-----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, KY2UxLOUlekoL2H8ZjN1t1aCs72kQyS5ZMr2GPeJ5cCls96N3HewnE+UyhOpjYhB B2Cedf/0zO5raE3TxhYi7w== 0000713095-98-000017.txt : 19980812 0000713095-98-000017.hdr.sgml : 19980812 ACCESSION NUMBER: 0000713095-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 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: SEC FILE NUMBER: 000-14412 FILM NUMBER: 98681921 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 6/30/98 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 $0.125 per share 7,555,240 shares outstanding at August 7, 1998 TABLE OF CONTENTS Part I - Financial Information Page No. - ------------------------------ -------- Item 1 - Financial Statements Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 3 Unaudited Consolidated Statements of Income - For the Three Months and Six Months Ended June 30, 1998 and June 30, 1997 4 Unaudited Consolidated Statements of Comprehensive Income - For the Three Months and Six Months Ended June 30, 1998 and June 30, 1997 5 Unaudited Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 1998 and June 30, 1997 6 Unaudited Consolidated Statements of Changes in Shareholders' Equity - For the Six Months Ended June 30, 1998 and June 30, 1997 7 Notes to Consolidated Financial Statements 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 15 Part II - Other Information - --------------------------- Item 4 - Submission of Matters to a Vote of Security Holders 15 Item 6 - Exhibits and Reports on Form 8-K 16 PART I - FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, (In thousands, except share data) 1998 1997 - --------------------------------- -------- ---------- ASSETS Cash and cash equivalents: Cash and due from banks $82,927 $75,830 Interest bearing deposits in other banks 2,369 1,300 Federal funds sold and securities purchased under agreements to resell 11,100 109,610 -------- ---------- Total cash and cash equivalents 96,396 186,740 Investment securities: Available for sale 157,551 119,076 Held to maturity 90,322 95,686 -------- ---------- Total investment securities 247,873 214,762 Loans, net of unearned income 597,525 585,940 Allowance for loan losses (8,963) (9,114) -------- ---------- Loans, net 588,562 576,826 Premises and equipment 24,385 21,214 Accrued interest receivable 8,108 7,805 Other assets 7,689 6,836 -------- ---------- Total assets $973,013 $1,014,183 ======== ========== LIABILITIES Deposits: Noninterest bearing $151,584 $151,600 Interest bearing 640,283 683,376 -------- ---------- Total deposits 791,867 834,976 Other borrowed funds 52,270 53,655 Dividends payable 1,813 1,815 Accrued interest payable 2,047 1,956 Other liabilities 4,563 4,737 -------- ---------- Total liabilities 852,560 897,139 Commitments and contingencies SHAREHOLDERS' EQUITY Common stock, par value $0.125 per share 9,608,000 shares authorized; 7,555,240 and 7,562,440 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively 944 945 Capital surplus 8,886 8,894 Retained earnings 110,587 107,105 Accumulated other comprehensive income 36 100 -------- ---------- Total shareholders' equity 120,453 117,044 -------- ---------- Total liabilities and shareholders' equity $973,013 $1,014,183 ======== ========== See accompanying notes to consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended June 30 June 30 (In thousands, except per share data) 1998 1997 1998 1997 - ------------------------------------- ------ ------ ------ ------ INTEREST INCOME Interest and fees on loans $13,540 $13,066 $26,921 $25,972 Interest on investment securities: Taxable 2,159 2,207 4,150 4,337 Nontaxable 918 775 1,684 1,544 Interest on deposits in other banks 33 30 86 49 Interest on federal funds sold and securities purchased under agreements to resell 644 635 1,481 1,374 ------ ------ ------ ------ Total interest income 17,294 16,713 34,322 33,276 INTEREST EXPENSE Interest on deposits 6,760 6,417 13,435 12,982 Interest on other borrowed funds 505 302 1,002 605 ------ ------ ------ ------ Total interest expense 7,265 6,719 14,437 13,587 ------ ------ ------ ------ Net interest income 10,029 9,994 19,885 19,689 Provision for loan losses 202 518 434 1,086 ------ ------ ------ ------ Net interest income after provision for loan losses 9,827 9,476 19,451 18,603 NONINTEREST INCOME Service charges and fees on deposits 1,302 1,273 2,579 2,575 Other service charges, commissions, and fees 1,008 930 2,055 1,943 Data processing income 426 410 790 758 Trust income 307 268 605 539 Investment securities gains 100 Gain on sale of loans 1 4 6 8 Other 143 110 288 434 ------ ------ ------ ------ Total noninterest income 3,187 2,995 6,423 6,257 NONINTEREST EXPENSE Salaries and employee benefits 4,105 3,728 8,300 7,758 Occupancy expense, net 534 506 1,033 989 Equipment expense 676 692 1,345 1,387 Data processing expense 252 238 548 488 Bank franchise tax 282 281 546 492 Other 2,084 1,720 4,008 3,684 ------ ------ ------ ------ Total noninterest expense 7,933 7,165 15,780 14,798 ------ ------ ------ ------ Income before income taxes 5,081 5,306 10,094 10,062 Income tax expense 1,347 1,521 2,778 2,886 ------ ------ ------ ------ Net income $3,734 $3,785 $7,316 $7,176 ====== ====== ====== ====== NET INCOME PER COMMON SHARE Basic $.49 $.50 $.97 $.95 Diluted .49 .50 .96 .95 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 7,555 7,572 7,557 7,582 Diluted 7,675 7,572 7,653 7,582 See accompanying notes to consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended Six Months Ended June 30 June 30 (In thousands) 1998 1997 1998 1997 - -------------- ------ ------ ------ ------ NET INCOME $3,734 $3,785 $7,316 $7,176 Other comprehensive income: Unrealized holding gain on available for sale securities arising during the period, net of tax of $48, $110, $3 and $13, respectively 93 213 6 26 Reclassification adjustment for prior period unrealized gain recognized during current period, net of tax of $36 in 1998 (70) ------ ------ ------ ------ Net gain (loss) recognized in other comprehensive income 93 213 (64) 26 ------ ------ ------ ------ Comprehensive income $3,827 $3,998 $7,252 $7,202 ====== ====== ====== ====== See accompanying notes to consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, (In thousands) 1998 1997 - ---------------------------------------- ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $7,316 $7,176 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,274 1,294 Net amortization of securities premiums and discounts: Available for sale 24 14 Held to maturity 123 44 Provision for loan losses 434 1,086 Mortgage loans originated for sale (7,988) (8,278) Proceeds from sale of mortgage loans 8,085 8,340 Deferred income tax benefit (1) Gain on sale of mortgage loans (6) (8) Gain on sale of available for sale investment securities (100) (Gain) loss on sale of fixed assets (1) 4 Increase in accrued interest receivable (303) (9) Increase in other assets (1,491) (1,660) Increase (decrease) in accrued interest payable 91 (104) Increase (decrease) in other liabilities 232 (1,264) ------- -------- Net cash provided by operating activities 7,689 6,635 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity or call of investment securities: Available for sale 51,833 59,141 Held to maturity 11,890 15,916 Proceeds from sale of available for sale investment securities 25,394 Purchase of investment securities: Available for sale (115,721) (78,330) Held to maturity (6,649) (6,599) Loans originated for investment, net of principal collected (12,261) (6,281) Purchase of premises and equipment (4,182) (2,256) Proceeds from sale of equipment 1 3 ------- -------- Net cash used in investing activities (49,695) (18,406) CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in deposits (43,109) (21,788) Dividends paid (3,629) (3,113) Purchase of common stock (215) (644) Net (decrease) increase in other borrowed funds (1,385) 31,888 ------- -------- Net cash (used in) provided by financing activities (48,338) 6,343 ------- -------- Net change in cash and cash equivalents (90,344) (5,428) Cash and cash equivalents at beginning of year 186,740 122,746 ------- -------- Cash and cash equivalents at end of period $96,396 $117,318 ======= ======== SUPPLEMENTAL DISCLOSURES Cash paid during the period for: Interest $14,346 $13,691 Income taxes 2,405 2,729 Cash dividend declared and unpaid 1,813 1,552 See accompanying notes to consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Total (In thousands, except per share data) Common Stock Capital Retained Accumulated Other Shareholders' Six months ended June 30, 1998 and 1997 Shares Amount Surplus Earnings Comprehensive Income Equity - --------------------------------------- ------ ------ ------- -------- -------------------- ------ Balance at December 31, 1996 7,594 $949 $8,931 $100,078 $(362) $109,596 Cash dividends declared, $.41 per share (3,107) (3,107) Purchase of common stock (32) (4) (37) (603) (644) Comprehensive income: Net income 7,176 7,176 Other comprehensive income, net of tax: Unrealized gain on available for sale securities, net of reclassification adjustment 26 26 ----- Comprehensive income 7,202 ----- ---- ------ -------- ----- -------- Balance at June 30, 1997 7,562 $945 $8,894 $103,544 $(336) $113,047 ===== ==== ====== ======== ===== ======== Balance at December 31, 1997 7,562 $945 $8,894 $107,105 $100 $117,044 Cash dividends declared, $.48 per share (3,628) (3,628) Purchase of common stock (7) (1) (8) (206) (215) Comprehensive income: Net income 7,316 7,316 Other comprehensive income, net of tax: Unrealized loss on available for sale securities, net of reclassification adjustment (64) (64) ----- Comprehensive income 7,252 ----- ---- ------ -------- ----- -------- Balance at June 30, 1998 7,555 $944 $8,886 $110,587 $36 $120,453 ===== ==== ====== ======== ===== ======== See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. 