SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
X Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 1999
___ Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _______ to _________
Commission File Number 333-67435
CITIZENS FIRST CORPORATION
(Name of Small Business Issuer in Its Charter)
Kentucky 61-0912615
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization) 42104
(Zip Code)
1805 Campbell Lane, Bowling Green, Kentucky
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (270)393-0700
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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__ No _X_
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Not Applicable
State issuer's revenues for its most recent fiscal year: $2,933,454
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on March 20, 2000: $7,991,040.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at March 20, 2000
----- ------------------------------
Common Stock, no par value 643,053
Transitional Small Business Disclosure Format: Yes ___ No X
<PAGE>
CITIZENS FIRST CORPORATION
Table of Contents
Part I
Item Page
1. Description of Business.............................................2-3
2. Description of Property.............................................3
3. Legal Proceedings...................................................3
4. Submission of Matters to a Vote of Security Holders.................3
Part II
5. Market for the Common Equity and Related Stockholder Matters........ 4
6. Management's Discussion and Analysis or Plan of Operation.......... 4-13
7. Financial Statements.............................................. 14-36
8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...................... 37
Part III
9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act............................ 38-39
10. Executive Compensation................................................ 40
11. Security Ownership of Certain Beneficial Owners and Management........ 41
12. Certain Relationships and Related Transactions........................ 41
Part IV
13. Exhibits, Lists and Reports on Form 8-K........................... 42-43
Signatures.............................................................. 44-45
<PAGE>
Part I
Item 1. Description of Business
Citizens First Corporation ("the Company") was incorporated under the laws of
the Commonwealth of Kentucky on December 24, 1975 for the purpose of conducting
business as an investment club, and is headquartered in Bowling Green, Kentucky.
In late 1998 and early 1999, the Company filed the appropriate regulatory
applications and received regulatory approval to become a bank holding company
under the Bank Holding Company Act of 1956, as amended, through its organization
and ownership of its only subsidiary, Citizens First Bank, Inc. (the "Bank"). On
February 17, 1999 the Company completed the initial public offering for the sale
of 536,667 shares of its no par value common stock. The Company, through the
Bank, is now involved in the banking business, primarily serving customers in
the Bowling Green/Warren County market. This process includes attracting
deposits and converting the deposits into loans and investments. The Company and
Bank currently employ twenty-eight employees (twenty-six full-time equivalent
employees), and no significant changes in the number of employees are planned.
The Company follows a corporate strategy which focuses on providing the Bank's
customers with high quality, personal banking services. Management anticipates
that the Bank's deposits will be funded through overall growth in the local
market as well as growth in the Bank's market share. The Bank offers products
designed to meet the needs of its customers that include individuals, small
businesses, partnerships and corporations. The Bank provides a full range of
corporate and retail banking services that include checking, savings, and time
deposit accounts; secured and unsecured loans to corporations, individuals, and
others; letters of credit; rental of safe deposit boxes; and cash management
services. The Bank also offers, through an affiliation with third parties, trust
services and investment management services.
The Bank offers a full range of deposit services. Checking account services
include regular non-interest bearing checking accounts as well as interest
bearing negotiable order of withdrawal ("NOW") accounts. Savings and certificate
of deposit accounts include accounts ranging from a daily maturity (regular
savings and also money market accounts) to longer term certificates as
authorized by law. In addition, retirement accounts such as IRA's (Individual
Retirement Accounts) are available. All deposit accounts are insured by the
Federal Deposit Insurance Corporation to the full amount permitted by law.
Deposit accounts are solicited from individuals, businesses, professional
organizations and governmental authorities.
Lending services include a full range of commercial, personal, and mortgage
loans. The Bank's primary focus is on business lending. The types of commercial
loans that are available include both secured and unsecured loans for working
capital (including inventory and receivables), business expansion (including
acquisition of real estate and improvements) and purchase of machinery and
equipment. The Bank does not emphasize real estate lending for land acquisition,
land development or open-end construction loans. The types of personal loans
that are available include secured and unsecured loans for such purposes as
financing automobiles, home improvements, education and personal investments.
The Bank originates, processes and closes residential real estate loans which
are then sold on the secondary market (each individually) to a correspondent.
The Bank offers credit cards (through correspondent banking services) including
MasterCard (TM) and Visa(TM) as well as a personal checking account related line
of credit. The line of credit is available for both protection against
unexpected overdrafts and also for the convenience of having a pre-arranged loan
that can be activated simply by a check drawn on a personal checking account.
Other services offered include, but are not limited to, safe deposit boxes,
letters of credit, travelers checks, direct deposit of payroll, social security
and dividend payments and automatic payment of insurance premiums and mortgage
loans. The Bank does not have a proprietary automated teller machine but
participates in a national ATM network through the FiServ EFT network and then
through the Visa Debit Card Program.
The Bank has spent no appreciable amount in order to determine or develop the
services that the Bank offers. Research activities relating to development of
Bank services were performed by the officers of the Bank during the organization
of the Bank and by those officers after the Bank opened for business.
<PAGE>
As a bank holding company within the meaning of the Bank Holding Company Act of
1956, as amended, the Company is under the supervisory and regulatory authority
of the Board of Governors of the Federal Reserve System (the "Federal Reserve").
The Company is also subject to regulation by the Kentucky Department of
Financial Institutions. Thus, the Company is required to file annual reports and
other information with the Federal Reserve and the Kentucky Department of
Financial Institutions regarding its financial condition, results of operations,
management and intercompany relationships and transactions between the Company
and its subsidiaries.
The Bank is a state chartered financial institution, and as such, is subject to
various statutory requirements, supervision and regulation (of which regular
bank examinations are a part) promulgated and enforced primarily by the Federal
Deposit Insurance Corporation and the Kentucky Department of Financial
Institutions.
Compliance with federal, state, and local provisions regulating the discharge of
materials into the environment had no material effect on the capital
expenditures, earnings and competitive positions of the Bank in the fiscal year
ended December 31, 1999.
The business of the Bank is not considered to be seasonal nor is the Bank's
business dependent on any one industry.
The Bowling Green economy is diversified, with financial and other service
industries representing the largest industry segment. The local unemployment
rate of approximately 3% is lower than the national unemployment rate of
approximately 4%. The Company's competition in the local market consists mainly
of regional and national financial institutions. In the Bank's primary service
area, there are 8 commercial banks, of which 3 are considered to have their
headquarters in the Bank's service area. In addition, there are various credit
unions, mortgage companies, and other commercial banks that have loan production
offices in the area. The Bank encounters strong competition from these financial
institutions as well as consumer and commercial finance companies, insurance
companies, brokerage firms and other financial institutions, some of which are
not subject to the same degree of regulation and restrictions as the Bank. Many
of these competitors have substantially greater resources and lending limits
than the Bank has to offer and certain services, such as trust and international
banking services, which the Bank is not providing.
On December 31, 1999, the Company had total consolidated assets of $46 million,
total loans of $34 million, total deposits of $37 million and shareholders'
equity of $7 million.
Item 2. Description of Property
The main banking office of the Bank, which also serves as the principal office
of the Company, is located at 1805 Campbell Lane, Bowling Green, Kentucky. The
Bank owns the main office property, which was renovated by the Company prior to
formation of the Bank. The Bank also leases property in Bowling Green, which is
used as a branch office, located at 901 Lehman Avenue. The lease of this
facility provided for an initial term of 1 year beginning on March 1, 1999 with
options to extend the lease for two (2) additional two (2) year terms, and the
Bank has exercised its option to extend the lease for the first two year term.
Base rent is payable in equal monthly installments of $2,200.00 in advance. The
base rent will increase at the end of the initial term by the percentage
increase in the Consumer Price Index for All Urban Consumers, all Items, U. S.
City Average, published by the U.S. Department of Labor, Bureau of Labor
Statistics.
Item 3. Legal Proceedings
In the opinion of management, there is no proceeding pending or, to the
knowledge of management, threatened, in which an adverse decision could result
in a material adverse change in the consolidated financial condition or results
of operations of the Company. To the knowledge of management, no proceedings
have been or are contemplated by or against any governmental authority in
connection with the Bank.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1999.
<PAGE>
Part II
Item 5. Market for the Common Equity and Related Stockholder Matters
The common stock of the Company is traded in the over-the-counter market under
the symbol CZFC. Prior to the initial public offering of the Company's common
stock in February, 1999, no public trading market existed for the stock. As of
December 31, 1999 there were approximately 400 shareholders of record of Company
common stock.
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions. The
following (based upon information provided by the Nasdaq Stock Market) reflects
the over-the-counter market range of high and low bid quotations for the
Company's common stock for the quarterly periods indicated:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
First quarter, 1999 $15.00 $15.00
Second quarter, 1999 15.81 15.00
Third quarter, 1999 16.00 15.00
Fourth quarter, 1999 15.75 15.00
</TABLE>
The Company has not paid or declared dividends on its common stock. The Company
does not intend to pay dividends to common shareholders until such time that the
Company begins to generate an adequate profit.
Item 6. Management's Discussion and Analysis or Plan of Operation
Management's discussion and analysis is included to provide the shareholders
with an expanded narrative of the Company's results of operations, changes in
financial condition, liquidity and capital adequacy. This narrative should be
reviewed in conjunction with the audited consolidated financial statements and
notes included in this report. Since the primary asset of the Company is its
wholly-owned subsidiary, most of the discussion and analysis relates to the
Bank.
On February 17, 1999 the Company completed the initial public offering for the
sale of 536,667 shares of its no par value common stock. The proceeds of the
sale of the stock were used to pay start up expenses, liquidate short-term
borrowings, and capitalize the Bank. The Bank opened for business on February
18, 1999. Because the Company historically operated as an investment company,
there are no comparable revenues from operations in prior fiscal years.
At the time the Company was converted from an investment company to a bank
holding company, it owned an investment portfolio of marketable equity
securities valued at approximately $1.5 million. These securities were the
primary asset of the Company prior to the formation of the Bank. The majority of
these securities were sold in 1999, and the proceeds from the sale of the
securities provided a source of cash to the Company. Going forward, the
Company's cash requirements are expected to be met by the anticipated growth of
customers' deposits. Other than these sources, the Company does not anticipate
the need to raise additional funds in the next twelve months. Property and
equipment needed for the operation of the Bank had been purchased by March 31,
1999, and no additional significant purchases or sales of plant and equipment
are planned. The Company and Bank are fully staffed, and no significant changes
in the number of employees are planned.
Total assets of the Company at December 31, 1999 were $45,973,310, an increase
of $43,283,904 over the total at December 31, 1998. Stockholders' equity at the
end of 1999 was $6,848,648, a $6,123,605 increase from the year ended December
31, 1998.
Income Statement Review
In 1999, the Company recorded a net loss of $(327,622), or $(0.57) per common
share. This compares to a net loss of $(395,575) and earnings per share of
$(3.72) in 1998. The earnings for 1999 reflect the first year of operations of
the Bank, and include the results of the loan, deposit, and investment activity
which was not included in the prior years. In addition, earnings for 1999
included income of $1,382,399 from the sale of marketable investment securities.
<PAGE>
Net Interest Income
Net interest income, the Company's principal source of earnings, is the
difference between the interest income generated by earning assets and the total
interest cost of the deposits and borrowings obtained to fund these assets.
