased
  and securities sold under
  agreements to repurchase                     74,823             502          1.35        101,037            907         1.81
Other borrowed funds                           66,179           1,107          3.37         40,432            753         3.76
---------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities       950,475        $ 10,572          2.24%       922,704       $ 13,412         2.93%
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits              35,790                                       35,146
Other demand deposits                         121,996                                      114,910
Other liabilities                               8,821                                        6,355
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                      1,117,082                                    1,079,115
---------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                     124,969                                      124,139
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity                 $ 1,242,051                                  $ 1,203,254
---------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            20,254                                      21,206
TE basis adjustment                                              (961)                                     (1,115)
---------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                     $ 19,293                                    $ 20,091
---------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                            3.25%                                      3.54%
Impact of noninterest bearing
  sources of funds                                                             .36                                        .42
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                            3.61%                                      3.96%
---------------------------------------------------------------------------------------------------------------------------------
1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amount to $1.1 million and $906 thousand in 2003 and 2002, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
-------------------------------------------------------------------------------------------------------------------
(In thousands)                                                         Variance         Variance Attributed to
Six Months Ended June 30,                                              2003/20021        Volume          Rate
-------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>           <C>
Interest Income
Taxable investment securities                                         $  (1,843)       $   653       $ (2,496)
Nontaxable investment securities2                                          (371)          (359)           (12)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell                         (194)           153           (347)
Loans2                                                                   (1,384)         4,082         (5,466)
-------------------------------------------------------------------------------------------------------------------
     Total interest income                                               (3,792)         4,529         (8,321)
-------------------------------------------------------------------------------------------------------------------
Interest Expense
Interest bearing demand deposits                                           (375)            80           (455)
Savings deposits                                                           (340)            50           (390)
Time deposits                                                            (2,074)         1,269         (3,343)
Federal funds purchased and securities sold under
   agreements to repurchase                                                (405)          (204)          (201)
Other borrowed funds                                                        354            576           (222)
-------------------------------------------------------------------------------------------------------------------
     Total interest expense                                              (2,840)         1,771         (4,611)
-------------------------------------------------------------------------------------------------------------------
Net interest income                                                   $    (952)       $ 2,758       $ (3,710)
-------------------------------------------------------------------------------------------------------------------
Percentage change                                                         100.0%        (289.7)%        389.7%
-------------------------------------------------------------------------------------------------------------------
1The changes that are not solely due to rate or volume are allocated on a percentage basis using the
 absolute values of rate and volume variances as a basis for allocation.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
</TABLE>

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

Noninterest  income  was $8.6  million  for the  first six  months  of 2003,  an
increase of $382 thousand or 4.6%  compared to the same period in 2002.  Service
charges and fees on  deposits,  the largest  component  of  noninterest  income,
increased  $74 thousand or 2.0% to $3.9  million.  Overdraft  fees declined $106
thousand or 4.2% and service  charges on demand  deposit  accounts  declined $44
thousand or 8.9% in the comparison. Offsetting these declines was an increase in
fees related to the  Commonwealth  of Kentucky of $185  thousand.  Other service
charges,  commissions,  and fees increased $43 thousand or 2.5% to $1.8 million.
Data  processing fees were up $11 thousand or 1.5% and totaled $734 thousand for
the first six months of 2003.  Trust fees  increased $84 thousand or 11.5%.  Net
gains on the sale of available  for sale  securities  was $144  thousand for the
current  six  months,  a decrease  of $849  thousand  or 85.5%  compared to $993
thousand in the comparable period a year ago as the Company sought to manage the
composition  of  its  balance  sheet  in  an  increasingly   difficult  economic
environment.  Net gains on the sale of  mortgage  loans were $512  thousand,  an
increase of $327 thousand from $185 thousand in the prior year as mortgage loans
originated  for sale  increased  $20.6 million in the  comparison due to the low
interest  rate  environment.  Income  from the  purchase of  company-owned  life
insurance  near the end of the first  quarter of 2003 was $673  thousand.  Other
noninterest income totaled $143 thousand, an increase of $19 thousand or 15.3%.

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

Noninterest  expenses totaled $18.6 million for the first six months of 2003, an
increase of $879 thousand or 5.0% compared to the same period in 2002.  Salaries
and employee benefits,  the largest component of noninterest expense,  increased
$330  thousand  or 3.3% and totaled  $10.3  million at June 30,  2003.  Employee
benefit  expenses  increased  $183 thousand  primarily  due to increased  health
insurance  costs,  which  include  additional  amounts  associated  with the new
postretirement  health insurance  coverage initiated during the first quarter of
2003. Salary and related payroll expenses increased $236 thousand or 3.0% in the
comparison  while  noncash   compensation   expense  related  to  the  Company's
nonqualified  stock  option  plan  declined  $89  thousand  or 29.6%  due to the
structure  of the  vesting  schedule  and  forfeitures.  The number of full time
equivalent  employees  decreased to 462 from 469  reported in the prior  period.
Occupancy  expense,  net of rental income,  increased $141 thousand or 12.2% and
totaled $1.3  million.  The increase in net  occupancy  expense is attributed to
increases  in  maintenance  and  repairs,  utilities  costs,  and  depreciation.
Equipment  expense was relatively  unchanged at $1.9 million.  Other noninterest
expense, including bank franchise taxes, increased $387 thousand or 8.1% to $5.2
million  mainly  due to a $301  thousand  increase  in  correspondent  bank fees
related to activity attributed to the Commonwealth of Kentucky.

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

Income tax expense for the first six months of 2003 was $2.0 million, a decrease
of $443 thousand or 18.3% from the same period a year earlier. The effective tax
rate  decreased 243 basis points to 23.0% from 25.4% in 2002.  The change in the
effective  tax rate is due to a  combination  of  factors,  primarily  including
credits derived from qualified zone academy bonds and nontaxable  income accrued
from the increase in cash  surrender  value on life  insurance  purchased on key
employees.

FINANCIAL CONDITION

Total assets were $1.3 billion on June 30, 2003, a decrease of $15.6  million or
1.2% from December 31, 2002.  The decrease in assets  includes a $114.6  million
lower balance in the securities portfolio, offset by a $71.2 million increase in
cash and cash equivalents and a $23.6 million increase in other assets resulting
primarily from the purchase of  company-owned  life  insurance  during the first
quarter of 2003.  Fed funds  purchased and securities  sold under  agreements to
repurchase declined $42.3 million and correspond to the decline in assets during
the period.  The makeup of the balance sheet continually  changes as the Company
responds to  extremely  competitive  market  forces.  Management  of the Company
considers it  noteworthy to understand  the  relationship  between the Company's
principal subsidiary,  Farmers Bank & Capital Trust Co., and the Commonwealth of
Kentucky.  Farmers  Bank  provides  various  services  to state  agencies of the
Commonwealth.  As the  depository  for the  Commonwealth,  these  agencies issue
checks drawn on Farmers Bank,  including paychecks and state income tax refunds.
Farmers Bank also  processes  vouchers of the WIC (Women,  Infants and Children)
program for the Cabinet for Human Resources.  The Bank's  investment  department
also provides services to the Teacher's  Retirement  systems.  As the depository
for the  Commonwealth,  large  fluctuations in deposits are likely to occur on a
daily  basis.  Therefore,  reviewing  average  balances  is  also  important  to
understanding the financial condition of the Company. On an average basis, total
assets were $1.2 billion for the first six months of 2003,  an increase of $35.7
million or 3.0% from year-end 2002. Average earning assets,  primarily loans and
securities,  were $1.1 billion at June 30, 2003, an increase of $42.8 million or
3.9% from  year-end  2002.  Average  earning  assets  represent  91.24% of total
average  assets on June 30,  2003,  an increase of 49 basis  points  compared to
90.75% at year-end 2002.

LOANS
-----

Loans,  net of unearned  income,  totaled  $742.9  million at June 30, 2003,  an
increase of $4.3 million or 0.6% from year-end 2002. The composition of the loan
portfolio is summarized in the table below.


--------------------------------------------------------------------------------
                                   June 30, 2003             December 31, 2002
(Dollars in thousands)             Amount      %              Amount      %
--------------------------------------------------------------------------------

Commercial, financial,
  and agriculture              $  107,297    14.4%        $  110,056    14.9%
Real estate - construction         53,078     7.1             55,896     7.6
Real estate - mortgage            474,346    63.9            459,620    62.2
Installment                        73,198     9.9             76,162    10.3
Lease financing                    34,993     4.7             36,905     5.0
--------------------------------------------------------------------------------
     Total                     $  742,912   100.0%        $  738,639   100.0%
--------------------------------------------------------------------------------

On average,  loans  represented  65.2% of earning  assets during the current six
month period compared to 64.7% for year-end 2002. As loan demand fluctuates, the
available  funds are  reallocated  between  loans and  lower  earning  temporary
investments  or investment  securities,  which  typically  involve a decrease in
credit risk and lower yields.

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

The allowance for loan losses was $11.2 million at June 30, 2003, an increase of
$94 thousand or 0.8% from the prior year-end.  The allowance for loan losses was
1.50% of loans net of unearned income at June 30, 2003,  unchanged from December
31,  2002.  The  provision  for loan losses  decreased  $637  thousand  and $373
thousand in the current three-month and six-month period, respectively, compared
to the same periods in 2002.  The decrease in the  provision  for loan losses in
the  comparison is attributed to higher  provisions in the second quarter of the
prior year related to a group of  nonperforming  construction  loans  secured by
residential  real estate.  The Company had net  charge-offs of $324 thousand and
$624  thousand  in the  current  three  and six  months  of 2003,  respectively,
compared  to net  charge-offs  of $291  thousand  and $632  thousand in the same
periods of 2002. Annualized net charge-offs represent 0.18% of average net loans
for three and six months ended June 30, 2003 compared to 0.60% at year-end 2002.
The  allowance for loan losses as a percentage  of  nonperforming  loans totaled
70.2%  and 57.3% at June 30,  2003 and  December  31,  2002,  respectively.  The
increase is primarily  reflective of the decline in nonperforming assets of $3.7
million in the comparison.  Management continues to emphasize collection efforts
and evaluation of risks within the loan portfolio.  In management's opinion, the
provision for loan losses  represents  incurred credit losses during the periods
presented and the allowance for loan losses is adequate to cover losses inherent
in the loan portfolio.

NONPERFORMING ASSETS
--------------------

Nonperforming  assets for the Company include  nonperforming  loans,  other real
estate  owned,  and other  foreclosed  assets.  Nonperforming  loans  consist of
nonaccrual loans,  restructured loans, and loans past due ninety days or more on
which interest is still accruing.  Nonperforming assets totaled $16.1 million at
June 30,  2003,  a decrease  of $3.7  million or 18.6% from the prior  year-end.
Nonperforming  loans  totaled  $15.9 million at June 30, 2003 a decrease of $3.4
million or 17.7% compared to year-end 2002.  Nonperforming  loans include a pool
of  constructions  loans  secured by  residential  real estate to a  financially
troubled  builder.  This pool of loans  totaled  $10.5 million at June 30, 2003.
Interest  income  lost on this  group of loans  due to their  nonaccrual  status
totaled $177  thousand and $366  thousand  during the three and six months ended
June 30,  2003,  respectively.  It is currently  estimated  that a total of $150
thousand of interest income will be lost in each  subsequent  quarter related to
this credit  while it remains on  nonaccrual  status.  Nonperforming  loans as a
percentage  of net loans were  2.14% at June 30,  2003,  a decrease  of 47 basis
points from 2.61% compared to year-end 2002.

Other real estate owned,  which had a balance of $385 thousand at year-end 2002,
decreased $329 thousand or 85.5% to $56 thousand on June 30, 2003.

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

Temporary  investments  consist of interest  bearing  deposits with other banks,
federal funds sold,  and  securities  purchased  under  agreements to resell and
totaled  $43.0  million at June 30, 2003,  an increase of $19.9 million or 86.7%
from year-end 2002.  Temporary  investments averaged $66.3 million for the first
six months of 2003, a decrease of $2.7 million from year-end  2002. The decrease
is primarily a result of the Company's net funding position and the relationship
between its principal  subsidiary and the  Commonwealth of Kentucky as described
in preceding sections of this report.  Temporary  investments are reallocated as
loan demand and other investment alternatives present the opportunity.

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

Investment securities were $327.0 million on June 30, 2003, a decrease of $114.6
million or 25.9% from  year-end  2002.  Available  for sale and held to maturity
securities  were $301.2  million  and $25.8  million,  respectively.  Investment
securities averaged $327.8 million for the first six months of 2003, an increase
of $11.4 million or 3.6% from year-end 2002. The increase in average  investment
securities is attributable to the Company's  continued efforts to manage its net
interest margin during a period of low market interest rates and correlates with
the increase in average  borrowed  funds.  The Company had an unrealized gain on
available  for sale  investment  securities  of $5.9  million  at June 30,  2003
compared to $5.5 million at year-end 2002.

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

The Company  purchased  life insurance  policies on certain key employees,  with
their knowledge and consent, during the current year at a cost of $24.0 million.
Company-owned  life  insurance is recorded at its cash surrender  value,  or the
amount that can be realized,  on the consolidated balance sheet with the related
change in cash surrender value and proceeds received under the policies reported
on the consolidated  statement of income as tax-free  noninterest income,  which
totaled $673 thousand for the current six-month period.  The Company is the sole
beneficiary of proceeds  received under the policies.  Expected  income from the
purchase of the  insurance  policies  will be used to offset the rising costs of
the  Company's  various  benefit  plans  as  well  as the  additional  costs  of
implementing  a new  postretirement  health  insurance  program.  Under  the new
postretirement  health  insurance  plan,  any  employee  that meets the  service
requirements  upon  retirement  would  be  eligible  to  continue  their  health
insurance  coverage,  identical  to the  coverage  that  is  offered  to  active
employees.  The employee  will pay 50% of the cost and the Company will pay 50%.
It is currently  estimated  that the expense  related to the new  postretirement
health  insurance plan will be  approximately  $114 thousand per quarter for the
remainder of 2003.