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, 1997. 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. 3. ADOPTION OF NEW ACCOUNTING PRINCIPLES On January 1, 1998, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS 130 establishes standards for reporting and display of comprehensive income and its components. Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. For the Company, this includes net income and unrealized gains and losses on available for sale investment securities. This Statement requires comprehensive income to be reported in a financial statement that is displayed with the same prominence as other financial statements. The implementation of SFAS 130 did not have a material impact on the Company's consolidated financial statements. SFAS 131 changes the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly report to shareholders. This Statement requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. This Statement is effective in 1998. In the initial year of application, this Statement is not required to be applied to interim periods. The Company does not expect the implementation of this Statement to have a material effect on the consolidated financial statements. 4. STOCK SPLIT On January 26, 1998, the Company's Board of Directors approved a two-for-one stock split of its common stock. The stock split was effective July 1, 1998 for holders of record on June 1, 1998. The stock split increased the Company's outstanding common shares from 3,777,620 to 7,555,240 shares. Additionally, all references in the Consolidated Financial Statements, Footnotes, and Supplementary data to the number of shares, per-share amounts, and market prices of the Company's common stock have been restated to give retroactive recognition to the stock split. Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations ------------- RESULTS OF OPERATIONS Second Quarter 1998 vs. Second Quarter 1997 ------------------------------------------- The Company reported earnings of $3.7 million, or $.49 per diluted share, for the second quarter of 1998 compared to earnings of $3.8 million, or $.50 per diluted share for the second quarter of 1997. Return on average assets was 1.58% for the second quarter of 1998, compared to 1.68% reported for the same period of 1997. Return on average equity was 12.60% for the second quarter of 1998, a decrease from 13.60% during the same period of 1997. Net Interest Income - ------------------- Net interest income totaled $10.0 million for the second quarter of 1998, unchanged from the second quarter 1997. Interest and fees on loans increased $474 thousand or 3.6%, which is primarily attributable to an increase in volume. Interest on taxable securities decreased $48 thousand, or 2.2% and interest on nontaxable securities increased $143 thousand, or 18.5%. Interest on short term investments increased $12 thousand, or 1.8%. Interest expense on deposits increased $343 thousand, or 5.3% due to slight increases in both rates and volume. Interest expense on other borrowed funds increased $203 thousand due primarily to an increase in volume. The net interest margin (net interest income as a percentage of average earning assets), on a tax equivalent basis, decreased to 4.87% during the second quarter of 1998 compared to 5.13% in the second quarter of 1997. The spread between rates earned and paid decreased to 3.99% compared to 4.37% in the second quarter of 1997. Noninterest Income - ------------------ Noninterest income of $3.2 million increased $192 thousand, or 6.4% from the second quarter of 1997. Service charges and fees on deposits of $1.3 million increased $29 thousand, or 2.3% from the second quarter of 1997. Other service charges, commissions, and fees increased $78 thousand, or 8.4% to $1.0 million from the second quarter of 1997. Data processing income increased 3.9% to $426 thousand for the second quarter of 1998. Trust fees increased $39 thousand, or 14.6% to $307 thousand. Other noninterest income increased $33 thousand in 1998 compared to 1997. Noninterest Expense - ------------------- Total noninterest expenses increased $768 thousand or 10.7% from the second quarter of 1997 to $7.9 million. Salaries and employee benefits, the largest component of noninterest expense, increased $377 thousand, or 10.1%. Occupancy expense, net of rental income, increased $28 thousand to $534 thousand. These increases are partially attributed to the Company's efforts to expand into new markets. Equipment expense decreased $16 thousand, or 2.3%. Data processing expense increased 5.9% from $238 thousand to $252 thousand for the second quarter of 1998. Bank franchise tax was relatively unchanged at $282 thousand. Other noninterest expense increased from $1.7 million to $2.1 million. Income Taxes - ------------ Income tax expense for the second quarter of 1998 was $1.3 million, a decrease of $174 thousand from the second quarter of 1997. The second quarter 1998 effective tax rate was 26.5%, a decrease of 7.7% from the second quarter of 1997. First six months of 1998 ------------------------ Net income for the six months ended June 30, 1998 was $7.3 million, or $.96 per diluted share compared to earnings of $7.2 million, or $.95 per diluted share for the same period in 1997. Net interest income increased 1.0% to $19.9 million. Noninterest income increased 2.7% to $6.4 million and the provision for loan losses decreased $652 thousand, or 60.0%. These positive variances have been partially offset by an increase in noninterest expense of $982 thousand, of which $542 thousand relates to salaries and employee benefits. Return on average assets was 1.57% for the six months ended June 30, 1998, a decrease of 2 basis points from the same period in 1997. Return on average equity was 12.48%, a decrease from 13.05% in the first six months of 1997. Net Interest Income - ------------------- Net interest income totaled $19.9 million for the six months ended June 30, 1998 compared to $19.7 million for the same period in 1997. Interest and fees on loans increased $949 thousand, or 3.7%. The increase is primarily attributed to a 4.4% increase in loan volume. Interest on taxable securities decreased $187 thousand, or 4.3%. The decrease is primarily attributed to a 5.9% decrease in volume. Interest on nontaxable securities increased $140 thousand, or 9.1% due to a 14.9% increase in volume. Interest on short term investments increased $147 thousand. This increase is attributed to slight increases in both rate and volume. Interest expense on deposits increased $453 thousand, or 3.5%. The increase is primarily due to an increase in rates paid of approximately 10 basis points. Interest expense on other borrowed funds increased $397 thousand, or 65.6%. The increase is made up of an $11.3 million, or 40% increase in volume and an increase of approximately 78 basis points on rates paid. Net interest margin on a tax equivalent basis decreased to 4.84% during the first six months of 1998 compared to 5.03% for the same period of 1997. The spread between rates earned and paid decreased from 4.29% in 1997 to 3.99% in the current period. Noninterest Income - ------------------ Total noninterest income increased $166 thousand, or 2.7% for the first six months of 1998 compared to the same period in 1997. Service charges and fees on deposits remained unchanged at $2.6 million. Other service charges, commissions, and fees increased 