Farmers Capital Bank Corporation
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(Exact name of registrant as specified in its charter) |
Kentucky
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0-14412
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61-1017851
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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P.O. Box 309 Frankfort, KY
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40602
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(Address of principal executive offices)
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(Zip Code)
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Not Applicable
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(Former name or former address, if changed since last report.)
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Farmers Capital Bank Corporation
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4-18-12
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/s/ Doug Carpenter
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Date
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C. Douglas Carpenter
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Executive Vice President, Secretary, and Chief Financial Officer
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(In thousands)
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March 31,
2012
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December 31,
2011
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September 30,
2011
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June 30,
2011
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March 31,
2011
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Nonaccrual loans
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$ | 61,358 | $ | 59,755 | $ | 60,322 | $ | 63,737 | $ | 57,473 | ||||||||||
Loans 90 days or more past due and still accruing
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50 | 1 | 2 | 3 | 45 | |||||||||||||||
Restructured loans
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17,551 | 19,125 | 28,742 | 32,241 | 36,746 | |||||||||||||||
Total nonperforming loans
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78,959 | 78,881 | 89,066 | 95,981 | 94,264 | |||||||||||||||
Other real estate owned
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41,750 | 38,157 | 35,993 | 34,710 | 34,371 | |||||||||||||||
Other foreclosed assets
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36 | 36 | 40 | 17 | 20 | |||||||||||||||
Total nonperforming assets
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$ | 120,745 | $ | 117,074 | $ | 125,099 | $ | 130,708 | $ | 128,655 | ||||||||||
Ratio of total nonperforming loans to total loans (net of unearned income)
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7.5 | % | 7.4 | % | 8.1 | % | 8.5 | % | 8.2 | % | ||||||||||
Ratio of total nonperforming assets to total assets
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6.4 | 6.2 | 6.6 | 6.8 | 6.5 |
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§
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The $2.1 million or 164% increase in net income in the linked quarter comparison was driven mainly by a $2.3 million or 70.3% decrease in the provision for loan losses. Net interest income and noninterest income increased $403 thousand or 3.1% and $130 thousand or 2.2%, respectively. Noninterest expenses decreased $151 thousand or 1.0% while income tax expense was $936 thousand or 161% higher.
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§
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The decrease in the provision for loan losses is mainly the result of a relatively unchanged amount of nonperforming loans outstanding combined with an improvement related to the historical loss rates, as adjusted for current risk factors, applied to the general portfolio.
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§
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The $403 thousand increase in net interest income was driven by lower interest expense of $548 thousand or 9.5%, which offset a decrease in interest income of $145 thousand or .8%. The decrease in interest expense is primarily due to a $405 thousand or 12.6% decrease in interest expense on deposits and lower interest expense on long-term borrowings of $144 thousand or 7.2%. Interest expense on deposits and other borrowings have trended downward primarily as a result of the overall low interest rate environment and a strategy to reduce higher-rate time deposits. Outstanding balances of long-term borrowings have also declined as a result of scheduled maturities.
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§
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Net interest margin was 3.14% for the current quarter, an increase of 18 basis points from 2.96% in the linked quarter. Net interest spread was 2.91% and 2.72% in the current and linked quarter, respectively.
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§
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The $130 thousand increase in noninterest income was driven by higher income from company-owned life insurance of $527 thousand or 226%, partially offset by a decrease in investment securities gains of $143 thousand or 97.9% and lower service charges and fees on deposits of $133 thousand or 6.2%. The increase in income from company-owned life insurance is the result of a $529 thousand gain related to death benefit proceeds received in the current quarter. The decrease in investment securities gains is attributed to a decrease in the volume of securities sold, which often take place at irregular intervals based on asset and liability management strategies. The decrease in service charges and fees on deposits is attributed to lower fees from overdraft/insufficient funds of $146 thousand or 11.1% resulting from lower transaction volumes.