DEPOSITS
--------

Total  deposits  were  $980.4  million at June 30,  2003,  an  increase of $22.9
million or 2.4% from year-end 2002. Noninterest bearing deposits increased $48.8
million  or 34.6% in the  comparison.  This  increase  is  primarily  due to the
relationship  between the Company's principal subsidiary and the Commonwealth of
Kentucky  as  described  in  preceding  sections  of this  report.  On  average,
noninterest  bearing deposits were $157.8 million during the current period,  an
increase  of $7.0  million  or 4.6%.  End of  period  interest  bearing  deposit
balances  decreased  $25.9  million or 3.2% during the six months ended June 30,
2003 due to decreases in interest bearing checking  accounts of $10.5 million or
4.7%,  money  market  deposit  accounts of $24.8  million or 21.7%,  and savings
accounts of $4.3 million or 6.6%.  Time deposits  increased $13.7 million in the
end of period  comparisons.  On average,  interest  bearing deposits were $809.5
million  in the  current  period,  an  increase  of $22.0  million  or 2.8% from
year-end 2002. The increase in average interest bearing deposits is attributable
to increases in interest  bearing demand  deposits of $5.2 million or 2.4%, time
deposits of $17.3 million or 4.3%, and savings accounts of $2.6 million or 4.3%.
Average  money  market  deposit  accounts  declined  $3.0 million or 2.8% in the
comparison. Total deposits averaged $967.3 million, an increase of $29.0 million
or 3.1% from year-end 2002.

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

Borrowed  funds  totaled  $142.2  million at June 30,  2003, a decrease of $40.2
million or 22.0% from  $182.3  million at  year-end  2002.  A $2.2  million  net
increase  in  long-term  borrowings  was offset by a $42.4  million  decrease in
short-term  borrowings,  which account for the total decrease in borrowed funds.
Federal  funds  purchased  and  securities  sold under  agreements to repurchase
decreased $42.3 million or 36.5% due primarily to the  relationship  between the
Company's principal  subsidiary and the Commonwealth of Kentucky as described in
preceding  sections  of this  report.  Other  short-term  borrowings,  primarily
short-term  borrowings  from the Federal Home Loan Bank ("FHLB") were relatively
unchanged at $9.2 million.  The $2.2 million increase in long-term borrowings is
attributed to the funding of new data processing  equipment financed over a term
of four years and an additional  $1.2 million in additional net borrowings  from
the FHLB.  Total  borrowed funds averaged  $141.0  million,  an increase of $5.0
million or 3.7% from year-end 2002.

LIQUIDITY

The Parent  Company's  primary use of cash consists of dividend  payments to its
common shareholders,  purchases of its common stock, and other general operating
purposes.  Liquidity of the Parent Company  depends  primarily on the receipt of
dividends from its subsidiary banks and cash balances maintained. As of June 30,
2003 combined retained  earnings of the subsidiary banks were $41.6 million,  of
which $2.4  million was  available  for the payment of  dividends  to the Parent
Company without  obtaining prior approval from bank  regulatory  agencies.  As a
practical matter, payment of future dividends is also subject to the maintenance
of other  capital ratio  requirements.  During the current six months ended June
30, 2003 the Parent  Company  received  dividends of $30.8  million.  Management
expects that in the aggregate,  its  subsidiary  banks will continue to have the
ability to pay dividends in order to provide funds to the Parent  Company during
the remainder of 2003 sufficient to meet its liquidity needs. The Parent Company
had cash balances of $28.1 million at June 30, 2003.

The Company's  objective as it relates to liquidity is to insure that subsidiary
banks  have funds  available  to meet  deposit  withdrawals  and credit  demands
without unduly penalizing profitability.  In order to maintain a proper level of
liquidity,  the banks have several  sources of funds available on a daily basis,
which can be used for  liquidity  purposes.  These  sources  of funds  primarily
include the  subsidiary  banks' core  deposits,  consisting of both business and
nonbusiness  deposits;  cash flow  generated by repayment of loan  principal and
interest;  and federal funds purchased and securities  sold under  agreements to
repurchase.  The  terms  of the  recent  FHLB  advances  have  been  taken  into
consideration in relation to the overall funding needs of the Company.

For the longer term, the liquidity position is managed by balancing the maturity
structure of the balance sheet. This process allows for an orderly flow of funds
over an extended  period of time. The Company's  Asset and Liability  Management
Committee  meets  regularly and monitors the composition of the balance sheet to
ensure comprehensive management of interest rate risk and liquidity.

Liquid assets consist of cash, cash  equivalents,  and securities  available for
sale. At June 30, 2003, such assets totaled $439.5 million,  a decrease of $40.6
million or 8.5% from year-end  2002. The decrease in liquid assets is attributed
to the overall  funding  position of the Company  combined  with the purchase of
company-owned life insurance on key employees during the current six months. Net
cash provided by operating  activities was $10.6 million in the first six months
of 2003,  relatively  unchanged  from $10.7 million  compared to the same period
last year.  Net cash  provided by investing  activities  was $84.6  million,  an
increase  of $31.8  million  due  primarily  to a $66.2  million  increase  from
investments securities transactions offset by the purchase of company-owned life
insurance on key employees of $24.0  million.  An increase in loan volume during
the six-month  periods used an additional  $9.6 million in the  comparison.  Net
cash used in  financing  activities  was $24.0  million for the six months ended
June 30, 2003. In the prior six-month  comparison  financing activities provided
$74.7  million.  The change is mainly due to lower funding  activity  during the
current  six-month  period  compared  to the  activity in the same period a year
earlier.

CAPITAL RESOURCES

Shareholders'  equity was $126.2  million on June 30, 2003,  an increase of $418
thousand or 0.3% from year-end 2002. The Company purchased 81 thousand shares of
its  outstanding  common  stock  during the first six months of 2003 for a total
cost of $2.5 million.

The Company issued 6 thousand shares of common stock during the first six months
of 2003  pursuant to its  nonqualified  stock  option  plan.  Dividends  of $4.3
million or $.64 per share were declared  during the first six months of 2003, an
increase  of 3.2% per  share  compared  to the  prior  year.  Accumulated  other
comprehensive income, consisting of the unrealized holding gain on available for
sale  investment  securities  (net of tax) increased $271 thousand from year-end
2002.

Consistent with the objective of operating a sound financial  organization,  the
Company's goal is to maintain  capital ratios well above the regulatory  minimum
requirements.  The Company's  capital ratios as of June 30, 2003, the regulatory
minimums and the regulatory standard for a "well capitalized" institution are as
follows3


                           Farmers Capital         Regulatory           Well
                          Bank Corporation           Minimum         Capitalized
--------------------------------------------------------------------------------
Tier 1 risk based               15.19%                 4.00%            6.00%
Total risk based                16.45%                 8.00%           10.00%
Leverage                         9.85%                 4.00%            5.00%

The capital ratios of all the subsidiary  banks, on an individual basis, were in
excess of the applicable  minimum  regulatory capital ratio requirements at June
30, 2003.

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No.  46,   CONSOLIDATION  OF  VARIABLE  INTEREST  ENTITIES,   AN
INTERPRETATION OF ARB NO. 51. This Interpretation  provides new guidance for the
consolidation of variable  interest entities ("VIEs") and requires such entities
to be  consolidated  by  their  primary  beneficiaries  if the  entities  do not
effectively  disperse risk among parties involved.  The Interpretation also adds
disclosure  requirements  for investors  that are involved  with  unconsolidated
VIEs. The  consolidation  requirements  apply  immediately to VIEs created after
January 31, 2003 and are effective  for the first fiscal year or interim  period
beginning  after June 15, 2003 for VIEs acquired  before  February 1, 2003.  The
adoption of this interpretation is not expected have a significant impact on the
Company's financial condition of results of operations.

In April 2003,  The FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 149,  AMENDMENT  OF STATEMENT  133 ON  DERIVATIVE  INSTRUMENTS  AND
HEDGING ACTIVITIES.  SFAS No. 149 amends and clarifies financial  accounting and
reporting for derivative  instruments,  including certain derivative instruments
embedded  in other  contracts  and for  hedging  activities  under SFAS No. 133,
"ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES." This statement
is effective for contracts entered into or modified after June 30, 2003. Because
the Company does not have these  instruments  or is only  nominally  involved in
these  instruments,  management  expects the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "ACCOUNTING  FOR CERTAIN  FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY". This statement
affects the accounting for certain  financial  instruments  that, under previous
guidance,  issuers could  account for as equity.  This  statement  requires that
freestanding  financial  instruments  that embody  obligations for the issuer be
classified  as  liabilities  on the balance  sheet.  Most of this  statement  is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after  June 15,  2003.  Because  the  Company  does  not  have  these
instruments  or is only  nominally  involved  in these  instruments,  management
expects the adoption of this  statement  will not have a material  effect on the
Company's consolidated financial statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

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

At June 30, 2003, the model  indicated that if rates were to gradually  increase
by 150 basis points during the calendar year,  then net interest  income and net
income would increase 0.35% and 0.73%, respectively for the year ending December
31, 2003. The model  indicated  that if rates were to gradually  decrease by 150
basis points over the same period, then net interest income and net income would
decrease 1.4% and 3.3%, respectively.

In the current low interest rate environment, it is not practical or possible to
reduce certain  deposit rates by the same magnitude as rates on earning  assets.
The average  rates paid on some of the  Company's  deposits are well below 1.5%.
This situation  magnifies the model's predicted results when modeling a decrease
in  interest  rates,  as  earning  assets  with  higher  yields  have more of an
opportunity to reprice at lower rates than lower-rate deposits.

ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

The Company's Chief Executive  Officer and Chief Financial Officer have reviewed
and evaluated the Company's  disclosure controls and procedures as of the end of
the  period  covered  by this  report,  and have  concluded  that the  Company's
disclosure  controls and  procedures  were adequate and effective to ensure that
information  required to be disclosed is recorded,  processed,  summarized,  and
reported in a timely manner.

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



PART II - OTHER INFORMATION

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

In September  1992,  Farmers Bank & Capital Trust Company (the "Bank") was named
as a defendant in Case No.  92CIO5734 in Jefferson  Circuit  Court,  Louisville,
Kentucky,  in a case styled  SHILLING  ET AL. V.  FARMERS  BANK & Capital  Trust
Company.  Details of this case have been disclosed in previous Annual Reports on
Form 10-K and  subsequent  10-Q  filings.  The  named  plaintiffs  purported  to
represent a class  consisting  of all present and former owners of the County of
Jefferson,  Kentucky,  Nursing Home  Refunding  Revenue  Bonds (Filson Care Home
Project)  Series  1986A  and  County  of  Jefferson,   Kentucky,   Nursing  Home
Improvement  Revenue Bonds (Filson Care Home Project) Series 1986B (collectively
"the Bonds").  The plaintiffs  alleged that the class had been damaged through a
reduction in the value of the Bonds and a loss of interest on the Bonds  because
of the  actions  of the  Bank  in its  capacity  as  indenture  trustee  for the
Bondholders. The plaintiffs demanded compensatory and punitive damages.

On July 6, 1993, the Court denied the plaintiffs'  motion to certify the case as
a class action.  Subsequently,  the plaintiffs  amended their  complaint to join
additional  Bondholders as plaintiffs.  The plaintiffs  claimed to hold Bonds in
the aggregate  principal  amount of $480,000.  Before trial, the Court dismissed
thirty-nine of the  plaintiffs  because they were unable or unwilling to present
testimony to support their claims.

The case was tried to a jury  beginning  on March 28, 2000 on the claims of four
plaintiffs holding Bonds in the aggregate principal amount of $80,000. The Court
granted a directed  verdict in favor of the Bank on the  plaintiffs'  claim that
the Bank had  engaged in  commercial  bribery  and that the legal fees that were
paid by the Bank should be disgorged  because of an alleged conflict of interest
of the Bank's  counsel.  The jury found for the plaintiffs on the claim that the
Bank had  breached  its  fiduciary  duty and awarded the  plaintiffs  $99,875 in
compensatory damages and $600,000 in punitive damages.

The Bank filed a motion for  judgment  notwithstanding  the  verdict  or, in the
alternative,  for a new trial,  asserting  that the jury's verdict that the Bank
breached its fiduciary duty was not supported by sufficient  evidence,  that the
jury's award of damages was  speculative  and was not supported by the evidence,
and that the jury's award of punitive  damages was not  supported by  sufficient
evidence.  The Bank also asserted that a new trial was warranted  because of the
erroneous admission of evidence concerning legal fees paid by the Bank.

Plaintiffs filed an appeal contending that the denial of class certification was
erroneous,  that the individual  plaintiffs  should not have been dismissed from
the  lawsuit,  that  certain  evidence was  erroneously  excluded,  and that the
directed  verdict  regarding the  disgorgement  of legal fees and the commercial
bribery claims was  erroneous.  On August 1, 2000, the Kentucky Court of Appeals
dismissed the appeal as having been prematurely filed.

On January 3, 2001, the Jefferson Circuit Court entered judgment in favor of the
Bank notwithstanding the jury's verdict in favor of the plaintiffs, holding that
the Bank  reasonably  relied in good  faith on the advice of its  counsel,  that
there  was no  evidence  that  the  Bank  breached  its  fiduciary  duty  to the
plaintiffs,  and that there was no evidence that the Bank caused the plaintiffs'
losses.