Factors that influence the level of net interest income include the volume of
earning assets and interest bearing liabilities, yields earned and rates paid,
the level of non-performing loans and non-earning assets, and the amount of
non-interest bearing deposits supporting earning assets. Net interest income is
discussed below.
For the year ended December 31, 1999, net interest income was $871,911 which
represents an increase of $866,947 over net interest income of $4,964 in 1998.
The increase in 1999 resulted from growth in the Company through the
establishment of the Bank. Apart from loans incurred in connection with the
organization of the Bank, no loans or deposits were owned by the Company prior
to the formation and opening of the Bank. The net interest margin in 1999 was
4.43%. For the year ended December 31, 1998, net interest income did not include
any of the assets of the Bank, which did not commence operations until February
1999.
<TABLE>
<CAPTION>
<S> <C>
Net Interest Analysis Summary
Average yield on interest earning assets 7.32%
Average rate on interest bearing liabilities 4.34%
Net interest-rate spread 2.98%
Net interest margin 4.43%
</TABLE>
<TABLE>
Average Consolidated Balance Sheets and Net Interest Analysis - 1999
(In Thousands)
<CAPTION>
Average Income/ Yield
Balance Expense Rate(%)
ASSETS
<S> <C> <C> <C>
Earning Assets
Interest bearing balances due from banks $ 182 $ 7 3.89%
Federal funds sold ..................... 2,556 126 4.91%
Securities available for sale (including
equity securities) ................... 4,018 185 4.61%
Loans .................................. 12,919 1,122 8.69%
------- -----
Total interest earning assets ...... 19,675 1,440 7.32%
------- -----
Non-earning assets ..................... 2,019
-----
Total assets ....................... $21,694
======
LIABILITIES and STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts ............... $ 4,024 $ 97 2.42%
Time deposits ........................ 8,445 440 5.21%
------- ----
Total interest bearing deposits .... 12,469 537 4.31%
Securities sold under agreement
to repurchase ........................ 453 19 4.24%
Other borrowed funds
Short-term debt ...................... 160 12 7.43%
------- ----
Total interest bearing liabilities . 13,082 568 4.34%
Non-interest bearing liabilities
Non-interest bearing deposits ........ 1,524
Other Liabilities ...................... 394
------
Total Liabilities .................. 15,000
Stockholders' equity ................... 6,694
------
Total liabilities and
stockholders' equity .............. $21,694
======
Net interest margin .................... $ 872 4.43%
====== ====
</TABLE>
<PAGE>
Provision for Loan Losses
The provision for loan losses in 1999 was $412,501 or 3.34% of average loans.
Net loan charge-offs were $11,581 in 1999. As a percentage of average loans, net
charge-offs were 0.09% in 1999.
Non-interest Income
Non-interest income totaled $1,493,120 in 1999 as compared to $0 in 1998.
The following table shows the detailed components of non-interest income:
<TABLE>
<CAPTION>
<S> <C>
Gain on the sale of securities $1,382,399
Service charges on deposit accounts 51,254
Gain on the sale of mortgage loans held for sale 38,328
Credit life insurance fees 13,780
All other non-interest income 7,359
</TABLE>
In 1999, the Company sold the majority of the investment securities that were
held by the Company prior to its conversion from an investment club to a bank
holding company. The sale of these securities resulted in a gain of $1,382,534,
which is netted against the Bank's loss from the sale of securities of $135, for
a consolidated gain of $1,382,399. In addition to the sales of investment
securities, the Company realized non-interest income in 1999 from banking
operations, which began in 1999.
Non-interest Expenses
Non-interest expenses for 1999 increased $1,779,613, from 1998. The changes to
non-interest expense over this period were primarily due to the transition of
the Company from an investment club to a bank holding company, and the resultant
increase in expenses for employees' wages and benefits, property and equipment,
utilities, data processing, advertising and marketing, professional services,
and insurance, as follows:
<TABLE>
<CAPTION>
Increase (Decrease) in
Non-interest Expenses
1999 vs. 1998
<S> <C>
Wages and employee benefits $ 1,118,086
Net occupancy expense 147,139
Equipment expense 195,879
Professional services (177,751)
Data processing 71,239
Franchise and other taxes 84,585
Postage 7,548
Telephone 48,618
Supplies 71,858
Courier 16,607
ATM network 21,520
Advertising & marketing 92,536
Insurance 31,000
Other operating expenses 50,749
--------------
Total non-interest expense $ 1,779,613
==============
</TABLE>
The increase in expenses in 1999 is a direct result of the formation, staffing,
and operation of the Bank, which commenced operations in early 1999.
<PAGE>
Income Taxes
Income tax expense has been calculated based on the Company's expected annual
rate for 1999. Deferred tax liabilities and assets are recognized for the tax
effects of differences between the financial statement and tax bases of assets
and liabilities. A valuation allowance is established to reduce deferred tax
assets if it is more likely than not that a deferred tax asset will not be
realized. Any tax benefits which might result from the losses incurred through
December 31, 1999 have been offset by a valuation allowance against the related
deferred tax asset.
Balance Sheet Review
Assets at year-end 1999 totaled $45,973,310, compared with $2,689,406 at
December 31, 1998. On an average basis, total assets were $21,693,846 in 1999.
Average interest earning assets were $19,675,202 in 1999.
Loans
Total loans, net of unearned income, averaged $12,919,064 in 1999. At year-end,
loans totaled $34,126,628. The Company has experienced strong loan growth in its
market area, with particular strength in middle market commercial and commercial
real estate.
The following table presents a summary of the loan portfolio by category:
<TABLE>
<CAPTION>
Loans outstanding
<S> <C>
December 31, 1999
Commercial $ 10,325,468
Commercial real estate 15,787,300
Residential real estate 3,682,128
Consumer:
Home equity lines 890,823
Other consumer 3,490,348
----------------
Total Loans $ 34,176,067
Less: Deferred loan fees (49,439)
----------------
Loans, net of unearned income $ 34,126,628
================
</TABLE>
Loan Concentrations
Commercial real estate loans include financing for industrial developments,
residential developments, retail shopping centers, industrial buildings,
restaurants, and hotels. The primary source of repayment cannot be traced to any
specific industry group.
<PAGE>
The percentage distribution of the Company's loans, by industry, is shown in the
following table:
<TABLE>
Loans by Industry
December 31, 1999
<CAPTION>
As a percentage of total loans
<S> <C>
Agriculture ..................................... 0.5%
Apartment buildings ............................. 2.8%
Construction and land development ............... 10.1%
Finance and insurance ........................... 5.2%
Manufacturing durable goods ..................... 6.2%
Services:
Health .......................................... 0.5%
Other than health and hotels .................... 8.5%
Wholesale trade ................................. 5.8%
Retail trade:
Restaurants ..................................... 7.7%
Automotive ...................................... 2.1%
Other ........................................... 5.4%
Other commercial real estate .................... 20.2%
All other commercial loans ...................... 2.1%
-------
Total commercial and commercial real estate loans 77.1%
Residential real estate loans ................... 7.2%
Consumer loans .................................. 15.7%
-------
Total loans, net of unearned income ............. 100.0%
</TABLE>
Substantially all of the Company's loans are to customers located in the Bowling
Green-Warren County area. As of December 31, 1999 the Company's 20 largest
credit relationships consisted of loans and loan commitments ranging from $1.2
million to $400,000. The aggregate amount of these credit relationships was
$13.0 million.
<PAGE>
The following table sets forth the maturity distribution and interest rate
sensitivity of commercial and commercial real estate loans as of December 31,
1999. Maturities are based upon contractual terms. The Company's policy is to
specifically review and approve all loans renewed; loans are not automatically
rolled over.
<TABLE>
Loan Maturities and Rate Sensitivity
December 31, 1999
<CAPTION>
One Year One Through Over Total
By maturity date: or Less Five Years Five Years Loans
<S> <C> <C> <C> <C>
Commercial $ 7,216,751 $1,081,097 $ 2,027,620 $10,325,468
Commercial real estate 4,419,865 1,324,165 10,043,270 15,787,300
----------- ---------- ----------- -----------
Total $11,636,616 $2,405,262 $12,070,890 $26,112,768
Fixed rate loans $ 5,019,813 $ 278,454 $ 3,797,001 $ 9,095,268
Floating rate loans 6,616,803 2,126,808 8,273,889 17,017,500
----------- ---------- ----------- -----------
Total $11,636,616 $2,405,262 $12,070,890 $26,112,768
----------- ---------- ----------- -----------
Commercial $ 9,010,628 $ 14,195 $ 1,300,645 $10,325,468
Commercial real estate 13,048,384 264,259 2,474,657 15,787,300
----------- ---------- ----------- -----------
Total $22,059,012 $ 278,454 $ 3,775,302 $26,112,768
Fixed rate loans $ 5,041,512 $ 278,454 $ 3,775,302 $ 9,095,268
Floating rate loans 17,017,500 0 0 17,017,500
----------- ---------- ----------- -----------
Total $22,059,012 $ 278,454 $ 3,775,302 $26,112,768
----------- ---------- ----------- -----------
</TABLE>
Asset and Liability Management
The assets and liabilities of the Company are managed to provide a consistent
level of liquidity to accommodate normal fluctuations in loans and deposits.
The yield on approximately one-half of the Company's earning assets adjusts
simultaneously with changes in the general level of interest rates. Some of the
Company's liabilities are issued with fixed terms and can be repriced only at
maturity. During periods of falling rates, the yield on the Company's assets
will decline faster than the rates paid on supporting liabilities. This causes a
decline in the net interest margin because the difference between what the
Company earns on its assets and what it pays on its liabilities becomes
narrower. After interest rates have stabilized, there is a period of time until
the rates paid on interest-bearing liabilities decline enough to restore the net
interest margin. The opposite effect of increasing net interest income is
realized in a rising rate environment. In a stable rate environment, the Bank's
net interest margin will be impacted by a change in mix of earning assets with
the deposit growth of the Bank being invested in federal funds sold, investment
securities, or loans.
Asset Quality
There were no non-performing loans, which include non-accrual loans, accruing
loans past due over 90 days, and restructured loans, at year end 1999. There
were no non-performing assets, which include non-performing loans, foreclosed
real estate, and other foreclosed property, at year-end 1999.
Management classifies commercial and commercial real estate loans as non-accrual
when principal or interest is past due 90 days or more and the loan is not
adequately collateralized and in the process of collection, or when, in the
opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation. Consumer loans are charged off
after 120 days of delinquency unless adequately secured and in the process of
collection. Non-accrual loans are not reclassified as accruing until principal
and interest payments are brought current and future payments appear reasonably
certain. Loans are categorized as restructured if the original interest rate,
repayment terms, or both were restructured due to a deterioration in the
financial condition of the borrower. However, restructured loans that
demonstrate performance under the restructured terms and that yield a market
rate of interest may be removed from restructured status in the year following
the restructure.
