FRANKFORT, Ky., Jan. 20 - Farmers Capital Bank Corporation (Nasdaq: FFKT) reported net income of $15,772,000 for the twelve months ended December 31, 2005, an increase of $2,380,000 or 17.8% compared to $13,392,000 reported for the twelve months ended December 31, 2004. Basic and diluted net income per share were $2.31 and $2.30, respectively, for the current twelve month period. This represents an increase of $.32 or 16.1% and 16.2% on a basic and diluted basis, respectively. For the three months ended December 31, 2005, net income was $3,975,000. This is an increase of $1,031,000 or 35.0% compared to $2,944,000 for the same three-month period in 2004. On a basic and diluted per share basis, net income was $.57 for the current three months ended December 31, 2005. This represents an increase of $.13 or 29.5% (basic) and $.14 or 32.6% (diluted) as compared to the same period in the prior year.
The Company closed two acquisitions during 2004 and one during the fourth quarter of 2005 that affect the comparisons presented herein; Citizens Bank (Kentucky), Inc. ("Citizens Bank") was acquired on July 1, 2004, Financial National Electronic Transfer, Inc. ("FiNET") was acquired on October 8, 2004, and Citizens Bancorp, Inc. was acquired on December 6, 2005. The timing of the FiNET and Citizens Bancorp acquisitions generally increased reported income and expense line items in the current three and twelve-month periods compared to the same periods a year earlier, while the timing of the Citizens Bank acquisition only effected the twelve month comparison.
The increase in net income for the three months ended December 31, 2005 is primarily attributed to an increase in net interest income partially offset by higher net noninterest expenses. Net noninterest expenses represent an excess of noninterest expenses over noninterest income. Net interest income for the current quarter was $12,413,000, an increase of $1,623,000 or 15.0% compared to $10,790,000 during the same period a year earlier. The increase in net income for the twelve months ended December 31, 2005 is attributed to an increase in net interest income and a lower provision for loan losses partially offset by higher net noninterest expenses. Net interest income for the current twelve-month period was $46,315,000, an increase of $3,589,000 or 8.4% compared to $42,726,000 for the same twelve months in 2004. The increase in net interest income in the quarterly and twelve-month comparisons can be attributed to higher interest income, primarily as a result of both loan growth and higher average interest rates earned on loans, which offset the increase in interest expense, primarily attributed to higher rates paid on deposits.
The provision for loans losses decreased $116,000 or 17.8% and $1,411,000 or 66.3% in the three and twelve-month comparisons, respectively. The decrease in the provision for loan losses for the current three and twelve months is related to improvements in credit quality, including a $3,600,000 reduction in nonperforming loans in the current twelve-month period ended December 31, 2005 and the sale of the Company's credit card portfolio during the first quarter of 2005. Nonperforming loans include nonaccrual loans and loans past due 90 days or more in which interest is still accruing. Nonperforming loans and credit card loans typically have larger allowances due to their identified risk of loss characteristics.
Noninterest income was relatively unchanged at $4,840,000 in the quarterly comparison. Higher allotment fees of $173,000 or 32.9% attributed to the FiNET acquisition were offset by lower securities gains of $224,000 in the comparable period a year earlier. The decrease is due to the absence of securities sold in the current quarterly period. For the year to date comparison, noninterest income increased $2,790,000 or 15.7% to $20,541,000. The increase is due mainly to higher allotment processing fees of $1,532,000 or 136.3% attributed to the FiNET acquisition. Other significant increases in noninterest income for the year to date comparison include service charges and fees on deposits of $1,035,000 or 12.2%, gains on the sale of mortgage loans of $396,000 or 107.0%, and a one-time $700,000 gain on the sale of the Company's credit card portfolio in the first quarter of the current year. Notable declines in noninterest income for the twelve month comparison include securities gains of $394,000 resulting from lower selling activity, lower non- deposit related service charges, commissions, and fees of $353,000 or 12.9%, and income from bank owned life insurance of $235,000 or 15.9% due to lower crediting rates on the underlying investments.
