-----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, Ke3UieSNqHBzjcA7lOR2n3zIr1jS9xWNXfth2Z88RJWVWg7/0YNlzIUKEaMStz3e 2KWbzLrlgRpKAj7XFlsMjQ== 0000713095-96-000019.txt : 19960814 0000713095-96-000019.hdr.sgml : 19960814 ACCESSION NUMBER: 0000713095-96-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96610809 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, 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 June 30, 1996 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 (I.R.S. Employer Identification Number) of 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 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 3,850,782 shares outstanding at August 10, 1996 TABLE OF CONTENTS Part I - Financial Information Page No. Item 1 - Financial Statements Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3 Consolidated Statements of Income - For the Three Months and Six Months Ended June 30, 1996 and June 30, 1995 4 Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 1996 and June 30, 1995 5 Notes to the Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information Item 1 - Legal Proceedings 13 Item 4 - Results of votes of security holders 13 Item 6 - Exhibits and Reports on Form 8-K 14 FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share figures) (unaudited) June 30, December 31, 1996 1995 ASSETS Cash and cash equivalents: Cash and due from banks $ 71,290 $ 41,126 Interest bearing deposits in other banks 607 688 Federal funds sold and securities purchased under agreements to resell 48,140 68,370 Total cash and cash equivalents 120,037 110,184 Investment securities: Available for sale 117,796 105,933 Held to maturity 115,013 120,991 Loans 548,914 554,942 Less: Allowance for loan losses (8,329) (8,472) Unearned income (8,782) (11,762) Loans, net 531,803 534,708 Bank premises and equipment 19,521 19,916 Interest receivable 8,408 7,889 Other assets 5,196 6,492 TOTAL ASSETS $ 917,774 $ 906,113 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $ 126,717 $ 109,490 Interest bearing 630,373 645,371 Total deposits 757,090 754,861 Other borrowed funds 43,699 38,524 Dividends payable 1,392 1,392 Interest payable 2,279 2,370 Other liabilities 4,907 4,037 Total liabilities 809,367 801,184 SHAREHOLDERS' EQUITY Common stock par value $0.25 per share 4,804,000 shares authorized; 3,866,382 shares issued and outstanding at June 30, 1996 and December 31, 1995 967 967 Capital surplus 9,094 9,094 Retained earnings 99,554 95,694 Unrealized net loss on securities available for sale (1,208) (826) Total shareholders' equity 108,407 104,929 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 917,774 $ 906,113 See notes to consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 INTEREST INCOME Interest and fees on loans $ 13,335 $ 13,313 $ 26,644 $ 26,203 Interest on investment securities: Taxable 2,357 2,011 4,553 3,802 Nontaxable 709 558 1,388 1,120 Interest on deposits in other banks 20 22 31 51 Interest on federal funds sold and securities purchased under agreements to resell 611 692 1,382 1,568 Total interest income 17,032 16,596 33,998 32,744 INTEREST EXPENSE Interest on deposits 6,728 6,493 13,664 12,552 Interest on other borrowed funds 383 495 770 1,020 Total interest expense 7,111 6,988 14,434 13,572 Net interest income 9,921 9,608 19,564 19,172 Provision for loan losses 1,819 1,048 3,089 1,761 Net interest income after provision for loan losses 8,102 8,560 16,475 17,411 NONINTEREST INCOME Service charges and fees 1,451 1,256 2,781 2,420 Trust income 238 277 429 454 Investment gains, net 1 10 1 Gain (loss) on sale of loans 3,052 (3) 3,239 (3) Other 1,107 1,579 2,286 2,800 Total noninterest income 5,848 3,110 8,745 5,672 NONINTEREST EXPENSE Salaries and employee benefits 4,281 4,068 8,496 8,152 Occupancy expenses, net 492 605 1,043 1,161 Equipment expenses 644 646 1,304 1,341 Bank shares tax 260 275 521 572 FDIC insurance 3 397 6 793 Other 2,086 2,573 4,243 4,602 Total noninterest expense 7,766 8,564 15,613 16,621 Income before income taxes 6,184 3,106 9,607 6,462 Income tax expense 1,995 920 2,963 1,930 NET INCOME $ 4,189 $ 2,186 $ 6,644 $ 4,532 Per common share: Net income $ 1.08 $ 0.57 $ 1.72 $ 1.17 Dividends declared $ 0.36 $ 0.33 $ 0.72 $ 0.66 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, 1996 1995 Cash flows from operating activities Net income $ 6,644 $ 4,532 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,251 1,331 Net amortization of investment securities premiums and discounts: