-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GTzhYqmqHX8MCCDb0npKmfYfwRtcA1LJ1Yk2f8JGi17aijcvgsKreh8bQv/LRnse 5jXL9Nha2uAqa1TWdKBSow== 0000713095-94-000009.txt : 19940816 0000713095-94-000009.hdr.sgml : 19940816 ACCESSION NUMBER: 0000713095-94-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMERS CAPITAL BANK CORP CENTRAL INDEX KEY: 0000713095 STANDARD INDUSTRIAL CLASSIFICATION: 6022 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: 94543907 BUSINESS ADDRESS: STREET 1: W MAIN ST PO BOX 309 STREET 2: ONE FARMERS BANK PLZ CITY: FRANKFORT STATE: KY ZIP: 40602 BUSINESS PHONE: 5021171600 MAIL ADDRESS: STREET 1: P O BOX 309 STREET 2: WEST MAIN STREET CITY: FRANKFORT STATE: KY ZIP: 40602 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 June 30, 1994 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 No.) incorporation or organization) P.O. Box 309, 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 report) 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 3,866,382 shares outstanding at August 12, 1994 TABLE OF CONTENTS Part I - Financial Information Page No. Item 1 - Financial Statements Consolidated Balance Sheets June 30, 1994 and December 31, 1993 3 Consolidated Statements of Income - For the Six Months Ended June 30, 1994 and June 30, 1993 4 Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 1994 and June 30, 1993 5 Notes to 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 14 Item 6(b) - Reports on Form 8-K 14 FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data) (unaudited) June 30, December 31, 1994 1993 ASSETS Cash and cash equivalents: Cash and due from banks $ 47,685 $ 43,171 Federal Funds sold and securities purchased under agreement to resell 48,513 54,613 Total cash and cash equivalents 96,198 97,784 Investment securities 184,528 188,866 Loans and lease financings 524,119 490,345 Less: Allowance for loan losses (8,980) (8,547) Unearned income (10,126) (8,708) Net loans and lease financings 505,013 473,090 Bank premises and equipment 20,037 20,504 Interest receivable 6,599 6,420 Other assets 6,646 7,605 TOTAL ASSETS $819,021 $794,269 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $107,055 $ 92,128 Interest bearing 574,090 566,111 Total deposits 681,145 658,239 Other borrowed funds 31,581 32,637 Dividends payable 1,160 1,160 Interest payable 1,405 1,475 Other liabilities 6,397 5,667 Total liabilities 721,688 699,178 SHAREHOLDERS' EQUITY Common stock, par value $.25 per share 4,804,000 shares authorized; 3,866,382 shares issued and outstanding at June 30, 1994 and December 31, 1993 967 967 Capital surplus 9,094 9,094 Retained earnings 87,524 85,030 Unrealized net loss on securities available for sale (252) Total shareholders' equity 97,333 95,091 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $819,021 $794,269 See notes to consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (unaudited) Quarter Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 INTEREST INCOME Interest and fees on loans $11,325 $10,691 $22,141 $21,241 Interest on investment securities: Taxable 1,457 1,969 2,963 4,109 Nontaxable 590 346 1,130 628 Interest on deposits in other banks 2 12 25 19 Interest on federal funds sold and securities purchased under agreements to resell 489 542 958 1,242 Total interest income 13,863 13,560 27,217 27,239 INTEREST EXPENSE Interest on deposits 4,795 5,210 9,562 10,744 Interest on federal funds purchased and securities sold under agreements to repurchase 253 199 490 395 Other 56 26 87 74 Total interest expense 5,104 5,435 10,139 11,213 Net interest income 8,759 8,125 17,078 16,026 Provision for loan losses 419 1,012 1,066 1,840 Net interest income after provision for loan losses 8,340 7,113 16,012 14,186 NONINTEREST INCOME Service charges and fees 990 1,092 1,931 2,141 Trust income 349 197 574 472 Investment securities gains (losses) (36) (75) 51 Other 2,039 1,365 3,407 2,748 Total noninterest income 3,342 2,654 5,837 5,412 NONINTEREST EXPENSE Salaries and employee benefits 3,882 3,883 7,654 7,336 Occupancy expenses, net of rental income 534 486 1,040 986 Equipment expense 610 647 1,266 1,341 Bank shares tax 269 237 529 472 FDIC insurance 374 396 749 791 Other 1,809 1,968 3,740 3,854 Total noninterest expense 7,478 7,617 14,978 14,780 Income before income taxes and cumulative effect of change in accounting principle 4,204 2,150 6,871 4,818 Income tax expense 1,260 621 2,058 1,406 Income before cumulative effect of change in accounting principle 2,944 1,529 4,813 3,412 Cumulative effect of change in accounting principle 380 NET INCOME $ 2,944 $ 1,529 $ 4,813 $ 3,792 Per common share: Income before cumulative change