Message from the Chairman
February 28, 2011
Dear Stockholder:
2010 was another difficult year in the banking industry. The declining housing market and a continued deterioration in the commercial real estate market negatively impacted the financial industry's credit quality. Our asset quality, however, remained solid and continues to compare favorably to our peer group.
The bank's net earnings were $315,771 for 2010 versus $1,241,526 for the year 2009. The reason for the decline in earnings was that total loan loss provisions were approximately $3.75 million. Even though the large provision was required, the fact that we still produced some, albeit small earnings, gives us optimism about potential profits for 2011 and beyond.
We continued to shift more of our deposits into checking and money market accounts, which lowered our cost of funds and improved our net interest margin. Transaction accounts grew by almost $50 million, which allowed us to decrease high cost certificates of deposit by nearly $11 million and pay off $38 million in high cost Federal Home Loan Bank advances. Deposit growth contributed to greatly increased liquidity for the year, ending the year at just less than 15% liquidity. Our net interest margin grew from 2.69% at the end of 2009 to 3.04% in December 2010, a substantial increase that we expect to result in improved earnings.
The bank originated almost $100 million in mortgage and commercial loans in 2010. Net loans increased by over $9.7 million during the year.
First Capital Bank of Kentucky continues to take great pride in its community involvement and strives to give back to each community in which its employees live and work. In 2010, 1,050 community service hours were performed by an average staff of 78. Each year community involvement ranks as a major bank objective, and our management team is committed to emphasizing the importance of employees' participation in community and civic events.
We welcome the opportunity to do business with any customers you may send our way. As always, we appreciate your continued support. Please feel free to call me at any time.
Sincerely,
H. David Hale
Chairman, President & CEO
