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The Company added $6.7 million and $5.9 million to its provision for loan losses in the three months ended September 30, 2009 and June 30, 2009, respectively. Net loan charge-offs were $5.9 million in the three months ended September 30, 2009 compared to $2.4 million for the linked quarter. Net charge-offs as a percentage of outstanding loans (net of unearned income) were 0.46% and 0.18% in the current and linked quarters, respectively. The allowance for loan losses was $22.0 million at September 30, 2009, an increase of $704 thousand or 3.3% compared to $21.3 million at June 30, 2009. The allowance for loan losses as a percentage of net loans outstanding increased to 1.70% at September 30, 2009 compared to 1.62% at June 30, 2009 and 1.28% at year-end 2008.
Nonperforming assets were $64.3 million at September 30, 2009, relatively unchanged compared to $64.4 million at June 30, 2009. Although total nonperforming assets were flat on a net basis, changes did occur among the components. Loans past due 90 days or more and still accruing interest decreased $6.2 million or 64.5% to $3.4 million; $4.4 million have now been reclassified as restructured loans. Loans that have been restructured and are performing in accordance with the modified terms were $6.4 million at September 30, 2009. This amount is attributed to two loans to a related group of borrowers secured by a common residential real estate development. Nonaccrual loans, on a net basis, were unchanged at $34.7 million in the linked quarter comparison. Other real estate owned, which represents properties acquired through foreclosure, declined $255 thousand or 1.3% to $19.7 million. The Company's level of nonperforming assets continues to be high as it and most of the banking industry struggles to cope with one of the most severe recessions in many decades. The deterioration in the overall economy and real estate markets in particular has negatively impacted the Company's lending portfolio. Loans to real estate developers and related businesses have shown the most signs of stress within the Company's customer base.
Third Quarter 2009 Compared to Second Quarter 2009
-- The $627 thousand or $.08 improvement in per common share earnings in
the third quarter of 2009 compared to the second quarter of 2009 is
driven mainly by a $1.7 million higher income tax benefit.
-- The provision for loan losses increased $713 thousand or 12.0% in the
linked quarter comparison.
-- Deposit insurance expense decreased mainly due to the special assessment
imposed by the Federal Deposit Insurance Corporation ("FDIC") during the
previous quarter as part of its plan to replenish the Deposit Insurance
Fund.
-- Net interest income inched upward $99 thousand or 0.7% primarily due to
a decline in overall borrowing costs, primarily deposits, which outpaced
a decrease in interest income.
-- Net interest margin was 2.84% in the current quarter, relatively
unchanged from 2.85% in the linked quarter comparison.
-- Noninterest income decreased $1.3 million or 16.6%, due mainly to
investment securities gains recorded in the prior quarter.
-- Noninterest expenses decreased $864 thousand or 5.3% due mainly to the
lower deposit insurance mentioned above.
-- The $1.7 million increase in income tax benefits is due to tax-exempt
income comprising a higher percentage of pre-tax income. The Company
recorded a pre-tax loss for the current quarter.
Third Quarter 2009 Compared to Third Quarter 2008
-- The $6.7 million or $.85 improvement in per common share earnings in the
third quarter of 2009 compared to the third quarter of 2008 was heavily
impacted by a pre-tax $14.0 million other-than-temporary impairment
("OTTI") charge in the third quarter a year ago. The impairment charge
related to the Company's investment in preferred stocks of the Federal
National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
-- The Company increased its provision for loan losses $4.9 million to $6.7
million as economic conditions and real estate markets continue to
negatively impact the Company and its lending portfolio.
-- Margin compression, primarily due to a larger decline in the average
rate earned on earning assets compared to the average rate paid on
interest bearing liabilities, lowered net interest income $1.3 million
or 8.6%. Net interest margin declined to 2.84% in the current quarter
compared to 3.27% in the same quarter a year earlier.
-- Noninterest income increased $14.4 million, mainly attributed to the
$14.0 million OTTI charge that was recorded in the prior year.
