Summary of FARMERS CAPITAL BANK CORP

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. In general, forward-looking statements relate to a discussion of future financial results or projections, future economic performance, future operational plans and objectives, and statements regarding the underlying assumptions of such statements. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets in which the Company and its subsidiaries operate) and lower interest margins; competition for the Company's customers from other providers of financial services; deposit outflows or reduced demand for financial services and loan products; government legislation, regulation, and changes in monetary and fiscal policies (which changes from time to time and over which the Company has no control); changes in interest rates; changes in prepayment speeds of loans or investment securities; inflation; material unforeseen changes in the liquidity, results of operations, or financial condition of the Company's customers; changes in the level of non-performing assets and charge-offs; changes in the number of common shares outstanding; the capability of the Company to successfully enter into a definitive agreement for and close anticipated transactions; the possibility that acquired entities may not perform as well as expected; unexpected claims or litigation against the Company; technological or operational difficulties; the impact of new accounting pronouncements and changes in policies and practices that may be adopted by regulatory agencies; acts of war or terrorism; the ability of the parent company to receive dividends from its subsidiaries; the impact of larger or similar financial institutions encountering difficulties, which may adversely affect the banking industry or the Company; the Company or its subsidiary banks to maintain required capital levels and adequate funding sources liquidity; and other risks or uncertainties detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. The Company expressly disclaims any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in the Company's opinions or expectations.

RESULTS OF OPERATIONS

Second Quarter 2009 Compared to Second Quarter 2008

The Company reported a net loss of $801 thousand or $.17 per common share for the quarter ended June 30, 2009 compared to net income of $4.9 million or $.67 per common share for the quarter ended June 30, 2008. A summary of the quarterly comparison follows.

† The $.84 decrease in per common share earnings in the second quarter of 2009 compared to the second quarter a year ago is driven mainly by a $5.5 million increase in the provision for loan losses, a decrease in net interest income of $1.9 million, and higher deposit insurance expense of $1.6 million. In addition, preferred stock dividends and related accretion, which did not exist in the prior year, account for $.06 of the decrease in per common share earnings.

† The higher provision for loan losses is attributed to an increase in nonperforming assets, primarily nonaccrual loans secured by real estate developments.

† The increase in deposit insurance expense was driven by a special assessment imposed by the Federal Deposit Insurance Corporation ("FDIC") in the current quarter as part of its plan to replenish the Deposit Insurance Fund.

† Margin compression, primarily due to a 107 basis point decline in the average rate earned on earning assets, lowered net interest income $1.9 million or 12.7%. Net interest margin declined to 2.85% compared to 3.43% a year ago.

† Noninterest income increased $1.6 million or 26.4%, mainly attributed to higher securities gains and moderate increases in other fee income categories.

† Noninterest expenses increased $1.8 million or 12.3% due mainly to the increase in deposit insurance premiums.

† Income tax expense decreased $1.8 million due to the net loss in the current quarter.

† Return on average assets ("ROA") and equity ("ROE") was -.14% and -1.62%, respectively compared to .92% and 11.35% for the previous-year quarter.

† Net interest spread and margin for the current quarter was 2.61% and 2.85%, respectively compared to 3.17% and 3.43% a year earlier.

Net Interest Income

The overall interest rate environment during the current quarter has been more stable compared to the extreme volatility that occurred during 2008. However, the overall rate environment remains near historic lows and has made managing the Company's net interest margin very challenging. At June 30, 2009 the short-term federal funds target interest rate was between zero and 0.25%, unchanged from December 31, 2008. The yield curve has inched upward in each of the previous two quarters since year-end 2008, particularly with the longer-term yields. The 10 and 30-year treasury yields are up 132 and 165 basis points, respectively, since year-end 2008. Shorter-term treasury yields moved upward at a much lower amount, up 10, 8, and 35 basis points for the 3-month, 6-month, and 2-year treasury's, respectively. The 3-year and 5-year treasury yields were up 65 and 101 basis points, respectively.

Net interest income was $13.4 million for the three months ended June 30, 2009, a decrease of $1.9 million or 12.7% from $15.4 million in the same period a year earlier. The decrease in net interest income is attributed mainly to a $2.6 million or 11.7% decline in interest income on loans that was partially offset by a $1.2 million or 12.1% decrease in interest expense on deposit accounts. The decrease in both of these line items was driven by overall rate declines, which offset the effect on net interest income of volume increases in both loans and deposits. Rate declines were driven mainly by weaker economic conditions.

Interest income and interest expense related to nearly all of the Company's earning assets and interest paying liabilities have declined in the quarterly comparison. These declines are due almost entirely to the lower interest rate environment in the current period compared to a year earlier. The Company is generally earning and paying less interest from its earning assets and funding sources as rates have dropped. This includes repricing of variable and floating rate assets and liabilities that have reset since the prior reporting period as well as activity related to new earning assets and funding sources that reflect the overall lower interest rate environment.

Total interest income was $25.5 million in the second quarter of 2009, a decrease of $3.6 million or 12.3% and was driven by lower interest income on loans of $2.6 million or 11.7%. The average rate earned on loans was 6.0% in the current quarter, down 92 basis points from 6.9% a year earlier. Similar declines were experienced in other earning asset categories. Interest income from deposits held in other banks and federal funds sold and securities purchased under agreements to resell was down $201 thousand or 70.3% as a 179 basis point decrease in the average rate earned offset a volume increase of $74.3 million. Interest on taxable securities decreased $907 thousand or 15.2% which is also attributed to an 81 basis point lower average rate earned.

Total interest expense was $12.1 million in the current quarter. This represents a decrease of $1.6 million or 11.8% compared to $13.7 million a year ago. The decrease in interest expense was driven by lower interest expense on deposits of $1.2 million or 12.1%. The average rate paid on deposit accounts was 2.44% in the current period, a decrease of 55 basis points compared to 2.99% a year earlier. Interest expense on time deposits, the largest component of interest expense, declined $532 thousand or 6.3% in the quarterly comparison. Interest expense on savings and interest bearing demand accounts decreased $384 thousand or 43.8% and $266 thousand or 53.0%, respectively. Interest expense on short and long-term borrowings decreased $326 thousand or 72.9% and $102 thousand or 2.9%, respectively. The decrease in interest expense was mainly driven by a lower average rate paid on the Company's deposits and borrowings and is attributed to the overall lower interest rate environment.

The net interest margin on a taxable equivalent basis decreased 58 basis points to 2.85% for the second quarter of 2009 compared to 3.43% in the same quarter of 2008. The lower net interest margin is attributed to a 56 basis point decrease in the spread between the average rate earned on earning assets and the average rate paid on interest bearing liabilities to 2.61% in the current quarter from 3.17% in the same quarter of 2008. The decrease in net interest margin was impacted mainly by the overall lower interest rate environment. The Company expects its net interest margin to remain relatively flat or decrease slightly in the near term due to the maturity structure of its earning assets, particularly loans, and to a lesser degree, recent purchases of investment securities at lower market yields and from its funding sources that continue to reprice downward to reflect the overall lower market interest 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