On January 31, 2001,  the  plaintiff  bondholders  appealed,  and on February 9,
2001, defendant Bank cross-appealed, the judgment of the Jefferson Circuit Court
to the Kentucky Court of Appeals.

In their appeal,  the  Bondholders  claim that the trial court's denial of class
certification was erroneous,  that certain individual plaintiffs should not have
been dismissed  from the lawsuit,  that the trial court  erroneously  directed a
verdict  against  them on the  issue of a  conflict  of  interest,  and that the
judgment  notwithstanding  the  verdict  was  erroneously  granted  because  the
evidence was sufficient to support the jury's verdict.

In its cross-appeal, the Bank claims that the trial court erroneously bifurcated
the trial on the issue of liability and damages,  that certain  witnesses should
have been  excluded  from the  trial,  that the Bank  should  have been  granted
summary judgment,  and that certain evidence and testimony regarding  attorneys'
fees should have been excluded.

On May 10, 2002,  the Kentucky Court of Appeals  affirmed the Jefferson  Circuit
Court's judgment in favor of the Bank. The plaintiff  bondholders filed a motion
for discretionary review to the Kentucky Supreme Court on June 7, 2002.

On June 7, 2002, the plaintiffs  filed with the Kentucky  Supreme Court a motion
for  discretionary  review.  The Bank filed a response  opposing the plaintiffs'
motion

On April 17, 2003 the  Kentucky  Supreme  Court  denied  plaintiffs'  motion for
discretionary  review.  The judgment in favor of the Bank is therefore now final
and subject to no further appeal or judicial review.

As of June 30,  2003,  there  were  various  other  pending  legal  actions  and
proceedings  against the Company  arising from the normal course of business and
in which claims for damages are  asserted.  Management,  after  discussion  with
legal  counsel,  believes  that these  actions  are  without  merit and that the
ultimate liability  resulting from these legal actions and proceedings,  if any,
will  not  have a  material  adverse  effect  upon  the  consolidated  financial
statements of the Company.

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

The annual meeting of shareholders  was held May 13, 2003. The matters that were
voted upon included the election of four directors for  three-year  terms ending
in 2006 or until their successors have been elected and qualified.

The outcome of the voting was as follows:

NAME                            FOR         AGAINST    WITHHELD      ABSTAINED
Frank W. Sower, Jr.          5,822,220         0         5,784          300
J. Barry Banker              5,821,970         0         6,034          300
Dr. John D. Sutterlin        5,827,054         0           950          300
Dr. Donald J. Mullineaux     5,822,370         0         5,634          300

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

Lloyd C. Hillard, Jr.           Shelley S. Sweeney
Harold G. Mays                  W. Benjamin Crain
Robert Roach, Jr.               Michael M. Sullivan
Gerald R. Hignite               G. Anthony Busseni

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

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

a) List of Exhibits
   ----------------

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

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

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

         31.1     CEO Certification (page 30)

         31.2     CFO Certification (page 31)

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


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

          On July 21, 2003, the Registrant filed a report on Form 8-K under Item
          9 (furnished under Item 12) in accordance with SEC release No. 33-8216
          reporting its earnings for the second  quarter of 2003.  There were no
          financial statements filed with this Form 8-K.
<PAGE>




                                   SIGNATURES

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





Date:  8-12-03                      /s/ G. Anthony Busseni
     -----------------              -----------------------------------------
                                    G. Anthony Busseni, President and CEO
                                    (Principal Executive Officer)


Date:  8-12-03                      /s/ C Douglas Carpenter
     -----------------              -----------------------------------------
                                    C. Douglas Carpenter, Vice President,
                                    Secretary, and CFO (Principal Financial and
                                    Accounting Officer)
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{"company-data": {"conformed-name": "FARMERS CAPITAL BANK CORP", "cik": "0000713095", "assigned-sic": "6021", "irs-number": "611017851", "state-of-incorporation": "KY", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-14412", "film-number": "03839143"}, "business-address": {"street1": "PO BOX 309", "street2": "202 W MAIN ST", "city": "FRANKFORT", "state": "KY", "zip": "40602", "phone": "5022271668"}, "mail-address": {"street1": "P O BOX 309", "street2": "202 WEST MAIN STREET", "city": "FRANKFORT", "state": "KY", "zip": "40602"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2003

                                       or

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

                         For the transition period from
                                       to
                            ------------ ------------

                         Commission File Number 0-14412

                        FARMERS CAPITAL BANK CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

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

       Registrant's telephone number, including area code: (502) 227-1600

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

                                 Yes |X| No

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

                                 Yes |X| No

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

                    Common stock, par value $0.125 per share
                 6,712,976 shares outstanding at August 11, 2003
TABLE OF CONTENTS

Part I - Financial Information                                          Page No.

     Item 1 - Financial Statements                                           3

         Unaudited Consolidated Balance Sheets -
             June 30, 2003 and December 31, 2002                             3

         Unaudited Consolidated Statements of Income -
             For the Three Months and Six Months Ended
             June 30, 2003 and June 30, 2002                                 4

         Unaudited Consolidated Statements of Comprehensive Income -
             For the Three Months and Six Months Ended
             June 30, 2003 and June 30, 2002                                 5

         Unaudited Consolidated Statements of Cash Flows -
             For the Six Months Ended
             June 30, 2003 and June 30, 2002                                 6

         Unaudited Consolidated Statements of Changes in
             Shareholders' Equity -
             For the Six Months Ended
             June 30, 2003 and June 30, 2002                                 7

         Notes to Unaudited Consolidated Financial Statements                8

     Item 2 - Management's Discussion and Analysis of Financial
                Condition and Results of Operations                         11

     Item 3 - Quantitative and Qualitative Disclosures About Market Risk    25

     Item 4 - Controls and Procedures                                       25

Part II - Other Information

     Item 1 - Legal Proceedings                                             26

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

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

     Signatures                                                             29
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------
UNAUDITED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------------------
                                                                                              June 30,       December 31,
(In thousands, except share data)                                                                2003               2002
--------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents:
     Cash and due from banks                                                               $    95,339        $    44,083
     Interest bearing deposits in other banks                                                    3,475              3,947
     Federal funds sold and securities purchased under
          agreements to resell                                                                  39,489             19,071
--------------------------------------------------------------------------------------------------------------------------
          Total cash and cash equivalents                                                      138,303             67,101
--------------------------------------------------------------------------------------------------------------------------
Investment securities:
     Available for sale, amortized cost of $295,327 (2003) and $407,560 (2002)                 301,222            413,038
     Held to maturity, fair value of $27,650 (2003) and $30,312 (2002)                          25,767             28,519
--------------------------------------------------------------------------------------------------------------------------
          Total investment securities                                                          326,989            441,557
--------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income                                                                  742,912            738,639
Allowance for loan losses                                                                      (11,155)           (11,061)
--------------------------------------------------------------------------------------------------------------------------
          Loans, net                                                                           731,757            727,578
--------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net                                                                     24,219             24,155
Company-owned life insurance                                                                    24,674
Other assets                                                                                    14,064             15,211
--------------------------------------------------------------------------------------------------------------------------
          Total assets                                                                     $ 1,260,006        $ 1,275,602
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
     Noninterest bearing                                                                   $   190,044        $   141,238
     Interest bearing                                                                          790,317            816,242
--------------------------------------------------------------------------------------------------------------------------
          Total deposits                                                                       980,361            957,480
--------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase                      73,639            115,979
Other short-term borrowings                                                                      9,175              9,207
Long-term debt                                                                                  59,372             57,152
Dividends payable                                                                                2,151              2,191
Other liabilities                                                                                9,117              7,820
--------------------------------------------------------------------------------------------------------------------------
          Total liabilities                                                                  1,133,815          1,149,829
--------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies

SHAREHOLDERS' EQUITY
Common stock, par value $.125 per share
     9,608,000 shares authorized; 8,142,639 and 8,135,977
     shares issued at June 30, 2003 and December 31, 2002, respectively                          1,018              1,017
Capital surplus                                                                                 17,998             17,623
Retained earnings                                                                              143,509            141,199
Treasury stock, at cost
     1,425,163 and 1,344,463 shares at June 30, 2003 and
     December 31, 2002, respectively                                                           (40,166)           (37,627)
Accumulated other comprehensive income                                                           3,832              3,561
--------------------------------------------------------------------------------------------------------------------------
          Total shareholders' equity                                                           126,191            125,773
--------------------------------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity                                       $ 1,260,006        $ 1,275,602
--------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------------------------------------------------------------------------
                                                                          Three Months Ended                 Six Months Ended
                                                                               June 30,                          June 30,
(In thousands, except per share data)                                     2003           2002               2003           2002
---------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans                                            $ 12,139       $ 12,639           $ 24,368       $ 25,703
Interest on investment securities:
     Taxable                                                             1,201          2,601              3,500          5,343
     Nontaxable                                                            780            938              1,583          1,849
Interest on deposits in other banks                                         22            133                 37            153
Interest of federal funds sold and securities
     purchased under agreements to resell                                  215            244                377            455
---------------------------------------------------------------------------------------------------------------------------------
          Total interest income                                         14,357         16,555             29,865         33,503
---------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits                                                     4,316          5,771              8,963         11,752
Interest on federal funds purchased and securities
     sold under agreements to repurchase                                   243            434                502            907
Interest on other borrowed funds                                           557            414              1,107            753
---------------------------------------------------------------------------------------------------------------------------------
          Total interest expense                                         5,116          6,619             10,572         13,412
---------------------------------------------------------------------------------------------------------------------------------
          Net interest income                                            9,241          9,936             19,293         20,091
---------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses                                                  351            988                736          1,109
---------------------------------------------------------------------------------------------------------------------------------
          Net interest income after provision for loan losses            8,890          8,948             18,557         18,982
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges and fees on deposits                                     2,018          1,960              3,853          3,779
Other service charges, commissions, and fees                               853            875              1,773          1,730
Data processing income                                                     389            387                734            723
Trust income                                                               413            361                812            728
Investment securities (losses) gains, net                                   (3)           396                144            993
Gain on sale of mortgage loans                                             323             90                512            185
Income from company-owned life insurance                                   408                               673
Other                                                                       77             72                143            124
---------------------------------------------------------------------------------------------------------------------------------
          Total noninterest income                                       4,478          4,141              8,644          8,262
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits                                           5,213          4,801             10,281          9,951
Occupancy expenses, net                                                    642            588              1,300          1,159
Equipment expenses                                                         924            914              1,861          1,840
Bank franchise tax                                                         331            306                665            613
Other                                                                    2,358          2,082              4,500          4,165
---------------------------------------------------------------------------------------------------------------------------------
          Total noninterest expense                                      9,468          8,691             18,607         17,728
---------------------------------------------------------------------------------------------------------------------------------
          Income before income taxes                                     3,900          4,398              8,594          9,516
---------------------------------------------------------------------------------------------------------------------------------
Income tax expense                                                         874          1,082              1,975          2,418
---------------------------------------------------------------------------------------------------------------------------------
          Net income                                                  $  3,026       $  3,316           $  6,619       $  7,098
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
     Basic                                                            $    .45       $    .48           $    .98       $   1.03
     Diluted                                                               .45            .48                .98           1.02
---------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
     Basic                                                               6,723          6,889              6,743          6,895
     Diluted                                                             6,765          6,941              6,781          6,943
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
---------------------------------------------------------------------------------------------------------------------------------
                                                                        Three Months Ended        Six Months Ended
                                                                              June 30,                June 30,
 (In thousands)                                                         2003           2002           2003          2002
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                           $ 3,026        $ 3,316        $ 6,619       $ 7,098
Other comprehensive income:
     Unrealized holding gain on available for sale
     securities arising during the period, net of tax
     of $606, $771, $207, and $405, respectively                       1,125          1,432            385           753

Reclassification adjustment for prior period
     unrealized gain recognized during current period,
     net of tax of $0, $57, $61, and $324, respectively                                (106)          (114)         (601)