<PAGE>
The provision to the allowance for loan losses is based on management's and the
Loan Committee's ongoing review and evaluation of the loan portfolio and general
economic conditions on a monthly basis and review by the full Board of Directors
on a quarterly basis. Management's review and evaluation of the allowance for
loan losses is based on an analysis of historical trends, significant problem
loans, current market value of real estate or collateral and certain economic
and other factors affecting loans and real estate or collateral securing these
loans. Loans are charged off when, in the opinion of management, they are deemed
to be uncollectible. Recognized losses are charged against the allowance and
subsequent recoveries are added to the allowance. While management uses the best
information available to make evaluations, future adjustments to the allowance
may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluation. The allowance for loan losses is
subject to periodic evaluation by various regulatory authorities and may be
subject to adjustment based upon information that is available to them at the
time of their examination.
The allowance for loan losses is established through a provision for loan losses
charged to expense. At December 31, 1999, the allowance was $400,920. The ratio
of the allowance for loan losses to total loans (excluding mortgage loans held
for sale) at December 31, 1999, was 1.17%.
Following is a summary of the changes in the allowance for loan losses:
<TABLE>
Summary of Loan Loss Experience
For the year ended December 31, 1999
<CAPTION>
<S> <C>
Balance at beginning of year ............................... $ 0
Provision for loan losses .................................. 412,501
Amounts charged off:
Commercial and commercial real estate ...................... 0
Residential real estate .................................... 0
Consumer ................................................... 11,581
Total loans charged off .................................... 11,581
Recoveries of amounts previously charged off:
Commercial and commercial real estate ...................... 0
Residential real estate .................................... 0
Consumer ................................................... 0
Total recoveries ........................................... 0
Net charge-offs ............................................ 11,581
-----------
Balance at end of year ..................................... $ 400,920
Total loans, net of unearned income:
Average .................................................... $12,919,064
At December 31 ............................................. 34,126,628
As a percentage of average loans:
Net charge-offs ............................................ 0.09%
Provision for loan losses .................................. 3.19%
Allowance as a percentage of year-end loans
(excluding mortgage loans held for sale) ................... 1.17%
Allowance as a percentage of non-performing
and restructured loans ..................................... 100+%
</TABLE>
Management believes that the allowance for loan losses at December 31, 1999, is
adequate to absorb losses inherent in the loan portfolio as of that date. That
determination is based on the best information available to management, but
necessarily involves uncertainties and matters of judgment and, therefore,
cannot be determined with precision and could be susceptible to significant
change in the future. In addition, bank regulatory authorities, as a part of
their periodic examinations of the Bank, may reach different conclusions
regarding the quality of the loan portfolio and the level of the allowance,
which could result in additional provisions being made in future periods.
<PAGE>
Securities, Federal Funds Sold and Resale Agreements
Securities are all classified as available for sale, and averaged $4,018,128 in
1999. The tables below present the carrying value of securities and the
maturities and yield characteristics of securities as of December 31, 1999:
<TABLE>
Carrying Value of Securities Available for Sale
December 31, 1999
<CAPTION>
Gross Gross Estimated
In thousands Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury .......................................... $ 500 0 $ (7) $ 493
U.S. Government agencies ............................... 2,600 0 (123) 2,477
Collateralized mortgage obligations securities ......... 965 13 (28) 950
State and municipal obligations ........................ 0 0 0 0
Other securities, including equity investment securities 407 63 0 470
------ ------ ------ ------
Total securities available for sale .................... $4,472 $ 76 $ (158) $4,390
------ ------- ------- ------
</TABLE>
<TABLE>
Maturity Distribution of Securities Available for Sale
December 31, 1999
<CAPTION>
Over Over
Dollars in thousands One Year Five Years Over
One Year Through Through Ten Total Equity Market
or Less Five Years Ten Years Years Maturities Securities Value
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ..................... $ 0 $ 500 $ 0 $ 0 $ 500 $ 0 $ 493
U.S. Government agencies .......... 1,000 1,500 0 100 2,600 0 2,477
Collateralized mortgage obligations
and mortgage-backed securities:(1) 691 274 0 0 965 0 950
State and municipal obligations ... 0 0 0 0 0 0 0
Other securities .................. 297 100 0 0 397 10 470
------ ------ ------ ------ ------ ------ ------
Total securities available for sale $1,988 $2,374 $ 0 $ 100 $4,462 $ 10 $4,390
Percent of total .................. 44.5% 53.1% 0% 2.2% 99.8% 0.2%
Weighted average yield(2) ......... 5.87% 5.58% 0% 6.50% 5.75% N/A
<FN>
(1) Collateralized mortgage obligations and mortgage-backed securities are
grouped into average lives based on December 1999 prepayment projections.
(2) The weighted average yields are based on amortized cost.
</FN>
</TABLE>
Deposits
Total deposits averaged $13,992,624 in 1999. Time deposits of $100,000 or more
totaled $11,033,646 at December 31, 1999. Interest expense on time deposits of
$100,000 or more was $173,671, in 1999. The following table shows the maturities
of time deposits of $100,000 or more as of December 31, 1999:
<TABLE>
<CAPTION>
Maturity of Time Deposits of $100,000 or More
<S> <C>
December 31, 1999
Three months or less $ 3,659,730
Over three through six months 2,834,363
Over six through twelve months 2,802,817
Over one year through two years 952,376
Over two years through five years 784,360
Over five years 0
-----------
Total $11,033,646
</TABLE>
Liquidity, Short-term Borrowings and Capital Resources Information regarding
short-term borrowings is presented below:
<TABLE>
Short-term Borrowings
Dollars in thousands
<CAPTION>
1999 1998
Federal funds purchased and repurchase agreements:
<S> <C> <C>
Balance at year end $1,488 $0
Weighted average rate at year end 4.60% 0%
Average balance during the year 453 0
Weighted average rate during the year 4.24% 0%
Maximum month-end balance 1,488 0
Other short-term borrowings:
Balance at year end 0 995
Weighted average rate at year end 0% 7.35%
Average balance during the year 160 179
Weighted average rate during the year 7.43% 7.55%
Maximum month-end balance 1,370 995
Total short-term borrowings:
Balance at year end 1,488 995
Weighted average rate at year end 4.60% 7.35%
Average balance during the year 613 179
Weighted average rate during the year 5.08% 7.55%
Maximum month-end balance 1,488 995
</TABLE>
Repurchase agreements mature in one business day. The rate paid on these
accounts is tied to the targeted federal funds rate and is based on a tiered
balance calculation.
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a material
effect on the financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and the Bank must
meet specific capital guidelines that involve quantitative measures of the
Company's and the Bank's assets, liabilities and certain off-balance sheet items
as calculated under the regulatory accounting practices. The Company's and the
Bank's capital amounts and classification are also subject to qualitative
judgements by the regulators about components, risk weightings and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of total
Tier 1 capital to risk-weighted assets and to total assets. Management believes,
as of December 31, 1999, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.
At December 31, 1999, the Company and the Bank were categorized as "well
capitalized" under the regulatory framework for prompt corrective action. To be
categorized as "well capitalized" the Company and the Bank must maintain minimum
total risk based, Tier I risk based and Tier I leverage ratios of 10%, 6%, and
5%, respectively and to be categorized as "adequately capitalized" the Company
and the Bank must maintain minimum total risk based, Tier I risk based and Tier
I leverage ratios of 8%, 4% and 4%, respectively. There are no current
conditions or events that management believes would change the Company's or the
Bank's capital category.
<PAGE>
The Company's capital ratios at December 31, 1999 (calculated in accordance with
regulatory guidelines) were as follows:
<TABLE>
<CAPTION>
December 31, 1999
<S> <C>
Tier I risk-based capital ratio 18.82%
Regulatory minimum 4.00
"Well-capitalized" minimum 6.00
Total risk-based capital ratio 19.91
Regulatory minimum 8.00
"Well-capitalized" minimum 10.00
Tier I leverage ratio 15.00
Regulatory minimum 4.00
"Well-capitalized" minimum 5.00
</TABLE>
The increase in these capital ratios in 1999 is due to the Company's initial
public offering on February 17, 1999. The Company has not paid dividends to its
shareholders. The Company does not intend to pay dividends to its shareholders
until such time as it generates adequate profit.
To maintain a desired level of liquidity, the Company has several sources of
funds available. The Company primarily relies upon net inflows of cash from
financing activities, supplemented by net inflows of cash from operating
activities, to provide cash used in its investing activities. As is typical of
most banking companies, significant financing activities include issuance of
common stock, deposit gathering, and the use of short-term borrowing facilities,
such as federal funds purchased and repurchase agreements. The Company is in the
process of applying for membership in the Cincinnati Federal Home Loan Bank in
order to be able to obtain advances and lines of credit from the FHLB. The
Company's primary investing activities include purchases of securities and loan
originations, offset by maturities, prepayments and sales of securities, and
loan payments. Because the Bank is not yet profitable, and due to other
constraints on the payment of dividends, no funds are available for the payment
of dividends to the Company.
Forward-Looking Statements
This report contains certain forward-looking statements either expressed or
implied, which are provided to assist the reader in making judgements about the
Company's possible future financial performance. Such statements are subject to
certain risks and uncertainities including, without limitation, changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctutations in interest rates, demand for loans in the
Company's market area, the adequacy of the Company's allowance for losses on
loans, competition and unexpected contingencies that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. These factors could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements expressed herein with respect to future periods.