5.8% to $2.1 million. Data processing fees increased 4.2% to $790 thousand. Trust fees increased 12.2% to $605 thousand. The Company recorded gains on the sale of available for sale investment securities of $100 thousand. Other noninterest income decreased by $146 thousand in 1998 compared to 1997. This is primarily attributed to a recovery of prior year legal expenses of $189 thousand recorded in 1997. Noninterest Expense - ------------------- Total noninterest expense increased $982 thousand, or 6.6% from the first six months of 1997 to $15.8 million. Salaries and employee benefits, the largest component of noninterest expense, increased $542 thousand, or 7.0%. Occupancy expense, net of rental income, increased 4.4% to $1.0 million. These increases are partially attributed to the Company's ongoing efforts to expand into new markets. Equipment expense decreased $42 thousand, or 3.0%. Data processing expense increased 12.3% to $548 thousand. This increase is primarily attributable to an increase in credit card interchange and processing. Bank franchise tax expense increased $54 thousand, or 11%. Other noninterest expense increased $320 thousand, or 8.8%. The largest increase in noninterest expense was in correspondent bank fees, which rose $121 thousand, or 31.9%. This increase is attributable to increased activity in the Company's role as custodian for various accounts of the Commonwealth of Kentucky in Frankfort. Net Other Real Estate Owned expense also contributed to the increase in noninterest expense by increasing $52 thousand. Income Taxes - ------------ Income tax expense for the first six months of 1998 was $2.8 million compared to $2.9 million for the same period in 1997. The effective tax rate was 27.52% for the first six months of 1998, down from 28.68% in the prior year. FINANCIAL CONDITION Total assets were $973 million on June 30, 1998, a decrease of 4.1% from December 31, 1997. The fluctuation in total assets is primarily due to the relationship between the Company's lead bank, Farmers Bank & Capital Trust Co. and the Commonwealth of Kentucky. Farmers Bank provides various services to state agencies of the Commonwealth of Kentucky. As the depository for the Commonwealth, these agencies issue checks drawn on Framers Bank, including paychecks and state income tax refunds. Farmers Bank also processes vouchers for the WIC (Womens, Infants and Children) program for the Cabinet for Human Resources. The Bank's investment department provides services to both the Kentucky Retirement and Teachers Retirement systems. As the depository for the Commonwealth, large fluctuations in deposits in the form of uncollected funds are likely to occur on a daily basis. On December 31, 1997, Farmers Bank held a significant amount of deposits for the Commonwealth, which were subsequently reduced shortly after year end. Assets averaged $940 million for the first six months of 1998, an increase of $34 million, or 3.8% from year end 1997. Loans - ----- Loans, net of unearned income, increased $11.6 million, or 2.0% from December 31, 1997 to $598 million. On average, loans represented 68.4% of earning assets compared to 69.5% for year end 1997. As loan demand fluctuates, the available funds are redirected between either temporary investments or investment securities. Allowance for Loan Losses - ------------------------- The provision for loan losses decreased $652 thousand or 60.0% compared to the first six months 1997. The Company had net charge-offs of $585 thousand in the first six months of 1998 compared to net charge-offs of $977 thousand in the same period of 1997. The allowance for loan losses was 1.50% of net loans at June 30, 1998, an decrease of 6 basis points from year end 1997. Management continues to emphasize collection efforts and evaluation of risks within the portfolio. Nonperforming Assets - -------------------- Nonperforming assets, consisting of nonaccrual loans, restructured loans, loans past due ninety days or more on which interest in still accruing, other real estate owned, and other foreclosed assets, totaled $7.9 million on June 30, 1998, an increase of $1.2 million or 18.1% from year end 1997. Nonperforming assets to total equity increased from 5.7% at year end 1997 to 6.5% at June 30, 1998. Nonperforming loans as a percentage of net loans increased from 1.13% at year end to 1.17%. Other real estate owned which had a balance of $29 thousand at year end 1997, increased to $816 thousand as of June 30, 1998. Temporary Investments - --------------------- Time deposits with banks, federal funds sold and securities purchased under agreements to resell averaged $56.6 million, an increase of $8.9 million, or 18.6% from year end 1997. Investment Securities - --------------------- Investment securities were $248 million on June 30, 1998, an increase of $33.1 million, or 15.4% from year end 1997. Available for sale and held to maturity securities were $158 and $90 million, respectively. Investment securities averaged $212 million for the first six months of 1998, an increase of $2.8 million, or 1.3% from year end 1997. The Company had a net unrealized gain on securities available for sale, net of taxes, of $36 thousand on June 30, 1998, as compared to a net unrealized gain of $100 thousand on December 31, 1997. Deposits - -------- Total deposits decreased $43 million, or 5.2%, from year end 1997 to $792 million. This fluctuation is primarily due to the relationship between the Company's lead bank and the Commonwealth of Kentucky, as described under the caption "FINANCIAL CONDITION". Deposits averaged $776 million, an increase of $22.3 million, or 3.0% from year end 1997. Borrowed Funds - -------------- Borrowed funds totaled $52.3 million, a decrease of $1.4 million, or 2.6% from year end 1997. This decrease is due primarily to repurchase agreements entered into with the Commonwealth of Kentucky. The fluctuations are due to the relationship with the Commonwealth of Kentucky as described under the caption "FINANCIAL CONDITION". Borrowed funds averaged $39 million, an increase of $8.0 million, or 25.5%. 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 1998. 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. Liquid assets consist of cash and due from banks, short-term investments, and securities available for sale. At June 30, 1998, such assets totaled $254 million, a decrease of $52 million from year end 1997. The decrease in liquid assets was primarily due to the decrease of the balances maintained by the Commonwealth of Kentucky. Fluctuations such as this are normal and are anticipated by Management in analyzing the Company's ongoing liquidity and funding needs. CAPITAL RESOURCES Shareholders' equity was $120 million on June 30, 1998, increasing $3.4 million from year end 1997. The Company purchased 7,200 shares of its outstanding common stock during the first six months of 1998 for a total cost of $215 thousand. Dividends of $3.6 million, or $.48 per share, were declared during the first six months of 1998, an increase of 17.1% per share compared to the prior year. Consistent with the objective of operating a sound financial organization, the Company's goal is to maintain capital ratios well above the regulatory minimum requirements. The Company's capital ratios as of June 30, 1998, 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 18.89% 4.00% 6.00% Total risk based 20.14% 8.00% 10.00% Leverage 12.66% 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 June 30, 1998. YEAR 2000 COMPLIANCE The Company is aware of the issues associated with the programming code in existing computer systems as the year 2000 approaches. The Year 2000 problem arises when computer programs use two digits rather than four to define the applicable year. Some systems may treat the year 2000 as the year 1900. This could result in a major system failure or miscalculations. A number of computer systems which are affected by the Year 2000 are utilized by the Company to operate its day-to-day business. Most of these systems use software developed by and licensed from third party software vendors. The Company is utilizing both internal and external resources to identify, correct and test the Company's systems for Year 2000 compliance. The Company is actively managing all of its third party software vendors to determine that software corrections and warranty commitments are obtained. The Company believes that mission critical applications are Year 2000 compliant. Most of the systems testing will be completed in 1998, with the remainder scheduled to be completed during the first quarter of 1999. The Company believes that the costs