in accounting principle $0.76 $0.40 $1.24 $0.88 Cumulative effect of change in accounting principle .10 Net income $0.76 $0.40 $1.24 $0.98 Dividends declared $0.30 $0.27 $0.60 $0.54 Weighted average shares outstanding 3,866 3,866 3,866 3,866 See notes to consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (unaudited) Six Months Ended June 30, 1994 1993 Cash flows from operating activities Net Income $ 4,813 $ 3,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,291 1,379 Net amortization of investment securities premiums and discounts: Available for sale 110 Held to maturity 158 542 Provision for loan losses 1,066 1,840 Deferred income tax (27) (309) Loss (gain) on sale of fixed assets 5 (1) Loss (gain) on sale of securities: Available for sale 78 Held to maturity (3) (51) Changes in: Interest receivable (179) 197 Other assets 816 140 Interest payable (70) (241) Other liabilities 730 1,531 Net cash provided by operating activities 8,788 8,819 Cash flows from investing activities Proceeds from maturity of investment securities: Available for sale 22,678 Held to maturity 19,457 40,255 Proceeds from sale of investment securities: Available for sale 11,603 Held to maturity 8,998 Purchase of investment securities: Available for sale (26,971) Held to maturity (23,137) (60,425) Net increase in loans (32,989) (5,900) Purchase of bank premises and equipment (555) (792) Proceeds from sale of equipment 10 16 Net cash used in investing activities (29,904) (17,848) Cash flows from financing activities: Net increase in deposits 22,906 3,101 Dividends paid (2,320) (2,088) Net decrease in securities sold under agreements to repurchase (1,056) (10,345) Decrease in debt (3,775) Net cash provided by (used in) financing activities 19,530 (13,107) Net change in cash and cash equivalents (1,586) (22,136) Cash and cash equivalents at beginning of year 97,784 166,001 Cash and cash equivalents at end of period $ 96,198 $143,865 Supplemental disclosures: Cash paid during the year for: Interest $ 10,445 $ 11,454 Income taxes 2,255 1,573 See notes to consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation, have been included. Operating results for the period ended June 30, 1994 are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. 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, 1993. NOTE 2 - BOND CLAIM During 1991, First Citizens Bank, Hardin County (the "Bank"), a subsidiary of the Company, filed a bond claim for $6,800,000 with its bonding company to recover losses incurred in 1990 resulting from an apparent scheme to defraud the bank. After exhaustive efforts to settle claim with the bonding company, the Bank initiated litigation during the first quarter of 1992 against the bonding company. During the third quarter of 1993, the Company reached a settlement in the amount of $5,279,000 which was accounted for as a loan loss recovery. Loan loss recoveries result in an increase in the Allowance for Loan Losses (Allowance). The Allowance was subsequently adjusted to the amount necessary, as determined by management, to absorb possible future losses on the total loans currently outstanding. NOTE 3 - EFFECT OF IMPLEMENTING SFAS NO. 114 In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan ("SFAS 114"), which addresses the accounting by creditors for impairment of a loan by specifying how allowances for credit losses related to certain loans should be determined. This Statement also addresses the accounting by creditors for all loans that are restructured in a troubled debt restructuring involving a modification of terms of a receivable. An impaired loan shall be measured by the present value of expected future cash flows using the loan's effective interest rate, except that as a practical expedient, it may be measured on the fair market value of the loan if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment, an impairment will be recognized by creating a valuation allowance with a corresponding charge to bad debt expense. SFAS 114 shall be effective for fiscal years beginning after December 15, 1994. The impact on the financial statements is not known at this time. NOTE 4 - INVESTMENT SECURITIES Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. Accordingly, debt securities in which the company does not have the positive intent or ability to hold to maturity are classified as securities available for sale and are carried at market value. Unrealized gains and losses on securities available for sale are reported as a separate component of shareholders' equity, net of tax effect. Prior to the adoption of this statement, securities were carried at amortized cost. The following