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§
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The $151 thousand decrease in noninterest expenses was led by lower net expenses related to repossessed properties of $209 thousand or 17.8%. Salaries and employee benefits increased $416 thousand or 6.2% offset by a decrease in all other operating expenses of $358 thousand or 5.2%. Salary and benefit expenses increased due to several factors: an increase in the average number of full time equivalent employees to 510 from 506, an increase in benefit expense related to health insurance and postretirement benefits, and a modest increase due to annual pay increases that took effect in the current quarter.
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§
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The Company recorded income tax expense of $356 thousand in the current quarter compared to an income tax benefit of $580 thousand in the fourth quarter of 2011. The effective tax rate for the current quarter was 9.7% compared to an income tax benefit of 86.3%.
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§
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The $2.3 million increase in net income for the current quarter compared to the first quarter a year earlier was driven mainly by a $1.5 million or 60.0% decrease in the provision for loan losses, lower noninterest expenses of $689 thousand or 4.5%, a decrease in income tax expense of $425 thousand or 54.4%, partially offset by a decrease in net interest income of $449 thousand or 3.3%.
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The $1.5 million decrease in the provision for loan losses is a result of a decrease in nonperforming loans combined with an improvement related to the historical loss rates, as adjusted for current risk factors, applied to the general portfolio.
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The $689 thousand decrease in noninterest expenses was driven by two non-routine losses recorded in the first quarter of last year in the aggregate amount of $1.0 million which are not present in the current quarter. Numerous other noninterest expense line items also decreased, led by lower deposit insurance expense of $202 thousand or 22.7% attributed mainly to the change in the FDIC’s assessment base and rate structure that went into effect during the second quarter of 2011. Salaries and employee benefits increased $356 thousand or 5.3% in the quarterly comparison due to an increase in health insurance and postretirement benefit expenses along with the addition of additional personnel hired in the credit administration and nonperforming asset management positions. Expenses associated with repossessed properties increased $282 thousand or 41.5% over the year-ago quarter due to higher impairment charges recorded in the current quarter.
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The $449 thousand or 3.3% decrease in net interest income was driven by lower interest income of $1.8 million or 8.7%, which was partially offset by a decrease in interest expense of $1.3 million or 20.1%. The decrease in interest income was primarily driven by a decrease in loan volume and, to a lesser extent, a decrease in the related average interest rate earned. The decrease in interest expense is mainly driven by lower average rates paid on interest bearing deposits and lower average outstanding time deposits.
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Net interest margin was 3.14% for the current quarter, a decrease of 4 basis points from 3.18% compared to a year earlier. Net interest spread was 2.91% and 2.94% in the current and year-ago quarters, respectively.
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§
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Income tax expense was $356 thousand for the first quarter of 2012, a decrease of $425 thousand or 54.4% compared to $781 thousand in the first quarter of 2011. The effective tax rate for the current quarter was 9.7% compared to 42.8% for the same quarter a year ago.
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Total assets were $1.9 billion at March 31, 2012, an increase of $7.2 million or .4% from year-end 2011. The net increase in total assets is attributed mainly to an increase in investment securities and repossessed real estate of $35.6 million and $3.6 million, respectively, partially offset by a $24.3 million decrease in loans (net of unearned income and allowance) and a $5.6 million decrease in cash and equivalents.
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The increase in investment securities is driven primarily by the lack of high quality loan demand. Funds received from loan paydowns and other sources have generally been reinvested in investment securities when loan demand has fallen.
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Other real estate owned was $41.8 million at quarter end, up $3.6 million or 9.4% compared to $38.2 million at year end. As discussed above, during the current quarter the Company acquired four separate larger-balance properties totaling $5.1 million securing loans previously classified as nonaccrual.
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§
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Total deposits increased $12.1 million or .8% in the linked quarter comparison. Noninterest bearing deposit balances increased $10.4 million or 4.6% and interest bearing deposits increased $1.7 million or .1%.
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Long-term borrowings decreased $10.1 million or 4.2% due to principal repayments related to scheduled maturities of federal home loan bank borrowings.
