-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RIdhHmm8Mz3vpc1kRwPI22cTV5bFE0SZYI50jtZsON9fx/uJQKeXhvxde8s0e7SC 7na/K98UrtX9fdsPN2L0Qw== 0000713095-97-000010.txt : 19970513 0000713095-97-000010.hdr.sgml : 19970513 ACCESSION NUMBER: 0000713095-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMERS CAPITAL BANK CORP CENTRAL INDEX KEY: 0000713095 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 611017851 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14412 FILM NUMBER: 97600710 BUSINESS ADDRESS: STREET 1: PO BOX 309 STREET 2: 202 W MAIN ST CITY: FRANKFORT STATE: KY ZIP: 40602 BUSINESS PHONE: 5022271668 MAIL ADDRESS: STREET 1: P O BOX 309 STREET 2: 202 WEST MAIN STREET CITY: FRANKFORT STATE: KY ZIP: 40602 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File Number 0-14412 Farmers Capital Bank Corporation (Exact name of registrant as specified in its charter) Kentucky 61-1017851 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) P.O. Box 309, 202 West Main Street Frankfort, Kentucky 40602 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (502)227-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, par value $0.25 per share 3,788,920 shares outstanding at April 22, 1997 TABLE OF CONTENTS Part I - Financial Information Page No. Item 1 - Financial Statements Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Consolidated Statements of Income - For the Three Months Ended March 31, 1997 and March 31, 1996 4 Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 1997 and March 31, 1996 5 Notes to the Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 1 - Legal Proceedings 13 Item 6 - Exhibits and Reports on Form 8-K 13 FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data) (unaudited) March 31, December 31, 1997 1996 ASSETS Cash and cash equivalents: Cash and due from banks $ 73,777 $ 52,073 Interest bearing deposits in other banks 1,718 758 Federal funds sold and securities purchased under agreements to resell 53,090 69,915 Total cash and cash equivalents 128,585 122,746 Investment securities: Available for sale 117,713 109,291 Held to maturity 101,381 111,609 Total investment securities 219,094 220,900 Loans 560,161 567,447 Less: Allowance for loan losses (8,463) (8,741) Unearned income (9,024) (9,198) Loans, net 542,674 549,508 Bank premises and equipment 20,169 19,320 Interest receivable 7,301 8,129 Other assets 5,677 4,716 TOTAL ASSETS $ 923,500 $ 925,319 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $ 124,309 $ 103,488 Interest bearing 642,721 682,822 Total deposits 767,030 786,310 Other borrowed funds 36,260 20,165 Dividends payable 1,556 1,558 Interest payable 2,161 2,204 Other liabilities 5,570 5,486 Total liabilities 812,577 815,723 SHAREHOLDERS' EQUITY Common stock par value $0.25 per share 4,804,000 shares authorized; 3,789,020 and 3,796,982 shares issued and outstanding at March 31, 1997 and December 31, 1996 947 949 Capital surplus 8,913 8,931 Retained earnings 101,612 100,078 Net unrealized loss on securities available for sale, net of tax (549) (362) Total shareholders' equity 110,923 109,596 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 923,500 $ 925,319 See notes to the consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (unaudited) Three Months Ended March 31, 1997 1996 INTEREST INCOME Interest and fees on loans $ 12,906 $ 13,309 Interest on investment securities: Taxable 2,130 2,196 Nontaxable 769 679 Interest on deposits in other banks 19 11 Interest on federal funds sold and securities purchased under agreements to resell 739 771 Total interest income 16,563 16,966 INTEREST EXPENSE Interest on deposits 6,565 6,936 Interest on other borrowed funds 303 387 Total interest expense 6,868 7,323 Net interest income 9,695 9,643 Provision for loan losses 568 1,270 Net interest income after provision for loan losses 9,127 8,373 NONINTEREST INCOME Service charges and fees on deposits 1,302 1,226 Other service charges, commissions, and fees 997 861 Trust income 271 166 Securities gains 10 Other 692 634 Total noninterest income 3,262 2,897 NONINTEREST EXPENSE Salaries and employee benefits 4,030 4,215 Occupancy expenses, net 483 551 Equipment expenses 695 660 Data processing expense 250 144 Bank franchise tax 211 261 Deposit insurance expense 21 3 Other 1,943 2,013 Total noninterest expense 7,633 7,847 Income before income taxes 4,756 3,423 Income tax expense 1,365 968 NET INCOME $ 3,391 $ 2,455 Per common share: Net income $ .89 $ 0.64 Dividends declared $ .41 $ 0.36 Weighted average shares outstanding 3,795 3,866 See notes to the consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands except per share data) (unaudited) Three Months Ended March 31, 1997 1996 Cash flows from operating activities: Net income $ 3,391 $ 2,455 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 624 631 Net amortization of securities premiums and discounts: Available for sale 10 (149) Held to maturity 22 46 Provision for loan