---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                             1,125          1,326            271           152
---------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME                                                 $ 4,151        $ 4,642        $ 6,890        $7,250
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------------------------
Six months ended June 30, (In thousands)                                                               2003            2002
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                                    $  6,619        $  7,098
     Adjustments to reconcile net income to net cash provided
          by operating activities:
          Depreciation and amortization                                                               1,496           1,472
          Net amortization of investment security premiums and (discounts):
                Available for sale                                                                    1,631             342
                Held to maturity                                                                        (36)            (33)
          Provision for loan losses                                                                     736           1,109
          Noncash compensation expense                                                                  213             296
          Mortgage loans originated for sale                                                        (34,986)        (14,399)
          Proceeds from sale of mortgage loans                                                       33,991          14,414
          Deferred income tax expense (benefit)                                                         106             (95)
          Gain on sale of mortgage loans                                                               (512)           (185)
          Gain on sale of premises and equipment                                                         (4)             (1)
          Gain on sale of available for sale investment securities, net                                (144)           (993)
          Decrease in accrued interest receivable                                                       596           1,154
          (Increase) decrease in other assets                                                          (122)            182
          Decrease in accrued interest payable                                                         (292)           (261)
          Increase in other liabilities                                                               1,337             556
---------------------------------------------------------------------------------------------------------------------------------
             Net cash provided by operating activities                                               10,629          10,656
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from maturities and calls of investment securities:
          Available for sale                                                                        223,257         222,201
          Held to maturity                                                                            2,788           5,033
     Proceeds from sale of available for sale investment securities                                  74,050         125,436
     Purchase of available for sale investment securities                                          (186,561)       (305,346)
     Loans originated for investment, net of principal collected                                     (3,408)          6,181
     Purchase of company-owned life insurance                                                       (24,001)
     Purchase of premises and equipment                                                              (1,562)           (701)
     Proceeds from sale of equipment                                                                      6               2
---------------------------------------------------------------------------------------------------------------------------------
             Net cash provided by (used in) investing activities                                     84,569          52,806
---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits                                                                        22,881          27,258
     Net (decrease) increase in securities sold under agreements to repurchase                      (42,340)         31,651
     Proceeds from long-term debt                                                                     3,874          16,500
     Repayments of long-term debt                                                                    (1,654)         (1,064)
     Net (decrease) increase in other short-term borrowings                                             (32)          6,683
     Dividends paid                                                                                  (4,349)         (4,290)
     Purchase of common stock                                                                        (2,539)         (3,133)
     Stock options exercised                                                                            163           1,139
---------------------------------------------------------------------------------------------------------------------------------
             Net cash (used in ) provided by financing activities                                   (23,996)         74,744
---------------------------------------------------------------------------------------------------------------------------------
             Net increase in cash and cash equivalents                                               71,202         138,206
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                                                       67,101         106,385
---------------------------------------------------------------------------------------------------------------------------------
             Cash and cash equivalents at end of period                                            $138,303        $244,591
---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
     Interest                                                                                      $ 10,864        $ 13,673
     Income taxes                                                                                       500           2,490
Cash dividend declared and unpaid                                                                     2,151           2,137
---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                                    Accumulated
                                                                                                            Other          Total
Six months ended                          Common Stock       Capital    Retained      Treasury Stock    Comprehensive  Shareholders'
June 30, 2003 and 2002                Shares     Amount      Surplus    Earnings   Shares     Amount       Income         Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2003           8,136     $1,017      $17,623    $141,199    1,344   $(37,627)       $3,561         $125,773
Net income                                                                 6,619                                              6,619
Other comprehensive income                                                                                     271              271
Cash dividends declared,
  $.64 per share                                                          (4,309)                                            (4,309)
Purchase of common stock                                                               81     (2,539)                        (2,539)
Stock options exercised                    6          1          162                                                            163
Noncash compensation expense
  attributed to stock option grants                              213                                                            213
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2003             8,142     $1,018      $17,998    $143,509    1,425   $(40,166)       $3,832         $126,191
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
  Balance at January 1, 2002           8,058     $1,007      $15,179    $137,227    1,153   $(31,077)      $ 1,224         $123,560
Net income                                                                 7,098                                              7,098
Other comprehensive income                                                                                     152              152
Cash dividends declared,
  $.62 per share                                                          (4,275)                                            (4,275)
Purchase of common stock                                                               91     (3,133)                        (3,133)
Stock options exercised                   47          6        1,133                                                          1,139
Noncash compensation expense
  attributed to stock option grants                              296                                                            296
------------------------------------------------------------------------------------------------------------------------------------
  Balance at June 30, 2002             8,105     $1,013      $16,608    $140,050    1,244   $(34,210)      $ 1,376         $124,837
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

The consolidated  financial  statements  include the accounts of Farmers Capital
Bank  Corporation  (the  "Company"),   a  financial  holding  company,  and  its
subsidiaries,  including its principal subsidiary,  Farmers Bank & Capital Trust
Company.  All  significant  intercompany  transactions  and  accounts  have been
eliminated in consolidation.

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

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

For further  information,  refer to the  consolidated  financial  statements and
footnotes  thereto  included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.

2.   RECLASSIFICATIONS

Certain   reclassifications   have  been  made  to  the  consolidated  financial
statements of prior periods to conform to the current period presentation.  Such
reclassifications   have  no  effect  on  previously   reported  net  income  or
shareholders' equity.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No.  46,   CONSOLIDATION  OF  VARIABLE  INTEREST  ENTITIES,   AN
INTERPRETATION OF ARB NO. 51. This Interpretation  provides new guidance for the
consolidation of variable  interest entities ("VIEs") and requires such entities
to be  consolidated  by  their  primary  beneficiaries  if the  entities  do not
effectively  disperse risk among parties involved.  The Interpretation also adds
disclosure  requirements  for investors  that are involved  with  unconsolidated
VIEs. The  consolidation  requirements  apply  immediately to VIEs created after
January 31, 2003 and are effective  for the first fiscal year or interim  period
beginning  after June 15, 2003 for VIEs acquired  before  February 1, 2003.  The
adoption of this interpretation is not expected have a significant impact on the
Company's financial condition of results of operations.

In April 2003,  The FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 149,  AMENDMENT  OF STATEMENT  133 ON  DERIVATIVE  INSTRUMENTS  AND
HEDGING ACTIVITIES.  SFAS No. 149 amends and clarifies financial  accounting and
reporting for derivative  instruments,  including certain derivative instruments
embedded  in other  contracts  and for  hedging  activities  under SFAS No. 133,
"ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES." This statement
is effective for contracts entered into or modified after June 30, 2003. Because
the Company does not have these  instruments  or is only  nominally  involved in
these  instruments,  management  expects the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "ACCOUNTING  FOR CERTAIN  FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY". This statement
affects the accounting for certain  financial  instruments  that, under previous
guidance,  issuers could  account for as equity.  This  statement  requires that
freestanding  financial  instruments  that embody  obligations for the issuer be
classified  as  liabilities  on the balance  sheet.  Most of this  statement  is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after  June 15,  2003.  Because  the  Company  does  not  have  these
instruments  or is only  nominally  involved  in these  instruments,  management
expects the adoption of this  statement  will not have a material  effect on the
Company's consolidated financial statements.

4.   COMPANY-OWNED LIFE INSURANCE

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

5.   NET INCOME PER COMMON SHARE

Basic net income per common  share is  determined  by dividing net income by the
weighted average total number of shares of common stock outstanding. Diluted net
income  per  common  share is  determined  by  dividing  net income by the total
weighted  average number of shares of common stock  outstanding,  plus the total
weighted average number of shares that would be issued upon exercise of dilutive
stock options  assuming  proceeds are used to repurchase  shares pursuant to the
treasury stock method.  Net income per common share computations were as follows
at June 30, 2003 and 2002.

---------------------------------------------------------------------------------------------------------
                                                          Three Months Ended          Six Months Ended
                                                               June 30,                  June 30,
(In thousands, except per share data)                     2003          2002         2003         2002
---------------------------------------------------------------------------------------------------------
Net income, basic and diluted                          $ 3,026       $ 3,316      $ 6,619      $ 7,098
---------------------------------------------------------------------------------------------------------

Average shares outstanding                               6,723         6,889        6,743        6,895
Effect of dilutive stock options                            42            52           38           48
---------------------------------------------------------------------------------------------------------
Average diluted shares outstanding                       6,765         6,941        6,781        6,943
---------------------------------------------------------------------------------------------------------

Net income per share, basic                             $  .45        $  .48       $  .98      $  1.03
Net income per share, diluted                              .45           .48          .98         1.02
---------------------------------------------------------------------------------------------------------
6.   STOCK-BASED COMPENSATION

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

The Company granted 54,000 options during 2000 in which there is no compensation
expense being recognized  pursuant to APB No. 25. Had compensation  expense been
determined under the fair value method described in SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, as amended by SFAS NO. 148, ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION  AND DISCLOSURE, the Company's net income and income per
common share would have been as shown in the table below.

-------------------------------------------------------------------------------------------------------
                                                      Three Months Ended           Six Months Ended
                                                            June 30,                   June 30,
(In thousands, except per share data)                  2003         2002          2003          2002
-------------------------------------------------------------------------------------------------------
NET INCOME
  As reported                                       $ 3,026      $ 3,316       $ 6,619       $ 7,098
  Add:  Stock-based employee compensation
        expense included in reported net
        income, net of related tax effects               68           84           138           192
  Less: Stock-based compensation expense
        determined under fair value based
        method for all awards, net of related
        tax effects                                     (83)        (100)         (168)         (226)
-------------------------------------------------------------------------------------------------------
Proforma                                            $ 3,011      $ 3,300       $ 6,589       $ 7,064
-------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE
  Basic, as reported                                $   .45      $   .48       $   .98       $  1.03
  Basic, proforma                                       .45          .47           .98          1.02

  Diluted, as reported                                  .45          .48           .98          1.02
  Diluted, proforma                                     .44          .48           .97          1.02
-------------------------------------------------------------------------------------------------------
The fair value of the options granted are estimated as of the  measurement  date
using the Black-Scholes option pricing model with the following weighted average
assumptions  used for grants in 2000 and 1997,  respectively:  dividend yield of
3.12% and 3.18%; expected volatility of 29.6% and 23.4%; risk-free interest rate
of 6.71% and  5.75%;  and  expected  life of seven  years for both  grants.  The
weighted  average fair value of options  granted  during 2000 and 1997 was $9.25
and $16.11 per share, respectively.

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

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

FORWARD-LOOKING STATEMENTS

This report contains  forward-looking  statements  under the Private  Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. Although the
Company believes that the assumptions underlying the forward-looking  statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore,  there  can  be no  assurance  that  the  forward-looking  statements
included  herein will prove to be  accurate.  Factors  that could  cause  actual
results to differ from the results discussed in the  forward-looking  statements
include,  but are not limited to: economic  conditions  (both generally and more
specifically in the markets in which the Company and its subsidiaries  operate);
competition  for the  Company's  customers  from other  providers  of  financial
services; government legislation and regulation (which changes from time to time
and over which the Company has no control);  changes in interest rates; material
unforeseen  changes  in the  liquidity,  results  of  operations,  or  financial
condition of the Company's customers;  and other risks detailed in the Company's
filings with the Securities and Exchange Commission,  all of which are difficult
to predict and many of which are beyond the control of the Company.

RESULTS OF OPERATIONS

                   SECOND QUARTER 2003 VS. SECOND QUARTER 2002
                   -------------------------------------------

The Company  reported  net income of $3.0  million or $.45 per basic and diluted
share for the second  quarter of 2003  compared to net income of $3.3 million or
$.48 per basic and diluted share for the second quarter of 2002. This represents
a 6.3%  decrease in basic and diluted per share  earnings  compared to the prior
period.  The decrease in net income in the three-month  comparison is attributed
primarily  to a $695  thousand or 7.0%  decrease  in net  interest  income.  The
decline in net  interest  income is  attributed  to  continued  declines  in the
overall  market  interest  rate  environment.  Interest  rates earned on earning
assets have  declined  more  rapidly  than the  interest  rates paid on interest
paying  liabilities  since many of the Company's  funding sources,  particularly
deposits, have approached their repricing floors.

The  provision  for loan losses  decreased  $637  thousand or 64.5% in the three
month  comparison.  Higher provisions in the second quarter of 2002 related to a
group of  nonperforming  constructions  loans secured by residential real estate
led to the decrease.

Total  noninterest  income  increased  $337 thousand or 8.1% despite lower gains
reported on the sale of investment  securities of $399 thousand in the quarterly
comparison. Income from the purchase of company-owned life insurance, instituted
in the  first  quarter  of 2003 to  offset  the  rising  costs of the  Company's
employee  benefits  plans,  totaled $408  thousand for the current three months.
Gains  on the  sale of  mortgage  loans  also  increased  $233  thousand  in the
comparisons as the low interest rate environment continues to fuel the Company's
secondary market mortgage loan originations.

Offsetting  the increase in  noninterest  income were  increases in  noninterest
expenses   totaling  $777  thousand  or  8.9%  for  the  current  three  months.
Noninterest  expense  increased  primarily  due to an increase  in salaries  and
employee  benefits of $412 thousand or 8.6%. These increases relate primarily to
employee  benefits and normal  salary  increases.  An increase in  correspondent
banking  fees  totaling  $187  thousand  also  contributed  to the  increase  in
noninterest expenses. The effective income tax rate declined 220 basis points to
22.4% for the three  months  ended June 30, 2003  compared to the same periods a
year earlier.

Return on average assets ("ROA") was 0.98% for the current  quarter,  a decrease
of 12 basis  points  compared  to 1.10%  reported  for the same  period in 2002.
Negatively  impacting ROA was a 46 basis point decline in net interest margin to
3.48% and an increase in  noninterest  expenses  of 19 basis  points.  Partially
offsetting  these  declines  that  positively  effected  ROA was an  increase in
earning assets that contributed 12 basis points, a decrease in the provision for
loan losses that contributed 22 basis points, an increase in noninterest  income
contributing  8  basis  points,  and a  decrease  in  income  tax  expense  that
contributed 11 basis points.  Return on average equity ("ROE") was 9.71% for the
second  quarter  of 2003  compared  to  10.71% in the same  period of 2002.  The
decrease is due to lower net income  reported in the current period coupled with
a slight increase in average equity compared to the same period a year ago.

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

Continuing  weaknesses in the overall  economic  environment  remain present and
have impacted the Company's net interest  income.  The interest rate environment
has continued to trend downward after a period of relative stability  throughout
much of 2002.  Additional actions taken by the Federal Reserve Board (the "Fed")
in the fourth  quarter of 2002 and the second quarter of 2003 have resulted in a
general  reduction  in  short-term  interest  rates  in the  reporting  periods.
Short-term  interest rates,  left unchanged since December 2001, were reduced 50
basis points by the Fed in November  2002 and an  additional  25 basis points in
June 2003.  The prime rate as reported in The Wall Street Journal was lowered in
an identical manner shortly following the Fed changes. The effects of prior rate
reductions by the Fed along with intense  competition  in the  Company's  market
areas continue to negatively impact net interest margin. The effect of the Fed's
actions on the Company has  generally  led to interest  rates on earning  assets
declining more rapidly than rates paid on interest bearing liabilities. During a
falling rate environment,  the challenge is to reduce the rates paid on interest
bearing liabilities  (primarily  deposits) to offset the decline in the yield on
variable  rate assets  (primarily  loans)  while  remaining  competitive  in our
markets.

