UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
___________________
Commission File Number: 33-96358
BOURBON BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0993464
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 157, Paris, Kentucky 40362-0157
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606)987-1795
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 _____
Number of shares of Common Stock outstanding as of November
10, 1997: 1,394,542.
<PAGE>
BOURBON BANCSHARES, INC.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income
Nine Months Ending September 30, 1997 & 1996 4
Three Months Ending September 30, 1997 & 1996 5
Consolidated Statements of Cash Flows
Nine Months Ending September 30, 1997 & 1996 6
Three Months Ending September 30, 1997 & 1996 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information 14
Signatures 14
Exhibits
27 Financial Data Schedule 15
<PAGE>
Item 1 - Financial Statements
BOURBON BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET (unaudited)
(thousands) 9/30/97 12/31/96
Assets
Cash & Due From Banks $ 8,973 $ 9,116
Federal Funds Sold
- 75
Total Cash & Cash Equivalents $ 8,973 $ 9,191
Investment Securities:
Securities Held to Maturity 15,682 16,314
Securities Available for Sale 64,716 76,227
Federal Home Loan Bank Stock 2,706 2,853
Loans $180,402 $159,664
Reserve for Loan Losses 2,101 2,360
Net Loans $178,042 $157,563
Premises and Equipment 5,004 5,716
Other Assets 5,448 5,687
Total Assets $281,669 $272,453
Liabilities & Stockholders' Equity
Deposits
Demand $ 30,515 $ 32,490
Savings & Interest Checking 80,839 79,886
Certificates of Deposit 123,931 118,695
Total Deposits $235,285 $231,071
Repurchase Agreements 2,836 3,253
Federal Home Loan Bank Advances 10,305 10,534
Other Borrowed Funds 3,902 1,324
Other Liabilities 2,055 2,865
Total Liabilities $255,610 $247,820
Stockholders' Equity
Common Stock $ 6,315 $ 6,392
Retained Earnings 19,567 18,240
Net Unrealized Gains (Losses) on Investment
Securities 177 1
Total Stockholders' Equity $ 26,059 $ 24,633
Total Liabilities & Stockholders' Equity $281,669 $272,453
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
(unaudited)
(thousands, except per share amounts)
Nine Months Ending
9/30/97 9/30/96
INTEREST INCOME:
Loans, including fees $ 11,408 $ 10,332
Investment Securities 3,903 3,777
Other 302 432
Total Interest Income $ 15,613 $ 14,541
INTEREST EXPENSE:
Deposits $ 7,020 $ 6,555
Other 691 800
Total Interest Expense $ 7,711 $ 7,355
Net Interest Income $ 7,902 $ 7,186
Loan Loss Provision 343 301
Net Interest Income After Prov $ 7,559 $ 6,885
OTHER INCOME:
Service Charges $ 1,333 $ 1,192
Securities Gains (Losses) 2 29
Other 358 285
Total Other Income $ 1,693 $ 1,506
OTHER EXPENSES:
Salaries and Benefits $ 3,154 $ 2,966
Occupancy Expenses 655 773
Other 2,179 1,890
Total Other Expenses $ 5,817 $ 5,800
Income Before Taxes $ 3,435 $ 2,591
Income Taxes 862 613
Net Income $ 2,573 $ 1,978
Primary earnings per share $ 1.81 $ 1.37
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
(unaudited)
(thousands, except per share amounts)
Three Months Ending
9/30/97 9/30/96
INTEREST INCOME:
Loans, including fees $ 3,992 $ 3,583
Investment Securities 1,271 1,206
Other 99 134
Total Interest Income $ 5,362 $ 4,923
INTEREST EXPENSE:
Deposits $ 2,459 $ 2,172
Other 233 247
Total Interest Expense $ 2,692 $ 2,419
Net Interest Income $ 2,670 $ 2,504
Loan Loss Provision 131 100
Net Interest Income After Prov $ 2,539 $ 2,404
OTHER INCOME:
Service Charges $ 429 $ 400
Securities Gains (Losses) (6) -
Other 149 99
Total Other Income $ 572 $ 499
OTHER EXPENSES:
Salaries and Benefits $ 1,049 $ 1,021
Occupancy Expenses 269 203
Other 604 853
Total Other Expenses $ 1,922 $ 2,077
Income Before Taxes $ 1,189 $ 826
Income Taxes 308 195
Net Income $ 881 $ 631
Primary earnings per share $ 0.62 $ 0.44
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
Nine Months Ending
9/30/97 9/30/96
Cash Flows From Operating Activities
Net Income $ 2,573 $ 1,978
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 383 328
Amortization 313 273
Investment securities (accretion) amortization, net 48 128
Provision for loan losses 343 301
Deferred Income Taxes 15 -
Investment securities losses (gains), net (2) (29)
Originations of loans held for sale (14,678) (20,302)
Proceeds from sale of loans 14,716 25,585
Capitalization of Mortgage Servicing Rights (130) -
Losses (gains) on sale of loans (47) (4)