associated with Year 2000 compliance will be absorbed in routine annual software maintenance contracts and are not likely to be incremental costs to the Company. The Company does not anticipate future material expenditures in order to become Year 2000 compliant. EFFECT OF IMPLEMENTING RECENTLY ISSUED ACCOUNTING STANDARDS In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS. This Statement revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. It standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures required in SFAS No. 87, SFAS No. 88 and SFAS No. 106. This Statement is effective for fiscal years beginning after December 15, 1997, and requires restatement of disclosures in earlier periods. The Company does not expect the implementation of this Statement to have a material effect on the consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This Statement requires companies to recognize derivatives on the balance sheet and measure them at fair value. Gains or losses resulting in the changes in fair value of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criteria for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. If the derivative is highly effective, but not perfectly effective and does not exactly offset the changes in fair value or cash flows of the hedged item, the ineffective portion must be recognized in income at the same time the change in fair value of the derivative is recognized on the balance sheet. This Statement amends SFAS No. 52 and SFAS No. 107, and supersedes SFAS No. 80, SFAS No. 105 and SFAS No. 119. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Initial application should be as of the beginning of an entity's fiscal quarter. Early application of this Statement is permitted only as of the beginning of any fiscal quarter that begins after issuance of this Statement. The Company is currently evaluating the merits of adopting this Statement before the mandatory date. The Company does not expect the implementation of this Statement to have a material effect on the consolidated financial statements. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets in which the Company and its subsidiaries operate); competition for the Company's customers from other providers of financial services; government legislation and regulation (which changes from time to time and over which the Company has no control); changes in interest rates; material unforeseen changes in the liquidity, results of operations, or financial condition of the Company's customers; and other risks detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- There have been no material changes in the Company's market risk from December 31, 1997. For information regarding the Company's market risk, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. PART II - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The annual meeting of shareholders was held May 12, 1998. The matters that were voted upon included: a) The election of four directors for three-year terms ending in 2001 or until their successors have been elected and qualified. b) Ratification of the Company's Nonqualified Stock Option Plan. c) Amendment of the Company's Articles of Incorporation to increase the authorized Common Stock and to reduce the par value of the Common Stock. d) The ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for the Company and its subsidiaries for the calendar year 1998. The outcome of the voting was as follows: NAME FOR AGAINST WITHHELD ABSTAINED Lloyd C. Hillard 6,433,568 0 223,841 0 Harold G. Mays 6,657,209 0 200 0 Robert Roach, Jr. 6,351,117 0 306,292 0 Dr. John D. Sutterlin 6,433,509 0 223,900 0 Ratification of Nonqualified Stock Option Plan 5,571,239 725,666 0 194,822 Amendment to Articles of Incorporation 6,687,360 147,656 0 19,533 Ratification of the appointment of KPMG Peat Marwick LLP 6,716,224 8,535 0 130,224 Listed below is the name of each director whose term of office continued after the meeting. Frank W. Sower, Jr. James E. Bondurant Harold G. Mays J. Barry Banker James H. Childers Cecil D. Bell Robert Roach, Jr. E. Bruce Dungan G. Anthony Busseni Lloyd C. Hillard, Jr. Charles S. Boyd Dr. John D. Sutterlin In addition to the directors above, Dr. John P. Stewart, Chairman Emeritus and Charles T. Mitchell serve as advisory directors for the Company. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- a) List of Exhibits ---------------- 3i Articles of incorporation 11 Statement re computation of per share earnings 27 Financial data schedule (for SEC use only) b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed during the quarter. 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: 8/11/98 /s/ Charles S. Boyd -------------- --------------------------------------------------- Charles Scott Boyd, President and CEO (Principal Executive Officer) Date: 8/11/98 /s/ C. Douglas Carpenter -------------- --------------------------------------------------- Cecil Douglas Carpenter Vice President and CFO (Principal Financial and Accounting Officer) Exhibit 3i Articles of incorporation ------------------------- Page No. Amended and Restated Articles of Incorporation - December 14, 1982 19 Articles of Amendment to Articles of Incorporation - April 8, 1986 24 Articles of Amendment to Articles of Incorporation - May 12, 1987 28 Articles of Amendment to Articles of Incorporation - May 9, 1989 30 Articles of Amendment to Articles of Incorporation - June 3, 1998 32 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FARMERS CAPITAL BANK CORPORATION The undersigned, Zack C. Saufley and James H. Childers, President and Secretary, respectively, of Farmers Capital Bank Corporation, hereby execute these Amended and Restated Articles of Incorporation of Farmers Capital Bank Corporation, and certify that: (A) The name of the corporation is Farmers Capital Bank Corporation. (B) The amendments so adopted are amendments to ARTICLE VI and the addition and amendment of ARTICLE X, so that each of said articles as amended shall read in their respective entirety as hereinafter set out. (C) The Restated Articles of Incorporation, as amended, are as follows: ARTICLE I --------- The name of the corporation is Farmers Capital Bank Corporation. ARTICLE II ---------- The existence of this corporation shall commence upon the issuance of the Certification of Incorporation and its duration shall be perpetual unless sooner dissolved by action of the shareholders in accordance with the laws of the Commonwealth of Kentucky. ARTICLE III ----------- The objects and purposes for which this corporation is organized and the powers which may be exercised by it are those enumerated in Sections 271A.020, 271A.026, and 271A.030 of the Kentucky Revised Statutes, and: (1) To purchase, subscribe for, or otherwise acquire and own, hold, use, sell, lease, assign, transfer, mortgage, pledge, exchange, or otherwise dispose of real and personal property of every kind and description including shares of stock, bonds, debentures, notes, evidences of indebtedness, and other securities, contracts or obligations, domestic or foreign, and to pay therefor in whole or in part in cash or by exchanging therefor stocks, bonds, or other evidences of indebtedness or securities of this or any other corporation, and while the owner or holder of any such real or personal property, stocks, bonds, debentures, notes, evidences of indebtedness or other securities, contracts, or obligations, to receive, collect, and dispose of the interest, dividends and income arising from such property, and to possess and exercise in respect thereof all the rights, powers an privileges of ownership, including all voting powers on any stocks so owned. (2) To act as a bank holding company. (3) To aid either by loans or by guaranty of securities or in any other manner, any corporation, domestic or foreign, any shares of stock, or any bonds, debentures, evidences of indebtedness or other securities whereof are held by this corporation or in which it shall have any interest, and to do any acts designed to protect, preserve, improve, or enhance the value of any property at any time held or controlled by this corporation or in which it at that time may be interested. (4) To enter into, make, perform, and carry out contracts of any kind for any lawful purpose with any firms, persons, associations or corporations. (5) To purchase, acquire, lease, own, and enjoy any and all such other property real and personal, as may be reasonably necessary for the carrying on of the business of the corporation. (6) To acquire, as a going concern or otherwise, and pay for in cash, stock or bonds of this corporation or