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 June 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 August 5,
1997: 1,392,074.
<PAGE>
BOURBON BANCSHARES, INC.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income
Six Months Ending June 30, 1997 & 1996 4
Three Months Ending June 30, 1997 & 1996 5
Consolidated Statements of Cash Flows
Six Months Ending June 30, 1997 & 1996 6
Three Months Ending June 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) 6/30/97 12/31/96
Assets
Cash & Due From Banks 9,134 9,116
Federal Funds Sold 575 75
Total Cash & Cash Equivalents 9,709 9,191
Investment Securities:
Securities Held to Maturity 16,211 16,314
Securities Available for Sale 67,881 76,227
Federal Home Loan Bank Stock 2,802 2,706
Loans 169,790 159,664
Reserve for Loan Losses 2,261 2,101
Net Loans 167,529 157,563
Premises and Equipment 5,395 5,004
Other Assets 5,222 5,448
Total Assets 274,749 272,453
Liabilities & Stockholders' Equity
Deposits
Demand 33,282 32,490
Savings & Interest Checking 77,372 79,886
Certificates of Deposit 121,412 118,695
Total Deposits 232,066 231,071
Repurchase Agreements 2,814 2,836
Federal Home Loan Bank Advances 10,401 10,534
Other Borrowed Funds 1,861 1,324
Other Liabilities 2,306 2,055
Total Liabilities 247,820 249,448
Stockholders' Equity
Common Stock 6,310 6,392
Retained Earnings 18,936 18,240
Net Unrealized Gains (Losses) on Investment Sec. 55 1
Total Stockholders' Equity 25,301 24,633
Total Liabilities & Stockholders' Equity 274,749 272,453
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
(unaudited)
(thousands, except per share amounts)
Six Months Ending
6/30/97 6/30/96
INTEREST INCOME:
Loans, including fees 6,749 7,416
Investment Securities 2,632 2,571
Other 203 298
Total Interest Income 9,618 10,251
INTEREST EXPENSE:
Deposits 4,383 4,561
Other 458 553
Total Interest Expense 4,936 5,019
Net Interest Income 4,682 5,232
Loan Loss Provision 212 201
Net Interest Income After Provision 4,481 5,020
OTHER INCOME:
Service Charges 792 904
Securities Gains (Losses) 8 29
Other 209 186
Total Other Income 1,007 1,121
OTHER EXPENSES:
Salaries and Benefits 1,945 2,105
Occupancy Expenses 504 452
Other 1,286 1,326
Total Other Expenses 3,723 3,895
Income Before Taxes 1,765 2,246
Income Taxes 554 418
Net Income 1,347 1,692
Primary earnings per share 0.93 1.19
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
(unaudited)
(thousands, except per share amounts)
Three Months Ending
6/30/97 6/30/96
INTEREST INCOME:
Loans, including fees 3,874 3,423
Investment Securities 1,311 1,253
Other 91 118
Total Interest Income 5,276 4,794
INTEREST EXPENSE:
Deposits 2,332 2,163
Other 227 249
Total Interest Expense 2,559 2,412
Net Interest Income 2,717 2,382
Loan Loss Provision 106 101
Net Interest Income After Provision 2,611 2,281
OTHER INCOME:
Service Charges 385 473
Securities Gains (Losses) 5 22
Other 87 93
Total Other Income 565 500
OTHER EXPENSES:
Salaries and Benefits 1,062 984
Occupancy Expenses 245 219
Other 653 641
Total Other Expenses 1,960 1,844
Income Before Taxes 1,216 937
Income Taxes 313 229
Net Income 903 708
Primary earnings per share 0.64 0.49
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands) Six Months Ending
6/30/97 6/30/96
Cash Flows From Operating Activities
Net Income 1,692 1,347
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 252 219
Amortization 207 182
Investment securities (accretion) amortization, net 40 67
Provision for loan losses 212 201
Deferred Income Taxes 98 -
Investment securities losses (gains), net (7) (29)
Originations of loans held for sale (7,446) (6,426)
Proceeds from sale of loans 7,615 6,187
Capitalization of Mortgage Servicing Rights (78) -
Losses (gains) on sale of loans (32) 5
Losses (gains), including write-downs, on real
estate acquired through foreclosure, net 23 -
Changes in:
Interest receivable (170) (163)
Income taxes refundable 47 -
Other assets 34 45
Interest payable 378 128
Income taxes payable - 55
Other liabilities (128) (534)
Net cash provided by operating activities $ 2,737 $ 1,284
Cash Flows From Investing Activities
Purchases of securities available for sale
$ (11,054) $(21,228)
Proceeds from sales of securities available for sale 7,503 16,248