losses 568 1,270 Deferred income tax benefit (1) Securities gain on call: Held to maturity (10) Changes in: Interest receivable 828 347 Other assets (996) 1,195 Interest payable (43) (3) Other liabilities 84 295 Net cash provided by operating activities 4,487 6,077 Cash flows from investing activities: Proceeds from maturity or call of investment securities: Available for sale 26,052 48,544 Held to maturity 11,932 12,635 Proceeds from sale of investment securities: Available for sale 66 Purchase of investment securities: Available for sale (34,832) (64,342) Held to maturity (1,726) (7,542) Net decrease in loans receivable 6,266 5,006 Purchase of bank premises and equipment (1,345) (363) Proceeds from sale of equipment 3 Net cash provided by (used in) investing activities 6,416 (6,062) Cash flows from financing activities: Net decrease in deposits (19,280) (2,547) Dividends paid (1,557) (1,392) Purchase of common stock (322) Net increase (decrease) in other borrowed funds 16,095 (5,104) Net cash used in financing activities (5,064) (9,043) Net change in cash and cash equivalents 5,839 (9,028) Cash and cash equivalents at beginning of year 122,746 110,184 Cash and cash equivalents at end of period $ 128,585 $ 101,156 Supplemental disclosures: Cash paid during the period for: Interest $ 6,941 $ 7,326 Income taxes 189 None Cash dividend declared and unpaid 1,556 1,392 See notes to the consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements include the accounts of Farmers Capital Bank Corporation (the "Company"), a bank holding company, and its subsidiaries, including its principal subsidiary, Farmers Bank & Capital Trust Company. All significant intercompany transactions and accounts have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company's net interest income and the value of its recorded assets and liabilities. Actual results could differ from those estimates used in the preparation of the financial statements. The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and the footnotes required by generally accepted accounting principles for complete statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. NOTE 2 - RECLASSIFICATIONS Certain reclassifications have been made to the consolidated financial statements of prior periods to conform to the current period presentation. These reclassifications do not affect net income or shareholders' equity as previously reported. NOTE 3 - ADOPTION OF NEW ACCOUNTING PRINCIPLES On January 1, 1997, the Company implemented Statement of Financial Accounting Standard ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extingishments of Liabilities." Under this standard, accounting for transfers and servicing of financial assets and extinguishments of liabilities is based on control. After a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered and derecognizes liabilities when extinguished. The implementation of SFAS No. 125 did not have a material effect on the Company's financial statements. FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Quarter 1997 vs. First Quarter 1996 The Company reported earnings of $3.4 million, or $.89 per share, for the first quarter of 1997 compared to earnings of $2.5 million, or $.64 per share for the first quarter of 1996. A reduction in the provision for loan losses of $702 thousand and the recovery of legal fees in the amount of $189 thousand contributed significantly to the increase in earnings for the first quarter of 1997 compared to the first quarter of 1996. Return on average assets was 1.51% for the first quarter of 1997, compared to 1.10% reported for the same period of 1996. Return on average equity was 12.48% for the first quarter of 1997, an increase from 9.37% during the same period of 1996. STATEMENT OF INCOME REVIEW Net Interest Income Net interest income totaled $9.7 million for the first quarter of 1997 compared to $9.6 million for the first quarter 1996. Interest and fees on loans decreased $403 thousand or 3.0%. This decrease relates primarily to the sale of Money One, The Company's consumer finance subsidiary, in 1996. Interest on taxable securities decreased $66 thousand, or 3.0% and interest on nontaxable securities is up $90 thousand, or 13.3%. Interest on short term investments is down $32 thousand, or 4.2%. Interest expense on deposits is down $371 thousand, or 5.3%. This decrease is partially due to the repricing of a substantial base of the Company's Certificates of Deposit. Interest on short term borrowings is down $84 thousand, or 21.7%. The net interest margin (net interest income as a percentage of average earning assets), decreased to 4.94% during the first quarter of 1997 compared to 4.99% in the first quarter of 1996. The spread between rates earned and paid decreased to 4.20% compared to 4.26% in the first quarter of 1996. Asset Quality The provision for loan losses decreased $702 thousand or 55.3% compared to the first quarter 1996. The Company