The  Company's  tax  equivalent  ("TE") yield on earning  assets for the current
three  months was 5.3%,  a reduction  of 111 basis  points from 6.4% in the same
period a year ago.  The cost of funds for the current  three  months was 2.2%, a
decline of 71 basis points compared to 2.9% in the same period a year earlier. A
goal of the  Company in the current  interest  rate  environment  is to increase
earning  assets  and  decrease  the  interest  rates  paid on  interest  bearing
liabilities.  However,  many  of the  Company's  funding  sources,  particularly
deposits,  have  approached  their  repricing  floors.  Average  earning  assets
increased $48.5 million or 4.5% to $1.1 billion in the quarterly comparison.  As
a percentage of total average assets,  earning assets increased 205 basis points
to 90.43% from 88.38%.  This  increase had the effect of adding an additional 12
basis points to ROA in the comparison.

Interest income totaled $14.4 million for the second quarter of 2003, a decrease
of $2.2 million or 13.3% compared to the same period in the prior year. Interest
expense totaled $5.1 million,  a decrease of $1.5 million or 22.7%. Net interest
income fell $695 thousand or 7.0% in the comparison and totaled $9.2 million for
the three months ended June 30, 2003.

Interest and fees on loans  totaled $12.1  million,  a decrease of $500 thousand
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$50.7  million or 7.3% to $742.1  million in the  comparison  due to higher loan
demand in a lower rate environment.  The tax equivalent yield on loans decreased
79 basis  points to 6.6% from 7.4% and  offset  the  effects  of higher  average
balances on interest income.  Interest on taxable securities was $1.2 million, a
decrease  of $1.4  million or 53.8% due  primarily  to a decrease in the average
rate earned and the effect of higher  premium  amortization  on  mortgage-backed
securities. Prepayemnts on mortgage-backed securities have increased greatly due
to  corresponding  refinancing  of home  mortgages  that serve as collateral for
these investment securities. The increase in activity is directly related to the
lower interest rate environment.  The average rate earned on taxable  securities
decreased 243 basis points to 2.1% from 4.5% while the average balance  remained
relatively  unchanged  at $231.3  million.  Interest  on  nontaxable  securities
declined $158  thousand or 16.8% due to a $12.2 million  decrease in the average
balance to $70.1 million from $82.3 million. Interest on short-term investments,
including  time  deposits in other banks,  federal  funds sold,  and  securities
purchased under agreements to resell, decreased $140 thousand due primarily to a
decrease in the average rate earned on these  investments of 110 basis points to
1.3% from 2.4%.

Interest expense on deposits  decreased $1.5 million or 25.2% to $4.3 million in
the quarterly  comparison.  This decrease resulted from a general decline in the
average rate paid  throughout  the deposit  portfolio  and  correlates  with the
general decline in market interest rates in the reporting  periods.  The decline
in the average  rates paid offset a general  increase in average  balances.  The
decline in interest  expense on  deposits  was as follows:  time  deposits  $1.1
million or 23.8%;  interest  bearing demand deposits $170 thousand or 32.5%; and
savings deposits $180 thousand or 30.1%. The average rate paid on time deposits,
the largest  component  of interest  bearing  deposits,  was 3.3% for the second
quarter  of 2003  compared  to 4.6% for the same  period  of 2002.  The  average
balance of time deposits increased $22.9 million or 5.7% to $426.2 million.  The
average rate paid on interest  bearing demand deposits  declined 33 basis points
to .65% from .98% while the average  balance  increased  $4.9 million or 2.3% to
$219.0  million.  The average rate paid on savings  deposits  decreased 42 basis
points to 1.0% from 1.5% while the average balance declined $2.9 million or 1.7%
to $163.0 million from $165.9 million. Interest expense on overnight borrowings,
consisting of federal funds  purchased and securities  sold under  agreements to
repurchase,  decreased  $191  thousand  due to a 44 basis  point  decline in the
average  rate paid along with a $24.7  million  decline in the average  balance.
Interest  expense  on  other  borrowed  funds  increased  $143  thousand  in the
comparison as additional  borrowings  from the Federal Home Loan Bank  increased
the average  balance  outstanding.  The average  balance of other borrowed funds
totaled $66.7 million,  an increase of $21.2 million or 46.5% in the comparison.
The average rate paid on other  borrowed  funds declined 29 basis points to 3.4%
from 3.6%.

The net  interest  margin (TE)  decreased  46 basis  points to 3.48%  during the
second  quarter of 2003  compared  to 3.94% in the second  quarter of 2002.  The
decrease in net  interest  margin is  primarily  attributed  to a 40 basis point
decline in the spread  between rates earned on earning assets and the rates paid
on interest  bearing  liabilities to 3.15% in the current  quarter from 3.55% in
the second quarter of 2002. The effect of noninterest  bearing  sources of funds
contributed an additional 6 basis points to the decline in net interest  margin.
The  effect of  noninterest  bearing  sources  of funds on net  interest  margin
typically declines in a falling rate environment.
The  following  tables  present  an  analysis  of net  interest  income  for the
quarterly periods ended June 30.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
---------------------------------------------------------------------------------------------------------------------------------
Quarter Ended June 30,                                         2003                                         2002
---------------------------------------------------------------------------------------------------------------------------------
                                             Average                         Average         Average                    Average
(In thousands)                               Balance         Interest          Rate          Balance      Interest        Rate
---------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Investment securities
  Taxable                                $   231,260        $  1,201           2.08%       $ 231,433      $ 2,601         4.51%
  Nontaxable1                                 70,133           1,147           6.56           82,347        1,372         6.68
Time deposits with banks,
  federal funds sold and
  securities purchased
  under agreements to resell                  73,562             237           1.29           63,383          377         2.39
Loans1,2,3                                   742,142          12,245           6.62          691,429       12,775         7.41
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                  1,117,097        $ 14,830           5.32%       1,068,592      $17,125         6.43%
---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                    (11,248)                                        (10,393)
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net
     of allowance for loan losses          1,105,849                                       1,058,199
---------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                       70,281                                         112,936
Premises and equipment, net                   24,314                                          24,312
Other assets                                  34,838                                          13,602
---------------------------------------------------------------------------------------------------------------------------------
     Total assets                        $ 1,235,282                                     $ 1,209,049
---------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                $   219,011        $    353           0.65%     $   214,116      $   523         0.98%
  Savings                                    163,032             418           1.03          165,918          598         1.45
  Time                                       426,174           3,545           3.34          403,276        4,650         4.62
Federal funds purchased
  and securities sold
  under agreements to repurchase              68,815             243           1.42           93,539          434         1.86
Other borrowed funds                          66,747             557           3.35           45,576          414         3.64
---------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities      943,779        $  5,116           2.17%         922,425      $ 6,619         2.88%
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits             38,662                                          39,927
Other demand deposits                        122,979                                         114,413
Other liabilities                              4,845                                           8,095
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                     1,110,265                                       1,084,860
---------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                    125,017                                         124,189
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity                $ 1,235,282                                     $ 1,209,049
---------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            9,714                                       10,506
TE basis adjustment                                             (473)                                        (570)
---------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                    $  9,241                                      $ 9,936
---------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                            3.15%                                      3.55%
Impact of noninterest bearing
  sources of funds                                                              .33                                        .39
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                            3.48%                                      3.94%
---------------------------------------------------------------------------------------------------------------------------------
1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amount to $612 thousand and $476 thousand in 2003 and 2002, respectively.
ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
-------------------------------------------------------------------------------------------------------------------
(In thousands)                                                          Variance         Variance Attributed to
Quarter Ended June 30,                                                2003/20021         Volume           Rate
-------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Taxable investment securities                                           $(1,400)        $    (2)      $ (1,398)
Nontaxable investment securities2                                          (225)           (201)           (24)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell                         (140)            324           (464)
Loans2                                                                     (530)          4,237         (4,767)
-------------------------------------------------------------------------------------------------------------------
     Total interest income                                               (2,295)          4,358         (6,653)
-------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest bearing demand deposits                                           (170)             79           (249)
Savings deposits                                                           (180)            (10)          (170)
Time deposits                                                            (1,105)          1,568         (2,673)
Federal funds purchased and securities sold under
   agreements to repurchase                                                (191)           (101)           (90)
Other borrowed funds                                                        143             348           (205)
-------------------------------------------------------------------------------------------------------------------
     Total interest expense                                              (1,503)          1,884         (3,387)
-------------------------------------------------------------------------------------------------------------------
Net interest income                                                      $ (792)        $ 2,474       $ (3,266)
-------------------------------------------------------------------------------------------------------------------
Percentage change                                                         100.0%        (312.4)%         412.4%
-------------------------------------------------------------------------------------------------------------------
1The changes that are not solely due to rate or volume are allocated on a percentage basis using the
 absolute values of rate and volume variances as a basis for allocation.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
NONINTEREST INCOME
------------------

Noninterest income was $4.5 million for the current quarter, an increase of $337
thousand  or 8.1%  compared  to the second  quarter of the prior  year.  Service
charges and fees on  deposits,  the largest  component  of  noninterest  income,
increased a modest $58 thousand or 3.0% to $2.0 million. Overdraft fees declined
$61 thousand or 4.6% and service charges on demand deposit accounts declined $19
thousand or 7.7% in the comparison.  Partially  offsetting these declines was an
increase in fees related to the Commonwealth of Kentucky of $119 thousand. Other
service  charges,  commissions,  and fees  declined $22 thousand or 2.5% to $853
thousand. Data processing fees were relatively unchanged at $389 thousand. Trust
income totaled $413  thousand,  an increase of $52 thousand or 14.4% compared to
$361 thousand a year earlier. A net loss of $3 thousand on the sale of available
for sale securities was reported in the current  quarter  compared to a net gain
of $396 thousand in the  comparable  period a year ago as the Company  sought to
manage  the  composition  of its  balance  sheet  in an  increasingly  difficult
economic  environment.  Net  gains  on the  sale of  mortgage  loans  were  $323
thousand,  an increase of $233  thousand  from $90 thousand in the prior year as
mortgage loans originated for sale increased $13.7 million in the comparison due
to the low interest rate environment.  Income from the purchase of company-owned
life  insurance  near the end of the first  quarter of 2003 was $408 thousand in
the current three-month  period.  Other noninterest income totaled $77 thousand,
an increase of $5 thousand or 6.9%.

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

Total  noninterest  expenses  increased  $777  thousand  or 8.9% from the second
quarter of 2003 compared to the second quarter of 2002 and totaled $9.5 million.
Salaries and employee  benefits account for more than half of the total increase
in noninterest  expense.  Total salaries and benefits increased $412 thousand or
8.6% to $5.2  million in the  quarterly  comparison.  Employee  benefit  related
expenses  account for a  significant  amount of the increase.  Employee  benefit
expenses  increased $283 thousand  primarily due to increased  health  insurance
costs,  which include  additional amounts associated with the new postretirement
health insurance coverage initiated during the first quarter of 2003. Salary and
related payroll expenses increased $155 thousand or 3.9% in the comparison while
noncash compensation expense related to the Company's  nonqualified stock option
plan declined $26 thousand or 19.6% due to the structure of the vesting schedule
and forfeitures.  The number of full time equivalent  employees decreased to 462
from 469 reported in the prior period.  Occupancy expense, net of rental income,
increased  $54 thousand or 9.2% and totaled $642  thousand.  The increase in net
occupancy  expense is  attributed  to  increases  in  maintenance  and  repairs,
utilities costs, and depreciation. Equipment expense was relatively unchanged at
$924 thousand.  Other  noninterest  expense,  including  bank  franchise  taxes,
increased  $301  thousand or 12.6% to $2.7 million due mainly to a $187 thousand
increase  in  correspondent  bank fees  related to  activity  attributed  to the
Commonwealth of Kentucky.

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

Income tax expense for the second quarter of 2003 was $874 thousand,  a decrease
of $208 thousand or 19.2% from the same period a year earlier. The effective tax
rate  decreased 220 basis points to 22.4% from 24.6% in 2002.  The change in the
effective  tax rate is due to a  combination  of  factors,  primarily  including
credits derived from qualified zone academy bonds and nontaxable  income accrued
from the increase in cash  surrender  value on life  insurance  purchased on key
employees.

              FIRST SIX MONTHS OF 2003 VS. FIRST SIX MONTHS OF 2002
              -----------------------------------------------------

Net income for the six months ended June 30, 2003 was $6.6  million  compared to
net income of $7.1  million  for the same  period in 2002,  a  decrease  of $479
thousand  or 6.7%.  Basic and  diluted  net  income per share were $0.98 for the
current six months,  a decrease of $.05 or 4.9% and $.04 or 3.9%,  respectively.
The decrease in net income in the six-month  comparison is attributed  primarily
to a $798 thousand or 4.0% decrease in net interest  income.  The decline in net
interest  income is  attributed  to  continued  declines in the  overall  market
interest rate environment. Interest rates earned on earning assets have declined
more rapidly than the interest rates paid on interest paying  liabilities  since
many of the Company's funding sources,  particularly  deposits,  have approached
their repricing floors.

The  provision  for loan losses  decreased  $373,000  or 33.6% in the  six-month
comparison.  Higher  provisions in the second quarter of 2002 related to a group
of nonperforming  constructions  loans secured by residential real estate led to
the decrease.

Total  noninterest  income  increased  $382 thousand or 4.6% in the  comparisons
despite  lower  gains  reported  on the sale of  investment  securities  of $849
thousand in the current period.  Income from the purchase of company-owned  life
insurance, instituted in the first quarter of 2003 to offset the rising costs of
the Company's employee benefits plans, totaled $673 thousand for the current six
months.  Gains on the sale of mortgage loans also increased $327 thousand in the
comparison as the low interest rate environment  continues to fuel the Company's
secondary market mortgage loan originations.

