FRANKFORT, Ky. (April 24, 2014) — Farmers Capital Bank Corp. (Nasdaq:FFKT) reported net income of $3.4 million for the quarter ended March 31, 2014, an increase of $298,000 or 9.7 percent compared to the quarter ended December 31, 2013. On a per common share basis, net income was $.38 and $.35 for the current and linked quarters, respectively. Net income for the current quarter represents a decrease of $422 thousand or 11.1% compared to the first quarter of a year ago, which equates to a decline of $.06 on a per common share basis.
“We were pleased to have announced two significant events that occurred during the quarter,” states Lloyd C. Hillard Jr., president/CEO of the company. “First, we received notice that our parent company is no longer subject to the regulatory agreement that had been in place since 2009. Second, we also announced that we are redeeming one-third of our outstanding preferred stock. Both of these positive events reflect the overall steady progress we’ve made over the last several years. But we have more challenges ahead, particularly the need to further reduce nonperforming assets and to increase outstanding loans without sacrificing credit quality.”
Overall, nonaccrual loans increased $882,000 or 3.7 percent during the quarter. Newly classified nonaccrual loans were $2.7 million, consisting primarily of three larger credits totaling $2.0 million in the aggregate secured by commercial real estate. The company received principal paydowns on nonaccrual loans of $1.1 million; transfers to other real estate owned, representing repossession of loan collateral, totaled $335,000.
Other real estate owned decreased $2.4 million or 6.3 percent, driven by sales and write-down activity. Property sales for the quarter include one larger-balance residential real estate development property sold at its carrying amount of $1.2 million. Write-downs during the quarter include impairment charges totaling $390,000 related to one residential real estate development project resulting from an annual appraisal, which reduced its carrying value to $1.4 million.
The allowance for loan losses was $18.7 million or 1.9 percent of loans (net of unearned income) outstanding at March 31, 2014 compared to $20.6 million or 2.06 percent at year-end 2013. Net loan charge-offs were $2.0 million and $353,000 for the current three months and linked quarter, respectively. Net charge-offs as a percentage of outstanding loans (net of unearned income) were 0.21 percent and 0.04 percent in the current and linked quarters, respectively.
The increase in net charge-offs was driven primarily by two events: charge-offs totaling $1.0 million related to a group of fraudulent loans initiated by a former loan officer and a charge-off of $755,000 related to one credit secured by commercial real estate. The company has filed an insurance claim seeking possible recovery of approximately $750,000 related to the fraudulent loans. The amount of recovery, if any, will be recognized when received.