Exhibit 99.3 The Pro Forma Financial Information
Pro Forma Condensed Combined Financial Statements
Citizens First Corporation and Kentucky Banking Centers
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 2006
(Dollars in thousands)
| | Citizens First | Kentucky Banking Centers | Adjustments | | Pro Forma Combined |
Assets | | | | | |
| Cash and cash equivalents | $ 11,943 | $ 12,512 | $ 981 | A | $ 25,436 |
| Securities | 13,568 | 22,800 | 16 | B | 36,384 |
| Loans, net of unearned income | 162,545 | 81,416 | (849) | B | 243,112 |
| Allowance for loan losses | (1,931) | (1,115) | - | | (3,046) |
| Premises and equipment | 8,967 | 4,158 | (1,517) | B | 11,608 |
| Goodwill | 1,327 | - | 9,518 | D | 10,845 |
| Core deposit premium | - | - | 2,203 | C | 2,203 |
| Other assets | 2,768 | 4,612 | (1,579) | | 5,801 |
| Total assets | $199,187 | $124,383 | $ 8,773 | | $332,343 |
Liabilities and Stockholders’ Equity
Liabilities | | | | | |
| Deposits | | | | | |
| Non-interest bearing | $ 15,314 | $ 10,796 | - | | $ 26,110 |
| Interest bearing | 146,311 | 101,595 | (869) | B | 247,037 |
| Total deposits | 161,625 | 112,391 | (869) | | 273,147 |
| Other borrowed funds | 15,056 | 1,547 | (64) | B | 16,539 |
| Subordinated debentures | - | - | 5,000 | A | 5,000 |
| Other liabilities | 1,020 | 782 | (207) | B | 1,595 |
| Total liabilities | 177,701 | 114,720 | 3,860 | | 296,281 |
| | | | | | |
Stockholders’ Equity | | | | | |
| Preferred stock | 7,659 | - | - | | 7,659 |
| Common stock | 11,936 | 6,275 | 8,301 | A | 26,512 |
| Retained earnings | 2,222 | 3,453 | (3,453) | A | 2,222 |
| Accumulated other comprehensive income (loss) | (331) | (65) | 65 | A | (331) |
| Total stockholders’ equity | 21,486 | 9,663 | 4,913 | | 36,062 |
| Total liabilities and stockholders’ equity | $199,187 | $124,383 | $ 8,773 | | $332,343 |
Pro Forma Condensed Combined Financial StatementsCitizens First Corporation and Kentucky Banking Centers
Unaudited ProForma Condensed Combined Statement of Income
| | Citizens First | Kentucky Banking Centers | Adjustments | | Pro Forma Combined |
Interest Income | | | | | |
| Loans | $9,505 | $4,981 | $ 118 | E | $ 14,604 |
| Investment securities | 391 | 694 | - | F | 1,085 |
| Other | 416 | 417 | - | | 833 |
| Total interest income | 10,312 | 6,092 | 118 | | 16,522 |
Interest Expense | | | | | |
| Deposits | 3,391 | 2,418 | 48 | G | 5,857 |
| Borrowed funds | 444 | 45 | 266 | H | 755 |
| Total interest expense | 3,835 | 2,463 | 314 | | 6,612 |
Net Interest Income | 6,477 | 3,629 | (196) | | 9,910 |
Provision for Loan Losses | 60 | (39) | - | I | 21 |
Net Interest Income After Provision for Loan Losses | 6,417 | 3,668 | (196) | | 9,889 |
Noninterest Income | | | | | |
| Service charges on deposit accounts | 585 | 561 | - | | 1,146 |
| Other noninterest income | 622 | 271 | - | | 893 |
| Total noninterest income | 1,207 | 832 | | | 2,039 |
Noninterest Expense | | | | | |
| Salaries and employee benefits | 2,741 | 1,472 | | | 4,213 |
| Occupancy and equipment expense | 836 | 393 | (38) | J | 1,191 |
| Other | 1,608 | 1,175 | 290 | K | 3,073 |
| Total noninterest expense | 5,185 | 3,040 | 252 | | 8,477 |
Income Before Income Taxes | 2,439 | 1,460 | (448) | | 3,451 |
Provision for Income Taxes | 834 | 443 | (152) | L | 1,125 |
Net Income | 1,605 | 1,017 | (296) | M | 2,326 |
Dividends declared on preferred stock | 389 | - | - | | 389 |
Net income available to common stockholders | $1,216 | 1,017 | (296) | | $ 1,937 |
Basic Earnings per Share | $1.29 | | | | $0.98 |
Diluted Earnings per Share | $1.05 | | | | $0.91 |
Weighted average shares: | | | | | |
Basic | 940,621 | | 1,035,000 | N | 1,975,621 |
Diluted | 1,533,402 | | 1,035,000 | N | 2,568,402 |
Pro Forma Condensed Combined Financial Statements
Citizens First Corporation and Kentucky Banking Centers
Unaudited ProForma Condensed Combined Statement of Income
Twelve Months Ended December 31, 2005
(Dollars in Thousands Except Per Share Data)
| | Citizens First | Kentucky Banking Centers | Adjustments | | Pro Forma Combined |
Interest Income | | | | | |
| Loans | $10,499 | $5,956 | 157 | E | $16,612 |
| Investment securities | 472 | 1,062 | (16) | F | 1,518 |
| Other | 103 | 172 | | | 275 |
| Total interest income | 11,074 | 7,190 | 141 | | 18,405 |
Interest Expense | | | | | |
| Deposits | 2,906 | 2,743 | 224 | G | 5,873 |
| Borrowed funds | 447 | 65 | 291 | H | 803 |
| Total interest expense | 3,353 | 2,808 | 515 | | 6,676 |