<PAGE>
Item 7. Financial Statements
The following consolidated financial statements of the Company and report of
independent auditors are included herein:
Report of Baird, Kurtz & Dobson, Independent Auditors
Report of KPMG LLP, Independent Auditors
Consolidated Balance Sheets--December 31, 1999 and 1998
Consolidated Statements of Operations --Years ended December 31, 1999 and
1998
Consolidated Statements of Changes in Shareholders' Equity--Years
ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows--Years ended December 31,
1999, and 1998
Notes to Consolidated Financial Statements
<PAGE>
Independent Accountants' Report
Board of Directors
Citizens First Corporation
Bowling Green, Kentucky
We have audited the accompanying consolidated balance sheet of CITIZENS FIRST
CORPORATION as of December 31, 1999, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CITIZENS
FIRST CORPORATION as of December 31, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
BAIRD, KURTZ & DOBSON
Bowling Green, Kentucky
January 11, 2000
<PAGE>
Independent Auditors' Report
The Board of Directors
Citizens First Corporation:
We have audited the accompanying balance sheet of Citizens First Corporation
(the Company) as of December 31, 1998, and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citizens First Corporation as
of December 31, 1998, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
KPMG LLP
Louisville, Kentucky
April 8, 1999
<PAGE>
<TABLE>
CITIZENS FIRST CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<CAPTION>
ASSETS
1999 1998
---- ----
<S> <C> <C>
Cash and due from banks .................................. $ 2,195,339 $ 16,817
Federal funds sold ....................................... 3,475,000 --
--------- ---------
Cash and cash equivalents ....................... 5,670,339 16,817
Available-for-sale securities ............................ 4,389,787 1,490,332
Mortgage loans held for sale ............................. 114,000 --
Loans .................................................... 34,126,628 --
Less allowance for loan losses ........................... (400,920) --
---------- ---------
Net loans ............................................. 33,725,708 0
Premises and equipment ................................... 1,641,257 1,088,235
Interest receivable ...................................... 259,255 --
Deferred income taxes .................................... 27,960 --
Other .................................................... 145,004 94,022
------------ ------------
Total Assets .................................... $ 45,973,310 $ 2,689,406
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---- ----
LIABILITIES
Deposits
Demand deposits ..................................... $ 7,264,845 $ --
Savings, NOW and money market deposits .............. 3,288,658 --
Time deposits ....................................... 26,576,818 --
---------- ---------
Total Deposits .................................. 37,130,321 0
Securities sold under agreements to repurchase ........... 1,487,878 --
Short-term debt .......................................... -- 995,000
Deferred income taxes .................................... -- 428,314
Accrued interest and other liabilities ................... 506,463 541,049
------------ ------------
Total Liabilities ............................... 39,124,662 1,964,363
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 1999 - 643,053
shares ; 1998 - 106,386 shares ........................... 7,357,477 20,542
Retained earnings (deficit) .............................. (454,554) (126,932)
Accumulated other comprehensive income
Unrealized appreciation (depreciation) on
available-for-sale securities, net of
income taxes of $(27,960) and $428,314 for
1999 and 1998, respectively .............................. (54,275) 831,433
------------ ------------
Total Stockholders' Equity ...................... 6,848,648 725,043
------------ ------------
Total Liabilities and Stockholders' Equity ...... $ 45,973,310 $ 2,689,406
============ ============
</TABLE>
<PAGE>
<TABLE>
CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
---- ----
INTEREST INCOME
<S> <C> <C>
Loans ..................................................... $ 1,122,473 $ --
Available-for-sale securities ............................. 185,007 18,509
Federal funds sold ........................................ 125,559 --
Other ..................................................... 7,295 --
----------- -----------
Total Interest Income ............................... 1,440,334 18,509
----------- -----------
INTEREST EXPENSE
Deposits .................................................. 537,300 --
Securities sold under agreements to repurchase ............ 19,230 --
Short-term debt ........................................... 11,893 13,545
----------- -----------
Total Interest Expense .............................. 568,423 13,545
----------- -----------
NET INTEREST INCOME .......................................... 871,911 4,964
PROVISION FOR LOAN LOSSES .................................... 412,501 --
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ........................................... 459,410 4,964
----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts ....................... 51,254 --
Other service charges and fees ............................ 21,139 --
Income on sale of mortgage loans .......................... 38,328 --
Net realized gains on sale of available-for-sale securities 1,382,399 --
----------- -----------
Total Noninterest Income ............................ 1,493,120 0
----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits ............................ 1,235,302 117,216
Net occupancy expense ..................................... 150,677 --
Equipment expense ......................................... 195,879 --
Deposit insurance premium ................................. 3,550 --
Other operating expenses .................................. 594,744 283,323
----------- -----------
Total Noninterest Expense ........................... 2,180,152 400,539
----------- -----------
LOSS BEFORE INCOME TAXES ..................................... (227,622) (395,575)
PROVISION FOR INCOME TAXES ................................... 100,000 --
----------- -----------
NET LOSS ..................................................... (327,622) (395,575)
----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized appreciation on available-for-sale
securities, net of income taxes of $13,741 and
$120,046 for 1999 and 1998, respectively ................... 26,675 233,031
Less: reclassification adjustment for appreciation
included in net income, net of income taxes of
$470,016 and $0 for 1999 and 1998, respectively ............ (912,383) --
----------- -----------
(885,708) 233,031
----------- -----------
COMPREHENSIVE LOSS ........................................... $(1,213,330) $ (162,544)
=========== ===========
NET LOSS PER SHARE - BASIC AND DILUTED ....................... $ (0.57) $ (3.72)
=========== ===========
</TABLE>
<PAGE>
CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income
---------------
Unrealized
Appreciation
(Depreciation)
on Available-
For-Sale
Common Retained Securities,
Stock Earnings Net Total
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 20,542 $ 268,643 $ 598,402 $ 887,587
Net loss -- (395,575) -- (395,575)
on available-for-sale securities,
net of income taxes of $120,046 -- -- 233,031 233,031
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 20,542 (126,932) 831,433 725,043
Net loss -- (327,622) -- (327,622)
Issuance of common stock 7,336,935 -- -- 7,336,935
on available-for-sale securities,
net of income taxes of $456,275 -- -- (885,708) (885,708)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $ 7,357,477 $ (454,554) $ (54,275) $ 6,848,648
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss ................................................... $ (327,622) $ (395,575)
Items not requiring (providing) cash:
Depreciation and amortization ............................ 223,287 --
Provision for loan losses ................................ 412,501 --
Amortization of premiums and discounts on securities ..... 6,573 --
Net realized gains on disposition of investment securities (1,382,399) --
Changes in:
Interest receivable ...................................... (259,254) --
Mortgage loans held for sale ............................. (114,000) --
Prepaid expenses and other ............................... (95,632) (94,022)
Accrued expenses and other liabilities ................... (34,586) 529,442
------------ ------------
Net cash provided by (used in) operating activities .. (1,571,132) 39,845
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans .................................. (34,138,209) --
Purchase of premises and equipment ......................... (731,662) (1,088,235)
Proceeds from maturities of available-for-sale securities .. 1,371,989 --
Proceeds from sales of available-for-sale securities ....... 2,103,344 --
Purchases of available-for-sale securities ................. (6,340,942) (38,277)
------------ ------------
Net cash used in investing activities ................ (37,735,480) (1,126,512)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, money market,
NOW and savings accounts ................................... 10,553,503 --
Net increase in certificates of deposit .................... 26,576,818 --
Proceeds from issuance (repayment) of short-term debt ...... (995,000) 995,000
Proceeds from issuance of common stock ..................... 7,336,935 --
Net increase in repurchase agreements ...................... 1,487,878 --
------------ ------------
Net cash provided by operating activities ............ 44,960,134 995,000
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
5,653,522 (91,667)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR ............................................. 16,817 108,484
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR ........................ $ 5,670,339 $ 16,817
============ ============
</TABLE>
<PAGE>
CITIZENS FIRST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Citizens First Corporation (the Company) was incorporated in 1975, for the
purpose of conducting business as an investment club. The Company is registered
under the laws of the Commonwealth of Kentucky and is headquartered in Bowling
Green, Kentucky. In September 1998, the Company filed an application with the
Kentucky Department of Financial Institutions (KDFI) and the Federal Deposit
Insurance Corporation (FDIC) to organize and charter Citizens First Bank, Inc.
(the Bank) as a new Kentucky bank and a wholly owned subsidiary of the Company.
In December 1998, the Company filed an application with the Board of Governors
of the Federal Reserve System (FRB) for approval to become a bank holding
company under the Holding Company Act of 1956, as amended. On December 28, 1998,
the FRB approved the Company's application to become a bank holding company. On
January 21, 1999, the FDIC approved the Bank's application for federal deposit
insurance subject to certain conditions, including minimum capital requirements,
which have been subsequently met by the Bank. The Bank commenced operations on
February 18, 1999.
The Company's operations include one reportable segment; providing a full
range of banking and mortgage services to individual and corporate customers in
Bowling Green and Warren County, Kentucky. The Company is subject to competition
from other financial institutions. The Company also is subject to the regulation
of certain federal and state agencies and undergoes periodic examinations by
those regulatory authorities.
Principles of Consolidation
The consolidated financial statements for 1999 include the accounts of the
Company and its 100% owned subsidiary, Citizens First Bank, Inc. Significant
intercompany accounts and transactions have been eliminated in consolidation.
Since the subsidiary was not incorporated until 1999, the financial statements
for 1998 include only the accounts of Citizens First Corporation.
Use of Estimates
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 at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses. In connection with
the determination of the allowance for loan losses, management obtains
independent appraisals for significant properties.
Management believes that the allowance for losses on loans is adequate. While
management uses available information to recognize losses on loans, changes in
economic conditions may necessitate revision of these estimates in future years.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the subsidiary bank's allowance for
losses on loans. Such agencies may require the Company to recognize additional
losses based on their judgments of information available to them at the time of
their examination.
Investment in Debt and Equity Securities
Available-for-sale securities, which include any security for which the
Company has no immediate plan to sell but which may be sold in the future, are
carried at fair value. Realized gains and losses, based on amortized cost of the
specific security, are included in other income. Unrealized gains and losses are
recorded, net of related income tax effects, in stockholders' equity. Premiums
and discounts are amortized and accreted, respectively, to interest income using
the level-yield method over the period to maturity.
<PAGE>
Interest and dividends on investments in debt and equity securities are
included in income when earned.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of cost or fair value,
determined using an aggregate basis. Write-downs to fair value are recognized as
a charge to earnings at the time the decline in value occurs. Gains and losses
resulting from sales of mortgage loans are recognized when the respective loans
are sold to investors. Gains and losses are determined by the difference between
the selling price and the carrying amount of the loans sold.
Loans
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoffs are reported at their outstanding principal
balance adjusted for any charge-offs, allowance for loan losses and any deferred
fees or costs on originated loans.
Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is maintained
at a level considered adequate to provide for potential loan losses, based on
management's evaluation of the loan portfolio, as well as on prevailing and
anticipated economic conditions and historical losses by loan category. General
allowances have been established, based upon the aforementioned factors, and
allocated to the individual loan categories. Allowances are accrued on specific
loans evaluated for impairment for which the basis of each loan, including
accrued interest, exceeds the discounted amount of expected future collections
of interest and principal or, alternatively, the fair value of loan collateral.
A loan is considered impaired when it is probable that the Company will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed at the time such
amounts are delinquent 90 days. Interest is recognized for nonaccrual loans only
upon receipt and only after all principal amounts are current according to the
terms of the contract.
Premises and Equipment
Depreciable assets are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are capitalized and
amortized using the straight-line method over the terms of the respective leases
or the estimated useful lives of the improvements, whichever is shorter.
Advertising
All advertising costs including media advertising for major new campaigns are
expensed when incurred. Total advertising expenses totaled $111,107 during 1999.
<PAGE>
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
Cash Equivalents
The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At December 31, 1999 and 1998, cash
equivalents consisted of federal funds sold and certain money market accounts
with brokers.
Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 financial statement presentation. These reclassifications
had no effect on net earnings (loss).
Earnings Per Share
Basic earnings per share is computed based on the weighted average number of
shares outstanding during each year. Diluted earnings per share is computed
using the weighted average common shares and all potential dilutive common
shares outstanding during the period.
The computation of per share earnings is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net loss .................................. $ (327,622) $(395,575)
=============== =========
Average common shares outstanding ......... 572,478 106,386
Average potential common shares outstanding -- --
--------------- ---------
Average diluted common shares ............. 572,478 106,386
=============== =========
Basic net loss per share .................. $ (0.57) $ (3.72)
================ ==========
Diluted net loss per share ................ $ (0.57) $ (3.72)
================ =========
</TABLE>
NOTE 2: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of available-for-sale
securities are as follows:
<TABLE>
December 31, 1999
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury $ 500,000 $ -- $ (6,565) $ 493,435
U. S. Government agencies 2,600,095 -- (123,234) 2,476,861
Mortgage-backed securities 964,877 12,573 (28,313) 949,137
Equity securities 9,640 63,304 -- 72,944
Corporate bonds 397,410 -- -- 397,410
------------ ----------- ----------- ------------
$ 4,472,022 $ 75,877 $ (158,112) $ 4,389,787
============ =========== =========== ============
December 31, 1998
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Equity securities $ 230,585 $ 1,259,747 $ -- $ 1,490,332
------------ ----------- ----------- ------------
$ 230,585 $ 1,259,747 $ 0 $ 1,490,332
============ =========== =========== ============
</TABLE>
Maturities of available-for-sale securities at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
Amortized Approximate
Cost Fair Value
<S> <C> <C>
One year or less ................. $ 297,177 $ 297,177
After one through five years ..... 3,200,328 3,070,529
Mortgage-backed securities not due
on a single maturity date ........ 964,877 949,137
Equity securities ................ 9,640 72,944
---------- ----------
$4,472,022 $4,389,787
========== ==========
</TABLE>
The book value of securities pledged as collateral, to secure public deposits
and for other purposes, amounted to $2,275,000 at December 31, 1999, and $0 at
December 31, 1998. The approximate fair value of pledged securities amounted to
$2,191,003 at December 31, 1999, and $0 at December 31, 1998.
