<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
----- ----
Commission file number 0-9630
LIBERTY NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0955936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
416 West Jefferson Street
Louisville, Kentucky 40202-3244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 566-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES (x) NO ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock - 25,747,066 shares outstanding at July 28, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
The consolidated financial statements of Liberty National Bancorp, Inc.
("Liberty") and subsidiaries submitted herewith are unaudited. However,
in the opinion of management, all adjustments (consisting only of
adjustments of a normal recurring nature) necessary for a fair presentation
of the results for the interim periods have been made.
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements of Liberty and
subsidiaries are submitted herewith:
Consolidated balance sheet - June 30, 1994 and December 31, 1993
Consolidated statement of income - three months and six months
ended June 30, 1994 and 1993
Consolidated statement of changes in stockholders' equity - six
months ended June 30, 1994 and 1993
Consolidated statement of cash flows - six months ended
June 30, 1994 and 1993
Notes to consolidated financial statements
<PAGE>
CONSOLIDATED BALANCE SHEET
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
In thousands except share data ---------- ----------
<S> <C> <C>
Assets
Cash and due from banks................................. $377,665 $252,414
Interest bearing deposits with banks.................... - 1,065
Federal funds sold and securities
purchased under agreements to resell.................. 45,525 116,650
Trading account securities.............................. 366 41
Mortgage loans held for sale............................ 2,069 6,364
Investment securities available for sale................ 218,999 -
Investment securities held to maturity (fair value
$603,050 in 1994; $826,654 in 1993)................... 607,145 811,918
Loans (net of unearned income of $38,316 in
1994; $36,014 in 1993)................................ 3,875,231 3,588,824
Less:
Allowance for loan losses............................. 49,725 49,101
---------- ----------
Net loans........................................... 3,825,506 3,539,723
Premises and equipment.................................. 74,302 72,393
Other assets............................................ 114,509 115,527
---------- ----------
Total............................................... $5,266,086 $4,916,095
========== ==========
Liabilities
Deposits
Non-interest bearing - domestic....................... $734,746 $818,978
Interest bearing - domestic........................... 3,091,351 3,199,158
Interest bearing - foreign............................ 271,338 61,083
---------- ----------
Total deposits...................................... 4,097,435 4,079,219
Federal funds purchased and securities
sold under agreements to repurchase................... 455,313 221,189
Commercial paper........................................ 6,928 5,072
Other short-term borrowings............................. 142,045 66,326
Other liabilities....................................... 43,281 41,147
Long-term debt.......................................... 103,140 103,610
---------- ----------
Total liabilities................................... 4,848,142 4,516,563
---------- ----------
Stockholders' Equity
Preferred stock
Authorized and unissued 10,000,000 shares............. - -
Common stock
Authorized 60,000,000 shares
Issued and outstanding 25,747,066 shares in
1994 and 25,729,935 shares in 1993.................... 47,054 46,863
Surplus................................................. 79,779 79,691
Retained earnings....................................... 291,647 272,978
Net unrealized loss on investment securities
available for sale.................................... (536) -
---------- ----------
Total stockholders' equity.......................... 417,944 399,532
---------- ----------
Total............................................... $5,266,086 $4,916,095
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
In thousands except per share data ------- ------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Loans (including fees).................... $73,862 $67,432 $142,731 $133,186
Federal funds sold and securities
purchased under agreements to resell.... 260 826 829 1,846
Deposits with banks....................... 8 1 18 2
U.S. Treasury and Federal agencies........ 7,200 8,073 14,108 16,197
Obligations of states and political
subdivisions............................ 3,632 3,534 7,210 7,034
Other securities.......................... 105 86 199 159
Mortgage loans held for sale.............. 57 100 143 159
Trading account securities................ 1 12 2 56
------- ------- -------- --------
Total interest income................... 85,125 80,064 165,240 158,639
------- ------- -------- --------
Interest expense
Deposits.................................. 30,519 28,867 59,106 57,210
Federal funds purchased and securities
sold under agreements to repurchase..... 3,538 2,295 6,023 5,259
Other short-term borrowings............... 765 247 1,190 543
Long-term debt............................ 1,776 1,094 3,560 1,729
------- ------- -------- --------
Total interest expense.................. 36,598 32,503 69,879 64,741
------- ------- -------- --------
Net interest income......................... 48,527 47,561 95,361 93,898
Provision for loan losses................. 3,250 6,321 6,135 11,948
Net interest income after provision for ------- ------- -------- --------
loan losses............................... 45,277 41,240 89,226 81,950
------- ------- -------- --------
Non-interest income
Trust income.............................. 3,560 3,647 7,141 6,908
Service charges on deposit accounts....... 5,390 4,499 10,079 8,627
Bankcard income........................... 1,604 1,528 2,943 2,836
Insurance premium income.................. 1,780 787 2,661 1,407
Commissions and trading account profits... 575 483 1,084 1,171
Investment securities gains............... 39 1,080 49 1,080
Other..................................... 3,749 4,480 8,379 7,531
------- ------- -------- --------
Total non-interest income............... 16,697 16,504 32,336 29,560
------- ------- -------- --------
Non-interest expense
Salaries and employee benefits............ 18,300 17,506 36,553 34,813
Net occupancy expense..................... 2,827 2,711 5,824 5,250
Equipment expense......................... 3,739 3,492 7,431 6,794
Other..................................... 16,359 15,310 31,384 28,461
------- ------- -------- --------
Total non-interest expense.............. 41,225 39,019 81,192 75,318
------- ------- -------- --------
Income before income taxes.................. 20,749 18,725 40,370 36,192
Income tax expense........................ 6,117 5,222 11,661 9,971
------- ------- -------- --------
Net income.................................. $14,632 $13,503 $28,709 $26,221
======= ======= ======== ========
Net income per share........................ $0.57 $0.53 $1.12 $1.04
Average shares outstanding.................. 25,745 25,440 25,739 25,248
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
1994 1993
In thousands except per share data -------- --------
<S> <C> <C>
Balance January 1,....................................... $399,532 $353,227
Net income............................................... 28,709 26,221
Cash dividends declared - 1994, $0.39 per
share; 1993, $0.3375 per share......................... (10,040) (8,520)
Exercise of stock options................................ 279 785
Net unrealized loss on investment securities
available for sale..................................... (536) -
Cash paid for fractional shares
resulting from stock split............................. - (18)
Acquisition of Financial Dominion of
Kentucky Corporation................................... - 9,518
-------- --------
Balance June 30,......................................... $417,944 $381,213
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
June 30
1994 1993
In thousands -------- --------
<S> <C> <C>
Cash flows from operating activities
Net income.................................................... $28,709 $26,221
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses................................. 6,135 11,948
Depreciation, amortization and accretion, net............. 10,736 10,552
Deferred income tax expense............................... 2,738 341
(Gain) on sales of trading account securities,