| Net Interest Income | 7,721 | 4,382 | (374) | | 11,729 |
| Provision for Loan Losses | (200) | 195 | | I | (5) |
Net Interest Income After Provision for Loan Losses | 7,921 | 4,187 | (374) | | 11,734 |
Noninterest Income | | | | | |
| Service charges on deposit accounts | 808 | 744 | | | 1,552 |
| Other noninterest income | 668 | 326 | | | 994 |
| Total noninterest income | 1,476 | 1,070 | | | 2,546 |
Noninterest Expense | | | | | |
| Salaries and employee benefits | 3,005 | 1,726 | | | 4,731 |
| Occupancy and equipment expense | 801 | 535 | (51) | J | 1,285 |
| Other | 2,198 | 1,415 | 344 | K | 3,957 |
| Total noninterest expense | 6,004 | 3,676 | 293 | | 9,973 |
Income Before Income Taxes | 3,393 | 1,581 | (667) | | 4,307 |
Provision for Income Taxes | 1,156 | 435 | (227) | L | 1,364 |
Net Income | 2,237 | $1,146 | (440) | M | 2,943 |
Dividends declared on preferred stock | 520 | | | | 520 |
Net income available to common stockholders | $1,717 | $1,146 | (440) | | $2,423 |
Basic Earnings per Share | $1.83 | | | | $1.23 |
Diluted Earnings per Share | $1.47 | | | | $1.15 |
Weighted average shares: | | | | | |
Basic | 936,847 | | 1,035,000 | N | 1,971,847 |
Diluted | 1,516,586 | | 1,035,000 | N | 2,551,586 |
Citizens First Corporation and Kentucky Banking Centers
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1 Basis of Presentation and Kentucky Banking Center, Inc. Acquisition
Basis of presentation
On June 1, 2006, we entered into a stock purchase agreement with Farmers Capital Bank Corporation to acquire its wholly owned subsidiary Kentucky Banking Centers, Inc. (“KBC”), a Kentucky-chartered bank headquartered in Glasgow, KY for a net purchase price of $18.6 million. The Company funded the acquisition of KBC from the net proceeds of a public offering of stock and the proceeds from the issuance of trust preferred securities. The unaudited pro forma condensed combined financial statements give effect to the acquisition by the Company of KBC in a business combination accounted for under the purchase method of accounting.
The unaudited pro forma condensed combined balance sheet reflects the proposed purchase as if it had occurred on September 30, 2006, while the unaudited pro forma condensed combined statements of income for the year ended December 31, 2005 and for the nine months ended September 30, 2006 reflect the proposed purchase as if it had occurred on January 1, 2005. Described below is the pro forma estimate of the proceeds from the public offering of common stock and of the total purchase price of the transaction as well as adjustments to allocate the purchase price based on preliminary estimates of the fair values of the assets and liabilities of KBC. The estimates will be refined and updated as the date of the transaction and the final values indicated in the pro forma condensed combined financial data may be more or less depending on operating results, changes in market conditions and other factors.
Described below is the pro forma estimate of the net proceeds of common stock and the total purchase price of the transaction as well as adjustments to allocate the purchase price based on preliminary estimates of fair values of the assets and liabilities of KBC. All amounts are in thousands.
| | | | | |
| | $ | 16,560 | |
| Offering costs | | | (1,984 | ) |
| Net proceeds | | $ | 14,576 | |
| | | | | |
| Purchase price | | $ | 20,000 | |
| Adjustment for Bank Owned Life Insurance retained by owner | | | (1,579 | ) |
| Acquisition related charges | | | 174 | |
| Other adjustments | | | 23 | |
| Adjusted purchase price | | | 18,618 | |
| | |
| Net assets of KBC based on historical carrying amounts as of September 30, 2006 | | $ | 9,663 | |
| Capital injection by Farmers into KBC made prior to closing | | | 629 | |
| Increase (decrease) in net assets to reflect estimated fair value adjustments under the purchase method of accounting: | | | | |
| Bank owned life insurance retained by owner | | | (1,579 | ) |
| Other adjustments | | | 23 | |
| Securities | | | 16 | |
| Loans | | | (849 | ) |
| Deposits | | | 240 | |
| Premises and equipment, net | | | (1,517 | ) |
| FHLB borrowings | | | 64 | |
| Deferred taxes | | | 207 | |
| Identified intangible assets (Note 2C) | | | 2,203 | |
| Net assets of KBC adjusted for fair value | | $ | 9,100 | |
| | | | | |
| Goodwill | | $ | 9,518 | |
Except as discussed in Note 2, there are no adjustments to other asset or liability groups, and the book values approximate fair values.
