Farmers Capital Bank (FFKT) in Frankfort, Ky., is one step closer to being freed from a regulatory order.

The $1.8 billion-asset company said Thursday that a December 2011 formal consent order between its United Bank and Trust Co. and the Federal Deposit Insurance Corp. had been modified into an informal memorandum of understanding.

"It's a sign of further progress," Farmers Capital President and Chief Executive Lloyd Hillard said in a press release. "We view this as recognition from our regulators that we are on the right path forward. But we remain focused on further reducing the level of nonperforming assets and improving the overall quality of our financial position and earnings prospects."

Many of the same agreements that existed in the former order remain in the MOU, the company said. The original order required regulatory approval before the bank could declare or pay dividends. It also gave regulators a say on executive and director appointments.

The bank was also required to maintain an 8% capital ratio and was barred from making additional loans to classified borrowers. Reducing risk position and maintaining a liquidity plan were also part in the consent order.

Separately, Farmers Capital said its fourth-quarter earnings rose 18% from a year earlier, to $3.1 million. At 35 cents per share, the results missed the average estimate of analysts polled by Bloomberg by less than 2 cents.

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