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The allowance for loan losses was 2.58% of loans outstanding (net of unearned income) at March 31, 2012, a decrease of 6 basis points compared to 2.64% at year-end 2011. Net charge-offs were $2.2 million and $5.9 million for the current and linked quarters, respectively. This represents a decrease of $3.7 million or 62.9%. Net charge-offs for the current quarter include three transactions totaling $1.1 million in the aggregate.
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The ratio of nonperforming loans to loans outstanding (net of unearned income) was 7.5% at March 31, 2012, up 19 basis points compared to 7.4% at year-end 2011. The increase was driven by the reduction in net loans outstanding as nonperforming loans were relatively unchanged.
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§
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On a consolidated basis, the Company’s regulatory capital levels remain in excess of “well-capitalized” as defined by bank regulators. Likewise, the regulatory capital for the Company’s subsidiary banks exceeds the targets established in the agreements with their regulatory agencies.
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(In thousands except per share data)
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Three Months Ended
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March 31,
2012
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December 31,
2011
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March 31,
2011
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Interest income
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$ | 18,410 | $ | 18,555 | $ | 20,168 | ||||||
Interest expense
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5,203 | 5,751 | 6,512 | |||||||||
Net interest income
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13,207 | 12,804 | 13,656 | |||||||||
Provision for loan losses
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977 | 3,286 | 2,441 | |||||||||
Net interest income after provision for loan losses
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12,230 | 9,518 | 11,215 | |||||||||
Noninterest income
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6,028 | 5,898 | 5,893 | |||||||||
Noninterest expenses
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14,593 | 14,744 | 15,282 | |||||||||
Income before income tax expense
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3,665 | 672 | 1,826 | |||||||||
Income tax expense
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356 | (580 | ) | 781 | ||||||||
Net income
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$ | 3,309 | $ | 1,252 | $ | 1,045 | ||||||
Net income
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$ | 3,309 | $ | 1,252 | $ | 1,045 | ||||||
Preferred stock dividends and discount accretion
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(478 | ) | (477 | ) | (472 | ) | ||||||
Net income available to common shareholders
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$ | 2,831 | $ | 775 | $ | 573 | ||||||
Basic and diluted net income per common share
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$ | .38 | $ | .10 | $ | .08 | ||||||
Averages
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Loans, net of unearned interest
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$ | 1,058,277 | $ | 1,084,839 | $ | 1,173,677 | ||||||
Total assets
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1,906,371 | 1,934,320 | 1,958,088 | |||||||||
Deposits
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1,434,399 | 1,448,496 | 1,464,858 | |||||||||
Shareholders’ equity
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159,357 | 156,613 | 151,325 | |||||||||
Weighted average shares outstanding-basic and diluted
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7,447 | 7,437 | 7,412 | |||||||||
Return on average assets
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.70 | % | .26 | % | .22 | % | ||||||
Return on average equity
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8.35 | % | 3.17 | % | 2.80 | % | ||||||
March 31,
2012
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December 31,
2011
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Cash and cash equivalents
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$ | 88,669 | $ | 94,309 | ||||
Investment securities
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634,250 | 598,694 | ||||||
Loans, net of allowance of $27,053 and $28,264
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1,019,508 | 1,043,844 | ||||||
Other assets
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148,400 | 146,743 | ||||||
Total assets
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$ | 1,890,827 | $ | 1,883,590 | ||||
Deposits
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$ | 1,447,203 | $ | 1,435,065 | ||||
Federal funds purchased and other short-term borrowings
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27,945 | 27,022 | ||||||
Other borrowings
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229,552 | 239,664 | ||||||
Other liabilities
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26,392 | 24,782 | ||||||
Total liabilities
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1,731,092 | 1,726,533 | ||||||
Shareholders’ equity
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159,735 | 157,057 | ||||||
Total liabilities and shareholders’ equity
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$ | 1,890,827 | $ | 1,883,590 | ||||
End of period tangible book value per common share1
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$ | 17.22 | $ | 16.86 | ||||
End of period common share value
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6.01 | 4.49 |