Offsetting  the increase in  noninterest  income were  increases in  noninterest
expenses totaling $879 thousand or 5.0% for the current six months.  Noninterest
expense increased primarily due to an increase in salaries and employee benefits
of $330  thousand or 3.3%.  These  increases  relate  primarily  to increases in
employee  benefits and normal  salary  increases.  An increase in  correspondent
banking  fees  totaling  $301  thousand  also  contributed  to the  increase  in
noninterest expenses. The effective income tax rate declined 243 basis points to
23.0% for the six months ended June 30, 2003  compared to the same period a year
earlier.

ROA was 1.07% for the six months  ended June 30,  2003,  a decrease  of 12 basis
points from the same  period in 2002.  Negatively  impacting  ROA was a 35 basis
point  decline in net  interest  margin to 3.61% and an increase in  noninterest
expenses of 5 basis points.  Partially offsetting these declines that positively
effected ROA was an increase in earning assets that  contributed 9 basis points,
a decrease in the provision for loan losses that contributed 7 basis points,  an
increase in noninterest  income  contributing  1 basis point,  and a decrease in
income tax expense that  contributed  11 basis points.  Return on average equity
("ROE")  was 10.68% for the first six months of 2003  compared to 11.53% for the
same period of 2002.  The  decrease  is due to lower net income  reported in the
current period coupled with a slight  increase in average equity compared to the
same period a year ago.

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

Continuing  weaknesses in the overall  economic  environment  remain present and
have impacted the Company's net interest  income.  The interest rate environment
has continued to trend downward after a period of relative stability  throughout
much of 2002.  Additional actions taken by the Fed in the fourth quarter of 2002
and  the  second  quarter  of 2003  have  resulted  in a  general  reduction  in
short-term  interest rates in the reporting periods.  Short-term interest rates,
left unchanged  since December 2001,  were reduced 50 basis points by the Fed in
November 2002 and an additional 25 basis points in June 2003.  The prime rate as
reported in The Wall Street  Journal was lowered in an identical  manner shortly
following the Fed changes. The effects of prior rate reductions by the Fed along
with intense  competition  in the Company's  market areas continue to negatively
impact net interest  margin.  The effect of the Fed's actions on the Company has
generally led to interest  rates on earning  assets  declining more rapidly than
rates paid on interest bearing  liabilities.  During a falling rate environment,
the  challenge  is to reduce  the rates  paid on  interest  bearing  liabilities
(primarily  deposits) to offset the decline in the yield on variable rate assets
(primarily loans) while remaining competitive in our markets.

The Company's tax equivalent  yield on earning assets for the current six months
was 5.5%,  a  reduction  of 98 basis  points from 6.5% in the same period a year
ago.  The cost of funds for the  current  six months  was 2.2%,  a decline of 69
basis points  compared to 2.9% in the same period a year earlier.  A goal of the
Company in the current  interest rate  environment is to increase earning assets
and decrease the interest rates paid on interest bearing  liabilities.  However,
many of the Company's funding sources,  particularly  deposits,  have approached
their repricing  floors.  Average earning assets increased $54.7 million or 5.1%
to $1.1 billion in the  comparison.  As a percentage  of total  average  assets,
earning assets  increased 161 basis points to 91.24% from 89.63%.  This increase
had the effect of adding an additional 9 basis points to ROA in the comparison.

Interest  income  totaled  $29.9  million  for the first six  months of 2003,  a
decrease of $3.6 million or 10.9% compared to the same period in the prior year.
Interest expense totaled $10.6 million, a decrease of $2.8 million or 21.2%. Net
interest  income fell $798 thousand or 4.0% in the  comparison and totaled $19.3
million at June 30, 2003.

Interest and fees on loans  totaled  $24.4  million,  a decrease of $1.3 million
mainly due to a decrease in the average rate  earned.  Average  loans  increased
$48.9  million or 7.1% to $739.1  million in the  comparison  due to higher loan
demand in a lower rate environment.  The tax equivalent yield on loans decreased
88 basis  points to 6.7% from 7.6% and  offset  the  effects  of higher  average
balances on interest income.  Interest on taxable securities was $3.5 million, a
decrease  of $1.8  million or 34.5% due  primarily  to a decrease in the average
rate earned and the effect of higher  premium  amortization  on  mortgage-backed
securities.  Prepayements on  mortgage-backed  securities have increased greatly
due to corresponding  refinancing of home mortgages that serve as collateral for
these investment securities. The increase in activity is directly related to the
lower interest rate environment.  The average rate earned on taxable  securities
decreased 163 basis points to 2.8% from 4.4% while the average balance increased
$10.8 million or 4.4%. Interest on nontaxable  securities declined $266 thousand
or 14.4% due to an $11.0  million or 13.4%  decrease in the  average  balance to
$70.9 million from $81.9 million. Interest on short-term investments,  including
time deposits in other banks, federal funds sold, and securities purchased under
agreements to resell, decreased $194 thousand due primarily to a decrease in the
average rate earned on these investments of 77 basis points to 1.3% from 2.0%.

Interest expense on deposits  decreased $2.8 million or 23.7% to $9.0 million in
the six month  comparison.  This decrease resulted from a general decline in the
average rate paid  throughout  the deposit  portfolio  and  correlates  with the
general decline in market interest rates in the reporting  periods.  The decline
in the average  rates paid offset a general  increase in average  balances.  The
decline in interest  expense on  deposits  was as follows:  time  deposits  $2.1
million or 21.9%;  interest  bearing demand deposits $375 thousand or 34.7%; and
savings deposits $340 thousand or 28.1%. The average rate paid on time deposits,
the largest component of interest bearing deposits,  was 3.5% for the six months
ended June 30, 2003  compared  to 4.8% for the same period of 2002.  The average
balance of time deposits increased $20.3 million or 5.1% to $421.9 million.  The
average rate paid on interest  bearing demand deposits  declined 36 basis points
to .65% from 1.01% while the average  balance  increased $5.7 million or 2.6% to
$220.9  million.  The average rate paid on savings  deposits  decreased 44 basis
points to 1.1% from 1.5% while the average  balance  increased  $2.3  million or
1.4% to $166.6  million  from  $164.3  million.  Interest  expense on  overnight
borrowings,  consisting of federal funds  purchased  and  securities  sold under
agreements  to  repurchase,  decreased  $405  thousand  due to a 46 basis  point
decline  in the  average  rate paid along  with a $26.2  million  decline in the
average  balance.  Interest  expense  on other  borrowed  funds  increased  $354
thousand in the comparison as additional  borrowings  from the Federal Home Loan
Bank increased the average  balance  outstanding.  The average  balance of other
borrowed funds totaled $66.2  million,  an increase of $25.7 million or 63.7% in
the comparison.  The average rate paid on other borrowed funds declined 39 basis
points to 3.4% from 3.8%.

The net interest  margin (TE)  decreased 35 basis points to 3.61% during the six
months  ended June 30, 2003  compared  to 3.96% in the same period of 2002.  The
decrease in net  interest  margin is  primarily  attributed  to a 29 basis point
decline in the spread  between rates earned on earning assets and the rates paid
on interest bearing liabilities to 3.25% in the current six months from 3.54% in
the same  period in 2002.  The effect of  noninterest  bearing  sources of funds
contributed an additional 6 basis points to the decline in net interest  margin.
The  effect of  noninterest  bearing  sources  of funds on net  interest  margin
typically declines in a falling rate environment.
The following tables present an analysis of net interest income for the six
months ended June 30.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:  INTEREST RATES AND INTEREST DIFFERENTIAL
---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30,                                      2003                                        2002
---------------------------------------------------------------------------------------------------------------------------------
                                              Average                        Average       Average                      Average
(In thousands)                                Balance         Interest        Rate         Balance       Interest         Rate
---------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Investment securities
  Taxable                                 $   256,913        $  3,500          2.75%   $   246,098       $  5,343         4.38%
  Nontaxable1                                  70,891           2,328          6.62         81,876          2,699         6.65
Time deposits with banks,
  federal funds sold and
  securities purchased under
  agreements to resell                         66,295             414          1.26         60,279            608         2.03
Loans1,2,3                                    739,127          24,584          6.71        690,242         25,968         7.59
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets                   1,133,226        $ 30,826          5.49%     1,078,495       $ 34,618         6.47%
---------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses                     (11,263)                                     (10,476)
---------------------------------------------------------------------------------------------------------------------------------
     Total earning assets, net
     of allowance for loan losses           1,121,963                                    1,068,019
---------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Cash and due from banks                        67,332                                       99,222
Premises and equipment, net                    24,180                                       24,502
Other assets                                   28,576                                       11,511
---------------------------------------------------------------------------------------------------------------------------------
     Total assets                         $ 1,242,051                                  $ 1,203,254
---------------------------------------------------------------------------------------------------------------------------------
INTEREST BEARING LIABILITIES
Deposits
  Interest bearing demand                 $   220,945        $    707          0.65%   $   215,265       $  1,082         1.01%
  Savings                                     166,608             871          1.05        164,324          1,211         1.49
  Time                                        421,920           7,385          3.53        401,646          9,459         4.75
Federal funds purchased
  and securities sold under
  agreements to repurchase                     74,823             502          1.35        101,037            907         1.81
Other borrowed funds                           66,179           1,107          3.37         40,432            753         3.76
---------------------------------------------------------------------------------------------------------------------------------
     Total interest bearing liabilities       950,475        $ 10,572          2.24%       922,704       $ 13,412         2.93%
---------------------------------------------------------------------------------------------------------------------------------
NONINTEREST BEARING LIABILITIES
Commonwealth of Kentucky deposits              35,790                                       35,146
Other demand deposits                         121,996                                      114,910
Other liabilities                               8,821                                        6,355
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                      1,117,082                                    1,079,115
---------------------------------------------------------------------------------------------------------------------------------
     Shareholders' equity                     124,969                                      124,139
---------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
     shareholders' equity                 $ 1,242,051                                  $ 1,203,254
---------------------------------------------------------------------------------------------------------------------------------
Net interest income                                            20,254                                      21,206
TE basis adjustment                                              (961)                                     (1,115)
---------------------------------------------------------------------------------------------------------------------------------
     Net interest income                                     $ 19,293                                    $ 20,091
---------------------------------------------------------------------------------------------------------------------------------
Net interest spread                                                            3.25%                                      3.54%
Impact of noninterest bearing
  sources of funds                                                             .36                                        .42
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin                                                            3.61%                                      3.96%
---------------------------------------------------------------------------------------------------------------------------------
1Income and yield stated at a fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
2Loan balances include principal balances on nonaccrual loans.
3Loan fees included in interest income amount to $1.1 million and $906 thousand in 2003 and 2002, respectively.
ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX EQUIVALENT BASIS)
-------------------------------------------------------------------------------------------------------------------
(In thousands)                                                         Variance         Variance Attributed to
Six Months Ended June 30,                                              2003/20021        Volume          Rate
-------------------------------------------------------------------------------------------------------------------
Interest Income
Taxable investment securities                                         $  (1,843)       $   653       $ (2,496)
Nontaxable investment securities2                                          (371)          (359)           (12)
Time deposits with banks, federal funds sold and
   securities purchased under agreements to resell                         (194)           153           (347)
Loans2                                                                   (1,384)         4,082         (5,466)
-------------------------------------------------------------------------------------------------------------------
     Total interest income                                               (3,792)         4,529         (8,321)
-------------------------------------------------------------------------------------------------------------------
Interest Expense
Interest bearing demand deposits                                           (375)            80           (455)
Savings deposits                                                           (340)            50           (390)
Time deposits                                                            (2,074)         1,269         (3,343)
Federal funds purchased and securities sold under
   agreements to repurchase                                                (405)          (204)          (201)
Other borrowed funds                                                        354            576           (222)
-------------------------------------------------------------------------------------------------------------------
     Total interest expense                                              (2,840)         1,771         (4,611)
-------------------------------------------------------------------------------------------------------------------
Net interest income                                                   $    (952)       $ 2,758       $ (3,710)
-------------------------------------------------------------------------------------------------------------------
Percentage change                                                         100.0%        (289.7)%        389.7%
-------------------------------------------------------------------------------------------------------------------
1The changes that are not solely due to rate or volume are allocated on a percentage basis using the
 absolute values of rate and volume variances as a basis for allocation.
2Income stated at fully tax equivalent basis using the marginal corporate Federal tax rate of 35%.
NONINTEREST INCOME
------------------

Noninterest  income  was $8.6  million  for the  first six  months  of 2003,  an
increase of $382 thousand or 4.6%  compared to the same period in 2002.  Service
charges and fees on  deposits,  the largest  component  of  noninterest  income,
increased  $74 thousand or 2.0% to $3.9  million.  Overdraft  fees declined $106
thousand or 4.2% and service  charges on demand  deposit  accounts  declined $44
thousand or 8.9% in the comparison. Offsetting these declines was an increase in
fees related to the  Commonwealth  of Kentucky of $185  thousand.  Other service
charges,  commissions,  and fees increased $43 thousand or 2.5% to $1.8 million.
Data  processing fees were up $11 thousand or 1.5% and totaled $734 thousand for
the first six months of 2003.  Trust fees  increased $84 thousand or 11.5%.  Net
gains on the sale of available  for sale  securities  was $144  thousand for the
current  six  months,  a decrease  of $849  thousand  or 85.5%  compared to $993
thousand in the comparable period a year ago as the Company sought to manage the
composition  of  its  balance  sheet  in  an  increasingly   difficult  economic
environment.  Net gains on the sale of  mortgage  loans were $512  thousand,  an
increase of $327 thousand from $185 thousand in the prior year as mortgage loans
originated  for sale  increased  $20.6 million in the  comparison due to the low
interest  rate  environment.  Income  from the  purchase of  company-owned  life
insurance  near the end of the first  quarter of 2003 was $673  thousand.  Other
noninterest income totaled $143 thousand, an increase of $19 thousand or 15.3%.