Losses (gains), including write-downs, on real
estate acquired through foreclosure, net 23 -
Changes in:
Interest receivable (568) (355)
Income taxes refundable 66 -
Other assets (69) (36)
Interest payable 633 113
Income taxes payable 112 126
Other liabilities 66 (72)
Net cash provided by operating activities $ 3,797 $ 8,034
Cash Flows From Investing Activities
Purchases of securities available for sale $(17,053) $(26,256)
Proceeds from sales of securities available for sale 13,336 7,248
Proceeds from principal payments, maturities and
calls of securities available for sale 15,309 31,141
Purchase of securities held to maturity (785) (1,375)
Proceeds from sales, principal payments, maturities
and calls of securities held to maturity 1,431 1,335
Net change in loans (20,870) (9,005)
Purchases of bank premises and equipment (1,095) (1,040)
Proceeds from sales of real estate acquired through
foreclosure 56 57
Net cash provided by investing activities $ (9,671) $ 2,105
Cash Flows From Financing Activities:
Net change in deposits 4,214 3,276
Net change in securities sold under agreements to
repurchase and federal funds purchased 417 (7,173)
Advances from Federal Home Loan Bank - 400
Payments on Federal Home Loan Bank advances (229) (8,872)
Net change in other borrowed funds 2,578 948
Proceeds from note payable 450 330
Payment on note payable (450) (600)
Repurchase of common stock (602) (369)
Proceeds from issuance of common stock 32 1
Dividends paid (754) (688)
Net cash provided by financing activities $ 5,656 $(12,747)
Net increase (decrease) in cash and cash equivalents $ (218) $ (2,608)
Cash and cash equivalents at beginning of period 9,191 11,047
Cash and cash equivalents at end of period $ 8,973 $ 8,439
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
Three Months Ending
9/30/97 9/30/96
Cash Flows From Operating Activities
Net Income $ 881 $ 631
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 109 131
Amortization 106 91
Investment securities (accretion) amortization, net 8 61
Provision for loan losses 131 100
Deferred Income Taxes (83) -
Investment securities losses (gains), net 5 -
Originations of loans held for sale (7,232) (13,876)
Proceeds from sale of loans 7,101 19,398
Capitalization of Mortgage Servicing Rights (52) -
Losses (gains) on sale of loans (15) (9)
Changes in:
Interest receivable (398) (192)
Income taxes refundable 19 -
Other assets (103) (81)
Interest payable 255 (15)
Income taxes payable 112 71
Other liabilities 194 462
Net cash provided by operating activities $ 1,060 $ 6,750
Cash Flows From Investing Activities
Purchases of securities available for sale $ (5,999) $ (5,028)
Proceeds from sales of securities available for sale 5,833 -
Proceeds from principal payments, maturities and
calls of securities available for sale 3,443 4,084
Purchase of securities held to maturity - (650)
Proceeds from sales, principal payments, maturities
and calls of securities held to maturity 540 45
Net change in loans (10,517) (8,714)
Purchases of bank premises and equipment (452) (489)
Net cash provided by investing activities $ (7,152) $(10,752)
Cash Flows From Financing Activities:
Net change in deposits $ 3,219 3,203
Net change in securities sold under agreements to
repurchase and federal funds purchased 439 1,062
Advances from Federal Home Loan Bank - 400
Payments on Federal Home Loan Bank advances (96) (2,746)
Net change in other borrowed funds 2,141 29
Proceeds from note payable - 330
Payment on note payable (100) (300)
Repurchase of common stock - (270)
Proceeds from issuance of common stock 4 1
Dividends paid (251) (229)
Net cash provided by financing activities $ 5,356 $ 1,480
Net increase (decrease) in cash and cash equivalents $ (736) $ (2,522)
Cash and cash equivalents at beginning of period 9,709 10,961
Cash and cash equivalents at end of period $ 8,973 8,439
<PAGE>
BOURBON BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In Management's opinion, the financial information,
which is unaudited, reflects all adjustments, (consisting
solely of normal recurring adjustments) necessary for a fair
presentation of the financial information as of and for the
nine month and three month periods ended September 30, 1997
and September 30, 1996 in conformity with generally accepted
accounting principles. These financial statements should be
read in conjunction with Bourbon Bancshares, Inc. (Company)
Annual Report on Form 10-KSB.