Gross gains of $1,382,534 and gross losses of $135 resulting from sales of
available-for-sale securities were realized for 1999.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
Categories of loans include:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
---- ----
Commercial and industrial $ 10,325,468 $ --
Commercial real estate 15,787,300 --
Residential real estate 3,682,128 --
Consumer 4,381,171 --
--------------- ----------
Total loans 34,176,067 0
Less: Allowance for loan losses (400,920) --
Deferred loan fees (49,439) --
--------------- ----------
Net loans $ 33,725,708 $ 0
=============== ==========
</TABLE>
There were no impaired loans or allowances for loan losses related to
impaired loans during 1999 or 1998.
Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year . $ -- $ --
Provision charged to expense 412,501 --
Losses charged off ......... (11,581) --
Recoveries ................. -- --
--------- ---------
Balance, end of year ....... $ 400,920 $ 0
========= =========
</TABLE>
NOTE 4: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Land and land improvements .. $ 651,845 $ --
Buildings and improvements .. 480,770 --
Leasehold improvements ...... 83,870 --
Furniture and fixtures ...... 86,427 --
Equipment ................... 516,984 --
Construction in progress .... -- 1,088,235
----------- -----------
1,819,896 1,088,235
Less accumulated depreciation (178,639) --
----------- -----------
Net premises and equipment .. $ 1,641,257 $ 1,088,235
=========== ===========
</TABLE>
NOTE 5: INTEREST BEARING DEPOSITS
Interest bearing deposits in denominations of $100,000 or more were
$11,033,646 and $0 on December 31, 1999 and 1998,
respectively.
At December 31, 1999, the scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 20,437,903
2001 4,108,007
2002 1,086,331
2003 160,000
2004 282,305
Thereafter 502,272
---------------
</TABLE>
$ 26,576,818
================
NOTE 6: INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Taxes currently payable $100,000 $ --
Deferred income taxes -- --
-------- -------------
$100,000 $ 0
-------- -------------
</TABLE>
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Computed at the statutory rate (34%) ............... $ (77,400) $(134,496)
Increase (decrease) resulting from:
State income taxes, net of federal benefit ..... 66,000 --
Tax exempt municipal income .................... (1,400) --
Change in deferred tax asset valuation allowance 114,300 137,251
Other .......................................... (1,500) (2,755)
--------- ---------
Actual tax provision ............................... $ 100,000 $ 0
========= =========
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on the
balance sheets are:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Allowances for loan losses ......................... $ 99,967 $ --
Start-up costs ..................................... 114,275 137,251
Unrealized loss on available-for-sale securities ... 27,960 --
Net operating loss carryforwards ................... 20,500
Deferred loan fees/costs ........................... 16,809 --
--------- ---------
279,511 137,251
--------- ---------
Deferred tax liabilities:
Unrealized gains on available-for-sale securities .. -- (428,314)
--------- ---------
0 (428,314)
--------- ---------
Net deferred tax asset (liability) before
valuation allowance: 279,511 (291,063)
--------- ---------
Beginning balance .................................. (137,251) --
Change during the year ............................. (114,300) (137,251)
--------- ---------
Ending balance ..................................... (251,551) (137,251)
--------- ---------
Net deferred tax asset ...................... $ 27,960 $(428,314)
========= =========
</TABLE>
NOTE 7: REGULATORY MATTERS
The Company and subsidiary bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and subsidiary bank must meet specific capital guidelines that
involve quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgements by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and subsidiary bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1999, that the Company and subsidiary bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1999, the most recent notification from regulatory
agencies categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based and Tier I leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The actual capital amounts and ratios on a consolidated and bank-only basis
are presented in the following table.
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1999:
Total Capital (to risk weighted
assets)
<S> <C> <C> <C> <C> <C> <C>
Consolidated $ 7,303,843 19.4% $ 3,007,507 8.0% $ 3,759,384 10.0%
Citizens First Bank, Inc. $ 6,237,973 16.8% $ 2,969,339 8.0% $ 3,711,674 10.0%
Tier 1 Capital (to risk
Consolidated $ 6,902,923 18.4% $ 1,503,754 4.0% $ 2,255,630 6.0%
Citizens First Bank, Inc. $ 5,837,053 15.7% $ 1,484,669 4.0% $ 2,227,004 6.0%
Tier 1 Capital (to average
Consolidated $ 6,902,923 30.5% $ 907,760 4.0% $ 1,134,700 5.0%
Citizens First Bank, Inc. $ 5,837,053 26.9% $ 867,760 4.0% $ 1,084,700 5.0%
</TABLE>
The subsidiary bank is subject to certain restrictions on the amount of
dividends that it may declare without prior regulatory approval. At December 31,
1999, no retained earnings were available for dividend declaration without prior
regulatory approval.
NOTE 8: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1999 and 1998, the Company had loans outstanding to executive
officers, directors and companies, in which the Company's executive officers or
directors were principal owners, in the amount of $1,589,381 and $0,
respectively.
In management's opinion, such loans and other extensions of credit were made
in the ordinary course of business and were made on substantially the same terms
(including interest rates and collateral) as those prevailing at the time for
comparable transactions with other persons. Further, in management's opinion,
these loans did not involve more than normal risk of collectibility or present
other unfavorable features.
Additionally, the Company occupied office space from a stockholder at no
charge during 1998.
<PAGE>
NOTE 9: EMPLOYEE BENEFIT PLAN
During 1999, the Company established a defined contribution pension plan
(SIMPLE plan) covering substantially all employees. Employees may contribute up
to 6% of their compensation with the Company matching 100% of the employee's
contribution on 3% of the employee's compensation. Employer contributions
charged to expense for 1999 were $10,707.
NOTE 10: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Additional Cash Payment Information
Interest paid ............................ $471,961 $ 0
Income taxes paid ........................ $ 920 $ 2,200
</TABLE>
NOTE 11: OTHER OPERATING EXPENSES
Other operating expenses consist of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Advertising ................................ $111,107 $ --
Professional fees .......................... 74,326 252,355
Data processing services ................... 71,239 --
Bank shares tax ............................ 84,585 --
Office supplies ............................ 73,068 --
Telephone .................................. 48,618 --
Postage .................................... 24,937 --
Other ...................................... 106,864 30,968
-------- --------
Total ................................. $594,744 $283,323
======== ========
</TABLE>
NOTE 12: COMMITMENTS AND CREDIT RISK
The Company grants commercial, consumer and residential loans to customers
primarily in Bowling Green and Warren County, Kentucky. Although the Company has
a diversified loan portfolio, loans secured by commercial real estate comprise
approximately 20% of the loan portfolio as of December 31, 1999, and loans for
construction and land development comprise an additional 10% of the loan
portfolio as of December 31, 1999.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments may expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Each customer's creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies, but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate and residential real estate.
At December 31, 1999, the Company had outstanding commitments to originate
loans aggregating approximately $7,425,000. The commitments extended over
varying periods of time with the majority being disbursed within a one-year
period.
Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.
The Company had total outstanding letters of credit amounting to $101,000
with terms generally maturing within one year.
At December 31, 1999, approximately 42% of the Company's total time deposits
consisted of short-term certificates of deposit having minimum denominations in
excess of $100,000.
NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit risk. Other
significant estimates and concentrations not discussed in those footnotes
include:
Deposits and Investments
The Company maintains cash in bank deposit accounts and investments in
federal funds sold which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company believes it
is not exposed to any significant credit risk on cash and cash equivalents.
<PAGE>
NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS(Continued)
Year 2000 Issue
Like all entities, the Company is exposed to risks associated with the year
2000 issue, which affects computer software and hardware; transactions with
customers, vendors and other entities; and equipment dependent on microchips.
The Company recognizes that the year 2000 issue poses a risk beyond January 1,
2000, as errors may not become evident until after that date. The Company has
performed the remediation steps it believes necessary to address the year 2000
issue. It is not possible for any entity to guarantee the results of its own
remediation efforts or to accurately predict the impact of the year 2000 issue
on third parties with which the Company does business. If remediation efforts of
the Company or third parties with which it does business are not successful, the
year 2000 problem could have negative effects on the Company's financial
condition and results of operations in the near term. The Company does not
believe any significant year 2000 problems have occurred.
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and Cash Equivalents
For these short-term instruments, the carrying amount approximates fair
value.
Investment Securities
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
Mortgage Loans Held for Sale
For homogeneous categories of loans, such as mortgage loans held for sale,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.
Loans
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest approximates its fair value.
Deposits
The fair value of demand deposits, savings accounts, NOW accounts and certain
money market deposits is the amount payable on demand at the reporting date,
i.e., their carrying amount. The fair value of fixed-maturity time deposits is
estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities. The carrying
amount of accrued interest payable approximates its fair value.
