-----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, NFnRVFRE620MPQdxS3BUNWiVyezJqWmAu29bWNKaWJYpjlxWUXA1uLKgk8a3btAp 7cez624Yy3pcaqRA5O6psg== 0000713095-96-000022.txt : 19961113 0000713095-96-000022.hdr.sgml : 19961113 ACCESSION NUMBER: 0000713095-96-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658122 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 September 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 3,798,982 shares outstanding at November 7, 1996 TABLE OF CONTENTS Part I - Financial Information Page No. Item 1 - Financial Statements Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 3 Consolidated Statements of Income - For the Three Months and Nine Months Ended September 30, 1996 and September 30, 1995 4 Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 1996 and September 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 12 Item 5 - Other Information 12 Item 6 - Exhibits and Reports on Form 8-K 12 FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share figures) (unaudited) September 30, 1996 December 31, 1995 ASSETS Cash and cash equivalents: Cash and due from banks $ 95,272 $ 41,126 Interest bearing deposits in other banks 1,279 688 Federal funds sold and securities purchased under agreements to resell 21,235 68,370 Total cash and cash equivalents 117,786 110,184 Investment securities: Available for sale 121,560 105,933 Held to maturity 108,751 120,991 Loans 558,724 554,942 Less: Allowance for loan losses (8,486) (8,472) Unearned income (9,061) (11,762) Loans, net 541,177 534,708 Bank premises and equipment 19,458 19,916 Interest receivable 7,985 7,889 Other assets 5,079 6,492 TOTAL ASSETS $ 921,796 $ 906,113 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $ 139,190 $ 109,490 Interest bearing 630,125 645,371 Total deposits 769,315 754,861 Other borrowed funds 35,485 38,524 Dividends payable 1,381 1,392 Interest payable 2,212 2,370 Other liabilities 5,249 4,037 Total liabilities 813,642 801,184 SHAREHOLDERS' EQUITY Common stock par value $0.25 per share 4,804,000 shares authorized; 3,798,982 and 3,866,382 shares issued and outstanding at September 30, 1996 and December 31, 1995, respectively 950 967 Capital surplus 8,936 9,094 Retained earnings 98,835 95,694 Unrealized net loss on securities available for sale (567) (826) Total shareholders' equity 108,154 104,929 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 921,796 $ 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 INTEREST INCOME Interest and fees on loans $ 12,971 $ 13,742 $ 39,615 $ 39,944 Interest on investment securities: Taxable 2,332 2,020 6,885 5,822 Nontaxable 723 578 2,111 1,698 Interest on federal funds sold and securities purchased under agreements to resell 699 632 2,112 2,251 Total interest income 16,725 16,972 50,723 49,715 INTEREST EXPENSE Interest on deposits 6,759 6,745 20,423 19,304 Interest on other borrowed funds 375 417 1,145 1,430 Total interest expense 7,134 7,162 21,568 20,734 Net interest income 9,591 9,810 29,155 28,981 Provision for loan losses 468 945 3,557 2,706 Net interest income after provision for loan losses 9,123 8,865 25,598 26,275 NONINTEREST INCOME Service charges and fees 1,472 1,510 4,253 3,930 Trust income 279 307 708 761 Investment gains, net 10 1 Gain (loss) on sale of loans (11) 3,220 Other 1,214 1,156 3,508 3,953 Total noninterest income 2,954 2,973 11,699 8,645 NONINTEREST EXPENSE Salaries and employee benefits 4,165 4,278 12,661 12,430 Occupancy expenses, net 480 474 1,523 1,634 Equipment expenses 595 630 1,899 1,971 Bank shares tax 241 223 762 795 FDIC insurance 4 (42) 10 751 Other 2,158 2,129 6,401 6,731 Total noninterest expense 7,643 7,692 23,256 24,312 Income before income taxes 4,434 4,146 14,041 10,608 Income tax expense 1,297 1,272 4,260 3,203 NET INCOME $ 3,137 $ 2,874 $ 9,781 $ 7,405 Per common share: Net income $ 0.82 $ 0.74 $ 2.54 $ 1.92 Dividends declared $ 0.36 $ 0.33 $ 1.08 $ 0.99 Weighted average shares outstanding 3,836 3,866 3,856 3,866 See notes to consolidated financial statements FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (unaudited) Nine Months Ended September 30, 1996 1995 Cash flows from operating activities Net income $ 9,781 $ 7,405 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,840 1,993 Net amortization of investment securities premiums and discounts: Available for sale (365) (657) Held to maturity 88 188 Provision for loan losses 3,557 2,706 Loss on sale of fixed assets 8 2 Gain on sale of loans (3,220) Gain on call of investment security: Held to maturity (10) (1) Changes in: Interest receivable (96) (1,101) Other assets 878 (410) Interest payable (158) 563 Other liabilities 1,212 1,350 Net cash provided by operating activities 13,515 12,038 Cash flows from investing activities Proceeds from maturity or call of investment securities: Available for sale 99,724 62,150 Held to maturity 36,471 40,240 Purchase of investment securities: Available for sale (114,594) (75,318) Held to maturity (24,309) (35,029) Net increase in loans (22,319) (14,631) Purchase of bank premises and equipment (1,168) (947) Proceeds from sale of equipment 180 1 Proceeds from sale of loans 15,513 Net cash used in investing activities (10,502) (23,534) Cash flows from financing activities Net increase in deposits 14,454 66,886 Dividends paid (4,176) (3,828) Purchase of treasury