The merger will be accounted under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”), and SFAS 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). In accordance with SFAS No. 142, intangible assets other than goodwill (such as core deposit intangibles) must be amortized over their estimated useful lives. Goodwill will not be amortized to expense, but instead will be reviewed for impairment at least annually and to the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge to earnings will be made.
| Note 2 | Purchase Accounting and Pro Forma Adjustments |
| | A | Reflects the issuance of 1,035,000 shares of Citizens First Corporation no par value common stock at a price of $16.00 per share less the underwriting discount and offering expenses, cash consideration of $18.6 million paid in association with the purchase of KBC plus the estimated acquisition costs of $174 thousand associated with the transaction, and the elimination of KBC’s equity accounts. |
| | | | | |
| | $ | 16,560 | |
| Less offering expenses: | | | | |
| Underwriting discount | | | 1,083 | |
| Investment banking | | | 361 | |
| Printing | | | 73 | |
| Legal | | | 166 | |
| Accounting | | | 185 | |
| Other | | | 116 | |
| Total offering expenses | | | 1,984 | |
| | | | | |
| Net proceeds from offering of common stock | | $ | 14,576 | |
| | | | | |
| Cash adjustment reconciliation: | | | | |
| Net proceeds from offering of common stock | | $ | 14,576 | |
| Proceeds from issuance of subordinated debentures | | | 5,000 | |
| Cash paid to KBC shareholder | | | (18,421 | ) |
| Acquisition related charges | | | (174 | ) |
| Total | | $ | 981 | |
| | | | | |
| Represents adjustment to record the purchase accounting costs, as follows: | |
| | | 56 | |
| Accounting fees | | | 71 | |
| Other acquisition related charges | | | 47 | |
| Total acquisition costs | | $ | 174 | |
| | | | | |
| | B | Represents the recording of estimated fair value adjustments relating to KBC's premises and equipment, investment securities, loans and deposits and eliminate deferred tax liabilities. Final valuations could differ significantly. |
| | C | Represents the adjustment to record the core deposit intangible which is calculated on KBC’s transaction deposits excluding time deposits. Additionally, an intangible related to customer relationships is being evalulated. |
| | D | Represents the adjustment to record the goodwill related to the transaction. |
| | E | Represents the adjustment to record the amortization of the fair value adjustment on acquired loans over their expected average life of 43 months. |
| | F | Represents the adjustment to record the amortization of the fair value adjustment on acquired investments over their expected average life of 12 months. |
| | G | Represents the adjustment to record the amortization of the fair value adjustment on acquired time deposits over their expected average life of 14 months. In addition, the replacement of KBC’s interest bearing intercompany deposit with its holding company (at a rate of 0.50%) with other short-term borrowed funds will increase its cost of funds. The additional interest expense is $14 and $12 for the year ended December 31, 2005 and nine months ended September 30, 2006, respectively. These amounts are based on an average federal funds rate of 2.75% for 2005 and 4.75% for 2006 based on an average balance of $516,000 for the year ended December 31, 2005 and for the nine months ended September 30, 2006. |
| | H | Represents the adjustment to record the interest on trust preferred securities issued for $5 million using a coupon rate of 165 basis points over LIBOR (London Inter-Bank Offering Rate). The interest expense is calculated on an average rate of 5.64% for 2005 and 6.91% for 2006. Also represents the fair value adjustment on FHLB advances over their expected average life of 84 months. |
| | I | The unaudited pro forma condensed combined income statements contain no adjustments to the provision for loan losses for the year ended December 31, 2005 or for the nine months ended September 30, 2006. However, the determination of the level of any bank’s allowance for loan losses is a subjective process that involves both quantitative and qualitative factors. CFC’s preliminary analysis performed during due diligence has revealed that there are certain differences in the methodologies employed by CFC and KBC in determining the levels of their respective allowances for loan losses. In connection with preparation for combining CFC and KBC, CFC will complete its analysis of their allowances for loan losses and further analyze the attributes of the combined loan portfolio. |
| | J | Represents the adjustment to record the amortization of the fair value adjustment on acquired premises and equipment over their expected average life of 360 months. |
| | K | Represents the amortization of core deposit intangible. The Company estimates these (assuming an acquisition date of September 30, 2006) would be amortized on an accelerated basis over 8 years. |
| | L | Represents estimated tax savings at a combined rate of 34%. |
| | M | The unaudited pro forma condensed combined income statements for the year ended December 31, 2005 or for the nine months ended September 30, 2006 do not give effect to the anticipated cost savings or other operating synergies in connection with this transaction. Certain costs disclosed in Note 2 of the KBC financial statements paid to related parties may no longer be incurred. Although we believe there will be some net savings, pro forma amounts have been disclosed based on historical operating results of KBC. |
| | N | Represents the increase in the number of shares outstanding for the issuance of 1,035,000 shares in the offering of common stock. |