<PAGE>
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Securities Sold Under Agreement to Repurchase
For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Short-Term Debt
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
Commitments to Extend Credit, Letters of Credit and Lines of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit and lines of credit is based on fees currently charged for
similar agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table presents estimated fair values of the Company's financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which method involves significant judgements by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, the Company does not know
whether the fair values shown below represent values at which the respective
financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents ............. $ 5,670,339 $ 5,670,339 $ 16,817 $ 16,817
Available-for-sale securities ......... 4,389,787 4,389,787 1,490,332 1,490,332
Mortgage loans held for sale .......... 114,000 114,000 -- --
Interest receivable ................... 259,255 259,255 -- --
Loans, net of allowance for loan losses 33,725,708 33,757,190 -- --
Financial liabilities:
Deposits .............................. 37,130,321 37,043,771 -- --
Securities sold under agreements
to repurchase.......................... 1,487,878 1,487,878 -- --
Short-term debt ....................... -- -- 995,000 995,000
Interest payable ...................... 110,007 110,007 -- --
Unrecognized financial instruments
(net of contract amount):
Letters of credit ................. -- -- -- --
Commitments to extend credit ...... -- -- -- --
</TABLE>
NOTE 15: PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
CONDENSED BALANCE SHEET
DECEMBER 31, 1999
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 756,973
Available-for-sale securities 470,355
Investment in Citizens First Bank, Inc. 5,740,997
Other assets 6,750
----------------
Total Assets $ 6,975,075
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued expenses and other $ 26,427
Short-term debt --
Deferred income taxes --
----------------
26,427
Stockholders' equity 6,948,648
----------------
Total Liabilities and Stockholders' Equity $ 6,975,075
================
</TABLE>
NOTE 15: PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
OPERATING INCOME
Investment income from available-for-sale securities $ 25,396
Gain on sale of available-for-sale securities ...... 1,382,534
-----------
1,407,930
OPERATING EXPENSES
Salaries and employee benefits ..................... --
Professional fees .................................. 37,615
Interest on short-term debt ........................ 11,893
Other .............................................. 16,664
-----------
66,172
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES AND EQUITY IN LOSS OF SUBSIDIARY.......... 1,341,758
PROVISION FOR INCOME TAXES ............................ 100,000
-----------
INCOME (LOSS) BEFORE EQUITY
IN LOSS OF SUBSIDIARY.................................. 1,241,758
EQUITY IN LOSS OF SUBSIDIARY .......................... (1,569,380)
------------
NET LOSS .............................................. $ (327,622)
============
</TABLE>
NOTE 15: PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net loss ................................................ $ (327,622)
Items not requiring (providing) cash:
Equity in loss of subsidiary .......................... 1,569,380
Gain on sale of available-for-sale securities ......... (1,382,534)
Amortization of premiums and discounts on securities .. 79
Changes in:
Other assets .......................................... 87,272
Other liabilities ..................................... (414,623)
-----------
Net cash used in operating activities ............. (468,048)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of premises and equipment ...................... --
Investment in subsidiary ................................ (6,339,720)
Proceeds from sales of available-for-sale securities .... 1,603,479
Purchases of available-for-sale securities .............. (636,490)
Proceeds from maturities of available-for-sale securities 239,000
-----------
Net cash used in investing activities ............. (5,133,731)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of short-term debt ............... --
Principal payments of short-term debt ................... (995,000)
Proceeds from stock issuance ............................ 7,336,935
-----------
Net cash provided by financing activities ......... 6,341,935
-----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ........................................... 740,156
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR ....................................... 16,817
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR ..................... $ 756,973
===========
</TABLE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
At its board meeting on September 2, 1999, the Board of Directors of
the Company dismissed KPMG LLP as its independent accountant. This decision was
communicated to KPMG LLP on September 9, 1999. During the audits of the
Company's two most recent fiscal years and through the interim period September
9, 1999 (i) the reports of KPMG LLP on the financial statements of the
Registrant as of and for the years ended December 31, 1998 and 1997 contained no
adverse opinion or disclaimer of opinion and were not modified as to
uncertainty, audit scope or accounting principles and (ii) there have been no
disagreements with KPMG LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements if not resolved to their satisfaction would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreement, nor have there been any reportable events.
<PAGE>
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The following sets forth certain information respecting the Company's directors,
all of whom will be nominees (for the terms noted) for directors at the
Company's Annual Meeting of Shareheolders to be held April 27, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year First Business Experience
Name Elected Positions with During the Past
and Age Director the Company Five Years
- -----------------------------------------------------------------------------------------------------------------
Nominees for One-Year
Terms Ending in 2001
Billy J. Bell 1998 Director Co-Owner and
(66) Secretary/Treasurer, Mid-South
Feeds, Inc. (feed manufacturer)
James H. Lucas 1998 Director; Secretary to the Of Counsel (and formerly
(67) Board of Directors partner), English, Lucas, Priest
& Owsley (law firm)
Joe B. Natcher, Jr. 1998 Director President and Chief Executive
(42) Officer, Southern Foods, Inc.
(food service distributor)
Nominees for Two-Year
Terms Ending in 2002
Barry D. Bray 1999 Director; Vice-President Vice-President and Chief Credit
(53) and Chief Credit Officer Officer of the Company and the
Bank since January 1999 and
February 1999, respectively;
Previously Executive Vice-
President and Chief Credit
Officer of Trans Financial Bank
from 1982 through 1998
Tommy W. Cole 1999 Director Vice-President of Strategic
(44) Development, Houchens
Industries; Previously Manager
for Private Banking, Trans
Financial Bank, from 1995 to
November 1999
John T. Perkins 1998 Director; Vice-President Vice-President and Chief
(57) and Chief Operating Officer Operating Officer of the
Company and the Bank since
August, 1998 and February,
1999, respectively; Previously,
Bank Consultant from April
1995 to July 1998 and Chief
Operating Officer, Trans
Financial Bank, from July 1973
to April 1995
Nominees for Three-Year
Terms Ending in 2003
Jerry E. Baker 1998 Director Chairman of the Board of
(69) Directors, Airgas Mid-America,
Inc. (industrial gas and welding
equipment)
Mary D. Cohron 1998 Director; President and President and Chief Executive
(52) Chief Executive Officer Officer of the Company and the
Bank since August, 1998 and
February, 1999, respectively;
Previously Board Team
Development Services Provider
for Kentucky School Boards
Association and Strategic
Planning and Business
Consultant
Floyd H. Ellis 1998 Chairman of the Board of Retired President and Chief
Directors Executive Officer, Warren Rural
Electric Cooperative
Corporation
</TABLE>
In addition to Ms. Cohron, Mr. Perkins and Mr. Bray, the Company's other
executive officer is Gregg A. Hall. Mr. Hall is 43 years of age, has served as
the Company's Vice-President and Chief Financial Officer since January 1,1999
and previously served as Internal Auditor and Senior Vice-President of Trans
Financial, Inc.
The Company's directors and executive officers are not subject to compliance
with Section 16(a) of the Exchange Act.
<PAGE>
Item 10. Executive Compensation
The following table sets forth information with respect to the Company's four
(4) executive officers for the three (3) fiscal years ended December 31, 1999:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Awards
Name and Fiscal Restriced Stock All Other
Principal Position Year Salary Bonus Awards Compensation--1
- ------------------ ------ ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Mary D. Cohron
Chief Executive 1999 $96,895 $ 0 $ 0 $ 3,491
Officer and President 1998 $34,615 0 0 354
1997 0 0 0 0
John T. Perkins
Vice-President and 1999 $86,661 $ 0 $ 0 $ 3,363
Chief Operating 1998 $30,769 0 0 354
Officer 1997 0 0 0 0
Barry D. Bray
Vice-President and 1999 $77,554 $ 0 $ 0 $ 2,786
Chief Credit Officer 1998 9,030--2 0 0 0
1997 0 0 0 0
Gregg A. Hall
Vice-President and 1999 $83,892 $ 0 $ 0 $ 3,171
Chief Financial 1998 22,792--2 0 0 0
Officer 1997 0 0 0 0
<FN>
1 Other compensation includes: (a) the Company's match of up to 3% of the
officers' salaries under the Savings Incentive Match Plan for Employees
implemented in September 1999; (b) the cost of life insurance premiums paid by
the Company on behalf of the officers for coverage equal to their respective
annual salaries, and; (c) the portion of the cost of health insurance coverage
for such officers that is paid by the Company. All full-time employees of the
Company receive similar benefits from the Company.
2 Compensation in 1998 for Messrs. Bray and Hall consists of payment for
consulting services that were incurred and expensed in 1998 and paid in 1999
pursuant to employment contracts with the Company dated January 1, 1999.
</FN>
</TABLE>
Directors of the Company currently receive no fees for their services in such
capacity.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The table below gives information as to the shares of Company common stock
beneficially owned as of March 10, 2000 by each Company director and executive
officer, and by all such persons as a group. Unless otherwise indicated,
beneficial ownership includes both sole voting power and sole investment power.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of
Company Common Stock
Name and Beneficial Owner As of March 10, 2000 Percent of Class
- ------------------------- -------------------- ----------------
<S> <C> <C>
Jerry E. Baker .... 14,000 2.18
Billy J. Bell ..... 14,000--1 2.18
Barry D. Bray ..... 9,000--2 1.40
Mary D. Cohron .... 14,000 2.18
Tommy W. Cole ..... 5,000 .78
Floyd H. Ellis .... 14,000 2.18
Gregg A. Hall ..... 6,867--3 1.06
James H. Lucas .... 10,430 1.62
Joe B. Natcher, Jr 6,700--4 1.04
John T. Perkins ... 10,000--5 1.55
------- -----
TOTAL: 103,997 16.17
<FN>
1Includes 3,570 shares held in an individual retirement account for the
benefit of Mr. Bell.
2Includes 7,000 shares held in an individual retirement account for the
benefit of Mr. Bray and 1,000 shares held by Mr. Bray's wife, Cathy L. Bray.
3Includes 6,667 shares held in an individual retirement account for the
benefit of Mr. Hall and 200 shares jointly owned with Mr. Hall's wife,
Desiree Hall.
4Shares are jointly owned with Mr. Natcher's wife, Cheri Natcher.
5Includes 6,667 shares held in an individual retirement account for the
benefit of Mr. Perkins and 3,333 shares held in an individual retirement account
for the benefit of Mr. Perkins' wife, Alice J. Perkins.
</FN>
</TABLE>
No person is known to the Company to be the beneficial owner of more than five
percent (5%) of Company common stock.
Item 12. Certain Relationships and Related Tranactions
Through the Bank, the Company has had and expects in the future to have banking
transactions in the ordinary course of business with directors and executive
officers of the Company and their associates. All loans to such persons or their
associates have been on the same terms, including interest rates and collateral
on loans, as those prevailing at the same time for comparable transactions with
others, and have not involved more than normal risk of collectibility or other
unfavorable features.
The law firm of English, Lucas, Priest & Owsley was paid fees totaling $100,005
in 1999 for legal services rendered by it on behalf of the Company and the Bank
in connection with the offering of common stock by the Company, the organization
of the Bank and general legal matters. Company director James H. Lucas is Of
Counsel to said law firm.
<PAGE>
Part IV
Item 13. Exhibits, Lists and Reports on Form 8-K
Exhibits
(a) 3.1 Articles of Restatement and Amendment to Articles of Incorporation of
Bowling Green Investors, Ltd. (now Citizens First Corporation) (incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on Form SB-2
[No. 333-67435]).
3.2 Amended and Restated Bylaws of Citizens First Corporation (incorporated
by reference to Exhibit 3.2 of the Company's Registration Statement on Form SB-2
[No. 333-67435]).
3.3 Articles of Amendment to Articles of Restatement and Amendment to
Articles of Incorporation of Citizens First Corporation (incorporated by
reference to Exhibit 3.3 of the Company's Registration Statement on Form SB-2
[No. 333-67435]).
4 Articles of Restatement and Amendment to Articles of Incorporation of
Bowling Green Investors, Ltd.(now Citizens First Corporation) (incorporated by
reference to Exhibit 4 of the Company's Registration Statement on Form SB-2 [No.
333-67435]).
10.1 Employment Agreement between Citizens First Corporation and Mary D.
Cohron (incorporated by reference to Exhibit 10.1 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.2 First Amendment to Employment Agreement between Citizens First
Corporation and Mary D. Cohron (incorporated by reference to Exhibit 10.2 of the
Company's Registration Statement on Form SB-2 [No. 333-67435]).
10.3 Employment Agreement between Citizens First Corporation and John T.
Perkins (incorporated by reference to Exhibit 10.3 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.4 Employment Agreement between Citizens First Corporation and Gregg A. Hall
(incorporated by reference to Exhibit 10.4 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.5 Bank Contract for Electronic Data Processing Services and Customerfile
System between Fiserv Bowling Green and Citizens First Bank (incorporated by
reference to Exhibit 10.5 of the Company's Registration Statement on Form SB-2
[No. 333-67435]).