otherwise, the whole or any part of the business, good will, rights, assets and other property, and to undertake, assume or secure the whole or any part of the obligations or liabilities of any person, firm, trust, association or corporation. (7) To issue bonds, debentures or obligations of this corporation from time to time, for any of the objects or purposes of the corporation, and to secure the same by mortgage, pledge, deed of trust, or otherwise. (8) To purchase the corporate assets of any other corporation and engage in the same character of business. (9) To apply for, acquire, enjoy, utilize and dispose of any patents, copyrights and trademarks and any licenses or other rights of interest thereunder or therein, whether or not in any way relating to any of the businesses in which the corporation may engage. (10) To purchase, hold, sell and transfer shares of its own capital stock, subject to the limitations contained in Sections 271A.030 and 271A.330 of the Kentucky Revised Statutes. The corporation may purchase its own capital stock to the extent of unreserved and unrestricted earned surplus available therefor, and to the extent of unreserved and unrestricted capital surplus available therefor. Shares of its own capital stock owned by the corporation shall not be voted directly or indirectly, or counted as outstanding for the purpose of any stockholders' quorum or vote. (11) To transact any and all lawful business for which corporations may be incorporated under Chapter 271A of the Kentucky Revised Statutes. The foregoing clauses shall be construed both as objects and powers, and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the powers of this corporation. ARTICLE IV ---------- The total authorized number of shares of capital stock of the corporation shall be Eight Hundred Four Thousand (804,000) shares, all of which shares shall be common stock of the par value of One Dollar and Twenty Five Cents ($1.25) each. All shares of common stock of the corporation shall have full and unlimited voting power and each share shall be entitled to one vote. The owners of common stock of the corporation shall have preemptive rights as set out in Section 271A.130 of the Kentucky Revised Statutes, except with respect to treasury shares of the corporation. No holder of shares of the capital stock of the corporation shall have any preemptive or preferential right to subscribe for, purchase or receive any treasury share(s) (as defined in Section 271A.010(8) of the Kentucky Revised Statutes) of the corporation. ARTICLE V --------- The location and post office address of the corporation's registered office shall be One Farmers Bank Plaza, Frankfort, Kentucky 40601 and the registered agent of the corporation at that address shall be Zack C. Saufley. ARTICLE VI IS HEREBY AMENDED TO READ AS FOLLOWS: ------------------------------------------------ ARTICLE VI ---------- From and after the first annual meeting of the shareholders of the corporation, the affairs of the corporation shall be conducted and managed by a Board of Directors consisting of not less than nine (9) nor more than fifteen (15) members, as may be fixed by the bylaws of the corporation from time to time. From and after the first annual meeting of the shareholders the Directors of the corporation shall be divided into three classes, each class to be as nearly equal in number as possible, said classes to be designated as Class I, Class II and Class III Directors. At the first annual meeting of the shareholders there shall be elected ten (10) Directors of the corporation, as follows: (a) three (3) members of Class I Directors who shall hold office until the second annual meeting of the shareholders at which second annual meeting the number of Class I Directors elected to office shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified; (b) three (3) members of Class II Directors who shall hold office until the third annual meeting of the shareholders at which third annual meeting of the shareholders the number of Class II Directors elected to office shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified, and (c) four (4) members of Class III Directors who shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified and following the expiration of their initial term of office the number of Class III Directors elected shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. The first Board of Directors who shall serve until the first annual meeting of the shareholders or until their successors shall be duly elected and qualified shall consist of ten (10) members who are: John P. Stewart John D. Sutterlin Route #7 12 Whitebridge Lane Frankfort, Kentucky Frankfort, KY Zack C. Saufley Joseph C. Yagel, Jr. One Farmers Bank Plaza 511 Leawood Dr. Frankfort, Kentucky Frankfort, KY Warner U. Hines Bruce Dungan Route #6 One Farmers Bank Plaza Frankfort, Kentucky Frankfort, KY John J. Hopkins Charles O. Bush 415 West Main Street 219 Walmac Frankfort, Kentucky Frankfort, KY Charles T. Mitchell Michael M. Sullivan 471 Breckinridge Avenue One Farmers Bank Plaza Frankfort, Kentucky Frankfort, KY ARTICLE VII ----------- In furtherance, and not in limitation of the powers conferred by stature, the board of directors is expressly authorized: (1) To make and alter the bylaws of this corporation, to fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages, security interests, and liens upon the real and personal property of this corporation, as an entirety or in part. (2) From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of this corporation (other then the stock book), or any of them, shall be open to inspection of shareholders; and no shareholder shall have any right of inspecting any account, book or document of this corporation except as conferred by statute, unless authorized by a resolution of the shareholders or directors. (3) To issue all or any portion of the capital stock of the corporation for lawful money of the United States, real or personal property, services, or any other right or thing of value having a value of not less than the par value of the stock to be issued, for the uses and purposes of the corporation, and when so issued the capital stock shall become and be fully paid and nonassessable; and the directors shall be sole judges of the value of any property, right or thing acquired in exchange for capital stock. (4) If the bylaws so provide, to designate two or more of its number to constitute an executive committee which committee shall for the time being, as provided in said resolution or in the bylaws of this corporation, have and exercise any or all of the powers of the board of directors in the management of the business and affairs of this corporation, and have power to authorize the seal of this corporation to be affixed to all papers which may require it. The board of directors may also designate one or more other committees in the manner prescribed by the bylaws, each committee to have such name and to exercise such powers as may, from time to time, be prescribed by the bylaws or by resolution adopted by the board of directors. ARTICLE VIII ------------ No contract or other transaction between the corporation and any other firm, partnership, association, corporation or other organization shall, in the absence of fraud, be affected or invalidated by the fact that any one or more of the directors of the corporation is or are interested in or is a member, director, shareholder or officer or are members, directors, shareholders or officers of such other firm, partnership, association, corporation or organization. Any director of the corporation may vote upon any contract or other transaction between the corporation and any subsidiary or controlled company without regard to the fact that he also is a director of such subsidiary or controlled company. ARTICLE IX ---------- The name and address of the incorporator is: Zack C. Saufley One Farmers Bank Plaza Frankfort, Kentucky 40601 ARTICLE X IS HEREBY ADDED TO THE ARTICLES OF INCORPORATION BY WAY OF ----------------------------------------------------------------------- AMENDMENT TO THE ARTICLES OF INCORPORATION TO READ AS FOLLOWS: - -------------------------------------------------------------- ARTICLE X --------- The affirmative vote or written consent of the holders of two-thirds of the outstanding shares of the common stock of the corporation shall be required for: (1) The approval by the shareholders of the corporation of a plan of merger or consolidation whereby this corporation would be merged or consolidated with or into an affiliate of this corporation; or (2) The authorization by the