stock (2,650) Net decrease in other borrowed funds (3,039) (23,204) Net cash provided by financing activities 4,589 39,854 Net change in cash and cash equivalents 7,602 28,358 Cash and cash equivalents at beginning of year 110,184 100,551 Cash and cash equivalents at end of period $ 117,786 $ 128,909 Supplemental disclosures Cash paid during the year for Interest $ 21,726 $ 20,171 Income taxes 2,835 2,266 Cash dividend declared and unpaid 1,381 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 September 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. FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter 1996 vs. Third Quarter 1995 The Company reported earnings of $3.1 million, or $0.82 per share, for the third quarter of 1996 compared to $2.9 million, or $0.74 per share one year ago. The increase is due primarily to a decrease in provision for loan losses. Return on average assets and return on average equity for the third quarter of 1996 were 1.40% and 11.67%, respectively, compared to 1.34% and 11.21% for the same period in 1995. Net Interest Income Net interest income totaled $9.6 million, compared to $9.8 million for the third quarter of 1995. The net interest margin (net interest income as a percentage of average earning assets), decreased to 4.89% compared to 5.25% for 1995. Likewise the spread between rates earned and paid decreased from 4.51% to 4.13%. The decrease is primarily due to the sale of approximately $12 million in high interest rate consumer loans in the second quarter. Asset Quality The provision for loan losses decreased $477 thousand compared to the third quarter of 1995. The Company had net charge-offs of $310 thousand compared to $497 thousand last year. Noninterest Income Noninterest income of $3.0 million was unchanged from last year. Service charges and fees decreased $38 thousand, or 2.5%. Trust income decreased $28 thousand, or 9.1% to $279 thousand. Investment gains were inconsequential in both years. Other noninterest income increased $58 thousand and offset the decline in service charges and fees and trust income. Noninterest Expense Total noninterest expense was down slightly from $7.7 million to $7.6 million. Salaries and benefits, the largest component of noninterest expense, decreased $113 thousand, or 2.6%. Occupancy expenses remained stable while equipment expenses decreased $35 thousand or 5.6%. These declines were partially offset by an 8.1% increase in bank shares tax and a $46 thousand increase in FDIC insurance. While the FDIC continued to charge a nominal premium in the third quarter of 1996, it actually gave refunds in the third quarter of 1995. Income Taxes Income tax expense increased $25 thousand or 2.0% from the third quarter of 1995. The effective tax rate was 29.3% for the third quarter of 1996 down from 30.7% for the same period in 1995. First Nine Months of 1996 Net income for the nine months was $9.8 million, or $2.54 per share compared to $7.4 million, or $1.92 for the same period in 1995. The return on average assets was 1.45% compared to 1.16% for the same period in 1995. The return on average equity was 12.20%, up from 9.79% for the first nine months of 1995. Net Interest Income Net interest income for the first nine months totaled $50.7 million, compared to $49.7 million last year. Interest and fees on loans is down $329 thousand, less than 1%. Interest on taxable securities is up $1.0 million, or 17.1%. Interest on nontaxable securities is also up $413 thousand, or 24.3%. Interest on short term investments is down $139 thousand, or 6.2% Interest expense on deposits is up $1.1 million, or 5.8%. Interest expense on other borrowed funds is down $285 thousand, or 19.9%. The net interest margin decreased to 5.00% from 5.20% for the first nine months in 1995. The spread decreased to 4.25% from 4.47%. Asset Quality The provision for loan losses increased $851 thousand, or 31.4%, compared to 1995. The Company had net charge-offs of $3.5 million compared to $3.1 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. On May 31, 1996, all the loans of the consumer finance subsidiary were sold and operations were ceased. Moreover, an improvement in asset quality can be seen in the decline in net charge-offs in the third quarter as well as the decline in nonperforming assets. On September 30, 1996, nonperforming assets were $6.0 million, down $920 thousand, or 13.2% 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 nine months ended September 30, 1996 totaled $11.7 million, up $3.1 million from the first nine months of 1995 due primarily to a gain on sale of loans in the second quarter. Service charges and fees increased $323 thousand, or 8.2%. Trust income was down $53 thousand, or 7.0%. Noninterest Expense Noninterest expense for the nine months ended September 30, 1996 was $23.3 million, down $1.0 million, or 4.3% from last year. Salaries and benefits were up $231 thousand, or 1.9%. Occupancy expense was down $111 thousand, or 6.8%. Equipment expense also decreased $72 thousand, or 3.7%. FDIC insurance decreased $741 thousand, or 98.7%, due to the FDIC charging a nominal premium in the first nine months of 1996. Income Taxes Income taxes increased $1.1 million, or 33.0% from last year and totaled $4.3 million. The effective tax rate remained flat at 30.3%. Financial Condition Total