2. Primary earnings per share is computed by dividing net
income by weighted average number of shares of common stock
outstanding and the number of shares of common stock which
would be assumed outstanding under the treasury stock method
upon exercise of stock options. Recently, the Financial
Accounting Standards Board issued Statement 128, Earnings
Per Share. Statement 128 is effective for financial
statements for both interim and annual periods ending after
December 15, 1997. Therefore, the Company will disclose the
appropriate information starting with the December 31, 1997
reports.
3. Dividends per share paid for the quarter ended
September 30, 1997 was $0.18 compared to $0.16 on September
30, 1996. The third quarter dividends were the same amounts
as were paid during the first two quarters of the respective
years.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Summary
Bourbon Bancshares, Inc. recorded net income of $2,573
thousand, or $1.81 per share on a primary basis for the
first nine months ended September 30, 1997 compared to
$1,978 thousand, or $1.37 per share for September 30, 1996.
The third quarter of 1997 also revealed an increase to $881
thousand from $631 thousand in 1996. The primary earnings
per share numbers were $0.62 and $0.44 for the third
quarters of 1997 and 1996, respectively. The third quarter
reflects an increase of 40% while the first nine months'
increase is 30%.
Return on average assets was 1.25% for the first nine months
ended September 30, 1997 compared to 1.01% for the same time
period in 1996. The third quarter numbers were 1.26% and
0.97% for 1997 and 1996, respectively. Return on average
equity was 13.7% and 11.2% for the nine months ended
September 30, 1997 and 1996, respectively. Third quarter
numbers resulted in a 13.7% and a 10.6% return on equity for
1997 and 1996, respectively. The return on assets was up
24% for the first nine months and 30% for the third quarter.
The return on equity improved 22% for the first nine months
and 29% for the third quarter.
<PAGE>
Net Interest Income
Net interest income was $7,902 thousand for the nine months
ended September 30, 1997 compared to $7,186 thousand in
1996, resulting in an increase of $716 thousand or 10.0%.
The third quarter net interest income increased $166
thousand from $2,504 in 1996 to $2,670 in 1997. Loan volume
continues to improve. Year to date average loans are up
nearly $13 million from 1996 to 1997 resulting in an
improvement in interest income of $1,076 thousand for the
year and $409 thousand for the third quarter. Average
deposits also increased from 1996 to 1997, up over $15
million. The increased volume resulted in higher interest
expense of $465 for the year and $287 for the third quarter.
Non-Interest Income
Non-interest income increased for the nine month period
ended September 30 from $1,506 thousand in 1996 to $1,693
thousand in 1997. The quarterly numbers reflect an increase
of $73 thousand from 1996 to 1997. For the year, an
increase of $268 thousand in service charges from 1996 to
1997 and a $73 thousand increase in other income from 1996
to 1997 was offset by a $27 thousand decrease in net gains
on securities. Income derived from service charges is a
result of improvement in overdraft charges of $37 thousand,
checking account service charges of $26 thousand and loan
servicing income of $13 thousand. Improvement in other
income is mainly attributable to an increase in trust income
of $27 thousand and net gains on loans sold of $43 thousand.