investment securities and mortgage loans held for sale.. (903) (2,460)
(Gain) on sales of premises and equipment................. (727) (467)
Decrease in trading account securities.................... 467 6,104
Decrease (increase) in mortgage loans held for sale....... 4,357 (397)
(Increase) decrease in accrued interest receivable........ (1,515) 3,595
Decrease in other assets.................................. 6,620 8,385
Increase (decrease) in accrued interest payable........... 1,205 (1,918)
(Decrease) increase in current income taxes payable....... (9) 651
Increase in other liabilities............................. 608 1,114
-------- --------
Net cash provided by operating activities............... 58,421 63,669
-------- --------
Cash flows from investing activities
Net decrease in interest bearing
deposits with banks......................................... 1,065 -
Net decrease in federal funds sold and
securities purchased under agreements to resell............. 71,125 163,175
Purchases of investment securities available for sale......... (119,204) -
Purchases of investment securities held to maturity........... (75,280) (203,767)
Proceeds from sales of investment
securities available for sale............................... 395 -
Proceeds from sales of investment
securities held to maturity................................. - 18,319
Proceeds from maturities of investment
securities available for sale............................... 97,223 -
Proceeds from maturities of investment
securities held to maturity................................. 77,957 188,858
Net (increase) in loans made to customers..................... (299,895) (106,637)
Purchases of premises and equipment........................... (6,960) (8,339)
Proceeds from sales of premises and equipment................. 814 756
Net cash and cash equivalents inflow
from acquisition of subsidiaries............................ - 452
-------- --------
Net cash (used) provided by investing activities............ (252,760) 52,817
-------- --------
Cash flows from financing activities
Net increase (decrease) in deposits........................... 18,216 (45,936)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase.......... 234,124 (75,519)
Net increase in commercial paper.............................. 1,856 2,452
Net increase in other short-term borrowings................... 75,719 18,980
Proceeds from issuance of long-term debt...................... - 79,911
Repayment of long-term debt................................... (475) (15,255)
Proceeds from issuance of common stock........................ 190 595
Cash dividends paid........................................... (10,040) (8,520)
Cash paid in lieu of fractional shares........................ - (18)
-------- --------
Net cash provided (used) by financing activities............ 319,590 (43,310)
-------- --------
Net increase in cash and cash equivalents....................... 125,251 73,176
Cash and cash equivalents at beginning of year.................. 252,414 252,817
-------- --------
Cash and cash equivalents at end of period...................... $377,665 $325,993
======== ========
Supplemental disclosure
Interest paid $68,674 $66,659
Income taxes paid 8,932 8,979
Noncash investing and financing activities 8,082 18,909
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liberty National Bancorp, Inc., and Subsidiaries
1. Summary of Significant Matters and Accounting Policies
The accounting and reporting policies of Liberty National Bancorp, Inc.,
("Liberty"), and its subsidiaries conform to generally accepted accounting
principles and general practices within the banking industry.
The consolidated financial statements include the accounts of Liberty
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain prior
year amounts have been reclassified to conform with current classifications.
A description of other significant matters and accounting policies is
presented in the notes to the consolidated financial statements in the
December 31, 1993 annual report to stockholders. Such notes should be read
in conjunction with the consolidated financial statements presented herein.
2. Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1994 1993
In thousands ------- -------
<S> <C> <C>
Balance January 1,................................... $49,101 $42,278
Additions:
Balances of allowance for
loan losses of acquired
banks at acquisition date........................ - 1,950
Provision for loan losses.......................... 6,135 11,948
------- -------
55,236 56,176
Deductions: ------- -------
Charge-offs........................................ 10,612 11,458
Less recoveries.................................... 5,101 3,572
------- -------
Net charge-offs.................................. 5,511 7,886
------- -------
June 30,............................................. $49,725 $48,290
======= =======
</TABLE>
3. Investment Securities Gains
Income tax expense attributable to investment securities gains was $13,000
and $367,000 for the three months ended June 30, 1994 and 1993,
respectively; and $17,000 and $367,000 for the six months ended June 30, 1994
and 1993, respectively.
4. Pending merger
On November 3, 1993, Liberty and BANC ONE CORPORATION ("BANC ONE")
announced they had signed an agreement for the merger of Liberty with a
a subsidiary of BANC ONE.
Terms of the agreement call for Liberty shareholders to receive $35.00 in
value of BANC ONE stock if BANC ONE shares are trading between $37.79 and
$40.00 a share. If BANC ONE shares are trading at or below $37.79 per
share, Liberty shareholders will receive 0.9262 shares of BANC ONE stock
for each share of Liberty. If BANC ONE is trading at or above $40.00,
Liberty shareholders will receive 0.8750 shares of BANC ONE stock for
each Liberty share.
Under the terms of the agreement, Liberty has the right to terminate the
transaction if BANC ONE shares are trading below $34.55 per share and at or
above $31.82 per share, unless BANC ONE agrees to issue additional shares
to Liberty shareholders so that the value of BANC ONE shares received by
Liberty shareholders is not less than $32.00 per Liberty share. Under
further terms of the agreement, Liberty may terminate the transaction if
the BANC ONE shares are trading at less than $31.82 per BANC ONE share.
Liberty's right to terminate the transaction in these circumstances occurs
shortly prior to the anticipated closing of the transaction when BANC ONE
stock is valued for purposes of the transaction. The value of BANC ONE
stock will be determined by averaging the closing trade prices during a
15-day trading period ending on the eight trading day prior to the closing.
The BANC ONE share prices and exchange ratio discussed in the previous
paragraphs have been adjusted to reflect a 10% stock dividend paid
March 4, 1994 to BANC ONE shareholders of record as of February 10, 1994
which BANC ONE declared on January 25, 1994.
In connection with this agreement, Liberty has granted BANC ONE an
option to purchase up to 19.9% of its common stock under certain
circumstances. The transaction has received all the required shareholder
and regulatory approvals and is expected to be completed by the first
week of September 1994.
5. Change in Accounting Principle
Effective January 1, 1994, Liberty adopted the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This Statement requires that
investment securities be classified as either securities held to maturity,
which are reported at amortized cost; trading securities, which are
reported at fair value, with unrealized gains and losses included in net
income; or securities available for sale, which are reported at fair value,
with unrealized gains and losses excluded from net income and reported as a
separate component of stockholders' equity. The net unrealized loss on
investment securities available for sale at June 30, 1994 was $536,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following paragraphs discuss the results of operations for Liberty
and its subsidiaries for the six months and quarter ended June 30, 1994 and
compare those periods with the same periods of the previous year. In
addition, the discussion describes the significant changes in the relative
financial condition of Liberty that have occurred during the first six
months of 1994 compared to the year ended December 31, 1993. The analysis
focuses on two key determinants of an institution's financial condition:
liquidity and capital. This discussion should be read in conjunction with
the consolidated financial statements and accompanying notes presented in
Part I, Item 1 of this report.