-- Noninterest expenses increased $420 thousand or 2.8% due mainly to the
increase in deposit insurance premiums.
-- The $1.1 million decrease in the income tax benefit between the periods
is mainly attributable to the OTTI charge during the third quarter of
2008.
Nine-month Comparison
-- Net income decreased $61 thousand or 2.6% in the nine-month comparison.
Per common share earnings decreased $.19 or 59.4% in the comparison due
mainly to the impact of preferred stock dividends and related accretion,
which did not exist in the prior year.
-- The provision for loan losses increased $10.9 million in the current
nine months and is attributed to a sharp increase in nonperforming
loans, primarily nonaccrual loans secured by real estate developments.
-- Net interest margin declined 42 basis points to 2.91% in the current
nine months compared to 3.33% a year earlier. The decrease in margin was
driven by a decline in the average rate earned on earning assets, which
outpaced the drop in the average interest rate paid on interest bearing
liabilities.
-- Noninterest income increased $16.4 million driven mainly by the $14.0
million OTTI charge that was recorded in the prior nine months and
higher investment securities gains of $1.5 million in the current nine
months.
-- Noninterest expenses increased $2.9 million or 6.7% due mainly to the
increase in deposit insurance.
-- Income taxes positively impacted net income by $1.1 million due to an
increase in tax-exempt investments in 2009 compared to 2008 as well as
expected decreased annual pre-tax net income in 2009.
Balance Sheet
-- Total assets were $2.3 billion at September 30, 2009, down $22.9 million
or 1.0% from the previous quarter end. The decrease in assets is
primarily related to $36.5 million or 13.4% lower cash and equivalents
and a decrease in loans (net of unearned income) outstanding of $20.9
million or 1.6% partially offset by an increase in net investment
securities of $39.1 million or 7.1%.
-- The decrease in net loans compared to June 30, 2009 is mainly attributed
to net principal payments received from borrowers that have exceeded new
extensions of credit and, to a lesser extent, net charge-offs of $5.9
million in the current quarter.
-- Total deposits were up $27.1 million or 1.7% in the linked quarter
comparison. Commonwealth of Kentucky deposits account for $14.2 million
or 52.3% of the increase in total deposits and 78.9% of the $18.0
million increase in noninterest bearing deposit balances.
-- Short-term borrowing arrangements and interest bearing cash balances
decreased in the linked quarter comparison due to a large volume of
activity with the Commonwealth on June 30, 2009 that increased those
balances on that date.
-- Nonperforming loans were $44.5 million at September 30, 2009, relatively
unchanged from $44.3 million compared to the linked quarter-end and an
increase of $19.0 million compared to year-end 2008.
-- The allowance for loan losses was 1.70% of net loans outstanding at
September 30, 2009 compared to 1.62% and 1.28% at June 30, 2009 and
December 31, 2008, respectively. Net charge-offs for the three months
ended September 30, 2009 were $5.9 million, an increase of $3.5 million
compared to $2.4 million for the previous quarter of 2009.
-- The Company's regulatory capital level remains in excess of
"well-capitalized" as defined by its regulators.
Farmers Capital Bank Corporation is a bank holding company headquartered in Frankfort, Kentucky. The Company operates 36 banking locations in 23 communities throughout Central and Northern Kentucky, a leasing company, and a data processing company. Its stock is publicly traded on the NASDAQ Stock Market LLC exchange in the Global Select Market tier under the symbol: FFKT.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based upon current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Among the risks and uncertainties that could cause actual results to differ materially are economic conditions generally and in the subject market areas, overall loan demand, increased competition in the financial services industry which could negatively impact the ability of the subject entities to increase total earning assets, and retention of key personnel. Actions by the Federal Reserve Board and changes in interest rates, loan prepayments by, and the financial health of, borrowers, and other factors described in the reports filed by the Company with the Securities and Exchange Commission could also impact current expectations. For more information about these factors please see the Company's Annual Report on Form 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements.