summarizes the amortized cost and estimated fair values of the securities portfolio at June 30, 1994. The summary is divided into available for sale and held to maturity securities. Investment securities - available for sale Gross Gross Estimated Amortized Unrealized Unrealized Fair June 30, 1994 (In thousands) Cost Gains Losses Value U.S. Treasury $28,117 $27 $134 $28,010 Obligations of U.S. Government agencies 45,670 0 275 45,395 Other securities 620 0 0 620 Total securities available for sale $74,407 $27 $409 $74,025 Investment securities - held to maturity Gross Gross Estimated Amortized Unrealized Unrealized Fair June 30, 1994 (In thousands) Cost Gains Losses Value U.S. Treasury $ 38,608 $ 19 $ 500 $ 38,127 Obligations of U.S. Government agencies 17,981 36 708 17,309 Obligations of states and political subdivisions 49,892 652 1,091 49,454 Mortgage-backed securities 2,221 0 134 2,087 Other securities 1,801 2 26 1,777 Total securities held to maturity $110,503 $ 709 $2,459 $108,754 The following summarizes the amortized cost and estimated fair values of the securities portfolio at December 31, 1993. On December 31, 1993, the securities were carried at amortized cost. (In thousand) Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 1993 Cost Gains Losses Value U.S. Treasury $ 67,355 $ 431 $ 32 $ 67,754 Obligations of U.S. Government agencies 68,529 215 60 68,684 Obligations of states and political subdivisions 46,081 1,098 220 46,959 Mortgage-backed securities 5,792 12 46 5,758 Other securities 1,109 26 1,135 Total securities $188,866 $1,782 $358 $190,290 5. NONRECURRING EVENT Net income after taxes during the second quarter of 1994 was increased by $503,000 due to a nonrecurring recovery of prior year lossed FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER 1994 VS. SECOND QUARTER 1993 The Company reported earnings of $2.9 million, or $.76 per share, for the second quarter of 1994 compared to $1.5 million, or $.40 per share one year ago. Net income after taxes during the second quarter of 1994 was increased by $503,000, due to a nonrecurring recovery of prior year losses. Return on average assets and return on average equity for the second quarter of 1994 was 1.42% and 12.22%, respectively, an increase from .75% and 6.75% for the same period in 1993. Net Interest Income Net interest income totaled $8.8 million for the second quarter of 1994, compared to 8.1 million one year ago. The net interest margin (net interest income as a percentage of average earning assets), increased 4.99% compared to 4.74% a year ago while the spread between rates earned and paid increased to 4.46% from 4.22% Asset Quality The provision for loan losses decreased $593 thousand compared to the second quarter of 1993, which is a reflection of the quality of the loan portfolio. The Corporation had net charge-offs of $154 thousand during the quarter compared to net charge-offs of $766 thousand during the same time period in in 1993. Management continues to emphasize collection efforts and evaluation of the risks within the portfolio. Noninterest Income Noninterest income of $3.3 million increased $688 thousand, or 25.9%, from the second quarter of last year. Service charges on deposits decreased $102 thousand, or 9.3%. Trust fees increased $152 thousand, or 77.2%. The Corporation had $36 thousand in investment losses during the quarter while there were no gains or losses during the same period of 1993. Other income increased $674 thousand as compared to the same time period in 1993. This change is due principally to the nonrecurring recovery of prior year losses. Noninterest Expense Total noninterest expense decreased $139 thousand, or 1.8% from the second quarter of last year. Salaries and benefits, the largest component, were unchanged at $3.9 million. Occupancy expense, net of rental income, increased $48 thousand, or 9.9%. FDIC insurance premiums decreased $22 thousand to $374 thousand. Taxes on bank shares increased $32 thousand to $269 thousand. Other real estate expenses decreased $47 thousand, or 66.2%. This decrease is due to the reduction in the amount of other real estate owned. Income taxes Income tax expense increased $639 thousand, over 100% from the same time period last year. The change in income tax expense can be directly attributed to the increase in income before taxes of $2 million, or 95.5%. The 1994 effective rate is 30% compared to 29% in 1993. FIRST SIX MONTHS OF 1994 Net income for the six months was $4.8 million, or $1.24 per share compared to $3.8 million, or $ .98 per share for the same time period in 1993. Net income after taxes during the first six months of 1994 was