Available for sale (272) (415) Held to maturity 68 136 Provision for loan losses (3,089) 1,761 Deferred income tax (1) Gain on sale of fixed assets (1) Gain on sale of loans (3,052) Gain on call of investment security: Held to maturity (10) (1) Changes in: Interest receivable (519) (712) Other assets 1,223 (869) Interest payable (91) 366 Other liabilities 869 256 Net cash provided by operating activities 3,022 6,383 Cash flows from investing activities: Proceeds from maturity or call of investment securities: Available for sale 84,978 45,727 Held to maturity 18,961 27,842 Purchase of investment securities: Available for sale (97,136) (51,708) Held to maturity (13,053) (22,028) Net increase in loans (5,746) (12,720) Purchase of bank premises and equipment (765) (597) Proceeds from sale of equipment 180 1 Proceeds from sale of loans 14,792 Net cash used in investing activities 2,211 (13,483) Cash flows from financing activities: Net increase in deposits 2,229 17,383 Dividends paid (2,784) (2,552) Net increase (decrease) in other borrowed funds 5,175 (7,579) Net cash provided by financing activities 4,620 7,252 Net change in cash and cash equivalents 9,853 152 Cash and cash equivalents at beginning of year 110,184 100,551 Cash and cash equivalents at end of period $ 120,037 $ 100,703 Supplemental disclosures: Cash paid during the year for: Interest $ 14,525 $ 13,206 Income taxes 1,800 2,036 Cash dividend declared and unpaid 1,392 1,276 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, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 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, 1995. 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 - EFFECT OF IMPLEMENTING SFAS NO. 125 In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinquishments 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. This statement applies prospectively in fiscal years beginning after December 31, 1996. The Company does not expect the implementation of this statement to have a material affect on the financial statements. FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter 1996 vs. Second Quarter 1995 The Company reported earnings of $4.2 million, or $1.08 per share, for the second quarter of 1996 compared to $2.2 million, or $0.57 per share one year ago. The increase is due primarily to a $2.0 million after tax gain on the sale of loans of the consumer finance subsidiary. Return on average assets and return on average equity for the second quarter of 1996 were 1.86% and 15.64%, respectively, compared to 1.00% and 8.66% for the same period in 1995. Net Interest Income Net interest income totaled $9.9 million, compared to $9.6 million for the second quarter of 1995. The net interest margin (net interest income as a percentage of average earning assets), decreased to 5.11% compared to 5.18% for 1995. Likewise the spread between rates earned and paid decreased from 4.46% to 4.38%. Asset Quality The provision for loan losses increased $771 thousand compared to the second quarter of 1995. The Company had net charge-offs of $2.3 million compared to $2.0 million last year. Noninterest Income Noninterest income of $5.8 million was up $2.7 million above last year's figure due primarily to the gain on sale of loans. Service charges and fees increased $195 thousand, or 15.5% to $1.5 million. Trust income decreased $39 thousand, or 14.1% to $238 thousand. Investment gains were inconsequential in both years. Noninterest Expense Total noninterest expense decreased $798 thousand, or 9.3% from the second quarter of 1995 to $7.8 million. Salaries and benefits, the largest component of noninterest expense, increased $213 thousand, or 5.2%. Occupancy expense decreased $113 thousand or 18.7%, while equipment expense remained stable. FDIC insurance expense decreased $394 thousand or 99.2% due to the FDIC charging a nominal premium in the second quarter of 1996. Income Taxes Income tax expense increased $1.1 million, in excess of 100% from the second quarter of 1995. The change in income tax expense can be directly attributed to the increase in income before income taxes. The effective tax rate was 32.3% for the second quarter of 1996 up from 29.6% for the same period in 1995. First Six Months of 1996 Net income for the six months was $6.6 million, or $1.72 per share compared to $4.5 million, or $1.17 for the same period in 1995. The return on average assets was 1.48% compared to 1.05% for the same period in 1995. The return on average equity was 