Non-Interest Expense
The explanations for the modest increase of $17 thousand in
non-interest expenses from $5,800 thousand for the nine
months ended September 30, 1996 to $5,817 thousand for the
same period in 1997 follows. The third quarter expenses
decreased $155 thousand from 1996 to 1997. Salaries and
benefits increased $188 thousand for the first nine months
of 1996 to 1997, an increase of 6.3%. Additional officer
staffing was added to various regions, along with routine
salary increases and increased cost of benefits have
resulted in higher costs for 1997 compared to 1996. In
addition a second quarter bonus was earned by employees
totaling $29 thousand.
<PAGE>
Occupancy expense increased $118 thousand for the first nine
months of 1997 compared to 1996 and $66 thousand for the
second quarter. This increase is mainly attributable to
improved facilities and equipment. Depreciation is up $55
thousand, and building and equipment maintenance increased
$31 thousand from the first nine months of 1996 to 1997.
Other expenses for the first nine months of 1997 compared to
1996 decreased $289 thousand, from $2,179 thousand to $1,890
thousand. For the quarter, other expenses decreased $249
thousand. In 1996, the one-time SAIF assessment amounted to
nearly $303 thousand. Savings from the conversion of the
savings institutions into branches of Kentucky Bank during
1996 are occurring during 1997. Savings from supplies, OTS
assessments, data processing and FDIC insurance premiums
(outside the one-time SAIF assessment) have amounted to $117
thousand through the first nine months of 1997 compared to
1996. In 1997 additional effort has been made on promoting
the institution through television media. Costs associated
with advertising have increased over $51 thousand during the
first nine months of 1997 compared to 1996.
Income Taxes
The tax equivalent rate for the nine months ended September
30, 1997 and June 30, 1996 was 25% for 1997 and 24% for
1996. These rates being less than the statutory rate is a
result of the tax free securities and loans held by the
Company.
Liquidity and Funding
The cash flow statements provide a useful analysis of
liquidity. This report reveals a decrease of cash and cash
equivalents for the first nine months of 1997 of $218
thousand and a decrease of $2,608 thousand for the same
period in 1996. For the third quarter, cash and cash
equivalents decreased in 1997 by $736 thousand and by $2,522
thousand in 1996. During 1996, an additional $5 million in
loans were sold than were originated compared to 1997. In
1997 and 1996, proceeds from principal payments, sales,
calls and maturities of securities exceeded purchases by
over $12 million. The increase in loans was nearly $12
million more in 1997 than in 1996, deposits increased $1
million more in 1997 than in 1996. For the third quarter of
1997, the decrease was mainly attributable to an increase in
loans of over $10 million offset by proceeds from principal
payments, sales, calls and maturities of securities
exceeding purchases by nearly $4 million, an increase in
deposits of $3 million and an increase in borrowed funds of
over $2 million. During 1996, nearly $9 million was repaid
on Federal Home Loan Bank advances and securities sold under
agreements to repurchase decreased by $7 million. These
decreases in cash were offset in 1996 mainly by sales of
loans with lesser assistance by cash provided by investing
activities. For the third quarter of 1996, the increase in
loans of nearly $9 million and payments on advances from
Federal Home Loan Bank of $3 million were offset by an
increase in deposits of $3 million and proceeds from the
sale of loans exceeding originations by $5.5 million.
Management believes there is sufficient liquidity to meet
all reasonable borrower, depositor and creditor needs in the
present economic environment.
<PAGE>
Non-Performing Assets
As of September 30, 1997, the Company's non-performing
assets totaled $679 thousand or 0.4% of loans compared to
$1,259 thousand or 0.8% of loans in 1996. (See table below)
Real estate loans composed 68% and 91% of the non-performing
loans as of September 30, 1997 and 1996, respectively. Lost
interest income on the non-accrual loans for both 1997 and
1996 is immaterial.