increased by $503 thousand, due to a nonrecurring recovery of prior year losses. Net income for the first six months of 1993, was increased by $380 thousand due to the adoption of SFAS 109 - Accounting for Income Taxes. Adjusting each year for these items, net income would be $4.3 million, or $1.11 per share in 1994, and $3.4 million, or $ .88 per share in 1993. Return on average assets was 1.18%, an increase from .93% in 1993. Return on average equity was 10.06%, an increase from 8.39% in 1993. Net Interest Income Net interest income for the first six months totalled $17.1million, compared to $16.0 million last year. This increase can be attributed to a $1.1 million decrease in interest expense. The net interest margin increased to 4.86% compared to 4.64% in 1993. The spread between rates earned and paid increased to 4.32% compared to 4.10% in 1993. Asset Quality The provision for loan losses declined $774 thousand, or 42%, as compared to the first six months of 1993. The Corporation had net charge-offs of $634 thousand compared to $766 thousand for the first six months of 1993. The allowance for loan losses was 1.75% of loans, net of unearned income, at June 30, 1994, a very small decline from 1.77% at year end. Management feels the current reserve is adequate to cover future losses within the loan portfolio. Noninterest Income Noninterest income for the six months ended June 30, 1994 totalled $5.8 million an increase of $425 thousand, or 7.9%, from the first six months of 1993. In comparing the first six months of 1994 to the same period in 1993, service charges decreased $210 thousand, or 9.8%, and trust fees increased $102 thousand, or 21.6%. The Corporation had $75 thousand in investment losses during the first six months of 1994 compared to a net gain of $51 thousand during the same period in 1993. Noninterest Expense Noninterest expense for the first six months of 1994 totalled $15.0 million an increase of $198 thousand, or 1.3%. In comparing the first six months of 1994 to the same period is 1993, salary and employees benefits increased $318 thousand, or 4.3%, occupancy expense (net of rental income) increased $54 thousand, or 5.5%, FDIC insurance premiums decreased $42 thousand, or 5.3%, taxes on bank shares increases $57 thousand, or 12.1%, and other real estate expenses decreased $36 thousand, or 29.6%. Income Taxes Income tax expense for the first six months of 1994 increased $652 thousand, or 46.4%. The increase can be directly attributed to the increase in income before taxes. The 1994 effective rate is 30% compared to 29% in 1993. BALANCE SHEET REVIEW Total assets were $819 million on June 30, 1994, an increase of $25 million or 3.1% from December 31, 1993. Assets averaged $817 million for the first six months of 1994, an increase of less than 1% from year end 1993. Loans Loans, net of unearned income, increased $33 million or 6.7% from December 31, 1993 to $515 million. Average loans, net of unearned income, represented 66.8% of earning assets compared to 63.6% for 1993. The increase can be attributed to growing loan demand from both the consumer and commercial markets. Temporary Investments Federal funds sold and securities purchased under agreement to resell averaged $55 million, a decrease of $21 million, or 27.6%, from year end 1993. The funds are being used to fund loans. Investment Securities Investment securities were $185 million on June 30, 1994, a decrease of $4 million, or 2.3%, from year end 1993. Available for sale and held to maturity securities were $74 and $111 million, respectively. Investment securities averaged $179 million for the six months ended June 30, 1994, an increase of $8 million, or 4.7%, from year end 1993. Net unrealized losses after taxes were $252 thousand on June 30, 1994. Nonperforming assets Other real estate owned decreased $691 thousand, or 59%, from year end 1993 to $478 thousand on June 30, 1994. Total nonperforming assets were $10.2 million on June 30, 1994, an increase of $2.3 million from year end 1993. The chart below shows the change in nonperforming assets by type: June 30, December 31, (In thousands) 1994 1993 Loans past due 90 days or more $ 2,476 $ 1,402 Non-accrual loans 2,861 1,565 Restructured loans 4,348 3,734 Other real estate owned 478 1,169 Total $10,163 $7,870 Nonperforming assets to total equity increased 230 basis points from year end 1993 to 10.44%. Nonperforming assets as a percentage of loans and other real estate were 1.9% on June 30, 1994, an increase of 30 basis points from year end 1993. While in the past three months total nonperforming assets have increased $2.6 million, the performance over the past