These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
Consolidated Financial Highlights (1)
(In thousands except per share data)
------------------------------------------------- ---------------------
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008
------------------------------------------------- --------------------
Interest income $25,381 $25,479 $27,859 $77,189 $86,931
Interest expense 11,879 12,076 13,085 36,045 42,051
------------------------------------------------- --------------------
Net interest
income 13,502 13,403 14,774 41,144 44,880
------------------------------------------------- --------------------
Provision for
loan losses 6,653 5,940 1,780 14,269 3,365
------------------------------------------------- --------------------
Net interest
income after
provision for
loan losses 6,849 7,463 12,994 26,875 41,515
------------------------------------------------- --------------------
Noninterest
income 6,528 7,825 (7,865) 21,078 4,713
Noninterest
expenses 15,299 16,163 14,879 46,574 43,651
------------------------------------------------- --------------------
(Loss) income
before income
tax expense (1,922) (875) (9,750) 1,379 2,577
Income tax
(benefit)
expense (1,748) (74) (2,865) (951) 186
-------------------------------------------------------------------------
Net (loss)
income $(174) $(801) $(6,885) $2,330 $2,391
-------------------------------------------------------------------------
Net (loss)
income $(174) $(801) $(6,885) $2,330 $2,391
Preferred stock
dividends and
discount
accretion (462) (462) (1,338)
-------------------------------------------------------------------------
Net (loss)
income
available to
common
shareholders $(636) $(1,263) $(6,885) $992 $2,391
-------------------------------------------------------------------------
Per common share
Basic and
diluted net (loss)
income $(.09) $(.17) $(.94) $.13 $.32
Cash dividend
declared .25 .25 .33 .75 .99
Averages
Loans, net of
unearned
interest $1,304,705 $1,319,377 $1,308,192 $1,313,182 $1,300,659
Total assets 2,268,342 2,268,229 2,111,753 2,254,206 2,127,957
Deposits 1,639,363 1,634,587 1,498,304 1,622,077 1,516,757
Shareholders'
equity 196,719 197,990 166,539 196,627 170,438
Weighted
average shares
outstanding
- basic and
diluted 7,367 7,363 7,349 7,363 7,358
Return on average
assets (.03)% (0.14)% (1.30%) .14% .15%
Return on average
equity (.35)% (1.62)% (16.45%) 1.58% 1.87%
Sept.30, June 30, Dec. 31,
2009 2009 2008
-------------------------------------------------------------------------
Cash and cash equivalents $236,241 $272,731 $190,775
Investment securities 591,620 552,476 536,109
Loans, net of allowance
of $22,022, $21,318, and
$16,828 1,272,372 1,293,988 1,295,752
Other assets 173,026 176,997 179,531
-------------------------------------------------------------------------
Total assets $2,273,259 $2,296,192 $2,202,167
-------------------------------------------------------------------------
Deposits $1,665,407 $1,638,265 $1,594,115
Federal funds purchased
and other short-term
borrowings 49,500 105,843 77,474
Other borrowings 329,596 329,762 335,661
Other liabilities 30,015 27,645 26,621
-------------------------------------------------------------------------
Total liabilities 2,074,518 2,101,515 2,033,871
-------------------------------------------------------------------------
Shareholders'
equity 198,741 194,677 168,296
-------------------------------------------------------------------------
Total liabilities and
shareholders' equity $2,273,259 $2,296,192 $2,202,167
-------------------------------------------------------------------------
End of period book value
per common share(1) $23.13 $22.60 $22.87
End of period common
share value 17.88 25.17 24.42
End of period dividend
yield(2) 5.59% 3.97% 5.41%
(1) Represents total common equity divided by the number of common
shares outstanding at the end of the period.
(2) Represents annualized dividend declared divided by the end of period
common share value.
SOURCE Farmers Capital Bank Corporation
http://www.farmerscapital.com
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