ACQUISITIONS
During 1993, Liberty completed the acquisition of two Kentucky banking
entities. The acquisitions included Financial Dominion of Kentucky
Corporation ("Financial Dominion"), holding company for Hardin County Bank
and Trust, Inc., in Radcliff ("Radcliff") and Farmers Deposit Bank in
Brandenburg ("Brandenburg") on March 31, 1993; and First Federal Savings
Bank located in Hopkinsville ("Hopkinsville") on November 30, 1993. The
Financial Dominion acquisition, which was recorded as of April 1, 1993 for
financial reporting purposes, was accounted for using the purchase method
of accounting and, accordingly, the results of operations of the acquired
banks prior to the acquisition date have not been included in the
accompanying consolidated statement of income. The Hopkinsville
acquisition was accounted for using the pooling-of-interests method of
accounting, except that prior periods have not been restated since the
effect was not material. Due to these acquisitions, any ratios or analyses
comparing periods before or after to the period of the individual
acquisition will not be comparable. The acquired banking entities
described above had combined total assets of approximately $202,000,000 at
their acquisition dates.
Radcliff and Brandenburg were merged with Liberty National Bank and
Trust Company of Hardin County during February 1994 to form Liberty
National Bank and Trust Company of Central Kentucky. Hopkinsville was
merged with Liberty National Bank of Madisonville during April 1994 to form
Liberty National Bank and Trust Company of Western Kentucky.
PENDING MERGER
On November 3, 1993, Liberty and BANC ONE CORPORATION ("BANC ONE")
announced they had signed an agreement for the merger of Liberty with a
subsidiary of BANC ONE.
Terms of the agreement call for Liberty shareholders to receive $35.00
in value of BANC ONE stock if BANC ONE shares are trading between $37.79
and $40.00 a share. If BANC ONE shares are trading at or below $37.79 per
share, Liberty shareholders will receive 0.9262 shares of BANC ONE stock
for each share of Liberty. If BANC ONE is trading at or above $40.00,
Liberty shareholders will receive 0.8750 shares of BANC ONE stock for each
Liberty share.
Under the terms of the agreement, Liberty has the right to terminate
the transaction if BANC ONE shares are trading below $34.55 per share and
at or above $31.82 per share, unless BANC ONE agrees to issue additional
shares to Liberty shareholders so that the value of BANC ONE shares
received by Liberty shareholders is not less than $32.00 per Liberty share.
Under further terms of the agreement, Liberty may terminate the transaction
if the BANC ONE shares are trading at less than $31.82 per BANC ONE share.
Liberty's right to terminate the transaction in these circumstances occurs
shortly prior to the anticipated closing of the transaction when BANC ONE
stock is valued for purposes of the transaction. The value of BANC ONE
stock will be determined by averaging the closing trade prices during a
15-day trading period ending on the eight trading day prior to the closing.
The BANC ONE share prices and the exchange ratio discussed in the
previous paragraphs have been adjusted to reflect a 10% stock dividend paid
March 4, 1994 to BANC ONE shareholders of record as of February 10, 1994
which BANC ONE declared on January 25, 1994.
In connection with this agreement, Liberty has granted BANC ONE an
option to purchase up to 19.9% of its common stock under certain
circumstances. The transaction has received all the required shareholder
and regulatory approvals and is expected to be completed by the first
week in September 1994. For additional information relating to the
transaction reference is made to Registration Statement No. 33-53947
on Form S-4 (together with any amendments) filed by BANC ONE with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
Net income was $14,632,000 for the second quarter of 1994, compared to
$13,503,000 for the same period in 1993. Net income per share for the
second quarter of 1994 was $0.57, compared to $0.53 for the same period
last year, a 7.5% increase. Return on average assets and return on average
stockholders' equity were 1.16% and 14.31%, respectively, for the second
quarter of 1994, compared to 1.14% and 14.38%, respectively, for the same
period in 1993.
For the six-month period ended June 30, 1994, net income was
$28,709,000, compared to $26,221,000 for the same period in 1993. Net
income per share was $1.12 for the six-month period of 1994 compared to
$1.04 for the same period last year, an increase of 7.7%. Return on
average assets and return on average stockholders' equity were 1.16% and
14.25%, respectively, for the first six months of 1994, compared to 1.14%
and 14.44%, respectively, for the same period in 1993.
Net Interest Income
Taxable equivalent net interest income for the first six months of
1994 was $100,308,000, compared to $98,684,000 for the first six months of
1993. The tax equivalent adjustment (which is net of the effect of the
nondeductible portion of interest expense) reflected in the following
schedule is based on a federal income tax rate of 35% for 1994 and 34% for
1993. The discussion of factors influencing net interest income which
follows is based on taxable equivalent income data.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
In thousands except percentages 1994 1993 1994 1993
------- ------- -------- --------
<S> <C> <C> <C> <C>
Interest income $85,125 $80,064 $165,240 $158,639
Tax equivalent adjustment 2,501 2,411 4,947 4,786
------- ------- -------- --------
Interest income 87,626 82,475 170,187 163,425
Interest expense 36,598 32,503 69,879 64,741
------- ------- -------- --------
Net interest income $51,028 $49,972 $100,308 $ 98,684
======= ======= ======== ========
Average earning assets $4,622,189 $4,287,121 $4,563,309 $4,210,437
Net interest spread (1) 3.83% 4.13% 3.85% 4.18%
Net interest margin (2) 4.43 4.68 4.43 4.73
</TABLE>
[FN]
(1) Yield on interest earning assets minus rate paid on interest bearing
liabilities.
(2) Net interest income annualized and stated on a taxable equivalent basis,
divided by average earning assets.
Net interest income increased $1,624,000, or 1.6%, for the six months
ended June 30, 1994 and $1,056,000, or 2.1%, for the second quarter of 1994
compared to the same periods in 1993. These increases are primarily due to
earning asset volume increases resulting from normal operations and the
acquisitions completed at the end of the first quarter and during the
fourth quarter of 1993. Liberty's net interest spread for the six-month
period ended June 30, 1994 was 3.85%, compared to 4.18% for the same period
in 1993. Net interest margin decreased 30 basis points to 4.43% for the
first six months of 1994, compared to 4.73% for the same period in 1993.
During the first six months of 1994, Liberty experienced a 31 basis
point reduction in the yield on earning assets while Liberty's cost of
funds increased 2 basis points. Liberty's earning assets during the
six month period were more interest sensitive than its interest bearing
liabilities and therefore Liberty experienced a drop in the yield on
earning assets while the cost of funds had a slight increase. These were
the primary reasons for the 30 basis point decrease in the net interest
margin.
Average earning assets increased $353 million, or 8.4%, for the first
six months of 1994 compared to the same period in 1993. Interest bearing
liabilities averaged $3.838 billion for the six months ended June 30, 1994,
an increase of $257 million, or 7.2%, over the same period in 1993. A
portion of these increases was attributable to the 1993 acquisitions.
Average earning assets and interest bearing liabilities would have
increased 5.7% and 4.4%, respectively, if the assets and liabilities
attributable to the 1993 acquisitions were not considered.
Provision for Loan Losses
The provision for loan losses for the first six months of 1994 was
$6,135,000 compared to $11,948,000 for the same period in 1993, a decrease
of $5,813,000. During the same period net charge-offs decreased
$2,375,000. Net charge-offs for the first six months of 1994 were
$5,511,000 compared to $7,886,000 in the first six months of 1993.