had net charge-offs of $846 thousand in the first quarter of 1997 compared to net charge-offs of $934 thousand in the same period of 1996. The allowance for loan losses was 1.54% of net loans in the first quarter of 1997, down 3 basis points from year end 1996. Management feels the current reserve is adequate to cover any potential future losses within the loan portfolio. Management also continues to emphasize collection efforts and evaluation of risks within the portfolio. Noninterest Income Noninterest income of $3.3 million increased $365 thousand, or 12.6% from the first quarter of 1996. A refund of legal fees expensed in prior periods of $189 thousand contributed significantly to the increase. Service charges on deposits of $1.3 million increased $76 thousand or 6.2% from the first quarter of 1996. Other service charges, commissions, and fees increased $136 thousand or 16% to $997 thousand from the first quarter of 1996. Trust fees increased $105 thousand, or 63% to $271 thousand. This is primarily the result of reporting income from trust services on the accrual basis of accounting instead of the cash basis which had been used in prior periods. The Company believes the accrual basis of accounting better reflects the income earned on trust services, and does not believe the change will be material for the year ended December 31, 1997. Noninterest Expense Total noninterest expenses decreased $214 thousand or 2.7% from the first quarter of 1996 to $7.6 million. Salaries and benefits, the largest component of noninterest expense, decreased $185 thousand, or 4.4%. Occupancy expense, net of rental income, decreased $68 thousand to $483 thousand. These reductions are primarily the result of the sale of Money One, the Company's consumer finance subsidiary, during 1996. Equipment expenses increased $35 thousand, or 5.3%. Data processing expense increased 74% from $144 thousand to $250 thousand for the first quarter of 1997. The increase is primarily attributable to an increase in credit card interchange and processing. Bank franchise taxes decreased $50 thousand, or 19.2%. FDIC insurance expense increased $18 thousand to 21 thousand for the first quarter of 1997. Income taxes Income tax expense increased $397 thousand, or 41.0% from the first quarter of 1996 to $1.4 million. The first quarter 1997 effective tax rate was 28.7%, up slightly from 28.3% in the first quarter of 1996. BALANCE SHEET REVIEW Total assets were $924 million on March 31, 1997, less than a 1% decrease from December 31, 1996. Assets averaged $912 million for the first quarter of 1997, an increase of $13 million, or 1.4% from year end 1996. Loans Loans, net of unearned income, decreased $7.1 million, or 1.3% from December 31, 1996 to $551 million. On average, loans represented 67.5% of earning assets compared to 67.0% for year end 1996. When loan demand is down, the available funds are redirected to either temporary investments or investment securities. Temporary Investments Federal funds sold and securities purchased under agreements to resell averaged $58.9 million, an increase of $7.3 million, or 14.2% from year end 1996. Investment Securities Investment securities were $219 million on March 31, 1997, a decrease of $1.8 million, or less than 1% from year end 1996. Available for sale and held to maturity securities were $118 and $101 million, respectively. Investment securities averaged $211 million for the first quarter of 1997, a decrease of $7.1 million, or 3.3% from year end 1996. The net unrealized loss on securities available for sale, net of taxes, was $549 thousand on March 31, 1997, as compared to $362 thousand on December 31, 1996. Nonperforming assets Nonperforming assets totaled $5.8 million on March 31, 1997, down $800 thousand or 11.1% from $6.6 million at year end 1996. Nonperforming assets to total equity decreased from 6.1% at year end 1996 to 5.3% at March 31, 1997. Nonperforming assets as a percentage of loans and other real estate decreased from 1.18% at year end to 1.06%. The Company's loan policy includes strict guidelines for approving and monitoring loans. This along with management's efforts to improve the quality of the loan portfolio has decreased the Company's nonperforming assets 66.6% since December 31, 1992. Other real estate owned which had a zero balance at year end 1996, increased to $93 thousand on March 31, 1997. Deposits Total deposits decreased $19.3 million, or 2.5%, from year end 1996 to $767 million. The Company's lead bank, Farmers Bank & Capital Trust Company, is the depository of the Commonwealth of Kentucky in Frankfort. As such, fluctuations in deposits are not unexpected. Deposits averaged $768 million, an increase of $14.5 million, or 1.9% from year end 1996. Borrowed Funds Borrowed funds totaled $36.3 million, an increase of $16.1 million, or 79.8% from year end 1996. This increase is due to repurchase agreements with the Commonwealth of Kentucky. The