Farmers Capital Bank Corporation Announces Second Quarter Earnings

FRANKFORT, Ky., July 22 /PRNewswire-FirstCall/ -- Farmers Capital Bank
Corporation (Nasdaq: FFKT) (the "Company") reported net income of $4.9 million
or $.67 per share for the quarter ended June 30, 2008 compared to $4.4 million
or $.59 per share for the quarter ended March 31, 2008 and $4.9 million or
$.62 per share for the quarter ended June 30, 2007. Net income for the six
months ended June 30, 2008 was $9.3 million or $1.26 per share compared to
$9.5 million or $1.21 per share for the same six months a year earlier.
Nonperforming assets were $35.2 million at June 30, 2008 compared to $37.4
million at March 31, 2008. This represents a decrease of $2.2 million or 5.8%
in the linked quarters. Nonperforming loans, primarily nonaccrual loans,
accounted for $5.9 million of the lower nonperforming assets in the
comparison. Other real estate owned, which consists of properties acquired
through foreclosure, is up $3.8 million in the linked quarter comparison.
Second Quarter 2008 Compared to First Quarter 2008

-- The $.08 or 13.6% increase in per share earnings in the second quarter
of 2008 compared to the first quarter of 2008 is heavily impacted by a
$596 thousand or 4.0% increase in net interest income combined with a
$619 thousand lower provision for loan losses.
-- The increase in net interest income was driven by lower interest
expense of $1.6 million or 10.4%, mainly attributed to a $1.2 million
or 10.9% decline in interest expense on deposits.
-- The lower provision for loan losses in the current quarter was
positively impacted by an $828 thousand recovery of a previously
charged-off credit initiated during 2001.
-- Noninterest income declined $196 thousand or 3.1% due mainly to lower
securities gains of $152 thousand.
-- Noninterest expenses were unchanged at $14.4 million.
-- Income tax expense increased $483 thousand or 37.6% due to an increase
in taxable sources of income. The effective income tax rate increased
382 basis points to 26.5%.

Second Quarter 2008 Compared to Second Quarter 2007

-- Net income for the second quarter of 2008 was unchanged at $4.9 million
compared to the same quarter a year earlier.
-- The $.05 or 8.1% increase in per share earnings in the comparison is
the result of the Company's purchase of 559 thousand of its outstanding
shares through a tender offer during the third quarter of 2007, which
significantly reduced the weighted average number of shares
outstanding.
-- Net interest income increased $501 thousand or 3.4% mainly as a result
of the Company's leverage transaction that occurred during the fourth
quarter of 2007.
-- The provision for loan losses increased $153 thousand or 46.4% due to
higher nonperforming loans in the comparable periods.
-- Income tax expense was up $360 thousand or 25.6% due mainly to an
increase in taxable sources of income and, to a lesser extent, lower
tax credits. The effective income tax rate increased 424 basis points
to 26.5%.

Six-month Comparison

-- The $.05 or 4.1% increase in per share earnings for the six-month
period ended June 30, 2008 compared to the same period for 2007 is due
mainly to the impact of the Company's tender offer. Net income declined
$246 thousand or 2.6%, but was more than offset by the 559 thousand
decrease in the number of shares outstanding from the tender offer.
-- Net interest income increased $1.2 million, driven by the Company's
leverage transaction that occurred during the fourth quarter of 2007.
-- The provision for loan losses jumped $1.8 million as overall economic
conditions continue to stress certain segments of the Company's lending
portfolio, particularly real estate development and related industries.
The increase in the provision for loan losses is magnified by the $166
thousand negative provision recorded in the prior year.
-- Noninterest income increased $803 thousand or 6.8% driven by securities
gains of $580 thousand.
-- Noninterest expenses were relatively unchanged at $28.8 million.
-- Income tax expense increased $334 thousand or 12.3% due mainly to an
increase in taxable sources of income and, to a lesser extent, lower
tax credits. The effective income tax rate increased 255 basis points
to 24.8%.