The provision for loan losses for the second quarter of 1994 was
$3,250,000 compared to $6,321,000 for the same period in 1993, a decrease
of $3,071,000. Net charge-offs for the second quarter of 1994 were
$2,336,000, compared to $3,953,000 for the second quarter of 1993, a
decrease of $1,617,000.
The decrease in net charge-offs is primarily attributable to a
reduction in charge-offs in Liberty National Bank and Trust Company of
Kentucky and three other of Liberty's affiliate banks.
Liberty's allowance for loan losses totaled $49.7 million at June 30,
1994, representing an increase of $0.6 million over the amount reported at
December 31, 1993. The allowance for loan losses was 235% of nonperforming
loans on June 30, 1994 compared to 220% on December 31, 1993.
Nonperforming loans represented 0.55% of outstanding loans on June 30,
1994. Net charge-offs to average loans was 0.30% (annualized) for the six
months ended June 30, 1994, compared to 0.46% for the year ended
December 31, 1993.
The allowance for loan losses is based on senior management's
continuing review of (1) the overall quality of the portfolio, (2) previous
loss experience, (3) the size and composition of the portfolio, and (4) an
assessment of current economic conditions. During the second quarter of
1994, this review resulted in an allowance for loan losses to average loans
outstanding for the quarter and to period-end loans of 1.32% and 1.28%,
respectively, compared to 1.44% and 1.42%, respectively, for the second
quarter of 1993. Selected ratios follow:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
Amounts annualized 1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Provision for loan losses
to average loans 0.35% 0.75% 0.34% 0.73%
Net charge-offs to
average loans 0.25 0.47 0.30 0.48
Allowance for loan losses
to average loans 1.32 1.44 1.35 1.46
Allowance for loan losses
to period-end loans 1.28 1.42 1.28 1.42
</TABLE>
Non-interest Income and Expense
Non-interest income increased $193,000, or 1.2%, for the second
quarter and $2,776,000, or 9.4%, for the first six months of 1994,
compared to the same periods in 1993. The increase in non-interest income
for the second quarter and first six months of 1994 would have been 7.3%
and 10.3%, respectively, if non-interest income for the second quarter
and first six months of 1994, which is attributable to the banks acquired
at the end of the first quarter and during the fourth quarter of 1993 but
is not comparable to the second quarter and first six months of 1993 ("Non-
comparable Income") and investment securities gains for both periods of
each year, were not considered. Investment securities gains were $39,000
and $49,000 for the second quarter and first six months of 1994, compared
to $1,080,000 for both the second quarter and first six months of 1993.
Contributing to the increase in non-interest income for both the
second quarter and first six months was an increase in insurance premium
income due to increased activity levels. Another factor which contributed
to the increase in the six-month period was a $733,000 gain on the sale of
a fixed asset which was recorded in the first quarter of 1994. A factor
which limited the increase in non-interest income for both the second
quarter and first six months was a $445,000 gain on the sale of a property
no longer utilized for banking purposes which was recorded in the second
quarter of 1993. Excluding the above items, the Non-comparable Income, and
the investment securities gains, the increase in non-interest income for
the second quarter and first six months of 1994 would have been 4.1% and
5.3%, respectively.
Non-interest expense increased $2,206,000, or 5.7%, for the second
quarter and $5,874,000, or 7.8%, for the first six months of 1994, compared
to the same periods in 1993. The increase in non-interest expense for the
second quarter and first six months of 1994 would have been 4.4% and 4.8%,
respectively, if non-interest expense for the second quarter and first six
months of 1994, which is attributable to the banks acquired at the end of
the first quarter and during the fourth quarter of 1993 but is not
comparable to the second quarter and first six months of 1993 ("Non-
comparable Expense"), were not considered.
Contributing to the increase in both the second quarter and first six
months were an increase in expenses in Liberty's insurance subsidiary due
to increased activity levels mentioned previously and expenses relating to
the pending merger with BANC ONE CORPORATION. Factors limiting the
increase in non-interest expense for both the second quarter and first six
months were additional writedowns recorded in 1993 on certain intangible
assets and a decrease in legal expenses. Excluding all of the above items
and the Non-comparable Expense, the increase in non-interest expense for
both the second quarter and first six months would have been 3.1%.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
In thousands 1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Non-interest income
Trust income $ 3,560 $ 3,647 $ 7,141 $ 6,908
Service charges on deposit
accounts 5,390 4,499 10,079 8,627
Bankcard income 1,604 1,528 2,943 2,836
Insurance premium income 1,780 787 2,661 1,407
Commissions and trading
account profits 575 483 1,084 1,171
Investment securities gains 39 1,080 49 1,080
Other 3,749 4,480 8,379 7,531
------- ------- ------- -------
Total non-interest income $16,697 $16,504 $32,336 $29,560
======= ======= ======= =======
Non-interest expense
Salaries and employee benefits $18,300 $17,506 $36,553 $34,813
Net occupancy expense 2,827 2,711 5,824 5,250
Equipment expense 3,739 3,492 7,431 6,794
Other 16,359 15,310 31,384 28,461
------- ------- ------- -------
Total non-interest expense $41,225 $39,019 $81,192 $75,318
======= ======= ======= =======
</TABLE>
Income Taxes
Liberty had an income tax expense of $11,661,000 for the first six
months of 1994 compared to $9,971,000 for the first six months of 1993.
These amounts represent effective tax rates of 28.9% and 27.6%,
respectively, for the periods above. The increase in the effective tax
rate is primarily due to a greater portion of Liberty's income coming from
taxable sources in 1994 and to the increase in the federal income tax rate
to 35% from 34%. For the second quarter of 1994 income tax expense was
$6,117,000 compared to $5,222,000 for the same period in 1993.
FINANCIAL CONDITION
Liquidity
A number of techniques are used to measure the liquidity position,
including the utilization of several ratios which follow:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Average balances June 30, 1994 December 31, 1993
------------------ -----------------
<S> <C> <C>
Total loans/total deposits 91.32% 87.60%
Total loans/total deposits less float 96.60 92.79
Net short-term borrowings/total assets 7.39 5.73
</TABLE>
The loan to deposit ratios increased during the first six months of
1994 compared to the year 1993 due to an increase in loan demand which
exceeded the increase in deposit activity. During the first six months
of 1994 average loans increased $302.7 million, or 8.9%, compared to
average loans for the year 1993 while average deposits increased $173.9
million, or 4.5%, during the same period.
The increase in loan demand, compared to the increase in deposits,
was funded by an increase in net short-term borrowings as reflected
in the ratio set forth above. During the first six months of 1994 average
net short-term borrowings increased $99.8 million compared to the year
1993.