two years has been much better. Since 1991 nonperforming assets have decreased $13 million and the percentage of nonperforming assets to loans and other real estate has decreased 280 basis points. This trend is a result of management's continued efforts to improve the quality of the loan portfolio. The Corporation's loan policy includes strict guidelines for approving and monitoring loans. These efforts have resulted in the declining trend of nonperforming assets over the past three years. Management will continue these same efforts in the future. Deposits Total deposits increased $23 million, or 3.4%, from year end 1993 to $681 million. Deposits averaged $659 million, unchanged from year end 1993. Borrowed Funds Borrowed funds totaled $32 million, unchanged from year end 1993. Borrowed funds averaged $37 million, an increase of $5 million or 15.6%. Shareholder's Equity Shareholders equity was $97 million on June 30, 1994, increasing $2.2 million from year end 1993. Dividends of $2.4 million were declared during the first six months of 1994. The Corporation's capital ratios as of June 30, 1994 and the regulatory minimums are as follows: Farmers Capital Regulatory Bank Corporation Minimum Tier 1 risk based 16.53% 4.00% Total risk based 17.78% 8.00% Leverage 11.06% 3.00% The capital ratios of all the subsidiary banks were in excess of the applicable minimum regulatory capital ratio requirements at June 30, 1994. Accounting Requirements In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan ("SFAS 114"), which addresses the accounting by creditors for impairment of a loan by specifying how allowances for credit losses related to certain loans should be determined. This Statement also addresses the accounting by creditors for all loans that are restructured in a troubled debt restructuring involving a modification of terms of a receivable. An impaired loan shall be measured by the present value of expected future cash flows using the loan's effective interest rate, except that as a practical expedient, it may be measured on the fair market value of the loan if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment, an impairment will be recognized by creating a valuation allowance with a corresponding charge to bad debt expense. SFAS 114 will be effective for fiscal years beginning after December 15, 1994. The impact on the financial statements is not known at this time. Liquidity The liquidity of the Corporation 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 Corporation during the remainder of 1994. The Corporation'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 bank's core deposits consisting of both business and nonbusiness deposits 2. Cash flow generated by repayment of loan principal and interest 3. Federal funds Liquidity projections are reviewed on a monthly basis and it is rare for a bank to call on the third source of funds to meet liquidity requirements. Generally, sources one and two are sufficient. 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. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Registrant's Georgetown, Kentucky affiliate, Farmers Bank & Trust Company (the "Bank") and the Bank's Executive Vice President, have been named defendents in a civil action brought on August 1, 1994 by a loan customer of the Bank in which the customer alleges (1) fraud, (2) breach of good faith and fair dealing, (3) disclosure of false credit information and (4) outrageous conduct. The amount in controversy for the first three counts is unspecified. The amounts sought as punitive damages for outrageous conduct is $10,000,000. The conduct complained about in counts one and two involves former officers of the Bank and the Bank, at this time, lacks sufficient knowledge to accurately asses its potential liability, if any, but has reason to believe that the allegations are not true. The Bank believes there is no merit to the allegations contained in counts three and four and intends to vigorously defend all claims. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K On April 19, 1994, the Corporation filed a report on Form 8-K with the Commision to report that they had recovered an additional $758,000 of the losses incurred from an apparent scheme in 1990 to defraud First Citizens Bank, Hardin County, a subsidiary of the Corporation. The Corporation intends to pursue other related claims. 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: 08/12/94 Charles S. Boyd Charles Scott Boyd, President and CEO Date: 08/12/94 C. Douglas Carpenter Cecil Douglas Carpenter Vice President, Principal Financial and Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----