assets were $922 million on September 30, 1996, an increase of $15.7 million, or 1.7% from December 31, 1995. Assets averaged $896 million for the first nine months of 1996, an increase of $34 million, or 3.9% from 1995. Loans Net loans increased $6.5 million, or 1.2% from December 31, 1995 to $550 million. The increase in loans can be primarily attributed to a $6.0 million increase in leases at the Company's lease financing subsidiary. In addition, the Company's banking affiliates have experienced enough loan growth in the first nine months of 1996 to make up for the approximately $12 million in net loans sold by the Company's consumer finance subsidiary earlier this year. On average, loans and leases represented 66.8% of earning assets compared to 69.3% for 1995. Temporary Investments Federal funds sold and securities purchased under agreements to resell averaged $51 million, relatively unchanged from the average of $52 million at year end. Investment Securities Investment securities were $230 million on September 30, 1996, a $3.4 million or 1.5% increase from year-end 1995. Available for sale and held to maturity securities were $121 million and $109 million, respectively. Investment securities averaged $220 million for the first nine months, an increase of $33 million, or 17.7%, from the 1995 average. Unrealized net losses on securities available for sale were $567 thousand on September 30, 1996, as compared to $826 thousand on December 31, 1995. The unrealized net loss relates entirely to debt securities which the Company has the capability to hold to maturity and, therefore, should not realize any loss of principal. Nonperforming Assets Nonperforming assets totaled $6.0 million on September 30, 1996, down $920 thousand, or 13.2%, from year-end 1995. Nonperforming assets to total equity declined to 5.57% from 6.63%. Nonperforming assets as a percentage of loans and other real estate was 1.12%, down from 1.28% at year-end. Nonaccrual loans were $3.0 million, up slightly from $2.9 million from year-end. Loans 90 days past due increased to $2.3 million from $1.7 million. Restructured loans were $626 thousand, down from $1.6 million. Other real estate owned decreased significantly to $58 thousand at September 30, 1996, down from $776 thousand at year-end 1995. Deposits Total deposits increased $14.4 million, or 1.9%, from year-end to $769 million. Deposits averaged $751 million during the first nine months of 1996. Borrowed Funds Borrowed funds totaled $35 million, a decrease of $3.0 million, or 7.9% from year-end 1995. Borrowed funds averaged $30 million. Shareholders' Equity Shareholders' equity was $108 million on September 30, 1996, increasing $3.2 million from year-end. During the third quarter of 1996 the Company purchased 67,400 shares of its own stock at an average cost of $39.31. The resulting decreases in common stock outstanding, surplus, and retained earnings totaled $2.6 million and were more than offset by the quarter's net income. Dividends of $4.2 million were declared during the first nine months of 1996. The Company's ratios as of September 30, 1996 and the regulatory minimums are as follows: Farmers Capital Regulatory Bank Corporation Minimum Tier 1 risk based 18.33% 4.00% Total risk based 19.58% 8.00% Leverage 11.87% 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 September 30, 1996. 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 Reference is made to Item 3, Legal Proceedings, in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 for a description of a civil suit brought against the Registrant's Georgetown affiliate on August 1, 1994 by a loan customer. On October 16, 1996, the court dismissed certain counts and granted summary judgement on the remaining. Although the plaintiff has the option to appeal the decision, management still believes the action is without merit and that any liability resulting from one or more of the claims will not materially affect the Registrant's consolidated financial position or results of operations, although resolution in any year or quarter could be material for that period. There have been no other significant changes in contingencies or commitments, including other pending litigation to report at this time. ITEM 5 - OTHER INFORMATION On October 28, 1996, the Corporation announced an increase in their quarterly dividend from thirty-six cents per share to forty-one cents per share, which represents an increase of 13.9%. Holders of record of the Corporation's stock as of December 1, 1996 will be paid on January 1, 1997. The action to increase the dividend was taken at the Board of Director's meeting on October 28, 1996. 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: November 8, 1996 /s/ Charles Scott Boyd Charles Scott Boyd President and CEO (Principal Executive Officer) Date: November 8, 1996 /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 September 30, 1996 financial statements and is qualified in its entirety by reference to such financial statements. 1000 9-MOS DEC-31-1996 SEP-30-1996 95272 1279 21235 0 121560 108751 107654 549663 8486 921796 769315 31860 8842 3625 0 0 950 107204 921796 39615 8996 2112 50723 20423 21568 29155 3557 10 23256 14041 14041 0 0 9781 2.54 2.54 5.00 3045 2308 626 0 8472 3925 382 8486 8486 0 0
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