Nonperforming Assets
The following schedule provides a summary of nonperforming assets
along with several ratios using period-end data:
<TABLE>
<CAPTION>
June 30 December 31
In thousands 1994 1993
------- -------
<S> <C> <C>
Nonaccrual loans $20,482 $21,633
Restructured loans 649 696
Other real estate 14,609 15,715
------- -------
Total nonperforming assets $35,740 $38,044
======= =======
Nonperforming assets to total
loans (net of unearned income)
and other real estate 0.92% 1.06%
Nonperforming assets to total assets 0.68 0.77
Allowance for loan losses
to nonperforming loans 235 220
</TABLE>
Liberty discontinues the accrual of interest on loans, except consumer
loans, which become 90 days past due as to principal or interest unless
they are adequately secured and in the process of collection. A loan
remains in a nonaccrual status until factors indicating doubtful collection
no longer exist. Consumer loans, when 120 days past due, are charged off
against the allowance for loan losses unless they are adequately secured
and in the process of collection. A loan is classified as a restructured
loan when the interest rate is materially reduced or the term is extended
beyond the original maturity date because of the inability of the borrower
to service the interest payments at market rates. Other real estate is
recorded at the lower of cost or fair value less estimated costs to sell.
Capital
During the first six months of 1994, Liberty increased both its tier I
and total capital (as defined by the Federal Reserve Board under the
Board's risk-based capital guidelines). These increases were primarily the
result of internal capital generation, a decrease in disallowed amounts of
goodwill and other intangible assets and, affecting total capital only, an
increase in the allowable amount of the allowance for loan losses. As
displayed by the following table, Liberty's tier I capital at June 30, 1994
increased $19,928,000 over the year-end 1993 amount to $379,857,000, and
total capital reached $484,502,000 at June 30, 1994. Liberty's risk-based
capital and leverage ratios, also shown in the following table, exceed the
4.00% tier I, 8.00% total capital and 3.00% leverage minimums that are
required for each ratio. The leverage ratio compares tier I capital to
total average assets less disallowed amounts of goodwill and other
intangible assets.
<TABLE>
<CAPTION>
June 30 December 31
In thousands 1994 1993 Change
-------- -------- ------
<S> <C> <C> <C>
Tier I capital $379,857 $359,929 $19,928
Tier II capital 104,645 102,731 1,914
-------- -------- -------
Total capital $484,502 $462,660 $21,842
======== ======== =======
Total risk-weighted assets $4,111,523 $3,823,911 $287,612
========== ========== ========
Ratios
Tier I capital to risk-weighted assets 9.24% 9.41%
Total capital to risk-weighted assets 11.78 12.10
Leverage 7.56 7.46
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
established five capital categories for insured depository institutions
under its Prompt Corrective Action provisions. The categories vary from
"well capitalized" to "critically undercapitalized." A "well capitalized"
bank is defined as one with a total risk-based capital ratio of 10% or
above, a tier I risk-based capital ratio of 6% or above, a leverage ratio
of 5% or above and one not subject to any order, written agreement, capital
directive, or prompt corrective action directive to meet or maintain a
specific capital level. On June 30, 1994, each of Liberty's affiliate
banks, had total risk-based capital, tier I risk-based capital and leverage
ratios which exceeded the minimum requirements established for the "well
capitalized" category.
ACCOUNTING AND REGULATORY MATTERS
In May 1993, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards No. 114 ("SFAS No. 114")
"Accounting by Creditors for Impairment of a Loan." The Statement requires
that impaired loans that are within the scope of SFAS No. 114 be measured
based on the present value of expected future cash flows, discounted at the
loan's effective interest rate; at the loan's observable market price; or
the fair value of the collateral, if the loan is collateral dependent.
Adoption of SFAS No. 114 is required in January 1995 with earlier adoption
permitted. Liberty has not determined the impact of SFAS No. 114 on
Liberty's financial condition and results of operations but expects it to
be immaterial.
Also in May 1993, the FASB issued Statement of Financial Accounting
Standards No. 115 ("SFAS No. 115") "Accounting for Certain Investments in
Debt and Equity Securities." This Statement requires that investment
securities be classified as either held-to-maturity securities, which are
reported at amortized cost; trading securities, which are reported at fair
value, with unrealized gains and losses included in earnings; or available-
for-sale securities, which are reported at fair value, with unrealized
gains and losses excluded from earnings and reported as a separate
component of stockholders' equity. SFAS No. 115 was required to be adopted
no later than January 1994. Liberty's adoption of SFAS No. 115 in January
1994 did not have a material impact on Liberty's financial condition or
results of operations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Liberty held a special meeting of stockholders on August 3, 1994.
(b) The special meeting of stockholders did not involve the election
of directors.
(c) Below is the vote count on the proposal to approve the merger
proposal by and among Liberty, BANC ONE CORPORATION ("BANC ONE")
and Aaron Acquisition Corporation, a wholly owned subsidiary of
BANC ONE.
For 21,231,724
Against 647,822
Withheld:
Broker non-votes 3,125,319
Abstentions 565,422
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3.1) Liberty's Amended and Restated Bylaws.
(4.1) Rights Agreement dated August 19, 1992, between Liberty
National Bancorp, Inc. and Chemical Bank is incorporated
by reference to Exhibits 4 and 10.1 to Liberty's Current
Report on Form 8-K dated August 19, 1992.
(4.2) First Amendment dated as of November 2, 1993, to the Rights
Agreement dated August 19, 1992, between Liberty National
Bancorp, Inc. and Chemical Bank is incorporated by reference
to Exhibit 4.1 to Liberty's Current Report on Form 8-K dated
November 2, 1993.
(4.3) Instruments defining the rights of holders of long-term debt
of Liberty and its subsidiaries are not filed as Exhibits
because the amount of debt under each instrument is less
than 10% of the consolidated assets of Liberty. Liberty
undertakes to file these instruments with the United States
Securities and Exchange Commission (the "Commission") upon
request.
(b) Reports on Form 8-K
Liberty filed the following report on Form 8-K during the three
month period ended June 30, 1994:
A Form 8-K dated May 19, 1994 was filed with the Commission
relating to an amendment to the Merger Agreement between Liberty and an
affiliate of BANC ONE CORPORATION.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Liberty has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBERTY NATIONAL BANCORP, INC.
(Registrant)
Date: August 4, 1994 By: /s/ MALCOLM B. CHANCEY, JR.
---------------------------
MALCOLM B. CHANCEY, JR.
Chairman of the Board, President
and Chief Executive Officer
Date: August 4, 1994 By: /s/ CARL E. WEIGEL
---------------------------
CARL E. WEIGEL
Treasurer
(Principal Financial Officer)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Paper (P) or
Number Brief Description Electronic (E)
- - --------- ----------------- -------------
<C> <S> <C>
(3.1) Liberty's Amended and Restated Bylaws. (E)
(4.1) Rights Agreement dated August 19, 1992, between Liberty (P)
National Bancorp, Inc. and Chemical Bank is incorporated
by reference to Exhibits 4 and 10.1 to Liberty's Current
Report on Form 8-K dated August 19, 1992.
(4.2) First Amendment dated as of November 2, 1993, to the Rights (E)
Agreement dated August 19, 1992, between Liberty National
Bancorp, Inc. and Chemical Bank is incorporated by reference
to Exhibit 4.1 to Liberty's Current Report on Form 8-K dated
November 2, 1993.
(4.3) Instruments defining the rights of holders of long-term N/A
debt of Liberty and its subsidiaries are not filed as
Exhibits because the amount of debt under each instrument
is less than 10% of the consolidated assets of Liberty.