shareholders of a sale, lease, exchange, or other disposition of all, or substantially all, the property and assets, with or without the good will, of the corporation to an affiliate of this corporation; or (3) The adoption by the shareholders of the corporation of a resolution to dissolve the corporation; or (4) The removal without cause of any or all directors of the corporation; or (5) The approval by the shareholders of the corporation of any amendment or amendments to the corporation's Articles of Incorporation which would amend, alter, modify or repeal the provisions of Article VI or this Article X of the Articles of Incorporation. For the purposes of this Article X, the term: (a) "Affiliate" means a person (i) who owns, directly or indirectly, ten (10%) percent or more of the outstanding common stock of this corporation, or (ii) who controls, is controlled by, or is under common control with a person who owns, directly or indirectly, or who controls, ten (10%) percent or more of the outstanding common stock of the corporation. (b) "Control" means the power to vote, or direct the vote, of ten (10%) percent or more of any class of voting securities of a person, and (c) "Person" means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of legal entity. * * * * * (D) Except for the designated amendments, these Restated Articles of Incorporation correctly set forth without change the corresponding provisions of the Articles of Incorporation, and the Restated Articles of Incorporation, together with the designated amendments, supersede the original Articles of Incorporation. (E) The foregoing Amended and Restated Articles of Incorporation were unanimously approved by the Board of Directors of the Corporation by a resolution adopted on the 14th day of December, 1982, upon which date no shares had been issued. The members of the Board of Directors are the only persons who have subscribed to stock in the corporation. As such stock subscribers (or shareholders) they unanimously approved the resolution on the 14th day of December, 1982. IN WITNESS WHEREOF, Zack C. Saufley and James H. Childers, President and Secretary, respectively, of the corporation, have set their hands this 14th day of December, 1982. FARMERS CAPITAL BANK CORPORATION BY:/s/ Zack C. Saufley ---------------------- ZACK C. SAUFLEY, President BY:/s/ James H. Childers ------------------------ JAMES H. CHILDERS, SECRETARY STATE OF KENTUCKY) COUNTY OF FRANKLIN) I, /s/Martha B. O'Neill, a notary public, do hereby certify that on this 14th day of December, 1982, personally appeared before me Zack C. Saufley, who, being by me first duly sworn, declared that he is the President of Farmers Capital Bank Corporation, a Kentucky corporation, that he signed the foregoing document as President of the corporation, and that the statements contained therein are true. /s/ Martha B. O'Neill --------------------- NOTARY PUBLIC, FRANKLIN COUNTY, KENTUCKY My commission expires: 6/10/85 THIS INSTRUMENT PREPARED BY: /s/ William L. Montague - ----------------------- William L. Montague Stoll, Keenon & Park 1000 First Security Plaza Lexington, Kentucky 40507 ARTICLES OF AMENDMENT --------------------- TO ARTICLES OF INCORPORATION ---------------------------- OF FARMERS CAPITAL BANK CORPORATION ----------------------------------- The undersigned corporation, Farmers Capital Bank Corporation, a Kentucky corporation, hereby adopts and files Articles of Amendment to its Articles of Incorporation in the manner provided for by Section 271A.305 of the Kentucky Revised Statutes. First. The name of the corporation is Farmers Capital Bank Corporation. Second. At the annual meeting of shareholders of the corporation held on April 8, 1986, a resolution was adopted by which Article VI and Article X were amended and a new Article XI was added so that Articles VI, X and XI of the Articles of Incorporation now read and provide as follows: ARTICLE VI ---------- From and after the first annual meeting of the shareholders of the corporation, the affairs of the corporation shall be conducted and managed by a Board of Directors consisting of not less than nine (9) nor more than fifteen (15) members, as may be fixed by the By-Laws of the corporation from time to time. The number of Directors so fixed in the By-Laws may be changed only by receiving the affirmative vote of (i) the holders of at least 80% of all the then outstanding shares of common stock of the corporation or (ii) a majority of the Continuing Directors. ("Continuing Director" shall mean for the purposes of this ARTICLE a member of the Board of Directors at the time the vote is taken, who also meets one or more of the criteria set forth in ARTICLE X(2) (g) (2) of these Articles.) From and after the first annual meeting of the shareholders the Directors of the corporation shall be divided into three classes, each class to be as nearly equal in number as possible, said classes to be designated as Class I, Class II and Class III Directors. At the first annual meeting of the shareholders there shall be elected ten (10) Directors of the corporation, as follows: (a) three (3) members of Class I Directors who shall hold office until the second annual meeting of the shareholders at which second annual meeting the number of Class I Directors elected to office shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified; (b) three (3) members of Class II Directors who shall hold office until the third annual meeting of the shareholders at which third annual meeting of the shareholders the number of Class II Directors elected to office shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified, and (c) four (4) members of Class III directors who shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified and following the expiration of their initial term of office the number of Class III Directors elected shall hold office for a term of three (3) years or until their respective successors are duly elected and qualified. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. A Director may be removed without cause, but only upon the affirmative vote of the holders of at least 80% of the outstanding shares of common stock of the corporation then entitled to vote at an election of Directors. The first Board of Directors who shall serve until the first annual meeting of the shareholders or until their successors shall be duly elected and qualified shall consist of ten (10) members who are: John P. Stewart, Route #7, Frankfort, Kentucky; Zack C. Saufley, One Farmers Bank Plaza, Frankfort, Kentucky; Warner U. Hines, Route #6, Frankfort, Kentucky; John J. Hopkins, 415 West Main Street, Frankfort, Kentucky; Charles T. Mitchell, 471 Breckinridge Avenue, Frankfort, Kentucky; John D. Sutterlin, 12 Whitebridge Lane, Frankfort, Kentucky; Joseph C. Yagel, 511 Leawood Drive, Frankfort, Kentucky; Bruce Dungan, One Farmers Bank Plaza, Frankfort, Kentucky; Charles O. Bush, 219 Walma, Frankfort, Kentucky; and Michael M. Sullivan, One Farmers Bank Plaza, Frankfort, Kentucky. * * * * * ARTICLE X --------- (1) In addition to the requirements of any applicable statute, the affirmative vote of not less than 80% of the common stock of the corporation shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) between the corporation or any subsidiary of the corporation and any "Related Person" (as hereinafter defined), provided, however, that such 80% vote shall not be required and this ARTICLE shall not apply if: (a) The Business Combination is solely a merger of a subsidiary of the corporation into the corporation under the provisions of Kentucky Revised Statute 271A.375; or (b) The Business Combination is approved by a majority of the "Continuing Directors" of the corporation (as hereinafter defined). (2) For the purposes of this ARTICLE: (a) The term "Business Combination" shall mean (1) any merger or consolidation of the corporation or any subsidiary of the corporation with or into a Related Person, (2) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any "Substantial Part" (as hereinafter defined) of the assets either of the corporation (including without limitation any voting securities of a subsidiary) or of any subsidiary of the corporation to a Related Person, (3) any merger or consolidation of a Related Person with or into the corporation or any subsidiary of the corporation, (4) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the corporation or any subsidiary of the corporation, (5) the issuance of any securities of the corporation or any subsidiary of the corporation to a Related Person, (6) any recapitalization that would have the effect of increasing the