12.55%, up from 9.08% for the first six months of 1995. Net Interest Income Net interest income for the first six months totaled $19.6 million, compared to $19.2 million last year. Interest and fees on loans is up $441 thousand, or 1.7%. Interest on taxable securities is up $751 thousand, or 19.8%. Interest on nontaxable securities is also up, $268 thousand, or 23.9%. Interest on short term investments is down $206 thousand, or 12.7% Interest expense on deposits is up $1.1 million, or 8.9%. Interest expense on other borrowed funds is down $250 thousand, or 24.5%. The net interest margin decreased to 5.05% from 5.16% for the first six months in 1995. The spread decreased to 4.31% from 4.44%. Asset Quality The provision for loan losses increased $1.3 million, or 75.4%, compared to 1995. The Company had net charge-offs of $3.2 million compared to $2.6 million in the prior year. Several loans to one borrower (an entity controlled by relatives of a director), totaling $976 thousand were charged- off during the second quarter of 1995. Remaining loans with this borrower have been charged-off in 1995 and in the second quarter of 1996. Charge-offs of $733 thousand occurred in the second quarter of 1996 at the consumer finance subsidiary prior to the sale of these loans. The consumer finance subsidiary is no longer operational. Charge-offs in the second quarter of 1996 were also impacted by slightly larger commercial loan charge-offs compared to 1995. These charge-offs related to only a few customers and do not represent a systemic trend throughout the Company. Moreover, an improvement in asset quality can be seen in the decline in nonperforming assets. On June 30, 1996, nonperforming assets were $5.1 million, down $1.8 million, or 26.3% from year-end 1995. The allowance for loan losses was 1.54% of net loans, down slightly from 1.56% at the end of 1995. Management believes 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 for the six months ended June 30, 1996 totaled $8.7 million, up $3.1 million from the first six months of 1995 due primarily to a gain on sale of loans. Service charges and fees increased $361 thousand, or 14.9%. Trust income was down $25 thousand, or 5.5%. Noninterest Expense Noninterest expense for the first half of 1996 was $15.6 million, down $1.0 million, or 6.1% from last year. Salaries and benefits were up $344 thousand, or 4.2%. Occupancy expense was down $118 thousand, or 10.2%, while equipment expense was stable. FDIC insurance decreased $787 thousand, or 99.2%, due to the FDIC charging a nominal premium in the first six months of 1996. Income Taxes Income taxes increased $1.0 million, or 53.5% from last year and totaled $3.0 million. The effective tax rate increased to 30.8% from 29.9% a year ago. Financial Condition Total assets were $918 million on June 30, 1996, an increase of $11.6 million, or 1.3% from December 31, 1995. Assets averaged $899 million for the first six months of 1996, an increase of $36 million, or 4.2% from 1995. Loans Net loans decreased $2.9 million, or less than 1% from December 31, 1995 to $540 million. The decrease in loans can be primarily attributed to the sale of loans of the consumer finance subsidiary. After selling net loans of $11.5 million, the Company's other subsidiaries have increased loans by $8.5 million since year end. On average, loans represented 67.1% of earning assets compared to 69.3% for 1995. Temporary Investments Federal funds sold and securities purchased under agreements to resell averaged $47 million, an increase of $4.5 million from the average at year end. Investment Securities Investment securities were $233 million on June 30, 1996, a $5.9 million or 2.6% increase from year-end 1995. Available for sale and held to maturity securities were $118 million and $115 million respectively. Investment securities averaged $222 million for the first six months, an increase of $36 million, or 19.0%, from the 1995 average. Net unrealized losses after tax on securities available for sale were $1.2 million on June 30, 1996, as compared to $826 thousand on December 31, 1995. The Company has the capability to hold these securities to maturity and should therefore not realize any loss of principal. Nonperforming Assets Nonperforming assets totaled $5.1 million on June 30, 1996, down $1.8 million, or 26.3%, from year-end 1995. Nonperforming assets to total equity declined to 4.73% from 6.63%. Nonperforming assets as a percentage of loans and other real estate was 0.95%, down