Liberty undertakes to file these instruments with the
United States Securities and Exchange Commission (the
"Commission") upon request.
</TABLE>
AMENDED AND RESTATED
BYLAWS
OF
LIBERTY NATIONAL BANCORP, INC.
AS ADOPTED MARCH 16, 1994
AMENDED AND RESTATED
BYLAWS
OF
LIBERTY NATIONAL BANCORP, INC.
TABLE OF CONTENTS
Section 1 -- Shareholders
Section 1.1 Annual Meeting. . . . . . . . . . 1
Section 1.2 Special Meetings. . . . . . . . . 1
Section 1.3 Place of Meeting . . . .. . . . . 1
Section 1.4 Notice . . . . . . . . . . . . . 1
Section 1.5 Closing of Transfer Books or
Fixing of Record Date. . . . . . . . . 2
Section 1.6 Voting Record . . . . . . . . . . 2
Section 1.7 Quorum . . . . . . . . . . . . . 2
Section 1.8 Proxies . . . . . . . . . . . . . 2
Section 1.9 Voting of Shares. . . . . . . . . 2
Section 1.10 Voting of Shares by Certain Holders. . 3
Section 1.11 Cumulative Voting. . . . . . . . . . . 3
Section 1.12 Shareholder Proposals . . . . . . . . 4
Section 2 -- Board of Directors
Section 2.1 General Powers . . . . . . . . . . 4
Section 2.2 Number, Tenure and Qualifications. . . 4
Section 2.3 Regular Meetings . . . . . . . . . . . 5
Section 2.4 Special Meetings . . . . . . . . . . . 5
Section 2.5 Notice . . . . . . . . . . . . . . . . 5
Section 2.6 Quorum . . . . . . . . . . . . . . . . 6
Section 2.7 Manner of Acting . . . . . . . . . . . 6
Section 2.8 Action Without A Meeting . . . . . . . 6
Section 2.9 Compensation . . . . . . . . . . . . . 6
Section 2.10 Committees . . . . . . . . . . . . . . 6
Section 2.11 Directors' Age Qualification Period. . 7
Section 2.12 Nomination of Directors . . . . . . . 7
Section 2.13 Directors Emeriti. . . . . . . . . . . 8
-i-
Section 3 -- Officers
Section 3.1 Number . . . . . . . . . . . . . . . . 8
Section 3.2 Election and Term of Office. . . . . . 8
Section 3.3 Removal. . . . . . . . . . . . . . . . 8
Section 3.4 Vacancies . . . . . . . . . . . . . . 9
Section 3.5 Chairman of the Board. . . . . . . . . 9
Section 3.6 Vice Chairman of the Board . . . . . . 9
Section 3.7 President. . . . . . . . . . . . . . . 9
Section 3.8 Vice President . . . . . . . . . . . . 9
Section 3.9 Secretary. . . . . . . . . . . . . . . 9
Section 3.10 Treasurer. . . . . . . . . . . . . . .10
Section 4 -- Contracts, Loans, Checks and Deposits
Section 4.1 Contracts. . . . . . . . . . . . . . .10
Section 4.2 Loans . . . . . . . . . . . . . . . .10
Section 4.3 Checks, Drafts and Other Orders. . . .10
Section 4.4 Deposits . . . . . . . . . . . . . . .10
Section 5 -- Certificate for Shares and Their Transfer
Section 5.1 Certificate for Shares . . . . . . . .11
Section 5.2 Transfer of Shares . . . . . . . . . .11
Section 6 -- Seal
Section 6.1 Seal . . . . . . . . . . . . . . . . .12
Section 7 -- Amendments
Section 7.1 Amendments . . . . . . . . . . . . . .12
-ii-
AMENDED AND RESTATED
BYLAWS
OF
LIBERTY NATIONAL BANCORP, INC.
Section 1
Shareholders
Section 1.1 Annual Meeting. Except as the Board of Directors may
otherwise designate, the annual meeting of the shareholders shall be held
at 10:30 a.m. on the third Wednesday of April of each year if not a legal
holiday or, if a legal holiday, on the next following business day, for the
purpose of electing directors and for the transaction of such other
business as may come before the meeting.
Section 1.2 Special Meetings. Special meetings of the shareholders
may be called by the Chairman of the Board or by the Board of Directors,
and shall be called by the Chairman of the Board at the request of the
holders of not less than one-fifth of all the shares of the Corporation
entitled to vote at the meeting.
Section 1.3 Place of Meeting. The Board of Directors may designate
any place, either within or without the Commonwealth of Kentucky, as
the place of meeting for any annual meeting or for any special meeting
called by the Board of Directors. If a special meeting is called by the
Chairman of the Board or at the request of the requisite number of
shareholders, the special meeting shall be held at the registered office of
the Corporation.
Section 1.4 Notice. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten nor more than 50 days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the
Board, the Secretary of the Board of Directors, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid.
-1-
Section 1.5 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for
a stated period not exceeding 50 days. If the stock transfer books shall
be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for
at least ten days immediately preceding such meeting. In lieu of closing
the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such
date to be not more than 50 days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is
fixed, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring a dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any
adjournment thereof.
Section 1.6 Voting Record. The officer or agent having charge of the
Corporation's stock transfer books shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of
and the number of shares held by each. Such record shall be produced
and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
Section 1.7 Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority
of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 1.8 Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after 11 months from the date of its execution,
unless otherwise provided in the proxy.
Section 1.9 Voting of Shares. Subject to the cumulative voting
provisions of Section 1.11, each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
-2-
Section 1.10 Voting of Shares by Certain Holders.
(a) Shares standing in the name of another
corporation may be voted by the president of
such corporation or by proxy appointed by him
unless some other person produces a certified
copy of a resolution of the board of directors
of such other corporation authorizing such
other person to vote such shares.
(b) Shares held by an administrator, executor,
guardian, conservator or committee may be
voted by him, either in person or by proxy,
without a transfer of such shares into his
name. Shares standing in the name of a
trustee may be voted by him, either in person
or by proxy, but no trustee shall be entitled to
vote shares held by him without a transfer of
such shares into his name.
(c) Shares standing in the name of a receiver may
be voted by such receiver, and shares held by
or under the control of a receiver may be
voted by such receiver without the transfer
thereof into his name if authority so to do be
contained in an appropriate order of the court
by which such receiver was appointed.
(d) A shareholder whose shares are pledged shall
be entitled to vote such shares until the
shares have been transferred into the name of
the pledgee, and thereafter the pledgee shall
be entitled to vote the shares so transferred.
(e) When shares are held jointly by three or more
fiduciaries acting under an instrument
becoming effective after June 30, 1946, the
will of the majority of such fiduciaries shall
control the manner of voting or the giving of
a proxy unless the instrument or order
appointing the fiduciaries otherwise directs.
(f) Neither treasury shares of its own stock held
by the Corporation, nor shares held by another
corporation if a majority of the shares entitled
to vote for the election of directors of such
other corporation are held by the Corporation,
shall be voted at any meeting or counted in
determining the total number of outstanding
shares at any given time for purposes of any
meeting.