Noninterest expenses were $11,731,000 for the three months ended December 31, 2005, relatively unchanged compared to the same period of 2004. Net occupancy expenses and salaries and employee benefits grew $138,000 or 17.9% and $131,000 or 2.2%, respectively, in the quarterly comparison. Partially offsetting these increases were a decrease in other expenses, primarily net expenses on foreclosed real estate of $105,000 or 55.6%, data processing and communications expenses of $60,000 or 5.1%, and bank franchise taxes of $41,000 or 9.7%. Income tax expense increased $561,000 in the quarterly comparison. The effective income tax rate was 20.3% for the current quarter compared to 13.3% a year ago. In the year to date comparison, noninterest expenses grew $4,159,000 or 9.9% to $46,092,000 from $41,933,000. The increase in noninterest expense occurred across a broad range of categories and is generally attributed to the Company's business expansion that began during the last half of 2004. The most significant increases were salaries and employee benefits, which increased $1,694,000 or 7.4%, net occupancy and equipment expenses of $725,000 or 13.7%, and amortization of intangibles of $672,000. Income tax expense increased $1,251,000 in the year to date comparison. The effective income tax rate was 21.3% for the current twelve months compared to 18.4% a year earlier.
Farmers Capital Bank Corporation is a financial holding company headquartered in Frankfort, Kentucky. The Company operates 33 banking locations in 22 communities throughout Kentucky, a leasing company, a data processing company, a mortgage company, and an insurance company. Its stock is publicly traded on the National Association of Securities Dealers Automated Quotation System (NASDAQ) Capital Market tier under the symbol: FFKT.
Consolidated Financial Highlights - Unaudited
(In thousands except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Interest income $20,560 $16,340 $73,925 $61,902
Interest expense 8,147 5,550 27,610 19,176
Net interest income 12,413 10,790 46,315 42,726
Provision for loan losses 534 650 718 2,129
Net interest income
after provision for
loan losses 11,879 10,140 45,597 40,597
Noninterest income 4,840 4,889 20,541 17,751
Noninterest expenses 11,731 11,633 46,092 41,933
Income before income
tax expense 4,988 3,396 20,046 16,415
Income tax expense 1,013 452 4,274 3,023
Net income $3,975 $2,944 $15,772 $13,392
Per common share:
Net income - basic $.57 $.44 $2.31 $1.99
Net income - diluted .57 .43 2.30 1.98
Cash dividend declared .33 .33 1.32 1.32
Weighted average shares
outstanding - basic 6,963 6,759 6,831 6,737
Weighted average shares
outstanding - diluted 6,991 6,812 6,864 6,780
December 31, December 31,
2005 2004
Cash and cash equivalents $133,454 $79,260
Investment securities 364,704 369,120
Loans, net of allowance of $12,462 (2005)
and $12,804 (2004) 1,045,544 863,901
Other assets 128,874 84,863
Total assets $1,672,576 $1,397,144
Deposits $1,332,368 $1,139,027
Federal funds purchased and securities sold
under agreements to repurchase 71,703 59,758
Other borrowings 77,660 54,949
Other liabilities 36,609 11,960
Total liabilities 1,518,340 1,265,694
Shareholders' equity 154,236 131,450
Total liabilities and shareholders' equity $1,672,576 $1,397,144
End of period book value per share (1) $20.87 $19.38
End of period share value 30.74 41.20
End of period dividend yield (2) 4.29% 3.20%
Averages for the twelve months ended
December 31, 2005 2004
Assets $1,462,254 $1,347,601
Deposits 1,173,873 1,072,486
Loans, net of unearned interest 902,602 818,933
Shareholders' equity 134,376 127,993
Return on average assets 1.08% .99%
Return on average equity 11.74% 10.46%
(1) Represents total equity divided by the number of shares outstanding at
the end of the period.
(2) Represents current annualized dividend declared divided by the end of
period share value.