fluctuations are due to the relationship with the Commonwealth of Kentucky as described above. Borrowed funds averaged $27 million, a decrease of $2.4 million, or 0.1%. Shareholders' Equity Shareholders' equity was $111 million on March 31, 1997, increasing $1 million from year end 1996. The Company purchased 7,962 shares of its outstanding common stock during the first quarter of 1997 for a total cost of $322 thousand. Dividends of $1.6 million were declared during the first quarter of 1997. The Company's capital ratios as of March 31, 1997, the regulatory minimums and the regulatory standard for a "well capitalized" institution are as follows: Farmers Capital Regulatory Well Bank Corporation Minimum Capitalized Tier 1 risk based 18.43% 4.00% 6.00% Total risk based 19.68% 8.00% 10.00% Leverage 12.01% 4.00% 5.00% The capital ratios of all the subsidiary banks, on an individual basis, were in excess of the applicable minimum regulatory capital ratio requirements at March 31, 1997. Liquidity The liquidity of the Company is dependent on the receipt of dividends from its subsidiary banks. Management expects that in the aggregate its subsidiary banks will continue to have the ability to dividend adequate funds to the Company during the remainder of 1997. The Company's objective as it relates to liquidity is to insure that subsidiary banks have funds available to meet deposit withdrawals and credit demands without unduly penalizing profitability. In order to maintain a proper level of liquidity, the banks have several sources of funds available on a daily basis which can be used for liquidity purposes. These sources of funds are: 1. The banks' core deposits consisting of both business and nonbusiness deposits 2. Cash flow generated by repayment of loan principal and interest 3. Federal funds purchased and securities sold under agreements to repurchase For the longer term, the liquidity position is managed by balancing the maturity structure of the balance sheet. This process allows for an orderly flow of funds over an extended period of time. EFFECT OF IMPLEMENTING RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128 "Earnings Per Share" and SFAS No. 129 "Disclosure of Information About Capital Structure." SFAS No. 128 simplifies the computation of earnings per share ("EPS") by replacing the presentation of primary EPS with a presentation of basic EPS. The Statement requires dual presentation of basic and diluted EPS by entities with complex capital structures. Basic EPS includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted EPS. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods, and requires restatement of all prior period EPS data presented. The Company does not expect the implementation of this Statement to have a material effect on the consolidated financial statements. SFAS No. 129 establishes standards for disclosing information about an entity's capital structure. This Statement contains no change in disclosure requirements for companies that were subject to previously existing requirements. This Statement was issued to eliminate the exemption of nonpublic entities from certain previously issued disclosure requirements. This Statement is effective for financial statements for periods ending after December 15, 1997. This Statement will not have an effect on the Company's consolidated financial statements. Part II ITEM 1 - LEGAL PROCEEDINGS There are no significant changes in contingencies or commitments, including pending litigation to report at this time. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - none b) Reports on Form 8-K On March 7, 1997 the Company filed a report on Form 8-K pursuant to Item 5 of that form. The Company reported, as a result of a formal proposal process, the appointment of KPMG Peat Marwick LLP as its principal accountants. The appointment of KPMG Peat Marwick LLP was approved by the Company's Board of Directors. The Company also reported that there were no disagreements with its former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure or any reportable events. No financial statements were filed as part of that form. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 12, 1997 /s/ Charles S. Boyd Charles Scott Boyd, President and CEO (Principal Executive Officer) Date: May 12, 1997 /s/ C. Douglas Carpenter Cecil Douglas Carpenter Vice President and CFO (Principal Financial and Accounting Officer) EX-27 2
9 This schedule contains summary financial information extracted from the March 31, 1997 financial statements and is qualified in its entirety by reference to such financial statements. 1000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 73777 1718 53090 0 117713 101381 100233 551137 8463 923500 767030 32859 9287 3401 947 0 0 109976 923500 12906 2899 758 16563 6565 6868 9695 568 0 7633 4756 4756 0 0 3391 .89 .89 4.94 2712 1163 1799 0 8741 1098 252 8463 8463 0 0
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