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

Noninterest  expenses totaled $18.6 million for the first six months of 2003, an
increase of $879 thousand or 5.0% compared to the same period in 2002.  Salaries
and employee benefits,  the largest component of noninterest expense,  increased
$330  thousand  or 3.3% and totaled  $10.3  million at June 30,  2003.  Employee
benefit  expenses  increased  $183 thousand  primarily  due to increased  health
insurance  costs,  which  include  additional  amounts  associated  with the new
postretirement  health insurance  coverage initiated during the first quarter of
2003. Salary and related payroll expenses increased $236 thousand or 3.0% in the
comparison  while  noncash   compensation   expense  related  to  the  Company's
nonqualified  stock  option  plan  declined  $89  thousand  or 29.6%  due to the
structure  of the  vesting  schedule  and  forfeitures.  The number of full time
equivalent  employees  decreased to 462 from 469  reported in the prior  period.
Occupancy  expense,  net of rental income,  increased $141 thousand or 12.2% and
totaled $1.3  million.  The increase in net  occupancy  expense is attributed to
increases  in  maintenance  and  repairs,  utilities  costs,  and  depreciation.
Equipment  expense was relatively  unchanged at $1.9 million.  Other noninterest
expense, including bank franchise taxes, increased $387 thousand or 8.1% to $5.2
million  mainly  due to a $301  thousand  increase  in  correspondent  bank fees
related to activity attributed to the Commonwealth of Kentucky.

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

Income tax expense for the first six months of 2003 was $2.0 million, a decrease
of $443 thousand or 18.3% from the same period a year earlier. The effective tax
rate  decreased 243 basis points to 23.0% from 25.4% in 2002.  The change in the
effective  tax rate is due to a  combination  of  factors,  primarily  including
credits derived from qualified zone academy bonds and nontaxable  income accrued
from the increase in cash  surrender  value on life  insurance  purchased on key
employees.

FINANCIAL CONDITION

Total assets were $1.3 billion on June 30, 2003, a decrease of $15.6  million or
1.2% from December 31, 2002.  The decrease in assets  includes a $114.6  million
lower balance in the securities portfolio, offset by a $71.2 million increase in
cash and cash equivalents and a $23.6 million increase in other assets resulting
primarily from the purchase of  company-owned  life  insurance  during the first
quarter of 2003.  Fed funds  purchased and securities  sold under  agreements to
repurchase declined $42.3 million and correspond to the decline in assets during
the period.  The makeup of the balance sheet continually  changes as the Company
responds to  extremely  competitive  market  forces.  Management  of the Company
considers it  noteworthy to understand  the  relationship  between the Company's
principal subsidiary,  Farmers Bank & Capital Trust Co., and the Commonwealth of
Kentucky.  Farmers  Bank  provides  various  services  to state  agencies of the
Commonwealth.  As the  depository  for the  Commonwealth,  these  agencies issue
checks drawn on Farmers Bank,  including paychecks and state income tax refunds.
Farmers Bank also  processes  vouchers of the WIC (Women,  Infants and Children)
program for the Cabinet for Human Resources.  The Bank's  investment  department
also provides services to the Teacher's  Retirement  systems.  As the depository
for the  Commonwealth,  large  fluctuations in deposits are likely to occur on a
daily  basis.  Therefore,  reviewing  average  balances  is  also  important  to
understanding the financial condition of the Company. On an average basis, total
assets were $1.2 billion for the first six months of 2003,  an increase of $35.7
million or 3.0% from year-end 2002. Average earning assets,  primarily loans and
securities,  were $1.1 billion at June 30, 2003, an increase of $42.8 million or
3.9% from  year-end  2002.  Average  earning  assets  represent  91.24% of total
average  assets on June 30,  2003,  an increase of 49 basis  points  compared to
90.75% at year-end 2002.

LOANS
-----

Loans,  net of unearned  income,  totaled  $742.9  million at June 30, 2003,  an
increase of $4.3 million or 0.6% from year-end 2002. The composition of the loan
portfolio is summarized in the table below.

--------------------------------------------------------------------------------
                                   June 30, 2003             December 31, 2002
(Dollars in thousands)             Amount      %              Amount      %
--------------------------------------------------------------------------------

Commercial, financial,
  and agriculture              $  107,297    14.4%        $  110,056    14.9%
Real estate - construction         53,078     7.1             55,896     7.6
Real estate - mortgage            474,346    63.9            459,620    62.2
Installment                        73,198     9.9             76,162    10.3
Lease financing                    34,993     4.7             36,905     5.0
--------------------------------------------------------------------------------
     Total                     $  742,912   100.0%        $  738,639   100.0%
--------------------------------------------------------------------------------

On average,  loans  represented  65.2% of earning  assets during the current six
month period compared to 64.7% for year-end 2002. As loan demand fluctuates, the
available  funds are  reallocated  between  loans and  lower  earning  temporary
investments  or investment  securities,  which  typically  involve a decrease in
credit risk and lower yields.

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

The allowance for loan losses was $11.2 million at June 30, 2003, an increase of
$94 thousand or 0.8% from the prior year-end.  The allowance for loan losses was
1.50% of loans net of unearned income at June 30, 2003,  unchanged from December
31,  2002.  The  provision  for loan losses  decreased  $637  thousand  and $373
thousand in the current three-month and six-month period, respectively, compared
to the same periods in 2002.  The decrease in the  provision  for loan losses in
the  comparison is attributed to higher  provisions in the second quarter of the
prior year related to a group of  nonperforming  construction  loans  secured by
residential  real estate.  The Company had net  charge-offs of $324 thousand and
$624  thousand  in the  current  three  and six  months  of 2003,  respectively,
compared  to net  charge-offs  of $291  thousand  and $632  thousand in the same
periods of 2002. Annualized net charge-offs represent 0.18% of average net loans
for three and six months ended June 30, 2003 compared to 0.60% at year-end 2002.
The  allowance for loan losses as a percentage  of  nonperforming  loans totaled
70.2%  and 57.3% at June 30,  2003 and  December  31,  2002,  respectively.  The
increase is primarily  reflective of the decline in nonperforming assets of $3.7
million in the comparison.  Management continues to emphasize collection efforts
and evaluation of risks within the loan portfolio.  In management's opinion, the
provision for loan losses  represents  incurred credit losses during the periods
presented and the allowance for loan losses is adequate to cover losses inherent
in the loan portfolio.

NONPERFORMING ASSETS
--------------------

Nonperforming  assets for the Company include  nonperforming  loans,  other real
estate  owned,  and other  foreclosed  assets.  Nonperforming  loans  consist of
nonaccrual loans,  restructured loans, and loans past due ninety days or more on
which interest is still accruing.  Nonperforming assets totaled $16.1 million at
June 30,  2003,  a decrease  of $3.7  million or 18.6% from the prior  year-end.
Nonperforming  loans  totaled  $15.9 million at June 30, 2003 a decrease of $3.4
million or 17.7% compared to year-end 2002.  Nonperforming  loans include a pool
of  constructions  loans  secured by  residential  real estate to a  financially
troubled  builder.  This pool of loans  totaled  $10.5 million at June 30, 2003.
Interest  income  lost on this  group of loans  due to their  nonaccrual  status
totaled $177  thousand and $366  thousand  during the three and six months ended
June 30,  2003,  respectively.  It is currently  estimated  that a total of $150
thousand of interest income will be lost in each  subsequent  quarter related to
this credit  while it remains on  nonaccrual  status.  Nonperforming  loans as a
percentage  of net loans were  2.14% at June 30,  2003,  a decrease  of 47 basis
points from 2.61% compared to year-end 2002.

Other real estate owned,  which had a balance of $385 thousand at year-end 2002,
decreased $329 thousand or 85.5% to $56 thousand on June 30, 2003.

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

Temporary  investments  consist of interest  bearing  deposits with other banks,
federal funds sold,  and  securities  purchased  under  agreements to resell and
totaled  $43.0  million at June 30, 2003,  an increase of $19.9 million or 86.7%
from year-end 2002.  Temporary  investments averaged $66.3 million for the first
six months of 2003, a decrease of $2.7 million from year-end  2002. The decrease
is primarily a result of the Company's net funding position and the relationship
between its principal  subsidiary and the  Commonwealth of Kentucky as described
in preceding sections of this report.  Temporary  investments are reallocated as
loan demand and other investment alternatives present the opportunity.

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

Investment securities were $327.0 million on June 30, 2003, a decrease of $114.6
million or 25.9% from  year-end  2002.  Available  for sale and held to maturity
securities  were $301.2  million  and $25.8  million,  respectively.  Investment
securities averaged $327.8 million for the first six months of 2003, an increase
of $11.4 million or 3.6% from year-end 2002. The increase in average  investment
securities is attributable to the Company's  continued efforts to manage its net
interest margin during a period of low market interest rates and correlates with
the increase in average  borrowed  funds.  The Company had an unrealized gain on
available  for sale  investment  securities  of $5.9  million  at June 30,  2003
compared to $5.5 million at year-end 2002.

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

The Company  purchased  life insurance  policies on certain key employees,  with
their knowledge and consent, during the current year at a cost of $24.0 million.
Company-owned  life  insurance is recorded at its cash surrender  value,  or the
amount that can be realized,  on the consolidated balance sheet with the related
change in cash surrender value and proceeds received under the policies reported
on the consolidated  statement of income as tax-free  noninterest income,  which
totaled $673 thousand for the current six-month period.  The Company is the sole
beneficiary of proceeds  received under the policies.  Expected  income from the
purchase of the  insurance  policies  will be used to offset the rising costs of
the  Company's  various  benefit  plans  as  well  as the  additional  costs  of
implementing  a new  postretirement  health  insurance  program.  Under  the new
postretirement  health  insurance  plan,  any  employee  that meets the  service
requirements  upon  retirement  would  be  eligible  to  continue  their  health
insurance  coverage,  identical  to the  coverage  that  is  offered  to  active
employees.  The employee  will pay 50% of the cost and the Company will pay 50%.
It is currently  estimated  that the expense  related to the new  postretirement
health  insurance plan will be  approximately  $114 thousand per quarter for the
remainder of 2003.

DEPOSITS
--------

Total  deposits  were  $980.4  million at June 30,  2003,  an  increase of $22.9
million or 2.4% from year-end 2002. Noninterest bearing deposits increased $48.8
million  or 34.6% in the  comparison.  This  increase  is  primarily  due to the
relationship  between the Company's principal subsidiary and the Commonwealth of
Kentucky  as  described  in  preceding  sections  of this  report.  On  average,
noninterest  bearing deposits were $157.8 million during the current period,  an
increase  of $7.0  million  or 4.6%.  End of  period  interest  bearing  deposit
balances  decreased  $25.9  million or 3.2% during the six months ended June 30,
2003 due to decreases in interest bearing checking  accounts of $10.5 million or
4.7%,  money  market  deposit  accounts of $24.8  million or 21.7%,  and savings
accounts of $4.3 million or 6.6%.  Time deposits  increased $13.7 million in the
end of period  comparisons.  On average,  interest  bearing deposits were $809.5
million  in the  current  period,  an  increase  of $22.0  million  or 2.8% from
year-end 2002. The increase in average interest bearing deposits is attributable
to increases in interest  bearing demand  deposits of $5.2 million or 2.4%, time
deposits of $17.3 million or 4.3%, and savings accounts of $2.6 million or 4.3%.
Average  money  market  deposit  accounts  declined  $3.0 million or 2.8% in the
comparison. Total deposits averaged $967.3 million, an increase of $29.0 million
or 3.1% from year-end 2002.

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

Borrowed  funds  totaled  $142.2  million at June 30,  2003, a decrease of $40.2
million or 22.0% from  $182.3  million at  year-end  2002.  A $2.2  million  net
increase  in  long-term  borrowings  was offset by a $42.4  million  decrease in
short-term  borrowings,  which account for the total decrease in borrowed funds.
Federal  funds  purchased  and  securities  sold under  agreements to repurchase
decreased $42.3 million or 36.5% due primarily to the  relationship  between the
Company's principal  subsidiary and the Commonwealth of Kentucky as described in
preceding  sections  of this  report.  Other  short-term  borrowings,  primarily
short-term  borrowings  from the Federal Home Loan Bank ("FHLB") were relatively
unchanged at $9.2 million.  The $2.2 million increase in long-term borrowings is
attributed to the funding of new data processing  equipment financed over a term
of four years and an additional  $1.2 million in additional net borrowings  from
the FHLB.  Total  borrowed funds averaged  $141.0  million,  an increase of $5.0
million or 3.7% from year-end 2002.

LIQUIDITY

The Parent  Company's  primary use of cash consists of dividend  payments to its
common shareholders,  purchases of its common stock, and other general operating
purposes.  Liquidity of the Parent Company  depends  primarily on the receipt of
dividends from its subsidiary banks and cash balances maintained. As of June 30,
2003 combined retained  earnings of the subsidiary banks were $41.6 million,  of
which $2.4  million was  available  for the payment of  dividends  to the Parent
Company without  obtaining prior approval from bank  regulatory  agencies.  As a
practical matter, payment of future dividends is also subject to the maintenance
of other  capital ratio  requirements.  During the current six months ended June
30, 2003 the Parent  Company  received  dividends of $30.8  million.  Management
expects that in the aggregate,  its  subsidiary  banks will continue to have the
ability to pay dividends in order to provide funds to the Parent  Company during
the remainder of 2003 sufficient to meet its liquidity needs. The Parent Company
had cash balances of $28.1 million at June 30, 2003.