10.6 Promissory Note secured by Real Estate Mortgage and Security Agreement
and Stock Pledge (issued by Citizens First Corporation for benefit of First
Security Bank of Lexington)(incorporated by reference to Exhibit 10.6 of the
Company's Registration Statement on Form SB-2 [No. 333-67435]).
10.7 Deed of Conveyance from David A. and Karla N. Dozer to Citizens First
Corporation (incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form SB-2 [No. 333-67435]).
10.8 Security Agreement and Stock Pledge between Citizens First Corporation
and First Security Bank of Lexington (incorporated by reference to Exhibit 10.8
of the Company's Registration Statement on Form SB-2 [No. 333-67435]).
10.9 Mortgage from Citizens First Corporation to First Security Bank of
Lexington (incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form SB-2 [No. 333-67435]).
10.10 Commercial Line of Credit Agreement and Note between Citizens First
Corporation and First Security Bank of Lexington (incorporated by reference to
Exhibit 10.10 of the Company's Registration Statement on Form SB-2 [No.
333-67435]).
10.11 Assignment of Securities Account by Citizens First Corporation
(incorporated by reference to Exhibit 10.11 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.12 Employment Agreement between Citizens First Corporation and Barry D. Bray
(incorporated by reference to Exhibit 10.12 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.13 Consulting Agreement between Citizens First Corporation and The Carpenter
Group (incorporated by reference to Exhibit 10.13 of the Company's Registration
Statement on Form SB-2 [No. 333-67435]).
10.14 Lease Agreement between Citizens First Corporation and Midtown Plaza,
Inc. (incorporated by reference to Exhibit 10.14 of the
Company's Registration Statement on Form SB-2 [No. 333-67435]).
10.15 Employment Agreement between Citizens First Corporation and Todd Kanipe
11 Statement re: computation of per share earnings
16 Letter on Change in Certifying Accountant (incorporated by reference to
Exhibit 16 of the Company's Current Report on Form 8-KA dated September 2,1999)
21 Subsidiaries of the Small Business Issuer
27 Financial Data Schedule for the year ended December 31, 1999 (for SEC use
only)
(b) The Company did not file any current reports on Form 8-K during the quarter
ended December 31, 1999.
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Citizens First Corporation
Date: March 20, 2000 By: /s/Mary D. Cohron
------------------
Mary D. Cohron
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated.
/s/Mary D. Cohron
----------------- March 20, 2000
Mary D. Cohron
President, Chief Executive Officer
and Director
/s/ Gregg A. Hall March 20, 2000
-----------------
Gregg A. Hall
Vice-President and Chief Financial Officer
<PAGE>
/s/ Floyd H. Ellis, Chairman March 20, 2000
----------------------------
Floyd H. Ellis
/s/ Jerry E.Baker March 20, 2000
Jerry E. Baker
/s/ Billy J. Bell March 20, 2000
-----------------
Billy J. Bell
/s/ Barry D. Bray March 20, 2000
-----------------
Barry D. Bray
/s/ Tommy W. Cole March 20, 2000
-----------------
Tommy W. Cole
/s/ James H. Lucas March 20, 2000
------------------
James H. Lucas
/s/ Joe B.Natcher, Jr. March 20, 2000
-----------------------
Joe B. Natcher
/s/ John T. Perkins March 20, 2000
-------------------
John T. Perkins
EXHIBIT 10.15--Employment Agreement between Citizens First Corporation and
Todd Kanipe
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, made and entered into as of this___ day of
October, 1999, by and between CITIZENS FIRST CORPORATION, a Kentucky corporation
("Employer"), and MATTHEW TODD KANIPE, an individual ("Kanipe").
For and in consideration of the mutual terms, conditions and benefits
to be obtained by the parties to this Employment Agreement, the receipt and
sufficiency of which the parties hereby acknowledge, Employer and Kanipe agree
as follows:
1. Employment. Employer hereby employs Kanipe, and Kanipe hereby accepts
employment with Employer, as the Trust/InvestmentOfficer of Citizens First
Bank (hereinafter "the Position").
2. Term of Employment. This Employment Agreement and Kanipe's employment
hereunder shall commence on and be effective as of October 18, 1999 (the
"Commencement Date"), and continue through October 17, 2002 subject to renewal
and to termination in accordance with the terms of this Employment Agreement. On
October 18, 2002, this Employment Agreement will be automatically renewed for a
new three year term, subject to renewal and to termination in accordance with
the terms of this Employment Agreement, unless either Employer or Kanipe gives
written notice to the other party hereto at least 60 days prior to the renewal
date that it does not intend to renew this Employment Agreement. Kanipe's
initial term of employment and any subsequent renewal thereof shall hereinafter
be referred to as the "Term." If this Employment Agreement is not renewed as
specified herein, all of Kanipe's rights to compensation and fringe benefits
shall terminate at the end of the Term. 3. Responsibilities in Position. During
the Term, except for illness, and reasonable vacation periods as hereinafter
provided and reasonable involvement in civic affairs and in organizations which
benefit, promote or complement the interests of Employer, and except as
otherwise provided in this Employment Agreement, or as approved by Employer,
Kanipe shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder and in the Position,
and shall use his best efforts, skill and experience to promote the business,
interests and welfare of Employer. Kanipe shall not, during the Term, without
the consent of Employer, be engaged in any other business activity, whether or
not such activity is pursued for gain, profit or pecuniary advantage. 4.
Specific Description of Authority. In the position, Kanipe shall have the
day-to-day responsibility for marketing and managing the trust and investment
relationships on behalf of Citizens First Bank. Kanipe shall additionally
observe such directions and restrictions as the Employer may from time to time
confer or impose upon him. Kanipe shall report directly to the Employer's
President and Chief Executive Officer.
5. Beginning with the Commencement Date and for the first six months
thereafter, Employer shall pay Kanipe a salary of $2,500.00 per bi-weekly pay
period. During the second six months of employment, Employer shall pay Kanipe a
salary of $1,250.00 per bi-weekly pay period. During the first year of
employment, Kanipe will additionally be entitled to receive 12.5% of the fee
income generated and received by Citizens First Bank from the referral of
customers to Kentucky Trust Company and Todd Investment Advisors, Inc. This
commission income will be paid to Kanipe quarterly beginning with the second six
months of employment.
After the first year of employment, and in lieu of salary, Kanipe will
receive on a quarterly basis 50% of the fee income generated and received by
Citizens First Bank from the referral of customers to Kentucky Trust Company and
Todd Investment Advisors, Inc. As part of this compensation system, Employer
agrees to advance Kanipe $1,000.00 on the first pay day of each month. Said
advances will then be deducted in full each quarter from Kanipe's commission
income. Should Kanipe's commission income in any quarter fail to equal or exceed
said advances for the quarter, Kanipe agrees to reimburse Employer for that
amount which cannot be deducted from his commission income.
Throughout his employment, Kanipe will additionally receive on a
quarterly basis 1 1/2% of the income generated and received by Citizens First
Bank from any loan referred by Kanipe to Employer for the first twelve months
the loan is on Employer's books.
6. Reimbursement. Employer will pay Kanipe's travel mileage at a rate
of $.31 per mile and a room and board per diem of $75.00 per day during the time
that Kanipe is receiving approved out-of-town training from Kentucky Trust
Company and Todd Investment Advisors, Inc.
Employer will additionally reimburse Kanipe for all reasonable and
necessary expenses incurred by him in carrying out his duties under this
Employment Agreement; provided that such expenses shall be incurred by him only
pursuant to the policies and procedures of Employer, from time to time in
effect, and that all such expenses must be reasonable and necessary expenses
incurred by him solely for the purpose of carrying out his duties under this
Employment Agreement. Kanipe shall present to Employer from time to time an
itemized account of such expenses in such form as may be required by Employer.
Any such itemized account shall be subject to approval by Employer.
7. Vacation. During the first year of employment, Kanipe shall be
entitled to twelve days of paid vacation. Because of the compensation structure,
vacation taken after the first year of employment shall be unpaid.
8. Employee Benefits. Kanipe shall be entitled to participate in the
group health insurance plan offered by the Employer and to participate in such
additional employee benefits as are conferred by Employer, from time to time,
upon its executive officers, including the following:
A. The right to participate in any profit sharing plan,
pension plan, or other incentive program, retirement benefit plan or similar
program established by Employer; provided, that Kanipe must be a "qualified
participant," as defined in the legal documentation establishing such plans;
B. The right to participate in any life insurance plan,
short-term disability plan, or long-term disability plan established by
Employer.
C. The right to participate in any bonus plan or stock option
plan established by Employer in its sole discretion.
9. Evaluation and Review of Employment Agreement. At six month
intervals, Employer shall complete an evaluation of Kanipe's performance as
measured against specific goals and objectives as established by Employer.
10. Termination. Kanipe's employment under the terms of this Employment
Agreement may be terminated by Employer at any time during the Term, if Employer
reasonably, properly, and in good faith determines that any of the following
causes for terminating Kanipe's employment exist:
A. Kanipe has appropriated to his personal use funds, rights
or property of Employer or of any of the customers of Employer;
B. Kanipe has engaged in any other act of substantial
dishonesty in the performance of his duties or responsibilities;
C. Kanipe has, in any substantial respects, failed to
discharge his duties and responsibilities in the Position, and fails or refuses
to correct such failings within thirty (30) days of receipt of written notice to
him from the Employer of the failings, which such notice shall specifically
describe Kanipe's failings and the steps required to remedy same;
D. Kanipe is engaging in competition with Employer in any
manner or in activities harmful to the business of Employer;
E. Kanipe is using alcohol, drugs or similar substances in
an illegal manner;
F. Kanipe has become "disabled" or "incompetent," as
hereinafter defined in this Employment Agreement; G. Kanipe is
convicted of a felony, or of a substantial misdemeanor
involving moral turpitude; H. For any reason, Employer or
Citizens First Bank is unable to procure upon Kanipe a
substantial fidelity bond, or a bonding company refuses to
issue a bond to Employer or
Citizens First Bank if Kanipe is employed in the Position; I.
Kanipe is guilty of gross professional misconduct, or of a
gross breach of this Employment Agreement of such a
serious nature as would reasonably render his service entirely unacceptable.
If Employer reasonably, properly, and in good faith determines that any
one or more of the above causes for terminating Kanipe's employment exists, then
Employer may, by giving Kanipe 60 days written notice of its intention to
terminate Kanipe's employment, terminate this Employment Agreement, the Term,
and Kanipe's employment, and all rights, duties and obligations of the parties
under this Employment Agreement. Kanipe shall be entitled to receive all
compensation and fringe benefits, hereinabove provided for, for such period of
60 days, plus any accrued vacation time, plus any rights to any fringe benefits
or other compensation hereinabove described in this Employment Agreement which
accrue during such period of 60 days. Nevertheless, although Kanipe shall be
entitled to his compensation and fringe benefits for such period, Employer may,
if it, in its discretion deems it prudent to do so, terminate Kanipe's
employment, effective on the date when such notice is given. Any of the
following provisions of this Employment Agreement to the contrary
notwithstanding (including those dealing with termination pay), Kanipe shall not
be entitled to any further compensation of any kind or nature whatsoever
following such termination.