Proceeds from principal payments, maturities and
calls of securities available for sale 11,866 18,057
Purchase of securities held to maturity (785) (725)
Proceeds from sales, principal payments, maturities
and calls of securities held to maturity 891 1,290
Net change in loans (10,353) (291)
Purchases of bank premises and equipment (643) (551)
Proceeds from sales of real estate acquired through 56 57
foreclosure
Net cash provided by investing activities (2,519) 12,857
Cash Flows From Financing Activities:
Net change in deposits 995 73
Net change in securities sold under agreements to
repurchase and federal funds purchased (22) (8,235)
Payments on Federal Home Loan Bank advances (133) (6,126)
Net change in other borrowed funds 437 919
Proceeds from note payable 450 -
Payment on note payable (350) (300)
Repurchase of common stock (602) (99)
Proceeds from issuance of common stock 28 -
Dividends paid (503) (458)
Net cash provided by financing activities $ 300 $(14,226)
Net increase (decrease) in cash and cash equivalents 518 (85)
Cash and cash equivalents at beginning of period 9,191 11,046
Cash and cash equivalents at end of period $ 9,709 $ 10,961
<PAGE>
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands) Three Months Ending
6/30/97 6/30/96
Cash Flows From Operating Activities
Net Income 903 708
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 126 38
Amortization 105 182
Investment securities (accretion) amortization, net 15 62
Provision for loan losses 106 100
Deferred Income Taxes 87 -
Investment securities losses (gains), net (4) (21)
Originations of loans held for sale (5,520) (3,733)
Proceeds from sale of loans 4,014 3,726
Capitalization of Mortgage Servicing Rights (41) -
Losses (gains) on sale of loans (17) 7
Losses (gains), including write-downs, on real
estate acquired through foreclosure, net 23 -
Changes in:
Interest receivable (458) (111)
Income taxes refundable (19) 27
Other assets - (260)
Interest payable 326 146
Income taxes payable (166) (176)
Other liabilities 50 (524)
Net cash provided by operating activities (470) 171
Cash Flows From Investing Activities
Purchases of securities available for sale (6,019) (7,022)
Proceeds from sales of securities available for sale 3,999 12,241
Proceeds from principal payments, maturities and
calls of securities available for sale 3,292 3,317
Purchase of securities held to maturity (535) -
Proceeds from sales, principal payments, maturities
and calls of securities held to maturity 891 790
Net change in loans (5,813) (2,600)
Purchases of bank premises and equipment (161) (311)
Proceeds from sales of real estate acquired through
foreclosure 56 -
Net cash provided by investing activities (4,290) 6,415
Cash Flows From Financing Activities:
Net change in deposits 4,509 (1,959)
Net change in securities sold under agreements to
repurchase and federal funds purchased (2,082) (231)
Payments on Federal Home Loan Bank advances (67) (1,064)
Net change in other borrowed funds 45 196
Proceeds from note payable 250 -
Payment on note payable (250) (150)
Repurchase of common stock (312) (99)
Dividends paid (250) (229)
Net cash provided by financing activities 1,843 (3,536)
Net increase (decrease) in cash and cash equivalents (2,917) 3,050
Cash and cash equivalents at beginning of period 12,626 7,911
Cash and cash equivalents at end of period 9,709 10,961
<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
six month and three month periods ended June 30, 1997 and
June 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 June 30,
1997 was $0.18 compared to $0.16 on June 30, 1996. The
second quarter dividends were the same amounts as were paid
during the first 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 $1,692
thousand, or $1.19 per share on a primary basis for the
first six months ended June 30, 1997 compared to $1,347
thousand, or $0.93 per share for June 30, 1996. The second
quarter of 1997 also revealed an increase to $903 thousand
from $708 thousand in 1996. The primary earnings per share
numbers were $0.64 and $0.49 for the second quarters of 1997
and 1996, respectively. The second quarter reflects an
increase of 28% while the first six months' increase is 26%.