Nonperforming Assets
September 30
(in thousands)
1997 1996
Non-accrual 225 56
Accruing Loans which are
Contractually past due
90 days or more 291 1,018
Restructured Loans 163 185
Total Nonperforming and Restructured 679 1,259
Other Real Estate - -
Total Nonperforming and Restructured
Loans and Other Real Estate 679 1,259
Nonperforming and Restructured Loans
as a Percentage of Net Loans 0.38% 0.79%
Nonperforming and Restructured Loans
and Other Real Estate as a Percentage
of Total Assets 0.24% 0.46%
<PAGE>
Provision and Reserve for Possible Loan Losses
The 1997 nine month provision for loan losses of $343
thousand compares to the 1996 number of $301 thousand and
the third quarter provisions were $131 thousand and $100
thousand for 1997 and 1996, respectively. The increase in
the provision is mainly attributable to the loan growth.
The quality of the loans, in management's opinion, is still
strong as is presented earlier in the non-performing loans.
As depicted in the table below, the loan loss reserve to
total loans changed from 1.31% on September 30, 1996 to
1.27% as of September 30, 1997. Net charge-offs for the
periods mentioned above have been relatively insignificant.
Management feels the current loan loss reserve is sufficient
to meet future loan problems.
Loan Losses
Nine Months Ended
September 30
(in thousands)
1997 1996
Balance at Beginning of Period 2,101 1,860
Amounts Charged-off:
Commercial 49
Real Estate Construction
Real Estate Mortgage 4
Agricultural 14 10
Consumer 116 108
Total Charged-off Loans 130 171
Recoveries on Amounts
Previously Charged-off:
Commercial 2 4
Real Estate Construction
Real Estate Mortgage 1 8
Agricultural 11 1
Consumer 32 22
Total Recoveries 46 35
Net Charge-offs 84 136
Provision for Loan Losses 343 301
Balance at End of Period 2,360 2,025
Total Loans, Net of Unearned Income
Average 167,169 154,482
At September 30 180,402 159,664
As a Percentage of Average Loans:
Net Charge-offs 0.05% 0.09%
Provision for Loan Losses 0.21% 0.19%
Allowance as a Percentage of
Period-end Net Loans 1.31% 1.27%
Allowance as a Multiple of
Net Charge-offs 28.1 14.9
<PAGE>
Loan Losses
Quarter Ended
September 30
(in thousands)
1997 1996
Balance at Beginning of Period
2,194 1,951
Amounts Charged-off:
Commercial - 49
Real Estate Construction - -
Real Estate Mortgage - 4
Agricultural 14 10
Consumer 89 85
Total Charged-off Loans 103 148
Recoveries on Amounts
Previously Charged-off:
Commercial 1 3
Real Estate Construction - -
Real Estate Mortgage 1 8
Agricultural 11 1
Consumer 19 9
Total Recoveries 32 21
Net Charge-offs 71 127
Provision for Loan Losses 237 201
Balance at End of Period 2,360 2,025
Total Loans, Net of Unearned income
Average 163,463 153,273
At September 30 180,402 159,664
As a Percentage of Average Loans:
Net Charge-offs 0.04% 0.08%
Provision for Loan Losses 0.14% 0.13%
Allowance as a Percentage of
Period-end Net Loans 1.31% 1.27%
Allowance as a Multiple of
Net Charge-offs 33.2 15.9
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits as required by Item 601 of Regulation S-B.
27 Financial Data Schedule
2. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused the report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Bourbon Bancshares, Inc.
Date __________________ _________________________________
Buckner Woodford, President and C.E.O.
Date __________________ _________________________________
Gregory J. Dawson, Chief Financial Officer
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<PERIOD-END> SEP-30-1997
<CASH> 8973
<INT-BEARING-DEPOSITS> 509
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 64716
<INVESTMENTS-CARRYING> 15682
<INVESTMENTS-MARKET> 16477
<LOANS> 180402
<ALLOWANCE> 2360
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<DEPOSITS> 235285
<SHORT-TERM> 6405
<LIABILITIES-OTHER> 2865
<LONG-TERM> 11055
0
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<COMMON> 6315
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