voting power of a Related Person, (7) the dissolution or liquidation of the corporation or any of its subsidiaries at a time when there is a Related Person to the corporation, or (8) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) The term "Related Person" shall mean a person (1) who owns, directly or indirectly, ten (10%) percent or more of the outstanding common stock of this corporation, or (2) who controls, is controlled by, or is under common control with, a person who owns, directly or indirectly, or who controls, ten (10%) percent or more of the outstanding common stock of this corporation. (c) Without limitation, any shares of common stock of this corporation that any person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed "owned" by that person. (d) The term "control" shall mean the power, directly or indirectly, to direct the management or policies of a person or to vote, or direct the vote, of ten (10%) percent or more of any class of voting securities of a person. (e) The term "person" shall mean an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of legal entity. (f) The term "Substantial Part" shall mean more than 30% of the fair market value of the total assets of the corporation in question, as of the end of its most recent fiscal year ending prior to the time the determination is being made. (g) The term "Continuing Director" shall mean a member of the Board of Directors of the corporation who (1) is a member of the Board of Directors of the corporation at the time the Director vote with respect to the Business Combination in question is taken, and (2) was (a) a member of the Board of Directors of the corporation on March 1, 1986, or (b) a member of the Board of Directors of the corporation immediately prior to the time that the Related Person involved in the Business Combination which is the subject of the Directors' vote became a Related Person, or (c) designated as a Continuing Director by a majority of the then Continuing Directors within ninety (90) days after the date upon which he or she was first elected as a member of the Board of Directors of the corporation. ARTICLE XI ---------- (1) The provisions of ARTICLE IV, ARTICLE VI, ARTICLE X AND ARTICLE XI of these Articles of Incorporation may not be repealed or amended in any respect, unless (in addition to the requirements of any applicable statute) such action is approved by the affirmative vote of the holders of not less than 80% of the common stock of the corporation, provided, however, that such 80% vote shall not be required and this ARTICLE shall not apply if: (a) At the time such repeal or amendment is approved by the Board of Directors of the corporation and at the time such repeal or amendment is voted upon by the shareholders of the corporation, there is no Related Person (as defined in ARTICLE X herein) of the corporation, or (b) In the event there is a Related Person of the corporation at the time such repeal or amendment is approved by the Board of Directors of the corporation or is voted upon by the shareholders, the repeal or amendment is, or has been, approved by a majority of the "Prior Directors" (as herein defined). (2) For the purpose of this ARTICLE XI, the term "Prior Director" shall mean a member of the Board of Directors of the corporation who (1) is a member of the Board of Directors of the corporation at the time the Directors' vote with respect to such repeal or amendment is taken, and (2) was (a) a member of the Board of Directors of the corporation on March 1, 1986, or (b) a member of the Board of Directors of the corporation immediately prior to the time that the Related Person became a Related Person, or (c) designated as a Prior Director by a majority of the then Prior Directors within ninety (90) days after the date upon which he or she was first elected as a member of the Board of Directors of the corporation. Third. The total number of shares of capital stock of the corporation outstanding at the time of the adoption of the resolution amending and supplementing the Articles of Incorporation as set forth above was 793,195 shares of $1.25 par value common stock (the "outstanding shares"), all of which outstanding shares were entitled to vote upon the proposed amendments. Fourth. At the annual meeting of the shareholders of the corporation held on April 8, 1986, a total of 704,379 of the outstanding shares were voted in favor of a resolution to amend Article VI and Article X of the Articles of Incorporation and to add new Article XI to the Articles of Incorporation, so that said Articles read and provide as set forth above, and none of the outstanding shares were voted against said resolution, which amounts to the affirmative vote of 88.8% of the outstanding shares. IN WITNESS WHEREOF, the foregoing Articles of Amendment have been executed by Zack C. Saufley as President and James H. Childers as Secretary of Farmers Capital Bank Corporation, a Kentucky corporation, this 8th day of April, 1986. FARMERS CAPITAL BANK CORPORATION BY:/s/ Zack C. Saufley ---------------------- Zack C. Saufley, President BY:/s/ James H. Childers ------------------------ James H. Childers, Secretary STATE OF KENTUCKY COUNTY OF FRANKLIN I, /s/ Brenda Rogers, a notary public, do hereby certify that on the 8th day of April, 1986, personally appeared before me Zack C. Saufley, who, being by me first duly sworn declared that he is President of Farmers Capital Bank Corporation, a Kentucky corporation, that he signed the foregoing Articles of Amendment as President of the corporation, and that the statements contained therein are true. My Commission expires: July 11, 1987. /s/ Brenda Rogers ----------------- NOTARY PUBLIC, FRANKLIN COUNTY, KENTUCKY This Instrument Prepared By: /s/ William L. Montague - ----------------------- William L. Montague STOLL, KEENON & PARK 1000 First Security Plaza Lexington, Kentucky 40507 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION The undersigned corporation, FARMERS CAPITAL BANK CORPORATION, a Kentucky corporation, hereby executes Articles of Amendment to its Articles of Incorporation under and pursuant to Section 271A.305 of the Kentucky Revised Statutes. 1. The name of the corporation is Farmers Capital Bank Corporation. 2. The Amendments adopted amend and change ARTICLE IV of the corporation's Articles of Incorporation so that ARTICLE IV of the corporation's Articles of Incorporation now reads and provides in its entirety as follows: ARTICLE IV ---------- The total authorized number of shares of capital stock of the corporation shall be Four Million, Eight Hundred and Four Thousand (4,804,000) shares, all of which shares shall be common stock of the par value of Twenty Five Cents ($.25) each. All shares of common stock of the corporation shall have full and unlimited voting power and shall be entitled to one vote on all matters properly presented to shareholders, except as may otherwise be provided by statute. No holder of shares of the common stock of the corporation shall have any preemptive or preferential right to subscribe for, purchase or receive any additional shares of capital stock of the corporation or rights or options to purchase additional shares of capital stock of the corporation or securities convertible into or carrying rights or options to purchase additional shares of the capital stock of the corporation. 3. The foregoing amendments and changes to ARTICLE IV of the corporation's Articles of Incorporation were adopted on May 12, 1987 by the affirmative vote of the holders of a majority of the outstanding $1.25 par value (now $.25 par value) common stock of the corporation, which is the only authorized, issued or outstanding stock of the corporation, and the only class of stock of the corporation entitled to vote upon said amendments. IN WITNESS WHEREOF, the Farmers Capital Bank Corporation, a Kentucky corporation, has caused the foregoing Articles of Amendment to Articles of Incorporation to be executed by and through its duly authorized President and Secretary, this 12th day of May, 1987. FARMERS CAPITAL BANK CORPORATION BY:/s/ Zack C. Saufley ---------------------- Zack C. Saufley, President BY:/s/ James H. Childers ------------------------ James H. Childers, Secretary STATE OF KENTUCKY COUNTY OF FRANKLIN I, /s/ Brenda Rogers, a notary public, do hereby certify that on the 12th day of May, 1987, personally appeared before me Zack C. Saufley, who, being by me first sworn, declared that he is President of Farmers Capital Bank Corporation, a Kentucky corporation, that he signed the foregoing Articles of Amendment as President of said corporation, and that the statements contained therein are true. /s/ Brenda Rogers ----------------- NOTARY PUBLIC FRANKLIN COUNTY, KENTUCKY My Commission expires: July 11, 1987. THIS INSTRUMENT PREPARED BY: /s/ William L. Montague - ----------------------- William L. Montague STOLL, KEENON & PARK 1000 First Security Plaza Lexington, Kentucky 40507 ARTICLES OF AMENDMENT --------------------- TO ARTICLES OF INCORPORATION ---------------------------- The undersigned corporation, Farmers Capital Bank Corporation, hereby executes and files Articles of Amendment to its Articles of Incorporation. 