Balance Sheet Highlights

-- Total assets were $2.1 billion at June 30, 2008, a decrease of $36.0
million or 1.7% compared to March 31, 2008. The decrease in assets are
primarily related to $48.2 million lower cash and equivalents, mainly
federal funds sold, that correlate to lower deposit balances of $27.5
million. The banking environment continues to be challenging. Lower
deposit balances are related to economic and competitive pressures that
have negatively impacted certain deposit sources in the current
quarter.
-- Net loans grew $14.3 million or 1.1% compared to the linked quarter as
the Company takes a more measured and cautious approach to loan growth
in the near term.
-- The decrease in investment securities and shareholders equity in the
linked quarters was driven by a general decline in fair value of the
Company's available for sale investment securities. Net unrealized
losses (gross of tax) on available for sale investment securities were
$2.7 million at June 30, 2008 compared to a net unrealized gain of $7.3
million at March 31, 2008. Market value declines have not been included
in income since they are identified as temporary. All investments in
the Company's portfolio are currently performing.
-- Nonperforming loans were $24.0 million at June 30, 2008. This
represents a decrease of $5.9 million or 19.8% from the linked
quarter-end and an increase of $2.9 million or 13.8% compared to
year-end 2007.
-- The allowance for loan losses was 1.15% of net loans outstanding at
June 30, 2008 compared to 1.13% and 1.10% at March 31, 2008 and
December 31, 2007, respectively. Net charge-offs for the current
quarter were $73 thousand, a decrease of $689 thousand compared to the
first quarter of 2008. The decrease in net charge-offs is attributed
primarily to an $828 thousand recovery of a previously charged-off
credit initiated during 2001.

During the first half of 2008, the Company made multiple purchases of
preferred stock of U.S. government-sponsored agencies totaling $15.4 million
that had an unrealized loss of $706 thousand or 4.6% at June 30, 2008.
Subsequent to June 30, the market value of these investments declined sharply
before trending back in a higher direction. No impairment charge has been
taken on these investments. The Company is monitoring these investments with a
high degree of scrutiny and will take appropriate actions, including
impairment write-downs, in future quarters as necessary.
Farmers Capital Bank Corporation is a financial holding company
headquartered in Frankfort, Kentucky. The Company operates 36 banking
locations in 23 communities throughout Central and Northern Kentucky, a
leasing company, a data processing company, and an insurance 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 Six Months Ended
June March June June June
30, 31, 30, 30, 30,
2008 2008 2007 2008 2007

Interest income $29,037 $30,035 $28,511 $59,072 $55,913
Interest expense 13,686 15,280 13,661 28,966 26,968
Net interest
income 15,351 14,755 14,850 30,106 28,945
Provision for
loan losses 483 1,102 330 1,585 (166)
Net interest income
after provision for
loan losses 14,868 13,653 14,520 28,521 29,111
Noninterest income 6,191 6,387 6,108 12,578 11,775
Noninterest expenses 14,392 14,380 14,309 28,772 28,647
Income before income
tax expense 6,667 5,660 6,319 12,327 12,239
Income tax expense 1,767 1,284 1,407 3,051 2,717
Net income $4,900 $4,376 $4,912 $9,276 $9,522

Per common share
Basic and diluted
net income $.67 $.59 $.62 $1.26 $1.21
Cash dividend declared .33 .33 .33 .66 .66

Averages
Loans, net of
unearned interest 1,297,789 1,295,913 1,255,692 1,296,851 1,227,574
Total assets 2,135,643 2,136,653 1,866,653 2,136,148 1,846,233
Deposits 1,531,628 1,520,542 1,467,546 1,526,085 1,459,898
Shareholders'
equity 173,584 171,234 180,626 172,409 179,222
Shares outstanding-
basic 7,350 7,374 7,884 7,362 7,888
Shares outstanding-
diluted 7,350 7,374 7,892 7,362 7,899
Return on average
assets .92% .82% 1.05% .87% 1.04%
Return on average
equity 11.35% 10.28% 10.90% 10.82% 10.71%

June March December
30, 31, 31,
2008 2008 2007

Cash and cash equivalents $111,707 $159,882 $79,140
Investment securities 547,571 559,629 546,477
Loans, net of allowance of $14,965,
$14,555, and $14,216 1,290,114 1,275,821 1,277,769
Other assets 172,951 163,045 164,861
Total assets $2,122,334 $2,158,377 $2,068,247
Deposits $1,513,614 $1,541,112 $1,474,097
Federal funds purchased and other
short-term borrowings 83,926 86,016 80,755
Other borrowings 327,957 325,117 316,309
Other liabilities 26,702 31,984 28,595
Total liabilities 1,952,199 1,984,229 1,899,756
Shareholders' equity 170,144 174,148 168,491
Total liabilities and
shareholders' equity $2,122,343 $2,158,377 $2,068,247
End of period book
value per share(1) $23.15 $23.69 $22.82
End of period share value 17.62 23.99 27.00
End of period dividend yield(2) 7.49% 5.50% 4.89%

(1) Represents total equity divided by the number of shares outstanding at
the end of the period.
(2) Represents annualized dividend declared divided by the end of period
share value.
SOURCE Farmers Capital Bank Corporation

Doug Carpenter of Farmers Capital Bank Corporation, +1-502-227-1668