The Company's  objective as it relates to liquidity is to insure that subsidiary
banks  have funds  available  to meet  deposit  withdrawals  and credit  demands
without unduly penalizing profitability.  In order to maintain a proper level of
liquidity,  the banks have several  sources of funds available on a daily basis,
which can be used for  liquidity  purposes.  These  sources  of funds  primarily
include the  subsidiary  banks' core  deposits,  consisting of both business and
nonbusiness  deposits;  cash flow  generated by repayment of loan  principal and
interest;  and federal funds purchased and securities  sold under  agreements to
repurchase.  The  terms  of the  recent  FHLB  advances  have  been  taken  into
consideration in relation to the overall funding needs of the Company.

For the longer term, the liquidity position is managed by balancing the maturity
structure of the balance sheet. This process allows for an orderly flow of funds
over an extended  period of time. The Company's  Asset and Liability  Management
Committee  meets  regularly and monitors the composition of the balance sheet to
ensure comprehensive management of interest rate risk and liquidity.

Liquid assets consist of cash, cash  equivalents,  and securities  available for
sale. At June 30, 2003, such assets totaled $439.5 million,  a decrease of $40.6
million or 8.5% from year-end  2002. The decrease in liquid assets is attributed
to the overall  funding  position of the Company  combined  with the purchase of
company-owned life insurance on key employees during the current six months. Net
cash provided by operating  activities was $10.6 million in the first six months
of 2003,  relatively  unchanged  from $10.7 million  compared to the same period
last year.  Net cash  provided by investing  activities  was $84.6  million,  an
increase  of $31.8  million  due  primarily  to a $66.2  million  increase  from
investments securities transactions offset by the purchase of company-owned life
insurance on key employees of $24.0  million.  An increase in loan volume during
the six-month  periods used an additional  $9.6 million in the  comparison.  Net
cash used in  financing  activities  was $24.0  million for the six months ended
June 30, 2003. In the prior six-month  comparison  financing activities provided
$74.7  million.  The change is mainly due to lower funding  activity  during the
current  six-month  period  compared  to the  activity in the same period a year
earlier.

CAPITAL RESOURCES

Shareholders'  equity was $126.2  million on June 30, 2003,  an increase of $418
thousand or 0.3% from year-end 2002. The Company purchased 81 thousand shares of
its  outstanding  common  stock  during the first six months of 2003 for a total
cost of $2.5 million.

The Company issued 6 thousand shares of common stock during the first six months
of 2003  pursuant to its  nonqualified  stock  option  plan.  Dividends  of $4.3
million or $.64 per share were declared  during the first six months of 2003, an
increase  of 3.2% per  share  compared  to the  prior  year.  Accumulated  other
comprehensive income, consisting of the unrealized holding gain on available for
sale  investment  securities  (net of tax) increased $271 thousand from year-end
2002.

Consistent with the objective of operating a sound financial  organization,  the
Company's goal is to maintain  capital ratios well above the regulatory  minimum
requirements.  The Company's  capital ratios as of June 30, 2003, the regulatory
minimums and the regulatory standard for a "well capitalized" institution are as
follows3

                           Farmers Capital         Regulatory           Well
                          Bank Corporation           Minimum         Capitalized
--------------------------------------------------------------------------------
Tier 1 risk based               15.19%                 4.00%            6.00%
Total risk based                16.45%                 8.00%           10.00%
Leverage                         9.85%                 4.00%            5.00%

The capital ratios of all the subsidiary  banks, on an individual basis, were in
excess of the applicable  minimum  regulatory capital ratio requirements at June
30, 2003.

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No.  46,   CONSOLIDATION  OF  VARIABLE  INTEREST  ENTITIES,   AN
INTERPRETATION OF ARB NO. 51. This Interpretation  provides new guidance for the
consolidation of variable  interest entities ("VIEs") and requires such entities
to be  consolidated  by  their  primary  beneficiaries  if the  entities  do not
effectively  disperse risk among parties involved.  The Interpretation also adds
disclosure  requirements  for investors  that are involved  with  unconsolidated
VIEs. The  consolidation  requirements  apply  immediately to VIEs created after
January 31, 2003 and are effective  for the first fiscal year or interim  period
beginning  after June 15, 2003 for VIEs acquired  before  February 1, 2003.  The
adoption of this interpretation is not expected have a significant impact on the
Company's financial condition of results of operations.

In April 2003,  The FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 149,  AMENDMENT  OF STATEMENT  133 ON  DERIVATIVE  INSTRUMENTS  AND
HEDGING ACTIVITIES.  SFAS No. 149 amends and clarifies financial  accounting and
reporting for derivative  instruments,  including certain derivative instruments
embedded  in other  contracts  and for  hedging  activities  under SFAS No. 133,
"ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES." This statement
is effective for contracts entered into or modified after June 30, 2003. Because
the Company does not have these  instruments  or is only  nominally  involved in
these  instruments,  management  expects the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "ACCOUNTING  FOR CERTAIN  FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY". This statement
affects the accounting for certain  financial  instruments  that, under previous
guidance,  issuers could  account for as equity.  This  statement  requires that
freestanding  financial  instruments  that embody  obligations for the issuer be
classified  as  liabilities  on the balance  sheet.  Most of this  statement  is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after  June 15,  2003.  Because  the  Company  does  not  have  these
instruments  or is only  nominally  involved  in these  instruments,  management
expects the adoption of this  statement  will not have a material  effect on the
Company's consolidated financial statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

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

At June 30, 2003, the model  indicated that if rates were to gradually  increase
by 150 basis points during the calendar year,  then net interest  income and net
income would increase 0.35% and 0.73%, respectively for the year ending December
31, 2003. The model  indicated  that if rates were to gradually  decrease by 150
basis points over the same period, then net interest income and net income would
decrease 1.4% and 3.3%, respectively.

In the current low interest rate environment, it is not practical or possible to
reduce certain  deposit rates by the same magnitude as rates on earning  assets.
The average  rates paid on some of the  Company's  deposits are well below 1.5%.
This situation  magnifies the model's predicted results when modeling a decrease
in  interest  rates,  as  earning  assets  with  higher  yields  have more of an
opportunity to reprice at lower rates than lower-rate deposits.

ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

The Company's Chief Executive  Officer and Chief Financial Officer have reviewed
and evaluated the Company's  disclosure controls and procedures as of the end of
the  period  covered  by this  report,  and have  concluded  that the  Company's
disclosure  controls and  procedures  were adequate and effective to ensure that
information  required to be disclosed is recorded,  processed,  summarized,  and
reported in a timely manner.

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

PART II - OTHER INFORMATION

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

In September  1992,  Farmers Bank & Capital Trust Company (the "Bank") was named
as a defendant in Case No.  92CIO5734 in Jefferson  Circuit  Court,  Louisville,
Kentucky,  in a case styled  SHILLING  ET AL. V.  FARMERS  BANK & Capital  Trust
Company.  Details of this case have been disclosed in previous Annual Reports on
Form 10-K and  subsequent  10-Q  filings.  The  named  plaintiffs  purported  to
represent a class  consisting  of all present and former owners of the County of
Jefferson,  Kentucky,  Nursing Home  Refunding  Revenue  Bonds (Filson Care Home
Project)  Series  1986A  and  County  of  Jefferson,   Kentucky,   Nursing  Home
Improvement  Revenue Bonds (Filson Care Home Project) Series 1986B (collectively
"the Bonds").  The plaintiffs  alleged that the class had been damaged through a
reduction in the value of the Bonds and a loss of interest on the Bonds  because
of the  actions  of the  Bank  in its  capacity  as  indenture  trustee  for the
Bondholders. The plaintiffs demanded compensatory and punitive damages.

On July 6, 1993, the Court denied the plaintiffs'  motion to certify the case as
a class action.  Subsequently,  the plaintiffs  amended their  complaint to join
additional  Bondholders as plaintiffs.  The plaintiffs  claimed to hold Bonds in
the aggregate  principal  amount of $480,000.  Before trial, the Court dismissed
thirty-nine of the  plaintiffs  because they were unable or unwilling to present
testimony to support their claims.

The case was tried to a jury  beginning  on March 28, 2000 on the claims of four
plaintiffs holding Bonds in the aggregate principal amount of $80,000. The Court
granted a directed  verdict in favor of the Bank on the  plaintiffs'  claim that
the Bank had  engaged in  commercial  bribery  and that the legal fees that were
paid by the Bank should be disgorged  because of an alleged conflict of interest
of the Bank's  counsel.  The jury found for the plaintiffs on the claim that the
Bank had  breached  its  fiduciary  duty and awarded the  plaintiffs  $99,875 in
compensatory damages and $600,000 in punitive damages.

The Bank filed a motion for  judgment  notwithstanding  the  verdict  or, in the
alternative,  for a new trial,  asserting  that the jury's verdict that the Bank
breached its fiduciary duty was not supported by sufficient  evidence,  that the
jury's award of damages was  speculative  and was not supported by the evidence,
and that the jury's award of punitive  damages was not  supported by  sufficient
evidence.  The Bank also asserted that a new trial was warranted  because of the
erroneous admission of evidence concerning legal fees paid by the Bank.

Plaintiffs filed an appeal contending that the denial of class certification was
erroneous,  that the individual  plaintiffs  should not have been dismissed from
the  lawsuit,  that  certain  evidence was  erroneously  excluded,  and that the
directed  verdict  regarding the  disgorgement  of legal fees and the commercial
bribery claims was  erroneous.  On August 1, 2000, the Kentucky Court of Appeals
dismissed the appeal as having been prematurely filed.

On January 3, 2001, the Jefferson Circuit Court entered judgment in favor of the
Bank notwithstanding the jury's verdict in favor of the plaintiffs, holding that
the Bank  reasonably  relied in good  faith on the advice of its  counsel,  that
there  was no  evidence  that  the  Bank  breached  its  fiduciary  duty  to the
plaintiffs,  and that there was no evidence that the Bank caused the plaintiffs'
losses.

On January 31, 2001,  the  plaintiff  bondholders  appealed,  and on February 9,
2001, defendant Bank cross-appealed, the judgment of the Jefferson Circuit Court
to the Kentucky Court of Appeals.

In their appeal,  the  Bondholders  claim that the trial court's denial of class
certification was erroneous,  that certain individual plaintiffs should not have
been dismissed  from the lawsuit,  that the trial court  erroneously  directed a
verdict  against  them on the  issue of a  conflict  of  interest,  and that the
judgment  notwithstanding  the  verdict  was  erroneously  granted  because  the
evidence was sufficient to support the jury's verdict.

In its cross-appeal, the Bank claims that the trial court erroneously bifurcated
the trial on the issue of liability and damages,  that certain  witnesses should
have been  excluded  from the  trial,  that the Bank  should  have been  granted
summary judgment,  and that certain evidence and testimony regarding  attorneys'
fees should have been excluded.

On May 10, 2002,  the Kentucky Court of Appeals  affirmed the Jefferson  Circuit
Court's judgment in favor of the Bank. The plaintiff  bondholders filed a motion
for discretionary review to the Kentucky Supreme Court on June 7, 2002.

On June 7, 2002, the plaintiffs  filed with the Kentucky  Supreme Court a motion
for  discretionary  review.  The Bank filed a response  opposing the plaintiffs'
motion

On April 17, 2003 the  Kentucky  Supreme  Court  denied  plaintiffs'  motion for
discretionary  review.  The judgment in favor of the Bank is therefore now final
and subject to no further appeal or judicial review.

As of June 30,  2003,  there  were  various  other  pending  legal  actions  and
proceedings  against the Company  arising from the normal course of business and
in which claims for damages are  asserted.  Management,  after  discussion  with
legal  counsel,  believes  that these  actions  are  without  merit and that the
ultimate liability  resulting from these legal actions and proceedings,  if any,
will  not  have a  material  adverse  effect  upon  the  consolidated  financial
statements of the Company.

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

The annual meeting of shareholders  was held May 13, 2003. The matters that were
voted upon included the election of four directors for  three-year  terms ending
in 2006 or until their successors have been elected and qualified.

The outcome of the voting was as follows:

NAME                            FOR         AGAINST    WITHHELD      ABSTAINED
Frank W. Sower, Jr.          5,822,220         0         5,784          300
J. Barry Banker              5,821,970         0         6,034          300
Dr. John D. Sutterlin        5,827,054         0           950          300
Dr. Donald J. Mullineaux     5,822,370         0         5,634          300

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

Lloyd C. Hillard, Jr.           Shelley S. Sweeney
Harold G. Mays                  W. Benjamin Crain
Robert Roach, Jr.               Michael M. Sullivan
Gerald R. Hignite               G. Anthony Busseni

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

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

a) List of Exhibits
   ----------------

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

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

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

         31.1     CEO Certification (page 30)

         31.2     CFO Certification (page 31)

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

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

          On July 21, 2003, the Registrant filed a report on Form 8-K under Item
          9 (furnished under Item 12) in accordance with SEC release No. 33-8216
          reporting its earnings for the second  quarter of 2003.  There were no
          financial statements filed with this Form 8-K.
SIGNATURES

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

Date:  8-12-03                      /s/ G. Anthony Busseni
     -----------------              -----------------------------------------
                                    G. Anthony Busseni, President and CEO
                                    (Principal Executive Officer)

Date:  8-12-03                      /s/ C Douglas Carpenter
     -----------------              -----------------------------------------
                                    C. Douglas Carpenter, Vice President,
                                    Secretary, and CFO (Principal Financial and
                                    Accounting Officer)