from 1.28% at year-end. Nonaccrual loans were $2.5 million, down from $2.9 million from year-end. Loans 90 days past due increased to $2.0 million from $1.7 million. Restructured loans were $636 thousand, down from $1.6 million. Other real estate owned decreased significantly to $23 thousand at June 30, 1996, down from $776 thousand at year-end 1995. Deposits Total deposits increased $2.2 million, less than 1%, from year-end to $757 million. Deposits averaged $751 million during the first six months of 1996. Borrowed Funds Borrowed funds totaled $44 million, an increase of $5.2 million, or 13.4% from year-end 1995. Borrowed funds averaged $32 million. Shareholders' Equity Shareholders' equity was $108 million on June 30, 1996, increasing $3.5 million from year-end. Dividends of $2.8 million were declared during the first six months of 1996. The Company's ratios as of June 30, 1996 and the regulatory minimums are as follows: Farmers Capital Regulatory Bank Corporation Minimum Tier 1 risk based 18.62% 4.00% Total risk based 19.87% 8.00% Leverage 11.88% 3.00% The capital ratios of all the subsidiary banks, on an individual basis, were in excess of the applicable minimum regulatory capital ratio requirements at June 30, 1996. Accounting Requirements In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinquishments 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. This statement applies prospectively in fiscal years beginning after December 31, 1996. The Company does not expect the implementation of this statement to have a material affect on the financial statements. 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 1996. 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 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 purchased 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 ITEM 1 - LEGAL PROCEEDINGS There have been no significant changes in contingencies or commitments, including pending litigation to report at this time. ITEM 4 - RESULTS OF VOTES OF SECURITY HOLDERS The annual meeting of shareholders was held May 14, 1996. The matters that were voted upon included: A. The election of nine directors in the following manner: two directors for one-year terms ending in 1997; three directors for two-year terms ending in 1998; and four directors for three-year terms ending in 1999, or until their successors have been elected and qualified. B. The ratification of the appointment of Coopers & Lybrand as independent accountants for the Corporation and its subsidiaries for the calendar year 1996. The outcome of the voting is as follows: Name For Against Withheld Abstained Frank W. Sower, Jr. 2,966,836 0 0 265,614 J. Barry Banker 2,966,836 0 0 265,614 W. Benjamin Crain 2,966,636 0 0 265,614 Lloyd C. Hillard 2,965,936 0 0 266,514 Harold G. Mays 2,966,836 0 0 265,614 G. Anthony Busseni 2,966,536 0 0 265,914 James E. Bondurant 2,965,903 0 0 266,547 James H. Childers 3,060,993 0 0 171,457 E. Bruce Dungan 2,966,836 0 0 265,614 Ratification of the appointment of Coopers & Lybrand, LLP 3,057,298 168,294 0 6,858 Listed below is the name of each director whose term of office continued after the meeting: Frank W. Sower, Jr. James E. Bondurant J. Barry Banker James H. Childers W. Benjamin Crain E. Bruce Dungan Lloyd C. Hillard Charles S. Boyd Harold G. Mays Dr. John D. Sutterlin G. Anthony Busseni Dr. John P. Stewart In addition to the directors above, Charles T. Mitchell serves as an Advisory Director for the Corporation. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - none b) Reports on Form 8-K (1) On July 3, 1996, the Corporation filed a report on Form 8-K, pursuant to Item 5 of that form. The Corporation reported its intention to repurchase up to 200,000 shares of its outstanding common stock. No financial statements were filed as part of that report. 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: 08/13/96 /s/ Charles Scott Boyd Charles Scott Boyd President and CEO (Principal Executive Officer) Date: 08/13/96 /s/ Cecil 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 March 31, 1996 financial statements and is qualified in its entirety by reference to such financial statements. 1000 6-MOS DEC-31-1996 JUN-30-1996 71290 607 48140 0 117796 115013 113881 540132 8329 917774 757090 39954 8578 3745 967 0 0 107440 917774 26644 5941 1413 33998 13664 14434 19564 3089 10 15613 9607 9607 0 0 6644 1.72 1.72 5.05 2475 1961 636 0 8472 3492 260 8329 8329 0 0
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