Section 1.11 Cumulative Voting. At each election for directors every
shareholder entitled to vote at such election shall have the right to cast,
in person or by proxy, as many votes in the aggregate as he shall be
entitled to vote under the Corporation's Articles of Incorporation,
multiplied by the number of directors to be elected at such election.
Each shareholder may cast the whole number of votes for one candidate,
or distribute such votes among two or more candidates.
-3-
Section 1.12 Shareholder Proposals. At all meetings of shareholders,
any proposal submitted by a shareholder for consideration by
shareholders shall be presented either by the proposing shareholder or his
legal representative and seconded by a different shareholder or the legal
representative of such shareholder.
Section 2
Board of Directors
Section 2.1 General Powers. The business and affairs of the
Corporation shall be managed by the Board of Directors.
Section 2.2 Number, Tenure and Qualifications.
(a) The number of directors of the Corporation
shall be not less than nine nor more than 30,
the exact number from time to time to be
fixed by the Board of Directors.
(b) If an interval between meetings of the
shareholders held for the election of directors
the Board of Directors by the affirmative vote
of a majority of the directors then in office,
whether or not a quorum of the Board of
Directors, may fill not more than three newly
created directorships resulting from an
increase in the authorized number of directors
fixed by the Board of Directors. Any
directorship to be filled by reason of an
increase in the number of directors may be
filled by the Board of Directors for a term of
office continuing only until the next election of
directors by the shareholders. Any vacancy in
the Board of Directors not resulting from an
increase in the authorized number of directors
may be filled by the affirmative vote of a
majority of the directors then in office,
whether or not a quorum of the Board of
Directors. A director elected to fill such a
vacancy shall be elected for the unexpired
term of his predecessor in office.
(c) Except as otherwise provided in this Section
2.2 each director shall hold office until the
next annual meeting of shareholders and until
his successor shall have been elected and
qualified.
-4-
(d) When the Board of Directors as fixed by the
shareholders shall consist of nine or more
members, the directors shall be divided into
three classes, each class to be nearly equal in
number as possible. The term of office of
directors of the first class shall expire at the
first annual meeting of shareholders after their
election; that of the second class shall expire
at the second annual meeting after their
election; and that of the third class shall
expire at the third annual meeting after their
election. At each annual meeting after such
classification the number of directors equal to
the number of the class whose term expires at
the time of such meeting shall be elected to
hold office until the third succeeding annual
meeting. In the case of any increase in the
number of directors, the additional directors
shall be distributed among the several classes
as nearly equally as possible. In the case of
any decrease in the number of directors, the
several classes shall be reduced so that they
will be as nearly equal in number as possible,
but no decrease shall have the effect of
shortening the term of any incumbent director.
Section 2.3 Regular Meetings. The Board of Directors may designate
by resolution a time and place, within or without the Commonwealth of
Kentucky, for the holding of regular meetings of the Board of Directors
without other notice than such resolution. A regular meeting of the
Board of Directors shall be held immediately after the annual meeting of
shareholders (a) at the same place designated by the Board of Directors
for the holding of regular meetings, without other notice than this bylaw,
or (b) at such other place as shall be designated by the Board of
Directors by resolution without other notice than such resolution.
Section 2.4 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the
Board or the President or any three directors. The person or persons
authorized to call special meetings of the Board of Directors may fix any
place, either within or without the Commonwealth of Kentucky, as the
place for holding any special meeting of the Board of Directors called by
them.
Section 2.5 Notice. Unless waived as permitted by the Kentucky
Business Corporation Act, notice of the time and place of each special
meeting of the Board of Directors shall be given to each director. The
notice may be given by telegram, letter or in person but however given
must be reasonably calculated to be received by the intended recipient
at least 24 hours before the time of the special meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such
meeting, except when a director attends a meeting for the express
purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
-5-
Section 2.6 Quorum. A majority of the number of directors fixed by the
shareholders shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
Section 2.7 Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors.
Section 2.8 Action Without a Meeting. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without
a meeting if a consent in writing, setting for the action so taken, shall be
signed by all of the directors.
Section 2.9 Compensation. By resolution of the Board of Directors each
director may be paid his expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a stated salary as director or
a fixed sum for attendance at each meeting of the Board of Directors or
both. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 2.10 Committees. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among
its members an executive committee and one or more other committees,
each of which to the extent provided in such resolution, shall have and
may exercise all the authority of the Board of Directors; provided,
however, a committee shall not:
(a) Authorize distributions;
(b) Approve or propose to shareholders action
that the Kentucky Business Corporation Act
requires to be approved by shareholders;
(c) Fill vacancies on the Board of Directors or on
any of its committees;
(d) Approve amendments to the Articles of
Incorporation not requiring shareholder
approval;
(e) Adopt, amend, or repeal the Bylaws of the Corporation;
(f) Approve a plan of merger not requiring
shareholder approval;
(g) Authorize or approve reacquisition of shares,
except according to a formula or method
prescribed by the Board of Directors; or
(h) Authorize or approve the issuance or sale or
contract for sale of shares, or determine the
designation and relative rights, preferences,
and limitations of a class or series of shares,
except that the Board of Directors may
authorize a committee (or a senior executive
officer of the Corporation) to do so within
limits specifically prescribed by the Board of
Directors.
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Unless waived as permitted by the Kentucky Business Corporation Act,
notice of the date, time and place of each meeting of a committee of the
Board of Directors shall be given to each member.
The notice may be given by telegram, letter, telephone, or in person, but
however given must be reasonably calculated to be received by the
intended recipient at least 12 hours before the time of the meeting. The
attendance of a committee member at a meeting shall constitute a
waiver of notice of such meeting, except when a member attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 2.11 Directors' Age Qualification Period. A person shall not be
elected a director in or after the month that person becomes 65 years
old; provided, however, that if a person who was serving as a director
of the Corporation and as a member of the Corporation's Examining
Committee on December 31, 1993 was at least 65 years old on
December 31, 1993, then any such person may nevertheless be re-
elected a director of the Corporation in 1994 for one term.
Section 2.12 Nomination of Directors.
(a) Nominations for election to the Board of
Directors may be made by the Board of
Directors or by any shareholder. Any
shareholder who intends to nominate or to
cause to have nominated any candidate for
election to the Board of Directors (other than
a candidate nominated by the Board of
Directors) shall deliver or mail written
notification of the nomination to the Chairman
of the Board not less than 14 days nor more
than 50 days before any meeting of
shareholders called for the election of
directors. Provided, however, that if less than
21 days notice of the meeting is given to
shareholders, such notification shall be
delivered or mailed to the Chairman of the
Board not later than the close of business on
the seventh day following the day on which
the notice of meeting was mailed. Any such
notification shall contain the following
information to the extent known to the
notifying shareholder or shareholders:
(1) the name and address of each
proposed nominee;
(2) The principal occupation of each
proposed nominee;
(3) the total number of shares that
to the knowledge of the
notifying shareholder or
shareholders will be voted for
each proposed nominee;
(4) the name and residence address
of each notifying shareholder;
and
(5) the number of shares owned by
each notifying shareholder.