1. The name of the corporation is Farmers Capital Bank Corporation (the "Corporation'). 2. At the Corporation's annual meeting of shareholders held on the 9th day of May, 1989 (the "Annual Meeting"), it was resolved that the Articles of Incorporation of the Corporation be amended to add a new Article XII to the Articles of Incorporation of the Corporation, said Article XII to read as follows: ARTICLE XII ----------- The liability of each and all of the directors of the corporation shall be and is hereby limited to the greatest extent permitted by law and no director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for a breach of his or her duties as director except for liability: (a) for any transaction in which the director's personal financial interest is in conflict with the financial interest of the corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or are known to the director to be a violation of law; (c) for voting for or assenting to any distributions made in violation of Section 271B.8-330 of the Kentucky Revised Statutes; or (d) for any transaction from which the director derives an improper personal benefit. The exceptions set forth in paragraphs (a) through (d) of this Article shall be construed as narrowly as legally permissible. If the Kentucky Revised Statutes are amended after approval by the shareholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Kentucky Revised Statutes, as so amended. Any repeal or modification of this Article XII by the shareholders of the corporation shall be approved by the affirmative vote of the holders of not less than 80% of the common stock of the corporation as governed and limited by Article XI of the corporation's Articles of Incorporation and any such repeal or modification shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. 3. At the Annual Meeting: (a) there were 3,888,152 shares of the $.25 par value common voting stock (the "Common Stock") of the Corporation outstanding and entitled to vote upon the proposed Article XII; (b) the Common Stock was (and is) the only class of stock which the Corporation had (or has) authorized or outstanding and holders of said Common Stock constitute the Corporation's only voting group; (c) there were 3,204,941 shares of Common Stock indisputably represented at the Annual Meeting; (d) there were 3,145,818 shares of Common Stock cast for and in favor of the addition of Article XII to the Corporation's Articles of Incorporation; (e) there were 29,890 shares of Common Stock cast against the addition of Article XII to the Corporation's Articles of Incorporation, with 29,233 shares of Common Stock abstaining from said vote; and (f) the number of shares of Common Stock cast for and in favor of the addition of Article XII to the Corporation's Articles of Incorporation was sufficient for approval of said proposal by the holders of the Common Stock, which was the only voting group entitled to vote upon said proposal. IN WITNESS WHEREOF, Farmers Capital Bank Corporation, a Kentucky corporation, has caused its name to be hereunto subscribed by and through its duly authorized President on this 9th day of May, 1989. FARMERS CAPITAL BANK CORPORATION BY:/s/ E. Bruce Dungan ---------------------- E. Bruce Dungan, President STATE OF KENTUCKY COUNTY OF FRANKLIN I, /s/ Donna G. Teater, a Notary Public, do hereby certify that on the 9th day of May, 1989, personally appeared before me E. Bruce Dungan, who being by me first sworn, declared that he is President of Farmers Capital Bank Corporation, a Kentucky corporation, that he signed the foregoing Articles of Amendment as President of said corporation and that the statements contained therein are true. /s/ Donna G. Teater ------------------- NOTARY PUBLIC, STATE-AT-LARGE, KENTUCKY My Commission expires: 2/28/89 THIS INSTRUMENT PREPARED BY: /s/ J. David Smith, Jr. - ----------------------- J. David Smith, Jr. STOLL, KEENON & PARK 1000 First Security Plaza Lexington, Kentucky 40507 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF FARMERS CAPITAL BANK CORPORATION Pursuant to Kentucky Revised Statutes Section 271B.10-060, the undersigned Kentucky corporation, Farmers Capital Bank Corporation, executes these Articles of Amendment to its Articles of Incorporation: (A) The name of the corporation is Farmers Capital Bank Corporation (the "Corporation"). (B) At a meeting of the shareholders of the Corporation held on May 12, 1998, in the manner prescribed by the Kentucky Business Corporation Act, the shareholders of the Corporation adopted a resolution that Article IV of the Corporation's Articles of Incorporation be amended and changed so that Article IV of the Articles of Incorporation reads in its entirety as follows: ARTICLE IV ---------- The total authorized number of shares of capital stock of the corporation shall be Nine Million, Six Hundred and Eight Thousand (9,608,000) shares, all of which shares shall be Common Stock of a par value of Twelve and One-Half Cents ($0.125) each. All shares of common stock of the corporation shall have full and unlimited voting power and shall be entitled to one vote on all matters properly presented to shareholders, except as may otherwise be provided by statute. No holder of shares of the common stock of the corporation shall have any preemptive or preferential right to subscribe for, purchase or receive any additional shares of capital stock of the corporation or rights or options to purchase additional shares of capital stock of the corporation or securities convertible into or carrying rights or options to purchase additional shares of the capital stock of the corporation. (C) The designation, number of outstanding shares, number of votes entitled to be cast by the holders of the Corporation's common stock, which is the only class of stock of the Corporation outstanding and therefore the only voting group entitled to vote on the aforesaid amendment, and the number of votes indisputably represented at the meeting, were as follows: NUMBER OF VOTES DESIGNATION OF NUMBER OF NUMBER OF VOTES REPRESENTED VOTING GROUP OUTSTANDING SHARES ENTITLED TO BE CAST AT MEETING ---------------------------------------------------------------------------- Common Stock (00.25 par value) 3,777,620 3,777,620 3,427,090 (E) The total number of undisputed votes cast for the amendment by the holders of the common stock was 3,343,681. The number of votes cast for the amendment by the holders of the Corporation's common stock, which was at the time of shareholder vote and is now the only class of stock which the Corporation has outstanding, was sufficient for approval by that voting group and the adoption of the amendment by the shareholders of the Corporation. IN WITNESS WHEREOF, the undersigned duly authorized officer has executed these Articles of Amendment the 3rd day of June, 1998. FARMERS CAPITAL BANK CORPORATION By:/s/ Charles S. Boyd ---------------------- Charles S. Boyd, President
Exhibit 11 Statement re computation of per share earnings ---------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share data) 1998 1997 1998 1997 - ------------------------------------- ---- ---- ---- ---- Net income, basic and diluted $3,734 $3,785 $7,316 $7,176 ====== ====== ====== ====== Average shares outstanding 7,555 7,572 7,557 7,582 Effective of dilutive stock options 120 96 ----- ----- ----- ----- Average diluted shares outstanding 7,675 7,572 7,653 7,582 ===== ===== ===== ===== Net income per share, basic $ .49 $ .50 $ .97 $ .95 Net income per share, diluted .49 .50 .96 .95
EX-27 2 FDS 6/30/98
9 This schedule contains summary financial information extracted from the June 30, 1998 financial statements and is qualified in its entirety by reference to such financial statements. 1000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 82927 2369 11100 0 157551 90322 90850 597525 8963 973013 791867 48234 8424 4035 0 0 944 119509 973013 26921 5834 1567 34322 13435 14437 19885 434 100 15780 10094 10094 0 0 7316 0.97 0.96 4.84 2470 3272 1274 0 9114 827 242 8963 8963 0 0
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