Return on average assets was 1.24% for the first six months
ended June 30, 1997 compared to 1.03% for the same time
period in 1996. The second quarter numbers were 1.32% and
1.10% for 1997 and 1996, respectively. Return on average
equity was 13.7% and 11.5% for the six months ended June 30,
1997 and 1996, respectively. Second quarter numbers
resulted in a 14.6% and a 12.2% return on equity for 1997
and 1996, respectively. The previously mentioned return
numbers were both up 20% in 1997 compared to 1996, both for
the quarter and year to date.
<PAGE>
Net Interest Income
Net interest income was $5,232 thousand for the six months
ended June 30, 1997 compared to $4,682 thousand in 1996,
resulting in an increase of $550 thousand or 11.7%. The
second quarter net interest income increased $335 thousand
from $2,382 in 1996 to $2,717 in 1997. Loan volume
continues to improve. Year to date average loans are up
over $10 million from 1996 to 1997 resulting in an
improvement in interest income of $667 thousand for the year
and $451 thousand for the second quarter. Average deposits
also increased from 1996 to 1997, up over $10 million. The
increased volume resulted in higher interest expense of $178
for the year and $169 for the second quarter.
Non-Interest Income
Non-interest income increased for the six month period ended
June 30 from $1,007 thousand in 1996 to $1,121 thousand in
1997. The quarterly numbers showed an improvement of $65
thousand from $500 thousand in 1996 to $565 thousand in
1997. For the year, an increase of $112 thousand in service
charges from 1996 to 1997 and a $23 thousand increase in
other income from 1996 to 1997 was offset by a $21 thousand
decrease in net gains on securities. Income derived from
service charges is a result of improvement in overdraft
charges, checking account service charges, loan servicing
income and fees from the credit card program. Improvement
in other income is mainly attributable to an increase in
trust income and net gains on loans sold.
Non-Interest Expense
The explanations for the increase of $172 thousand in non-
interest expenses from $3,723 thousand for the six months
ended June 30, 1996 to $3,895 thousand for the same period
in 1997 follows. The second quarter expenses increased $116
thousand from 1996 to 1997. Salaries and benefits increased
$160 thousand for the first six months of 1996 to 1997, an
increase of 8.2%. 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.
Occupancy expense increased $52 thousand for the first six
months of 1997 compared to 1996 and $26 thousand for the
second quarter. This increase is mainly attributable to
improved facilities and equipment. Depreciation is up $33
thousand and smaller equipment purchased increased $8
thousand from the first six months of 1996 to 1997. Other
expenses for the first quarter of 1997 compared to 1996
decreased $40 thousand, from $1,326 thousand to $1,286
thousand. Savings from the conversion of the savings
institutions into branches of Kentucky Bank during 1996 are
occurring during 1997. Savings from supplies, postage, OTS
assessments, data processing and FDIC insurance premiums
have amounted to $117 thousand through the first six months
of 1997 compared to 1996.
<PAGE>
Income Taxes
The tax equivalent rate for the six months ended June 30,
1997 and June 30, 1996 was 24% for both periods. 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 increase of cash and cash
equivalents for the first six months of 1997 of $518
thousand and a decrease of $85 thousand for the same period
in 1996. For the second quarter, cash and cash equivalents
decreased in 1997 by $3 million, while they increased by $3
million in 1996. In 1997, proceeds from principal payments,
sales, calls and maturities of securities exceeded purchases
by over $8 million and an increase in deposits of $1
million. This was offset by an increase in loans of $10
million. For the second quarter of 1997, the decrease was
mainly attributable to an increase in loans of nearly $6
million offset by an increase in deposits of $4 million.