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(b) The chairman of any meeting of shareholders
held for the election of directors may in his
discretion disregard any votes cast for any
nominee whose nomination was not made in
accordance with the provisions of this section.
Section 2.13 Directors Emeriti. Any person who is serving as a director
of the Corporation but cannot be reelected a director of the Corporation
because of the age qualifications established by Section 2.11 of these
Bylaws shall become a director emeritus when he ceases to be an active
director and shall serve as a director emeritus until he becomes 72 years
old. However, any person who is designated a director emeritus in
Section 3.03(e) of the Merger Agreement and Plan of Reorganization
between United Kentucky, Inc. and the Corporation (the "Merger
Agreement") and any person who is designated as a director in Section
3.03(d) of the Merger Agreement, is at least 65 years old at the
Effective Time provided for by the Merger Agreement and becomes a
director emeritus pursuant to this Section 2.13 shall continue to serve
as a director emeritus until his death or resignation. The directors emeriti
shall be entitled to receive notice of and to attend such meetings as the
Board of Directors may invite them to attend. No director emeritus shall
have any power or right to vote on any matter voted upon by the Board
of Directors.
Section 3
Officers
Section 3.1 Number. The Corporation shall have a Chairman of the
Board, a President, a Secretary and a Treasurer, and may have a Vice
Chairman of the Board, one or more Executive Vice Presidents, one or
more Senior Vice Presdients and one or more other Vice Presidents, all
of whom shall be elected by the Board of Directors. The Corporation
may also have such assistant officers as the Board of Directors may
deem necessary, all of whom shall be elected by the Board of Directors
or chosen by an officer or officers designated by the Board of Directors.
Section 3.2 Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. Each
officer shall hold office until his successor shall have been duly elected
and shall have qualified, or until his death, or until he shall resign or shall
have been removed in the manner hereinafter provided.
Section 3.3 Removal. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election or
appointment of an officer shall not of itself create contract rights.
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Section 3.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 3.5 Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation. Except as he shall
otherwise designate, the Chairman of the Board shall preside at all
meetings of the shareholders and of the Board of Directors. Subject to
the Board of Directors he shall supervise and have overall responsibility
for the business, administration and operations of the Corporation. In
general, he shall perform all duties incident to the office of the Chairman
of the Board and chief executive officer and such other duties as from
time to time may be assigned to him by the Board of Directors. He shall
from time to time make such reports of the affairs of the Corporation as
the Board of Directors may require.
Section 3.6 Vice Chairman of the Board. In the absence of the Chairman
of the Board the Vice Chairman of the Board, if any, shall preside at the
meetings of the shareholders and of the Board of Directors, unless the
Chairman of the Board shall have designated another person to preside.
Section 3.7 President. The President shall be the chief operating officer
of the Corporation and shall have general charge of the operations of the
Corporation, subject to the Chairman of the Board and to the Board of
Directors. If there is no Chairman of the Board then serving, the
President shall be the chief executive officer of the Corporation. The
President shall perform such other duties as from time to time may be
assigned to him by the Board of Directors or by the Chairman of the
Board.
Section 3.8 Vice President. Any Vice President shall perform such duties
as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board or the President.
Section 3.9 Secretary. The Secretary shall
(a) Keep the minutes of the proceedings of the
shareholders and of the Board of Directors in
one or more books provided for that purpose;
(b) See that all notices are duly given in
accordance with the provisions of these
Bylaws or as required by law;
(c) Be custodian of the corporate records;
(d) Keep a register of the post office address of
each shareholder which shall be furnished to
the Secretary by such shareholder;
(e) Sign with the Chairman of the Board, the
President or a Vice President, certificates for
shares of the Corporation, the issuance of
which shall have been authorized by issuance
of which shall have been authorized by
resolution of the Board of Directors;
(f) Have general charge of the stock transfer
books of the Corporation; and
(g) In general perform all duties incident to the
office of Secretary and such other duties as
from time to time may be assigned to him by
the Board of Directors, the Chairman of the
Board or the President.
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Section 3.10 Treasurer. The Treasurer shall
(a) Have charge and custody of and be
responsible for all funds and securities of the
Corporation;
(b) Receive and give receipts for moneys due and
payable to the Corporation from any source
whatsoever, and deposit all such moneys in
the name of the Corporation in such banks,
trust companies or other depositories as shall
be selected in accordance with the provisions
of Section 4 of these Bylaws; and
(c) In general perform all the duties incident to
the office of Treasurer and such other duties
as from time to time may be assigned to him
by the Board of Directors, the Chairman of the
Board or the President. If required by the
Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in
such sum and with such surety or sureties as
the Board of Directors shall determine.
Section 4
Contracts, Loans,
Checks and Deposits
Section 4.1 Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Section 4.2 Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
Section 4.3 Checks, Drafts and Other Orders. All checks, drafts or
other orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation shall be signed by
such officer or officers, agent or agents of the Corporation and in such
manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4.4 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies other depositories as the
Board of Directors may select.
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Section 5
Certificate for Shares
and Their Transfer
Section 5.1 Certificate for Shares.
(a) Certificates representing shares of the
Corporation shall be in such form as shall be
prescribed from time to time by the Chairman
of the Board of Directors. Such certificates
shall be signed by the Chairman of the Board,
the President or a Vice President and by the
Secretary or an Assistant Secretary. The
signatures of such officers upon a certificate
may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a
registrar, other than the Corporation itself or
an employee of the Corporation. Each
certificate for shares shall be consecutively
numbered or otherwise identified. The name
and address of the person to whom the shares
represented thereby are issued, with the
number of shares and date of issue, shall be
entered on the stock transfer books of the
Corporation. All certificates surrendered to
the Corporation for transfer shall be canceled
and no new certificate shall be issued until the
former certificate for a like number of shares
shall have been surrendered and canceled,
except that in case of a lost, destroyed or
mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the
Corporation as the Secretary may prescribe.
(b) Every certificate shall state upon its face or
back that the Corporation will furnish to any
shareholder upon request and without charge
a full statement of (i) the designations,
preferences, limitations and relative rights of
the shares of each class authorized to be
issued by the Corporation, and (ii) as to the
Corporation's Preferred Stock, which the
Corporation is authorized to issue in series,
the variations in the relative rights and
preferences between the shares of each such
series so far as the same have been fixed and
determined and the authority of the Board of
Directors to fix and determine the relative
rights and preferences of subsequent series.
Section 5.2 Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the
Secretary of the Corporation, and on surrender for cancellation of the
new certificate for such shares. The person in whose name shares stand
on the books of the Corporation shall be deemed by the Corporation to
be the owner thereof for all purposes.
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Section 6
Seal
Section 6.1 Seal. The corporate seal shall be circular in form and shall
have inscribed thereon the name of the Corporation, the state of
incorporation and the words "Corporate Seal."
Section 7
Amendments
Section 7.1 Amendments. These Bylaws may be amended or repealed
and new bylaws may be adopted by the Board of Directors or by the
shareholders at any regular or special meeting.
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