11. Termination Otherwise. The above provisions of this Employment
Agreement to the contrary notwithstanding, Kanipe's employment may be
terminated, upon delivery to Kanipe of 60 days notice of termination, at any
time during the Term, for any reason whatsoever, with or without cause, if
Employer determines that such employment should be terminated. It is understood
that Kanipe has no continuing right to employment by Employer, and that Employer
may, therefore, terminate Kanipe's employment at any time of its choosing, and
for any reasons which are satisfactory to it. If notice is delivered pursuant to
this Paragraph 11 that Kanipe's employment is terminated, then Kanipe shall be
entitled to receive all compensation and fringe benefits to which he is
otherwise entitled (and which would otherwise accrue) under this Employment
Agreement during the period of 60 days following delivery of such notice. At the
conclusion of such period of 60 days, Kanipe's employment in the Position shall
be terminated and the only rights to compensation and fringe benefits which
Kanipe shall thereafter have under this Employment Agreement shall be: (a) the
right to receive from Employer, on the next scheduled salary payment date, the
value of fringe benefits accruing to Kanipe under this Agreement as of the
effective date of the termination (subject to the terms and conditions of any
plan or agreement pursuant to which such benefits are made available) and (b)
the right to receive from Employer $4,063.00 per month or the continuation of
commission income at the rate specified in Paragraph 5 of this Agreement which
is thereafter received by Citizens First Bank as a result of Kanipe's efforts
prior to Kanipe's termination, whichever is greater on a monthly basis, for a
period equal to the number of months of Kanipe's service under the Term but in
no event to exceed twelve (12) months (such total amount being referred to as
"Severance Pay"). For purposes of this Paragraph 11, the Term shall begin anew
on each occasion that this Employment Agreement is renewed.
12. Voluntary Termination. Kanipe may terminate his employment in the
Position, and this Employment Agreement, at any time during the Term, provided
that he shall give to the Employer at least 60 days written notice of such
termination. Any of the above provisions of this Employment Agreement to the
contrary notwithstanding, if Kanipe shall voluntarily terminate his employment
in the Position and this Employment Agreement at any time during the Term, then
all rights to compensation and fringe benefits shall terminate as of the
effective date of such termination; provided, however, that Kanipe shall be
entitled to receive payment for any accrued vacation.
13. Death of Kanipe. Kanipe's death shall terminate the Term and
Kanipe's employment and shall terminate all of Kanipe's rights to all salary,
compensation and fringe benefits effective as of the date of such death.
14. Disability. Kanipe shall be deemed to be "disabled" or shall be
deemed to be suffering from a "disability" under the provisions of this
Employment Agreement if a competent physician, acceptable to Kanipe and
Employer, states in writing that it is such physician's opinion that Kanipe will
be permanently (or for a continuous period of four (4) calendar months) unable
to perform a substantial number of the usual and customary duties of Kanipe's
employment. In the event Kanipe and Employer are unable to agree upon such a
suitable physician for the purposes of making such a determination, then Kanipe
and Employer shall each select a physician, and such two physicians as selected
by Employer and Kanipe shall select a third physician who shall make the
determination, and the determination made by such third physician shall be
binding upon Kanipe and Employer. It is further agreed that if a guardian is
appointed for Kanipe's person, or a conservator or curator is appointed for
Kanipe's estate, or he is adjudicated "incompetent" or is suffering or operating
under a mental "disability" by a court of appropriate jurisdiction, then Kanipe
shall be deemed to be "disabled" for all purposes under this Employment
Agreement. In the event Kanipe becomes "disabled," as defined in this Paragraph
14, then his employment and all rights to compensation and fringe benefits shall
terminate effective as of the date of such disability determination.
15. Faithfulness. Kanipe shall diligently employ himself in the
Position and in the business of Employer and shall be faithful to Employer in
all transactions relating to it and its business and shall give, whenever
required, a true account to the Employer of all business transactions arising
out of or connected with Employer and its business, and shall not, without first
obtaining the consent of Employer, employ either his interest in Employer, or
his interests in this Employment Agreement or the capital or credit of Employer
for any purposes other than those of Employer. Kanipe shall keep Employer fully
informed of all work for and transactions on behalf of Employer. He shall not,
except in accordance with regular policies of the Board of Directors from time
to time in effect, borrow money in the name of Employer, use collateral owned by
Employer as security for loans or lease or dispose of or in any way deal with
any of the property, assets or interests of Employer other than in connection
with the proper conduct of the business of Employer.
16. Nonassignability. Neither this Agreement, nor any rights or
interests hereunder, shall be assignable by Employer, or by Kanipe, his
beneficiaries or legal representatives, without the prior written consent of the
other party. All services to be performed hereunder by Kanipe must be personally
performed by him.
17. Consolidation. Merger or Sale of Asset. Nothing in this Employment
Agreement shall preclude Employer from consolidating or merging into or with, or
transferring all or substantially all of its assets to another bank or
corporation which assumes this Employment Agreement and all obligations and
undertakings of it hereunder. Upon such a consolidation, merger or transfer of
assets and assumption, "Employer," as used herein, shall mean such other bank or
corporation, as the case may be, and this Employment Agreement shall continue in
full force and effect.
18. Binding Effect. This Employment Agreement shall be binding upon,
and shall inure to the benefit of Employer and its successors and assigns, and
Kanipe and his heirs, executors, administrators and personal representatives.
19. Amendment of Agreement. This Employment Agreement may not be
amended or modified except by an instrument in writing signed by the parties
hereto. Although Kanipe's compensation may be increased, from time to time, by
Employer's Board of Directors, in order for any purported agreement to increase
Kanipe's compensation to be enforceable by Kanipe, the provisions for increased
compensation must be set forth in a resolution of Employer's Board of Directors,
duly adopted by such Board of Directors, and properly reflected in the minutes
of such Board of Directors. Any purported agreement for additional compensation
or for an adjustment in compensation which is not so evidenced by a written
resolution of Employer's Board of Directors shall not be enforceable, and shall
be of no force or effect whatsoever.
20. Waiver. No term or condition of this Employment Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Employment Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such written
waiver shall be deemed to be a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived, and shall not constitute a waiver of such term or condition in
the future or as to any act other than that specifically waived.
21. Severability. If for any reason any provision of this Employment
Agreement is held invalid, such invalidity shall not affect any other provision
of this Employment Agreement not held invalid, and each such other provision
shall, to the full extent consistent with law, continue in full force and
effect. If any provisions of this Employment Agreement shall be invalid in part,
such partial invalidity shall in no way affect the rest of such provision not
held invalid, and the rest of such provision, together with all other provisions
of this Employment Agreement, shall, to the extent consistent with law, continue
in full force and effect.
22. Trade Secrets. Kanipe shall not, at any time or in any manner,
either directly or indirectly, divulge, disclose or communicate to any person,
firm or corporation, in any manner whatsoever, any information concerning any
matters affecting or relating to Employer, including, without limiting the
generality of the foregoing, any information concerning any of its customers,
its manner of operation, its plans, process or other data, without regard to
whether all or any part of the foregoing matters will be deemed confidential,
material or important, as the parties hereto stipulate that as between them, the
same are important, material and confidential and gravely affect the effective
and successful conduct of the business and goodwill of Employer, and that any
breach of the terms of this Paragraph 22 shall be a substantial and material
breach of this Employment Agreement. All terms of this Paragraph 22 shall remain
in full force and effect after the termination of Kanipe's employment and of
this Employment Agreement. Kanipe acknowledges that it is necessary and proper
that Employer preserves and protects its proprietary rights and unique,
confidential and special information and goodwill, and the confidential nature
of its business and of the affairs of its customers, and that it is therefore
appropriate that Employer prevent Kanipe from engaging in any breach of the
provisions of this Paragraph 22. Kanipe, therefore, agrees that a violation by
Kanipe of the terms of this Paragraph 22 would result in irreparable and
continuing injury to Employer, for which there might well be no adequate remedy
at law. Therefore in the event Kanipe shall fail to comply with the provisions
of this Paragraph 22, Employer shall be entitled to such injunctive and other
relief as may be necessary or appropriate to cause Kanipe to comply with the
provisions of this Paragraph 22, and to recover, in addition to such relief, its
reasonable costs and attorney's fees incurred in obtaining same. Such right to
injunctive relief shall be in addition to, and not in lieu of, such rights to
damages or other remedies as Employer shall be entitled to receive.
23. Covenant Not to Compete. Should this Agreement be terminated for
any reason by Employer or Kanipe during the Term, Kanipe covenants and agrees
that he will not accept a similar position or title requiring him to perform
duties and responsibilities comparable to those described in Paragraph 4 of this
Agreement with a banking institution or any business operating a banking
institution within the geographical limits of Warren County, Kentucky and all
counties adjoining Warren County, Kentucky for a period of one year following
the date of termination of the Agreement. Kanipe further covenants and agrees
that should this Agreement be terminated for any reason by Employer or Kanipe
during the Term, Kanipe will not accept a position with any entity, including
but not limited to Kentucky Trust Company and Todd Investment Advisors, Inc.,
which is paying a fee to Citizens First Bank as a result of the referral of
trust and/or investment customers to that entity by Citizens First Bank for a
period of one year following the date of termination of the Agreement.
24. Entire Agreement. This Employment Agreement contains the entire
agreement between the parties with respect to Kanipe's employment by Employer.
Each of the parties acknowledges that the other party has made no agreements or
representations with respect to the subject matter of this Employment Agreement
other than those hereinabove specifically set forth in this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
CITIZENS FIRST CORPORATION
BY:________________________________
MARY COHRON, President and
Chief Executive Officer
-----------------------------------
MATTHEW TODD KANIPE
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
For the periods ended December 31
1999 1998
Diluted and basic earnings per common share:
Average common shares outstanding ......... 572,478 106,386
Average potential common shares outstanding -- --
--------- ---------
Average diluted common shares ............. 572,478 106,386
Net loss .................................... $(327,622) $(395,575)
Diluted and basic loss per share: ........... $ (0.57) $ (3.72)
Exhibit 21--Subsidiaries of Small Business Owner
Citizens First Corporation owns 100% of Citizens First Bank, Inc.
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001073475
<NAME> Citizens First Corporation
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 2,195,339
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,475,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,389,787
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 34,240,628
<ALLOWANCE> (400,920)
<TOTAL-ASSETS> 45,973,310
<DEPOSITS> 37,130,321
<SHORT-TERM> 1,487,878
<LIABILITIES-OTHER> 506,463
<LONG-TERM> 0
0
0
<COMMON> 7,357,477
<OTHER-SE> (508,829)
<TOTAL-LIABILITIES-AND-EQUITY> 45,973,310
<INTEREST-LOAN> 1,122,473
<INTEREST-INVEST> 185,007
<INTEREST-OTHER> 132,854
<INTEREST-TOTAL> 1,440,334
<INTEREST-DEPOSIT> 537,300
<INTEREST-EXPENSE> 568,423
<INTEREST-INCOME-NET> 871,911
<LOAN-LOSSES> 412,501
<SECURITIES-GAINS> 1,382,399
<EXPENSE-OTHER> 2,180,152
<INCOME-PRETAX> (227,622)
<INCOME-PRE-EXTRAORDINARY> (227,622)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (327,622)
<EPS-BASIC> (.57)
<EPS-DILUTED> (.57)
<YIELD-ACTUAL> 4.430
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 11,581
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 400,920
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 400,920
</TABLE>