During 1996, $6 million was repaid on Federal Home Loan Bank
advances and securities sold under agreements to repurchase
decreased by $8 million. These decreases in cash were
offset in 1996 mainly by cash provided by investing
activities with lesser assistance by cash provided by
operating activities. For the second quarter of 1996, the
net proceeds from securities of under $8 million was offset
by an increase in loans of nearly $3 million, payments on
advances from Federal Home Loan Bank of $1 million and a
decrease in deposits of $2 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 June 30, 1997, the Company's non-performing assets
totaled $591 thousand or 0.3% of loans compared to $1,304
thousand or 0.8% of loans in 1996. (See table below) The
reduction was mainly due to loans that were ultimately taken
into Other Real Estate and subsequently sold during the
second quarter of 1997 at a loss of $23 thousand. Real
estate loans composed 64% and 89% of the non-performing
loans as of June 30, 1997 and 1996, respectively. Lost
interest income on the non-accrual loans for both 1997 and
1996 is immaterial.
Nonperforming Assets
June 30
(in thousands)
1997 1996
Non-accrual Loans 81 60
Accruing Loans which are
Contractually past due
90 days or more 342 1,053
Restructured Loans 168 191
Total Nonperforming and Restructured 591 1,304
Other Real Estate - -
Total Nonperforming and Restructured
Loans and Other Real Estate 591 1,304
Nonperforming and Restructured
Loans as a Percentage of Net Loans 0.35% 0.82%
Nonperforming and Restructured Loans
and Other Real Estate as a Percentage
of Total Assets 0.22% 0.48%
<PAGE>
Provision and Reserve for Possible Loan Losses
The 1997 six month provision for loan losses of $212
thousand compares to the 1996 number of $201 thousand and
the second quarter provisions were $106 thousand and $101
thousand for 1997 and 1996, respectively. As depicted in
the table below, the loan loss reserve to total loans
changed from 1.38% on June 30, 1996 to 1.33% as of June 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
Six Months Ended June 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 6
Agricultural 14 10
Consumer 73 55
Total Charged-off Loans 87 120
Recoveries on Amounts
Previously Charged-off:
Commercial 2 2
Real Estate Construction
Real Estate Mortgage 1 8
Agricultural 10 1
Consumer 22 16
Total Recoveries 35 27
Net Charge-offs 52 93
Provision for Loan Losses 212 201
Balance at End of Period 2,261 1,968
Total Loans, Net of Unearned Income
Average 163,385 153,375
At June 30 169,790 159,664
As a Percentage of Average Loans:
Net Charge-offs 0.03% 0.06%
Provision for Loan Losses 0.13% 0.13%
Allowance as a Percentage of
Period-end Net Loans 1.33% 1.23%
Allowance as a Multiple of
Net Charge-offs 43.5 21.2
<PAGE>
Loan Losses
Quarter Ended June 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 - 6
Agricultural 14 10
Consumer 46 32
Total Charged-off Loans 60 97
Recoveries on Amounts
Previously Charged-off:
Commercial 1 1
Real Estate Construction - -
Real Estate Mortgage 1 8
Agricultural 10 1
Consumer 9 3
Total Recoveries 21 13
Net Charge-offs 39 84
Provision for Loan Losses 106 101
Balance at End of Period 2,261 1,968
Total Loans, Net of Unearned Income
Average 161,571 152,719
At June 30 169,790 159,664
As a Percentage of Average Loans:
Net Charge-offs 0.02% 0.06%
Provision for Loan Losses 0.07% 0.07%
Allowance as a Percentage of
Period-end Net Loans 1.33% 1.23%
Allowance as a Multiple of
Net Charge-offs 58.0 23.4
<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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<INVESTMENTS-HELD-FOR-SALE> 67881
<INVESTMENTS-CARRYING> 16211
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